You can wash the car and you can also wash yourself
The answer in the space provided is real options. Real
options are the choices in which are present or available in terms of
opportunities in the business investments. The reason that is termed as real is
because it is not considered to be financial instrument but rather as a
tangible asset.
Missing information:
Corporation makes 5,700 units of part U13 each year. This part is used in one of the company's products. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $9.60 Direct labor $7.80 Variable manufacturing overhead $10.20 Supervisor's salary $5.90 Depreciation of special equipment $8.80 Allocated general overhead $8.00 An outside supplier has offered to make and sell the part to the company for $25.10 each.
Answer:
annual financial advantage of purchasing part from outside vendor = $73,380
Explanation:
current production costs per unit:
- direct materials $9.60
- direct labor $7.80
- variable manufacturing overhead $10.20
- supervisor's salary $5.90
- depreciation of special equipment $8.80
- allocated general overhead (fixed) $8.00
- total current costs per unit = $50.30
- total costs $50.30 x 5,700 units = $286,710
costs if company decides to purchase the part form outside vendor:
- purchase cost per unit $25.10
- deprecation of special equipment $8.80
- allocated general overhead $8.00
- total costs per unit = $41.90
- total costs $41.90 x 5,700 = $238,830
- - revenue generated from using facility space = $238,830 - $25,500 = $213,330
annual financial advantage of purchasing part from outside vendor = $286,710 - $213,330 = $73,380
When conducting incremental analysis related to the decision if it should eliminate one of its unprofitable product lines, Giant should assume a percentage of fixed costs associated with the discontinued product line will remain, where fixed costs <span>are the costs </span><span>that have to be paid by a company, independent of any business activity. They are not variable.</span>
Answer:
Interest on a national debt
Explanation:
If a government decides to pay the interest on the national debt, that is one of the examples of an opportunity cost which a whole country will abide. For instance, a government pays interest on a debt of 10 million dollars, that money could have been spent on education, health or on building infrastructure such as roads. Governments every now and then make certain decisions which result in a large sum of opportunity cost, and a whole country experiences that.
