Forecasting Methods
Financial analysts utilize four basic types of forecasting techniques to project future sales, costs, and investment costs for a company. Although there are many commonly used quantitative budget forecasting tools, in this article we concentrate on the top four techniques: Straight-line, moving average, simple linear regression, multiple linear regression, and straight-line.
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You are aware that there are 150 units in stock at the moment (beginning inventory = SI), and ABC's marketing manager predicts that demand for the motor will be 240, 225, 265, 270, 260, and 275 units over the course of the following six months (M = 6). (D1, D2, D3, D4, and D5 respectively).
In six months, you wish to have 50 units in stock (ending inventory = EI) and have decided that you want to lower the average inventory level of various goods, including this one.
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Answer:
a. 138,000
Explanation:
Equivalent Units of Production (FIFO method)
Whole % Completion Equ. units
Units Dir. Mat.
Beg. Work in process (100% - 70%) 10,000 30% 3,000
Started & completed (140,000-10,000) 130,000 100% 130,000
Ending Work in process 20,000 25% <u> 5,000 </u>
Total Equivalent units <u>138,000</u>
Answer:
A. True
Explanation:
The terms of 2/10, net 30 implies that the firm is entitled to receive a 2 percent discount if it makes payment within 10 days for the goods it bought on term but the seller expects to pay full amount of the amount due in 30 days if it fails to pay within 10 days.
However, since there will be no more discount after the discount period, the cost of trade credit will continue to fall longer the payment is extended. For this question this can be demonstrated using the formula for calculating the cost of trade discount as follows:
Cost of trade discount = {[1 + (discount rate / (1 - discount rate))]^(365/days after discount)} - 1 ................... (1)
We can now applying equation (1) as follows:
<u>For payment in 40 days </u>
Cost of trade credit (payment in 40 days)= {[1 + (0.02 / (1 - 0.02))]^(365/40)} - 1 = 0.202436246672765, or 20%
<u>For payment in 30 days </u>
Cost of trade credit (payment in 30 days) = {[1 + (0.02 / (1 - 0.02))]^(365/30)} - 1 = 0.278643315029666, or 28%
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<u>Conclusion</u>
Since the 20% calculated cost of trade credit for payment in 40 days is lower than 28% calculated cost of trade credit for payment in 30 days, the <u>correct option is A. True</u>. That is, the calculated cost of trade credit for a firm that buys on terms of 2/10, net 30, is lower (other things held constant) if the firm plans to pay in 40 days than in 30 days.
The answer is c because 6 can go in to 30000 evenly
