Answer:
A. 566 pounds
Explanation:
Given: Demand for rice is very consistent= 200 pounds per month.
Cost of rice per order= $50 per order.
Rice cost= $5 per pound.
Carrying charge= 15%
EOQ: Economic order quantity (EOQ) is the number of units that company should include in their inventory with each order to reduce cost of inventory.
Now, calculating EOQ.
Formula; EOQ= 
D= Demand in units for specified period.
P= relevant ordering costs per order.
C= Relevant carrying cost of one unit in stock for the time period used for D.
EOQ= 
⇒ EOQ= 
Opening parenthesis
⇒ EOQ= 
⇒ EOQ= 
∴ EOQ= 
Hence, Economic order quantity is 566 pounds.
Answer:
Testerman Construction Co.
Internal rate of return method in analyzing capital expenditure:
Present value of expenditure = $149,630
Present of cash inflows annuity = $149,630 (using 20% discount rate and present value annuity factor of 3.3251 x $45,000)
NPV = $0 (PV of cash outflow - PV of cash inflow)
Therefore, the IRR = 20%
Explanation:
a) Data and Calculations:
Investment cost = $149,630
Annual net cash flows = $45,000
Investment period = 6 years
Annuity of future cash flows = 3.3251
b) Testerman’s IRR (Internal Rate of Return) is a capital budgeting and analysis tool which determines the discount rate that makes the present value of future inflows equal to the present value of outflows from a project. This IRR helps the managers to determine the projects that add value and are worth undertaking. IRR is based on assumptions. Similar projects with the same IRR will differ in returns due to the differences in timing and the size of the cash, the amount of debts and equity used to generate the returns, and the assumption of a constant reinvestment may which IRR makes.
Answer:
C) Townson's fixed asset turnover ratio has decreased between Year 1 and Year 2.
Explanation:
Year 2 Year 1
Sales $3,645,000 $4,250,000
Fixed assets:
Beginning of year 880,000 820,000
End of year 520,000 880,000
fixed asset turnover (FAT) ratio = net sales / average fixed assets
FAT ratio year 1 = $4,250,000 / [($820,000 + $880,000) / 2] = 5
FAT ratio year 2 = $3,645,000 / [($880,000 + $520,000) / 2] = 5.2
Townson's fixed asset turnover ratio increased between year 1 and year 2.
Answer:
b. are usually composed of diagrams and equations.
Explanation:
Economic models involve huge number of factors for their study and analysis.
It encompasses the analysis of various situations in an economy. It amounts for significant influence on the changes in market and environment, in which an economy runs.
Since it is complex in nature it involves huge diagrams, metrics, equations.
As with just theory it is not easy to form the understanding of economics. Thus, it involves many pictorial representations in the form of diagrams, graphs, etc:
Therefore, correct statement is
Statement b
Answer:
Businesses use three types of profit to examine different areas of their companies.
1. Gross profit subtracts variable costs to revenue for each product line. Variable costs are only those needed to produce each product, like assembly workers, materials, and fuel. It doesn't include fixed costs, like plants, equipment, and the human resources department. Companies compare product lines to see which is most profitable.
2. Operating profit includes both variable and fixed costs. Since it doesn't include certain financial costs, it's also commonly called EBITA. That stands for Earnings Before Interest, Tax, Depreciation, and Amortization. It's the most commonly used, especially for service companies that don't have products.
3. Net profit includes all costs. It's the most accurate representation of how much money the business is making. On the other hand, it may be misleading. For example, if the company generates a lot of cash, and it's invested in a rising stock market, it may look like it's doing well. But it might just have a good finance department, and not be making money on its core products.
Explanation:
