Answer:
Financial leverage
Explanation:
Financial leverage is defined as the use of borrowed funds to perform a business activity or investment that is expected to have higher returns than the cost of borrowing the money (interest).
When a company is looking for funds for its activities there are 3 options they can use: equity, debt, or lease.
Use of equity is the only option where no extra cost is incurred for use of funds.
When using debt or lease cost of use is incurred. The business will need to engage in an activity that will give it revenue above cost of debt.
This practice is called use of financial leverage.
Smith states that capitalism allows individuals to prosper,<span> capitalism allows for such things as division of labor and the specialization that comes with it, this increases the productive efficiency of a nation which in turn increases its wealth and standing in the rest of the world.
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Average Cost
Cost of average cost = cost of goods available for sale/ No. of units available for sale
114060/(400+300+460)
= $3.5
Cost of goods sold average cost =no. of units sold * average cost
= 860*3.5
= $3010
Ending inventory average cost =no. of units in ending inventory* average
(1160-860)*3.5
= $1050
FIFO
Cost of goods sold as per FIFO =no. of units sold * cost as per FIFO
(400*3)+(300*3.4)+(160*4)
= $2860.
The average cost is the unit cost of production obtained by dividing total cost (TC) by total production (Q). The unit cost of production means that all fixed and variable costs are considered when calculating the average cost. Hence, it is also called the total cost per unit.
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