Answer:
Cost savings in sourcing from Country A = $0.5 million ($57.5 - $57 million)
Explanation:
Sourcing from Country A:
Purchase price = $0.55 per unit
Shipping = $0.02
Total Cost = $0.57
Cost of 100 million units = $57 million
Sourcing from Country B:
Purchasing price = $0.44 ($0.55 x 80%)
Shipping = $0.06
CIF Tariff = 15% = $0.075 ($0.5 x 15%)
Total Cost = $0.575
Cost of 100 million units = $57.5 million
Sourcing from Country A is more beneficial than sourcing from Country B with reduced product cost, but increased shipping and additional tariff. Whereas Country A gives a total cost for 100 million units of $57 million, sourcing the same units from Country B gives a total cost of $57.5 million. The savings of $0.5 million is substantial that no company would like to lose unless the goods from Country B are of higher quality than those from Country A.
Option D, Both A & C
Explanation:
A company invested $400,000 in a technology that reduced the overall costs of production by reducing their cost per unit from $2 to $1.85 . Later, a manager has an opportunity to outsource production to another company at a cost per unit of $1.75 . If you are the manager, you should consider the $400,000 as a sunk cost, not relevant to the decision and should ignore the $400,000 fixed cost.
Sunk cost is the cost which is already incurred in past and does not have any significance in decision making.
A sunk cost is already incurred in the fields of economy and business decision-making and can not be recovered. Sunk costs are contrasted with future costs, which can be avoided if measures are taken.
Answer:
$77,200
Explanation:
Conversion cost is calculated as;
= Direct labor cost + Manufacturing overhead.
Given that;
Direct labor cost = $40,500
Manufacturing overhead = $36,700
Conversion cost = $40,500 + $36,700
= $77,200
Answer:
A. If the reserve requirement is 5% then money multiplier is 20 and the the money supply for each reserve requirement is $10,000 billion
B. If the reserve requirement is 10% then money multiplier is 10 and the the money supply for each reserve requirement is $5,000 billion
For a given level of reserves, a lower reserve requirement is associated with a larger money supply. Suppose the Federal Reserve (the Fed) wants to increase the money supply by $500 billion. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to buy $50 billion worth of U.S. government bonds. Now, suppose that rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic conditions. Specifically, in addition to the required reserves of 10%, banks hold an additional 40% of their deposits as reserves. This increase in the reserve ratio causes the money multiplier to fall to 2. Under these conditions, the Fed would need to buy $250 billion worth of U.S. government bonds in order to increase the money supply by $500 billion.
The following statements help to explain why the Fed cannot precisely control the money supply are:
B- The Fed cannot control the amount of money that households choose to hold as currency.
C- The Fed cannot control whether and to what extent banks hold excess reserves.
Explanation:
A. If the reserve requirement is 5% then money multiplier is 20 (= 100%:5%) and the the money supply for each reserve requirement is $10,000 billion (=$500 billion x 20)
B. If the reserve requirement is 10% then money multiplier is 10 (= 100%:10%) and the the money supply for each reserve requirement is $5,000 billion (=$500 billion x 10)
