Answer:
By producing the starters the company will save $20,000 per year.
Explanation:
production costs
direct materials $3.10 per unit
direct labor $2.70 per unit
supervision $60,000
depreciation <u>$40,000</u>
variable manufacturing overhead $0.60 per unit
rent <u>$12,000</u>
total production cost $9.20 per unit
The engineer is wrong because he is considering fixed costs like depreciation and rent that should not be included because they are independent on whether this project is approved or not. Once you take away depreciation and rent, the cost per unit will fall by $1.30 [= ($40,000 + $12,000) / 40,000 units].
Since the production cost = $9.20 - $1.30 = $7.90, which is lower than $8.40 which is the purchase cost, the company should start producing the starters at least until its sales bonce back.
By producing the starters the company will save ($8.40 - $7.90) x 40,000 units = $20,000 per year
Answer:
b) Considered to be a direct variable cost
Explanation:
Direct costs are expenditures that can be traced to a specific product, project, or service. It is a cost component that arises due to the production of a particular good or service as opposed to a general expense. Direct costs contrast indirect cost that covers a variety of items, such as administration.
Variable costs are the expenses that change with production volume. An increase in production leads to an increase in variable costs. Variable costs, therefore, have a direct relationship with the output level.
Belts, in this case, are a direct variable cost because
- The belt expense is traceable directly to the production of cars. It is a cost incurred only when a car is being produced.
- The cost varies with the number of cars produced. The expenses will change with changes in the production of cars.
Answer:
$ 10512000
Explanation:
The market value of Madison investment which is the aggregate value of the company's investment =$ 12 million
The book value = assets - liabilities = (1700000 - 419000) ×0.4 = $ 51240
The year-end balance = $ 51240 + $ 10 million = $ 10512000 approx
Answer:
The correct answer is option (d) $1.3 billion.
Explanation:
Given Data:
inventory value under FIFO costing = $2.1 billion
LIFO Reserve for year-end 2013 = $0.6 billion
LIFO Reserve for year-end 2014 = $0.8 billion
LIFO inventory is calculated using the formula;
LIFO inventory value at year-end 2014 = FIFO inventory - LIFO reserve
=$2.1 billion-$0.8 billion
= $1.3 billion
