Solution:
The reporting unit's book value of $250 million meets the market value of $220 million.
Requirement 1:
Determination of implied fair value of goodwill:
Fair value of Center point, Inc. $220 million
Fair value of Center point’s net assets (excluding goodwill) 200 million
Implied fair value of goodwill $ 20 million
Measurement of impairment loss:
Book value of goodwill $62 million
Implied fair value of goodwill 20 million
Impairment loss $42 million
Requirement 2: If the operating unit's market valuation of 270 million dollars surpasses 250 million dollars, there is no depreciation risk.
Answer:
a.
i. $6
ii. $8
b.
i. $600,000
ii. $800,000
Explanation:
a. Standard Cost is the cost which is stated or described as the amount which is per unit.
i. For materials
Standard Cost = Expected amount to be spend on materials / Units
= $600,000 / 100,000
= $6
ii. For labor
Standard Cost = Expected amount to be spend on labor / Units
= $800,000 / 100,000
= $8
b. Budgeted cost are those costs which are stated as the total or aggregate amount.
i. For total material cost
Budgeted cost for the year = Expected or total cost spend on materials
= $600,000
ii. For total labor cost
Budgeted cost for the year = Expected or total cost spend on labor
= $800,000
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