Answer: Changing an item's lot size does not directly affect the average level of the pipeline inventory.
Answer:
It should replace the old machine. In the current accounting period.
Explanation:
We need to perform a relevant cost analysis:
Keep the machine:
F0 = $0
F1 = $1500 maintenance
F2 = $3,000 maintenance
F3 = $6,000 maintenance
F4 = $12,000 maintenance
F5 =$24,000 maintenance + 250 resale value
replace the machine:
F0 = -12,000 purchase + 4,000 sale of old machine = -800
F1 = $900 maintenance
F2 = $900 maintenance
F3 = $900 maintenance
F4 = $900 maintenance
F5 =$900 maintenance + 1,500 resale value
As revenues are the same for each machine, we ignore them. We will only focus on the cost each machine generate:
We solve for the present worth of each machine with a discount rate of 12%
As the present worth of the new machine is lower, the best decision for the company is to purchase the new machine and sale the old machine.
Delaying this will incur in higher maintenance cost (1,500 - 900)
and a lower recovery value (4,000 - 2,000)
As there is no cost saving for delaying the purchase, it should be made immediately.
Answer:
Consider the possible advantages and drawbacks of a decision.
Explanation:
In Financial accounting, costing is the measurement of the cost of production of goods and services by assessing the fixed costs and variable costs associated with each step of production.
Cost-benefit analysis is also known as the break even analysis, it is an important tool in predicting the volume of activity, the costs to be incurred, the sales to be made, and the profit to be earned is. It is used to determine how changes in differing levels of activities such as costs and volume affect a company's operating income and net income.
Generally, to use the cost-benefit analysis, financial experts usually make some assumptions and these are;
1. Sales price per unit product is kept constant.
2. Variable costs per unit product are kept constant and the total fixed costs of production are kept constant i.e costs can be divided into fixed and variable components.
3. All the units produced are sold i.e there is no change in inventory quantities during the period.
5. The costs accrued are as a result of change in business activities.
6. A company selling more than a product should simply sell in the same mix i.e the sales mix is constant.
Hence, a business performs a cost benefit analysis when it consider the possible advantages and drawbacks of a decision i.e whether or not it would bring value to the company or create a significant level of impact on the business.
These questions are for your opinion.
