Answer: -13.35%
Explanation:
Based on the information given in the question, the annual rate of return on this painting will be calculated thus:
Sales price of painting = $1,080,000
Cost price of painting = $1,660,000
The sales Price formula is given as
= Cost price × (1 +r)³
1080000 = 1660000 × (1+r)³
1,080,000/1,660,000 = (1+r)³
0.65 = (1 + r)³
Annual rate of return r will now be:
= 0.6506^⅓ - 1
= -13.35%
i have a resturant which is famous for hydrabdi biryani but the ingredients are not avilable in the resturant suddenly if the guest will be came how i will manage it
Assume that the demand for bicycles increases significantly at the same time that there is an increase in the number of people qualified to make bicycles. What would happen to the market equilibrium quantity of labor and wage rate for the labor to produce bicycles
Answer: The quantity of labor increases, and the effect on the wage rate is indeterminate.
Explanation:
The supply of people who can make bicycles has increased at the same time the demand for bicycles has increased. The supply curve would therefore shift to the right and so would the demand curve for labor. They will intersect at a new point where the quantity of labor has now increased.
Unfortunately, the effect on the wag rate would be indeterminate because the wage rate might just stay the same on account of the supply increasing along with the demand instead of either of them increasing unilaterally. When tis happens, the change is said to be indeterminate.
a. Suppose Whole Foods adopts a cost leadership strategy for its new business. What would be the advantages and disadvantages of this strategy
Answer:
The answer is below
Explanation:
Some of the advantages the Whole Foods will derive when they adopt a cost leadership strategy:
1. The firm will earn more profits
2. The market share will increase
3. There will be more availability of capital for the business growth
Some of the disadvantages the Whole Foods will derive when they adopt a cost leadership strategy:
1. Financial reduction in vital areas of the business that might affect the successful running of the business
2. It lowers innovation in production
3. It promotes the production of lower quality commodities
The following data are given for Harry Company: Budgeted production 1,088 units Actual production 946 units Materials: Standard price per ounce $1.976 Standard ounces per completed unit 11 Actual ounces purchased and used in production 10,718 Actual price paid for materials $21,972 Labor: Standard hourly labor rate $14.96 per hour Standard hours allowed per completed unit 4.2 Actual labor hours worked 4,872 Actual total labor costs $79,170 Overhead: Actual and budgeted fixed overhead $1,091,000 Standard variable overhead rate $28.00 per standard labor hour Actual variable overhead costs $136,416 Overhead is applied on standard labor hours. (Round interim calculations to the nearest cent.) The direct labor rate variance is a.$19,730.93 favorable b.$6,284.88 favorable c.$19,730.93 unfavorable d.$6,284.88 unfavorable
Answer:
Direct labor rate variance= $6,284.88 unfavorable
Explanation:
Giving the following information:
Standard hourly labor rate is $14.96 per hour
Actual labor hours worked 4,872
Actual total labor costs $79,170
To calculate the direct labor rate variance, we need to use the following formula:
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Direct labor rate variance= (14.96 - 16.25)*4,872
Direct labor rate variance= $6,284.88 unfavorable
Actual rate= 79,170 / 4,872= $16.25
MC Qu. 90 Sea Company reports the following information... Sea Company reports the following information regarding its production costs: Units produced 46,000units Direct labor$39per unit Direct materials$32per unit Variable overhead$21per unit Fixed overhead$115,000in total Compute the product cost per unit under absorption costing.
Answer:
Unit product cost= $94.5
Explanation:
The absorption costing method includes all costs related to production, both fixed and variable. The unit product cost is calculated using direct material, direct labor, and total unitary manufacturing overhead.
Unit product cost= direct material + direct labor + total unitary overhead
Total unitary overhead= 115,000 / 46,000= $2.5
Unit product cost= 39 + 32 + 21 + 2.5
Unit product cost= $94.5
who is the richest person in the world ?
Answer:
Jeffrey Preston Bezos
Explanation:
Jeffrey Preston Bezos is an American investor, business tycoon, media proprietor, and he is founder and executive chairman of Amazon. Although, he had served as the chief executive officer (CEO), president and chairman of Amazon before becoming its executive chairman.
He was born on the 12th of January, 1964 in Albuquerque, New Mexico, United States of America.
According to Forbes magazine, Jeff currently has an estimated net worth of two hundred and five (205) billion dollars, making him the richest man in the world and on Earth.
In conclusion, Jeffrey Preston Bezos is the richest person in the world.
E15.1B (L0 1) (Recording the Issuances of Common Stock) During its first year of operations, Endevor Corporation had the following transactions pertaining to its common stock. Apr. 26 Issued 15,000 shares for cash at $4.50 per share. May 11 Issued 10,000 shares to attorneys in payment of a bill for $48,000 for services rendered in helping the company to incorporate. Aug. 1 Issued 20,000 shares for cash at $5 per share. Nov. 1 Issued 10,000 shares for cash at $7 per share. Instructions (a) Prepare the journal entries for these transactions, assuming that the common stock has a par value of $1 per share. (b) Prepare the journal entries for these transactions, assuming that the common stock is no par with a stated value of $3 per share.
Answer:
Endevor Corporation
Journal Entries:
a) Assuming that the common stock has a par value of $1 per share
Apr. 26 Debit Cash $67,500
Credit Common stock $15,000
Credit APIC $52,500
To record the issue of 15,000 shares for cash at $4.50 per share.
May 11 Debit Attorneys' fees $48,000
Credit Common stock $10,000
Credit APIC $38,000
To record the issuance of 10,000 shares to attorneys in payment of a bill for $48,000 for services rendered in helping the company to incorporate.
Aug. 1 Debit Cash $100,000
Credit Common stock $20,000
Credit APIC $80,000
To record the issuance of 20,000 shares for cash at $5 per share.
Nov. 1 Debit Cash $70,000
Credit Common stock $10,000
Credit APIC $60,000
To record the issuance of issuance of 10,000 shares for cash at $7 per share.
b) Assuming the common stock is no par with a stated value of $3 per share:
Apr. 26 Debit Cash $67,500
Credit Common stock $45,000
Credit APIC $22,500
To record the issue of 15,000 shares for cash at $4.50 per share.
May 11 Debit Attorneys' fees $48,000
Credit Common stock $30,00
Credit APIC $18,000
To record the issuance of 10,000 shares to attorneys in payment of a bill for $48,000 for services rendered in helping the company to incorporate.
Aug. 1 Debit Cash $100,000
Credit Common stock $60,000
Credit APIC $20,000
To record the issuance of 20,000 shares for cash at $5 per share.
Nov. 1 Debit Cash $70,000
Credit Common stock $30,000
Credit APIC $40,000
To record the issuance of 10,000 shares for cash at $7 per share.
Explanation:
a) Data and Analysis:
a) Assuming that the common stock has a par value of $1 per share
Apr. 26 Cash $67,500 Common stock $15,000 APIC $52,500 for the issue of 15,000 shares for cash at $4.50 per share.
May 11 Attorneys' fees $48,000 Common stock $10,000 APIC $38,000 issuance of 10,000 shares to attorneys in payment of a bill for $48,000 for services rendered in helping the company to incorporate.
Aug. 1 Cash $100,000 Common stock $20,000 APIC $80,000 issuance of 20,000 shares for cash at $5 per share.
Nov. 1 Cash $70,000 Common stock $10,000 APIC $60,000 issuance of 10,000 shares for cash at $7 per share.
b) Assuming the common stock is no par with a stated value of $3 per share:
Apr. 26 Cash $67,500 Common stock $45,000 APIC $22,500 for the issue of 15,000 shares for cash at $4.50 per share.
May 11 Attorneys' fees $48,000 Common stock $30,000 APIC $18,000 issuance of 10,000 shares to attorneys in payment of a bill for $48,000 for services rendered in helping the company to incorporate.
Aug. 1 Cash $100,000 Common stock $60,000 APIC $20,000 issuance of 20,000 shares for cash at $5 per share.
Nov. 1 Cash $70,000 Common stock $30,000 APIC $40,000 issuance of 10,000 shares for cash at $7 per share.
Leon and Beth own 1/13 of a timeshare estate. They own weeks 20 and 21, and also weeks 40 and 41. These weeks are inheritable. What type of ownership is this
Answer: Fee simple.
Explanation:
The type of ownership applicable in this case is the fee simple ownership. The fee simple refers to a term in real estate such that the property owner has full ownership of the land as well as any buildings that are on such land and can do what he or she wishes on the land.
Based on the information given, since we are informed that Leon and Beth own 1/13 of a timeshare estate and own some particular weeks which are inheritable, thus is called the fee simple.
Do you think the phases work the same in construction as they do in event management or software development
Answer:
Yes
Explanation:
It is true that phases work the same in construction as they do in event management or software development because:
The constitution project phase defines and orchestrates the technical and methodical concept for the whole project including the design stage to the completion; It is a significant aspect to total completion and successful delivery of a construction project.
Typically, construction phases are commonly split into 4 vital phases including Planning, Preconstruction, Construction, and Close-out.
Hence, if a particular phase is missed or jumped over, there may be a problem, or the whole project will be jeopardized
Suppose a State of Nevada bond will pay $1,000 eight years from now. If the going interest rate on these 8-year bonds is 5.5%, how much is the bond worth today
Answer:
$651.60
Explanation:
the worth of the bond today can be determined by calculating the present value of the bond's cash flow
Present value is the sum of discounted cash flows
Present value = cash flow / (1 + r)^n
r = interest rate
n = years
1000 / ( 1.055)^8 = $651.60
Suppose management estimated the market valuation of some obsolete inventory at $99,000; this inventory was recorded at $120,000, which resulted in recognizing a loss of $21,000. The auditors obtained the following information: The inventory in question could be sold for an amount between $78,000 and $92,000. The costs of advertising and shipping could range from $5,000 to $7,000.
Required:
a. Would you propose an audit adjustment to the management estimate?
b. Prepare the appropriate accounting entry.
Answer:
a. An audit adjustment is needed since the best case scenario, where the net realizable value is highest would result in $92,000 - $5,000 = $87,000.
b. the value of inventory must decerase by $99,000 - $87,000 = $12,000, so COGS must increase by that amount:
Dr Cost of goods sold 12,000
Cr Merchandise inventory 12,000
A project with an initial investment of $460,100 will generate equal annual cash flows over its 11-year life. The project has a required return of 8.2 percent. What is the minimum annual cash flow required to accept the project
Answer: $65,075.85
Explanation:
Given that the cash flow should be constant, it will be an annuity.
The initial investment will be the present value of this annuity.
Present value of annuity = Annuity * ( 1 - (1 + rate)^-number of periods) / rate
460,100 = Annuity * ( 1 - (1 + 8.2%) ⁻¹¹) / 8.2%
460,100 = Annuity * 7.070211525
Annuity = 460,100 / 7.070211525
= $65,075.85
Match the elements of the marketing mix to the scenarios that portray them.
product
price
place
promotion
price-a company decides on the worth of a product, keeping in mind the disposable income of its customers.
promotion-a company raises awareness about a revolutionary medication that guarantees reduction in hair loss
product-something offered to customers in return for a pre-decided value
place-the most feasible location for selling the goods
In an indirect message, valid reasons for the refusal are presented before the bad news. Which option is most effective
Answer:
Following are the response to the given question:
Explanation:
The oblique message attempts to soften a piece of bad news, in order to achieve this aim, a soothing discourse sends the message describing why the negative stuff was being reported prior to hit the fact and minimizing its effect. Throughout the case of transmitting bad news, indirect speech is better accepted, because persons tend to better accept the explanation. So letter c matches an oblique speech better effectively, that's why These acceptability guidelines for the used computer hardware would have to be established since only new computers offer guarantees, young elite, and matching devices.
"A corporation has annual sales of $18 million, total assets of $4 million, a debt ratio of 40%, depreciation expense of $200,000, and a tax rate of 40%. The corporation's total stockholders' equity is equal to"
Answer:
$2.4 million
Explanation:
The total assets of the firm are funded by both debt and equity,hence, the total assets is the same as total equity plus total debt based on the accounting equation formula below:
total assets=equity+debt
tota assets=$4 million
equity=unknown
debt can be derived using the debt ratio as shown thus:
debt ratio=debt/total assets
debt ratio=40%
debt=unknown
total assets=$4 million
40%=debt/$ 4 million
debt=40%*$4 million
debt=$1.6 million
$4 million=equity+$1.6 million
equity=$4 million-$1.6 million
equity =$2.4 million
Assume that your company is considering switching to cloud computing for some of its services. Some people on the team are worried about security. What are some things that you can do to minimize the potential security disadvantages?
Answer:
See the explanation below.
Explanation:
Cloud computing can be described as the on-demand availability of computer system resources, particularly data storage and computational power, without the user having to manage them directly.
The potential security disadvantages of cloud computing can be minimized by doing the following:
a. Teach effective protection techniques to other members of the team and staff.
b. To ensure that internal and external data privacy regulations are followed, ensure that you in place the correct cloud application governance mechanism.
c. Make sure you have a backup plan in place. This ensures that you have a secure backup of your data in the event that something goes wrong.
d. To manage risk, implement access controls. Even for external identities, link user identities to backend folders.
e. Encrypt data and text before transmitting it, and store the keys that encrypt and decrypt it.
f. To keep hackers at bay, create unique, one-of-a-kind passwords.
g. Penetration testing should be employed to test your security measures. Penetration testing is an IT security practice that aims to find and fix flaws as well as reduce cloud security risks.
An investor purchases one municipal and one corporate bond that pay rates of return of 8% and 10% respectively. If the investor is in the 15% tax bracket, his after tax rates of return on the municipal and corporate bonds would be respectively:______.a. 6.4% and 8%.
b. 6.8% and 10%.
c. 8% and 8.5%.
d. 8% and 10%.
Answer:
c. 8% and 8.5%
Explanation:
Calculation to determine his after tax rates of return on the municipal and corporate bonds would be respectively:
Tax rates of return on the municipal=8%*(1-0)
Tax rates of return on the municipal=8%
Tax rates of return on corporate bonds=
10*(1-15%)
Tax rates of return on corporate bonds=10*0.85
Tax rates of return on corporate bonds=8.5%
Therefore his after tax rates of return on the municipal and corporate bonds would be respectively:8% and 8.5%
How does Porter characterize the industrial and trade potential of western New York and the Midwest? What does he argue will help the region realize that full potential?
Answer:
Porter market forces will helps in realizing the full potential.
Explanation:
M. porter characterized the industrial and trade potentialities of western new York and Midwest as these region will help to increase in globalization and industrial development of the nation. The factors like the bargaining power of buyers and suppliers and threat of substitutes create a market full of competition.Buff Company had average operating assets of $580,000 and sales of $196,000 last year. If the controllable margin was $26,000, what was the ROI
Answer:
4.5
Explanation:
The average operating assets is $580,000
The sales from last year is $196,000
The controllable margin was $26,000
Therefore the ROI can be calculated as follows
= 26,000/580,000
= 0.045×100
= 4.5
Hence the ROI is 4.5%
_____ cannot monitor personal email accounts.
1. Spouses
2. Colleagues
3. Employers
4. Trade association
the answer is colleagues
Colleagues cannot monitor personal email accounts. Hence, option A is correct.
What is Colleagues?A colleague is someone with whom you share a workplace or who is in the same profession as you, particularly a peer in the same field. Colleagues are also known as coworkers or coworkers of the same employer as people.
Today, coworker is more often used to describe people who share a workplace or tasks, whereas colleague is more often used to describe people who work in the same industry but for different companies.
People's coworkers are the people you work with, particularly in a professional context. He took a flight from Lisbon to Split without consulting his coworkers. A coworker suggested that he see a psychiatrist, but Faulkner declined.
Thus, option A is correct.
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Reedy Company reports the following information for 2012:
Cost of goods manufactured $68,250
Direct materials used 27,000
Direct labor incurred 25,000
Work in process inventory, January 1, 2012 11,000
Factory overhead is 75% of the cost of direct labor. Work in process inventory on December 31, 2012, is:________
a. $16,250
b. $8,500
c. $18,750
d. $13,500
Answer:
Ending WIP= $13,500
Explanation:
First, we need to calculate the factory overhead:
Factory overhead= 25,000*0.75= $18,750
Now, the ending WIP inventory:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
68,250 = 11,000 + 27,000 + 25,000 + 18,750 - Ending WIP
Ending WIP= $13,500
A business's source documents:_____.A. Must be in electronic form. B. Include the ledger. C. Provide objective evidence that a transaction has taken place. D. Are records of all increases and decreases in specific asset. E. Include the chart of accounts.
C. Provide objective evidence that a transaction has taken place.
Oerstman, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 125,000 units requiring 500,000 direct labor hours. (Practical capacity is 520,000 hours.) Annual budgeted overhead costs total $820,000, of which $590,000 is fixed overhead. A total of 119,400 units using 498,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $262,000, and actual fixed overhead costs were $555,050.
Required:
a. Compute the fixed overhead spending and volume variances.
b. Compute the variable overhead spending and efficiency variances.
Answer:
Oerstman, Inc.
a. Fixed overhead spending variance
= $34,950 F
Fixed overhead volume variance
= $2,360 F
b. Variable overhead spending variance
= $32,868 U
Variable overhead efficiency variance
= $20,400 U
Explanation:
a) Data and Calculations:
Expected annual output = 125,000 units
Required direct labor hours = 500,000 hours
Standard direct labor hours per unit = 4 hours (500,000/125,000)
Practical capacity of direct labor hours = 520,000 hours
Annual budgeted overhead costs = $820,000
Fixed overhead = $590,000
Fixed overhead rate per dlh = $1.18 ($590,000/500,000)
Variable overhead = $230,000 ($820,000 - $590,000)
Variable overhead rate per dlh = $0.46 ($230,000/500,000)
Actual production = 119,400
Actual direct labor hours used = 498,000
Actual variable overhead costs = $262,000
Actual variable direct hours used per unit = 4.17 hours (498,000/119,400)
Actual variable overhead rate per dlh = $0.526 ($262,000/498,000)
Actual fixed overhead costs = $555,050
Actual fixed overhead rate per dlh = $1.115 ($555,050/498,000)
a. Fixed overhead spending variance = Actual fixed overhead Minus Budgeted fixed overhead
= $555,050 - $590,000
= $34,950 F
Fixed overhead volume variance = budgeted fixed overhead Minus applied fixed overhead costs
= standard rate * (500,000 - 498,000)
= $2,360 F
b. Variable overhead spending variance = Actual direct labor hours (Actual overhead rate - Standard overhead rate)
= 498,000 * ($0.526 - $0.46)
= 498,000 * $0.066
= $32,868 U
Variable overhead efficiency variance = (standard hours direct labor hours – actual direct labor hours) * standard variable overhead rate per hour
= (477,600 - 498,000) * $0.46
= $20,400 U
Orange Corp. uses the indirect method to prepare its statement of cash flows. Refer to the following information for the year: 1. Long-Term Notes Payable, beginning balance, $81,000 2. Long-Term Notes Payable, ending balance, $74,000 3. Common Stock, beginning balance, $3100 4. Common Stock, ending balance, $29,000 5. Retained Earnings, beginning balance, $76,000 6. Retained Earnings, ending balance, $118,000 7. Treasury Stock, beginning balance, $5500 8. Treasury Stock, ending balance, $10,300 9. No stock was retired. 10. No treasury stock was sold. 11. During the year, the company repaid $37,000 of long-term notes payable. 12. During the year, the company borrowed $30,000 on new long-term notes payable. 13. Net income for the year was $55,000. 14. Assume all dividends declared during the year were paid. What is the net cash provided by financing activities
Answer:
$1,100
Explanation:
Cash-flows from Financing activities:
Repayment of LT Note payable -$37,000
Borrowing from LT note payable $30,000
Issue of Common Stock (29,000-3,100) $25,900
Dividend paid (76,000+55,000-118,000) -$13,000
Purchase of treasury stock (10,300-5,500) -$4,800
Net Cash-flows from Financing activities $1,100
Cash-flows from Financial activities are:
Repayment of LT Note payable -$37,000
Borrowing from LT note payable $30,000
Issue of Common Stock (29,000-3,100) $25,900
Dividend paid (76,000+55,000-118,000) -$13,000
Purchase of treasury stock (10,300-5,500) -$4,800
Net Cash-flows from Financing activities $1,100
What is Cash-Flows?The term cash flow refers to the net amount of cash and cash equivalents being transferred in and out of a company.
When cash is received represents inflows, while money spent represents outflows.
A company’s ability to create value for shareholders is fundamentally determined by its ability to generate positive cash flows or, more specifically, to maximize long-term free cash flow (FCF). FCF is the cash generated by a company from its normal business operations after subtracting any money spent on capital expenditures.
What are Financing Activities?In the financial statements of any firm, it becomes very important to first know what actually are:
Financing activities are transactions that include owner’s equity, long-term liabilities, and changes in short-term loans.
Financing activities include the movement of cash and cash equivalents among the organization and its sources of cash.
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Identify a company in any sector. Using relevant examples, defend the use of information technology to bring about a cost reduction in this company’s products and services.
Answer:
Amazon is a ecommerce company that makes use of IT in enhancing productivity and reducing costs. Such as reducing delivery time and packaging expenses.
Explanation:
The simplest methods to reduce the costs in any company is by reducing the supply expenses and cutting the production, expenditure and making use of effective time strategy all through the use of virtual and information technology. Narrowing down the focus, making most of space etc.Which of the following is the primary cause of salary compression? A. taxes B. inflation C. interest rates D. collective bargaining
You have been asked to assist Emerald City in its response to increasing flooding. The National Weather Service (NWS) reports it has been raining heavily for the past 7 days, averaging 1.3 inches of rain each 24-hour period.
The areas of concerns are as follows:
The Rapid River, which runs north and south through Emerald City, is experiencing slow-rise flooding.
The flooding is being aggravated by debris catching on the low bridge downstream from lower Lake Emerald. Located near the bridge is the Lake Emerald Independent Living Complex, which includes a skilled nursing facility.
Residents are being asked to evacuate their homes in anticipation of the rising floodwaters.
It is 1200 hours, and the NWS has just informed the County Emergency Management office that the flooding is expected to crest at 1800 today. It is expected that this flood crest will cause flooding as indicated on the projected floodplain map.
a. Divide the Operations Section into three Divisions, each assigned to a different geographical area to evacuate.
b. Divide the Operations Section into three Groups, each assigned to a different geographical area to evacuate.
c. Divide the Operations Section into seven Task Forces, each assigned to a different geographical area to evacuate.
Answer: Divide the Operations Section into three Divisions, each assigned to a different geographical area to evacuate.
Explanation:
Since the initial objective is to evacuate residents, therefore, in addition to a Flood Control Group and a Nursing Home Task Force, another organizational structure that can be used to tackle this issue is to divide the Operations Section into three Divisions, each assigned to a different geographical area to evacuate.
Assigning the individuals in each group to s particular area will lead to a faster evacuation and bring about efficiency with regards to the evacuation.
Departmental contribution to overhead is calculated as the amount of sales of the department less: Direct and indirect costs. Product and period costs. Direct expenses. Controllable costs. Joint costs.
Answer:
Direct expenses.
Explanation:
The departmental contribution is determined by deducting the direct expense from the amount of sales
In mathematically,
The following formula should be used
Departmental contribution = Department revenues - direct expense
Here The expenses to be - rent, utilities, taxes, insurance, etc
ANd, It is arrive after paying off the direct expenses that related to the overhead.
Head-First Company plans to sell 5,170 bicycle helmets at $74 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Total fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative expense). Break-even units equal 1,707.
Required:
Calculate the break-even number of helmets and check your answer by preparing a contribution margin income statement based on the break-even units.
Answer:
Head-First Company
Break-even number of bicycle helmets = 1,707 units
Contribution Margin Income Statement based on the break-even units
Sales revenue ($74 * 1,707) = $126,318
Variable cost ($45 * 1,707) = 76,815
Contribution margin = $49,503
Fixed costs = $49,500
Net operating income = $0
Explanation:
a) Data and Calculations:
Planned sales for the coming year = 5,170 bicycle helmets
Selling price per helmet = $74
Unit variable cost = $45
Contribution margin per unit = $29 ($74 - $45)
Total fixed cost = $49,500
Break-even units = 1,707 ($49,500/$29)
Contribution Margin Income Statement based on the break-even units
Sales revenue ($74 * 1,707) = $126,318
Variable cost ($45 * 1,707) = 76,815
Contribution margin = $49,503
Fixed costs = $49,500
Net operating income = $0
Product Y has a value of $100 and a holding cost rate of 10% per year. The ordering costs are $1,000, and the yearly demand is 45,000 units. The economic order quantity can be determined to equal 3,000 (feel free to check this). Determine the total inventory costs (i.e., ordering costs + holding costs) per year.
Answer:
$30,000
Explanation:
Use the following formula to calculate the total cost
Total cost = ordering costs + holding costs
Where
Ordering costs = Numbers of orders placed per year x Ordering Cost per order = ( 45,000 units / 3,000 units per order ) x $1,000 per order = 15 x $1,000 = $15,000
Holding costs = Average Inventory x Holding cost per unit per year = ( 3,000 units / 2 ) x ( $100 x 10% ) = 1,500 units x $10 = $15,000
Placing values in the formula
Total Cost = $15,000 + $15,000
Total Cost = $30,000
