Answer:
a. We have:
Interest cost of long-term fixed-rate = $191,475
Interest cost of short-term variable-rate = $192,51
b. Long-term fixed rate plan is less costly
Explanation:
a. Determine the total interest cost under each plan.
Interest cost of long-term fixed-rate = Amount required to be borrowed * Fixed interest rate per year * Number of years = $690,000 * 9.25% * 3 = $191,475
Interest cost of short-term variable-rate = (Amount required to be borrowed * First year interest rate) + (Amount required to be borrowed * Second year interest rate) + (Amount required to be borrowed * Third year interest rate) = ($690,000 * 7.50%) + ($690,000 * 12.15%) + (($690,000 * 8.25%) = $192,510
b. Which plan is less costly?
Since the $191,475 interest cost of long-term fixed-rate is less than $192,510 interest cost of short-term variable-rate, this implies that long-term fixed rate plan is less costly.
In class 2 ., The Model D is the Top/ favorite one having highest market return (24%) with lowest inventory cost ($79)
Explanation:
To Determine the value of the inventory at the lower of cost or market applied to each item in the inventory. simply we should calculate the profit margin for each category
Profit margin = (market value - cost price) = Profit ÷ cost price × 100
Class 1:
Model A
46 $116 $139
Profit margin = (139 - 116) = 23 ÷ 116 × 100 = 19.32%
Model B
49 243 239
Profit margin = (239 - 243)= -4 ÷ 243 × 100 = - 1.65% (loss)
Model C
43 233 252
Profit margin = (252 - 233) = 19 ÷ 233 × 100 = 8.15%
Class 2:
Model D
37 79 98
Profit margin = (98 - 79) = 19 ÷ 79 × 100 = 24%
Model E
6 151 130
Profit margin = (130 - 151) = - 21 ÷ 79 × 100 = -13.91 % (loss)
Result
In class 1
Model A is preferable., It has the lowest inventory value and has highest market value (Returns) at 19.82%
In class 2
Model D is preferable., It has the lowest inventory value and has highest market value (Returns) at 24%
Overall the Model D is the Top/ favorite one having highest market return with lowest inventory cost
Answer:
1. B) Deflation
2. A)-10.00%
3. D) 8
4. E) 8.89 baskets.
5. (A) Rises
Explanation:
Deflation is a fall in general price levels. When deflation occurs, the value of money increases: The purchasing power of money increases.
The deflation rate = ( this year price level - last year's price level ) / last year's price level
Deflation rate =( $9 - $10) / $10 = -10%
In the previous year, $80 would purchase $80 / $10= 8 baskets
This year, $80 would purchase $80 / $9= 8.89 baskets
Inflation is a rise in the general price levels.
I hope my answer helps you
Answer:
The amount of factory overhead to be allocated to each unit using direct labor hours.
Handbag = $4.3 / unit
Moccasins = $2.55 / unit
Explanation:
Predetermined Overheads rate
Cutting = 80,000 / 100,000 = $0.8 / labor hour
Sewing = 280,000 / 160,000 = $1.75 / labor hour
Overheads Allocation
Handbag
Cutting = 1 x 0.8 = $0.8
Sewing = 2 x 1.75 = $3.5
Total Per unit overhead allocation = 0.8+3.5 = $4.3 / unit
Moccasins
Cutting = 1 x 0.8 = $0.8
Sewing = 1 x 1.75 = $1.75
Total Per unit overhead allocation = 0.8+1.75 = $2.55 / unit
Answer: 21.63%
Explanation:
The firm's cost of equity capital will be calculated thus:
Market value of assets = $50000
Debt = $12500
Cost of debt = 7%
Unlevered cost of equity = 18%
Then, we'll calculate equity which will be calculated as:
= Market value of assets - Debt
= $50000 - $12500
= $37500
Then, the cost of equity capital will be:
= Unlevered cost of equity + [(Debt/equity) x (Unlevered cost of equity - Cost of debt)]
= 18% + [($12500/$37500) x (18% - 7%)]
= 18% + [0.33 x 11%]
= 18% + 3.63%
= 21.63%
