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-BARSIC- [3]
3 years ago
10

Production costs activity use the table below with page 4 of the fasttrack to complete the activity. first shift capacity first

and second shift capacity automation level cost to double capacity cost to raise automation to 10 company found under "capacity next round" capacity next round x 2 (shifts) found under "automation next round" increasing capacity is $6 per unit with an adjustment for automation. increasing automation is per unit of capacity industry total the capacity of each product in that segment total capacity of each product in that segment x 2 formula is: first shift capacity x [$6 + ($4 x automation level)] example input: 500 formula is: first shift capacity x [$4 x (10 - automation level)] example input: 700* in the simulation, the input cells are in thousands (‘000's), so an input of 1 is actually 1000 units. so, in the example below 500,000 units is inputted as 500 in the cell. this applies to dollar values as well. incomplete capacity analysis product name first shift capacity first & second shift capacity automation level cost to double capacity cost to raise automation to 10.0 company industry company industry eat 800 1304 1600 0 3 14400
Business
1 answer:
Sophie [7]3 years ago
4 0
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Derrick Iverson is a divisional manager for Holston Company. His annual pay raises are largely determined by his division’s retu
almond37 [142]

Answer:

a. Project's net present value is $1,015,163.09

b. Simple rate of return is 15%

c. Yes. The reason is that the project has a positive net present value of $1,015,163.09.

d. No. The reason is that the simple rate of return of 15% obtained in part b is lower the division’s return on investment (ROI), which has been above 20% each of the last three years.

Explanation:

a. Compute the project's net present value.

To compute this, we first calculate the annual cash inflow as follows:

Annual cash inflow = Net operating income + Depreciation = $452,000 +  $828,000 = $1,,280,000

Now, the project's net present value can be calculated using the formula for calculating the present of an ordinary annuity as follows:

PV = P * [{1 - [1 / (1 + r)]^n} / r] …………………………………. (1)

Where;

PV = Present value of the annual cash flow = ?

P = Annual cash inflow = $1,280,000

r = Discount rate = 17%, or 0.17

n = Equipment useful years = 5

Substitute the values into equation (1) to have:

PV = $1,280,000 * [{1 - [1 / (1 + 0.17)]^5} / 0.17]

PV = $4,095,163.09

Project's net present value = PV - Project's initial investment = $4,095,163.09 - $3,080,000 = $1,015,163.09

b. Compute the project's simple rate of return

This can be computed as follows:

Simple rate of return = Net operating income / Initial investment =  $452,000 / $3,080,000 = 0.15, or 15%

c. Would the company want Derrick to pursue this investment opportunity?

Yes. The reason is that the project has a positive net present value of $1,015,163.09.

Note that had it been the net present value of the project was negative, the company would not want to Derrick to pursue this investment opportunity since the decision of the company is based on whether the project's NPV is positive or negative.

d. Would Derrick be inclined to pursue this investment opportunity?

No. The reason is that the simple rate of return of 15% obtained in part b is lower the division’s return on investment (ROI), which has been above 20% each of the last three years.

Pursuing this investment opportunity will therefore reduce the Overall ROI of the division and Derrick will not get annual pay raises if this happens.

8 0
3 years ago
Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentag
Iteru [2.4K]

Answer:

Computer Tycoon, Inc.

1. Horizontal Analysis, calculating the year-over-year changes in each line:

Computer Tycoon, Inc. Income Statements  For the Year Ended December 31    

                                                      2016         2015            Dollars      %

Sales Revenue                             $108,000  $132,000  -$24,000  -18.2%

Cost of Goods Sold                         64,000      74,700   -$10,700  -14.3%

Gross Profit                                      44,000     57,300   -$13,300  -23.2%

Selling, General, & Administrative

                         Expenses               36,800     38,600   -$1,800      -4.7%

Interest Expense                                  580           515     $65         +12.6%

Income before Income Tax Exp.      6,620       18,185  -$11,565     -63.6%

Income Tax Expense                         1,500       5,800   -$4,300     -74.1%

Net Income                                      $5,120    $12,385   -$7,265    -58.7%

2-A. Vertical analysis by expressing each line as a percentage of total revenues:

Computer Tycoon, Inc. Income Statements  For the Year Ended December 31    

                                                      2016            %             2015             %

Sales Revenue                             $108,000     100        $132,000    100

Cost of Goods Sold                         64,000      59             74,700     56.6

Gross Profit                                      44,000       41             57,300     43.4

Selling, General, & Administrative

                         Expenses               36,800       34           38,600       29.2

Interest Expense                                  580       0.5                515      0.4

Income before Income Tax Exp.      6,620        6              18,185      13.8

Income Tax Expense                         1,500       1.4             5,800       4.4

Net Income                                      $5,120       4.7         $12,385      9.4

2-B No. It made less profit per dollar of sales in 2016 compared to 2015.

Explanation:

a) Horizontal analysis is the analysis of financial statements to show changes in the amounts of corresponding financial statement items over a period of time.  It is used to evaluate the trend situations, using financial statements for two or more periods.

b) Vertical analysis is another technique for analyzing financial statements with each line item being listed as a percentage of a base figure within the statement.  For income statement, the base figure is usually the Sales Revenue, while for balance sheet, the base figure is the total assets.

8 0
3 years ago
Squeaky Shine provides car washing services in Jersey City, New Jersey. A three-month pass for automatic car wash sells for $60,
soldi70 [24.7K]

Answer:

Explanation:

1. The journal entries are shown below:

On December 1

Cash A/c Dr $1,260

     To  Deferred Service Revenue $1,260

(Being cash is received)

On December 31, 2016

Deferred Service Revenue $420                 ($1,260 ÷ 3 months)

      To Service revenue                    $420

(Being service revenue is recorded)

2. Income statement

Earned income from car washing services    $420

Balance sheet

Assets

Cash              $1,260

Liabilities

Deferred Service Revenue       $840        ($1,260 - $420)

7 0
3 years ago
What is meant by consistency when discussing financial accounting information?
goblinko [34]

Answer:

The correct answer is letter "A": Information presented by a company applies the same accounting treatment to similar events, from period to period.

Explanation:

In accounting, consistency is the principle that states a company must use an accounting method for book-keeping its transactions and the same method should be used from one period to the following. However, the consistency principle allows the company to change the current method for a more preferred method.

6 0
3 years ago
An investor places $5,000 in an account. The stated annual interest rate is 6% compounded monthly. The value of the account at t
Nostrana [21]

Answer:

$5,983.40

Explanation:

Data provided in the question:

Principle amount = $5,000

Interest rate, r = 6% = 0.06

Time, t = 3 years

Compounded monthly i.e number of periods n = 12

Now,

Final amount = Principle × \left( 1 + \frac{r}{n} \right)^{\Large{n\times t}}

or

Final amount = $5,000 × \left( 1 + \frac{0.06}{12} \right)^{\Large{12\times3}}

or

Final amount = $5,000 × 1.005³⁶

or

Final amount = $5,000 × 1.196

or

Final amount = $5,983.40

7 0
3 years ago
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