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miv72 [106K]
2 years ago
15

An electronics firm is currently manufacturing an item that has a variable cost of $ 0.50 per unit and a selling price of $ 1.00

per unit. Fixed costs are $ 14,000. The current volume is 30 comma 000 units. The firm can substantially improve product quality by adding a new piece of equipment at an additional fixed cost of $ 6,000. The variable cost would increase to $ 0.60​, but volume should jump to 50,000 units due to a​ higher-quality product.
Based on the given information, the decision should be to:
a. For Smithson Cutting, the break-even point in units?
b. For Smithson Cutting, the break-even point in dollars =?
Business
1 answer:
Paladinen [302]2 years ago
6 0

Answer:

a) the break-even point in unit= 50, 000 units

b.) the break-even point in dollars = $50,000

Explanation:

The break even point in units is the minimum units of the product that the company should sell in order for it to make no profit or loss.  

At this units of sales, the sales revenue would produce a total contribution exactly equal to the fixed cost.

Break -even point in unit = General fixed cost/price  - variable cost

= 14,000 + 6000/(1-0.6)= 50,000  units

Break -even point (sales revenue) =General fixed cost/contribution sales ratio

Contribution sales ratio-= 1-0.6/1× 100= 40%

Break-even sales revenue= 14,000 + 6000/40%=$50,000

a) For Smithson Cutting, the break-even point in unit= 50, 000 units

b) For Smithson Cutting, the break-even point in dollars = $50,000

Profit before decision

Profit = (sales price - variable cost)× units - Fixed cost

= (1-0.5)×30000 - 14,000 = $1000

Profit after = 1- 0.60× 50,000 - 20,000= $0

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An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting
Tresset [83]

Answer:

under activity-based costing the sum of all product costs does not equal the total costs of the company.

Explanation:

The method of an activity-based costing system can be used use to find the total cost of all the activities that are required to make a product. This system also helps to find out which overhead costs can be avoided.

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because under activity-based costing the sum of all product costs does not equal the total costs of the company.

8 0
3 years ago
Which probability distribution is commonly used to model the inherent variability of activity time estimates in project manageme
Ksivusya [100]

Answer:

Beta distribution

Explanation:

Beta distribution In probability theory

is regarded as a part of continuous probability distributions with a defined interval which could be 0 and 1, and it is characterized with two positive parameters (α and β) which is seen as

as exponents of the random variable .

It should be noted that Beta distribution probability is commonly used to model the inherent variability of activity time estimates in project management

5 0
2 years ago
On January 1, 20X9, Pallet Company acquires 80 percent ownership in Slat Corporation for $200,000. The fair value of the noncont
polet [3.4K]

Answer:

<em>Consolidated Assets 850,000</em>

Explanation:

We need to calcualte the alue of the purchased portion of Slat.

total assets - non-controlled = proportional owned assets

250,000 - 50,000 = 200,000

The consolidated net assets would be:

Pallet Company 650,000

Slat Company    250,000

non-controlling    (50,000)

<em>Consolidated Assets 850,000</em>

7 0
3 years ago
YellowCard Company manufactures accessories for iPods. It had the following selected transactions during 2017. (Note: For any pa
jarptica [38.1K]

Answer:

warrant expense 51,000 debit

          cash                       6,000 credit

          warranty liability 45,000 credit

--to record warrant-related accounts--

interest payable 16,667 debit

interest expense  3,333 debit

          cash                  20,000 credit

--to record interest expense for the loan and installment--

Manufacturing Facilities 5,192,772  debit

              Cash                    5,000,000 credit

              Restoration Liability 192,772 credit

-- to record the payment to contractor--

Explanation:

Warranty: the additional expected expense are considered warranty laibility

Loan: we previously recorded accrued interest from March 1st to Dec 31th

That is: 200,000 x 10% x 10/12 months = 16,667 payable

At February 28th we recognize the last two month of interest

200,000 x 10% x 2/12 months = 3,333 expense

in total we have 16,667 + 3,333 = 20,000 cash outlay

Facility: the asset should add to all the cost necessary to acquire it:

As the conversion into community center is mandatory it is part of the cost:

present value of the 500,000 in ten years:

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  $500,000.00

time  10.00

rate  0.10000

\frac{500000}{(1 + 0.1)^{10} } = PV  

PV   192,771.6447

Total cost:

5,000,000 cashg + 192,772 liability = 5,192,772

4 0
3 years ago
The market value of​ Fords' equity, preferred​ stock, and debt are $ 7 ​billion, $ 2 ​billion, and $ 13 ​billion, respectively.
steposvetlana [31]

Answer:

WACC is 9%

Explanation:

WACC is the average cost of capital of the firm based on the weightage of the debt and weightage of the equity multiplied to their respective costs.

According to WACC formula

WACC = ( Cost of equity x Weightage of equity ) + ( Cost of debt ( 1- t) x Weightage of debt ) + ( Cost of Preferred equity x Weightage of Preferred equity )

As per given data

Market Values

Equity = $7 ​billion,

Preferred​ stock = $2 ​billion

Debt = $13 ​billion

Cost

Equity

Capital asset pricing model measure the expected return on an asset or investment. it is considered as the cost of common stock.

Formula for CAPM

Cost of Equity = Risk free rate + beta ( market return - risk free rate )

Cost of Equity = Rf + β ( Mrp )

Cost of Equity = 3% + 1.6 ( 8% ) = 15.8%

Preferred​ stock = $2 / $26 = 0.077 = 7.7%

Debt = 8%

Placing values in the formula

WACC = ( 15.8% x $7 billion / $22 billion ) + ( 8% ( 1- 0.3) x $13 billion / $22 billion ) + ( 7.7% x $2 billion / $22 billion )

WACC = 5.03% + 3.31% + 0.7% = 9.04%

7 0
3 years ago
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