Answer:
1. $46,550
2. $405,000
3. $450,600
Explanation:
1. Computation of differential cost regarding the decision to buy the model 200
Differential cost = Cost of a new model 300 - Cost of a new model 200
Differential cost = $396,350 - $349,800
Differential cost = $46,550
So, the differential cost regarding decision to buy model 200 is $46,550.
2. Sunk costs are the costs which are already incurred by the entity in the past and which are not relevant to decision made today. In this case, sunk cost is the cost of the machine purchased seven years ago for $405,000.
3. Opportunity cost is the profit forgone by chosen alternative course of action. In this case, the Opportunity cost regarding the decision to invest in the model 200 machine is $450,600.
Answer: Risk mitigation
Explanation: In simple words, risk mitigation refers to the strategy in which the management of an organisation tries to reduce the threat that may occur to the business in future by taking suitable risk in present.
Usually the threats it reduces related to the problems affecting the continuity of the business.
In the given case, The manager of the company is employing highly qualified personnel instead of less qualified to manage procurement risk. Hence he is taking actions to reduce risk that may arise in future. Thus, the correct option is B.
Life cycle costing (LCC) includes all relevant costs expected in the first three years of ownership.
Option D
<u>Explanation:</u>
Life-cycle costing (LCC) is a method used to appraise the all out cost of proprietorship. It is a framework that tracks and aggregates the real expenses and incomes owing to cost object from its innovation to its relinquishment.
It enables near cost appraisals to be made over a particular timeframe, considering significant monetary elements both as far as introductory capital expenses and future operational and resource substitution cost.
Life-cycle costing is otherwise called all out cost of possession (TCO).
The way toward recognizing and archiving every one of the costs required over the life of an advantage is known as life-cycle costing (LCC).
The life-cycle costing procedure can be as basic as a table of anticipated yearly expenses, or as mind boggling as an electronic model that takes into account the formation of situations dependent on suppositions about future cost drivers.
Answer:
Dividend in Year 4 = 1.30
Terminal value at year 3 = 16.25
Stock price today = 14.27
Explanation:
Dividend in Year 4 = 1.25 * 1.04 = 1.30
Terminal value at year 3 = 1.30 / ( 12% - 4%) = 16.25
Stock price today = 1 / (1+12%)^1 + 1.15 /(1+12%)^2 + 1.25 / (1+12%)^3 + 16.25 / (1+12%)^3 = 14.27
Answer:
B. increase the total cost per unit
Explanation:
Adding additional materials means increasing the total production cost, and if that situation is not increasing the number of produced units the cost per unit will be increased.
Remember:
Cost Per Unit = Total Cost of Production / Units Produced
