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Norma-Jean [14]
3 years ago
11

Peppertree Company has two divisions, East and West. Division East manufactures a component that Division West uses. The variabl

e cost to produce this component is $1.48 per unit; full cost is $2.01. The component sells on the open market for $4.94. Assuming Division East has excess capacity, what is the lowest price Division East will accept for the component?
Business
1 answer:
notka56 [123]3 years ago
8 0

Answer:

The lowest price that Division East will accept for the component is:

$1.48 per unit.

Explanation:

a) Data:

Variable product cost = $1.48

Full cost = $2.01 (Variable + Fixed costs)

Market price = $4.94

b) The variable product cost of $1.48 is the direct cost for producing the component, which includes the direct materials, direct labor, and direct overhead.  The full cost of $2.01 includes other fixed costs (indirect materials, indirect labor, and indirect overhead), which cannot be directly traced to the component.  The market price is the selling price, which includes the full cost and the profit margin (markup) which is added as compensation for the manufacturing effort.

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Answer:

a) must accept market price for its physical capital inputs.

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The price of gold in the commodity market is being influenced by market speculation.  Market speculation implies investors are trying to profit from the changing prices of gold.  When the market is active, the price of gold will be moving up and down depending on demand.

The current prices are high is a motivation to sell. For I'maGoldMiner to profit from the current high prices, it must continue with production. In the event the prices of physical capital inputs change, the company must accept the new prices.  The high selling prices will assist the company in absorbing any changes input costs. That way, the company will maximize on the current high prices.

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Answer:

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Here the warranty expense is debited as it increased the expense and credited the estimated warranty liability as it also increased the liability

Therefore the option b is correct

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Why is cvp analysis more difficult when using absorption costing than when using variable costing?.
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CVP analysis is more difficult because its requires costs to be broken down between variable and fixed which is not done in absorption costing.

<h3>What is a CVP analysis?</h3>

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Hence, the analysis is difficult when using absorption costing than when using variable costing because its requires costs to be broken down between variable and fixed which is not done in absorption costing.

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Another name for a chart is “Venn diagram.”
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