A company uses activity-based costing to determine the costs of its three products: a, b, and
1 answer:
Answer:
$3.10 ; $2.10 and $14.20
Explanation:
The computation of the activity rates is shown below:
For Activity 1
= Budgeted cost ÷ Total budgeted activity of cost driver
= $94,550 ÷ (18,200 + 8,100 + 4,200)
= $94,550 ÷ 30,500
= $3.10
For Activity 2
= Budgeted cost ÷ Total budgeted activity of cost driver
= $53,550 ÷ (7,100 + 13,200 + 5,200)
= $53,550 ÷ 25,500
= $2.10
For Activity 3
= Budgeted cost ÷ Total budgeted activity of cost driver
= $59,995 ÷ (1,175 + 1,000 + 2,050)
= $59,995 ÷ 4,225
= $14.20
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Answer:
Discounted payback period shall be as follows:
a. 1 year 7.36 months
b. 2 years 3.27 months
c. 3 years 2.9 months
Explanation:
a. Payback period in case of cash outflow = $5,700
For calculating the pay back period we shall firstly discount the cash flows to present value @14 %.
Year Cash Flow PV Factor PV of Cash Flow Cumulative
Cash Flow
0 - $5,700 1 - $5,700 -5,700
1 $4,400 0.877 $3,858.8 -$1,841.2
2 $3,900 0.770 $3,003 $1,161.8
Since the cumulative cash flows are positive in 2nd year payback period =
1 + = 1 year and 7.36 months
b. Payback period in case of cash outflow = $7,800
For calculating the pay back period we shall firstly discount the cash flows to present value @14 %.
Year Cash Flow PV Factor PV of Cash Flow Cumulative
Cash Flow
0 - $7,800 1 - $7,800 -7,800
1 $4,400 0.877 $3,858.8 -$3,941.2
2 $3,900 0.770 $3,003 -$938.2
3 $5,100 0.675 $3,442.5 $2,504.3
Since the cumulative cash flows are positive in 3rd year payback period =
2 + = 2 years and 3.27 months
b. Payback period in case of cash outflow = $10,800
For calculating the pay back period we shall firstly discount the cash flows to present value @14 %.
Year Cash Flow PV Factor PV of Cash Flow Cumulative
Cash Flow
0 - $10,800 1 - $10,800 -$10,800
1 $4,400 0.877 $3,858.8 -$6,941.2
2 $3,900 0.770 $3,003 -$3,938.2
3 $5,100 0.675 $3,442.5 -$495.7
4 $4,300 0.592 $2,545.6 $2,049.9
Since the cumulative cash flows are positive in 4th year payback period =
3 + = 3 years and 2.9 months
Final Answer
Discounted payback period shall be as follows:
a. 1 year 7.36 months
b. 2 years 3.27 months
c. 3 years 2.9 months