Answer:
Many fast-growing companies would prefer to use debt to support their growth, rather than equity, because it is, arguably, a less expensive form of financing (i.e., the rate of growth of the business's equity value is greater than the debt's borrowing cost).
Explanation:
Answer:
There could be many reasons, but probably the company reached its debt ceiling and is not able to borrow anymore (at acceptable conditions), due to low net cash flow relative to debt service, or low available collateral, or both.
Larger expansions or risky undertakings would also be more likely financed by equity - the expansion might require taking on more debt than the company is currently able to service, and the creditors are not sure if it will also bring sufficient additional EBITDA to service large debt. Similar thing with risky business proposals - it is more logical to finance them through equity, where investors share the hard-to-predict benefits as well as potential losses. If they were to be financed by debt, the loan should in theory carry very high interest to make up for the risk profile of the endeavor. Better to make it an equity investment.
Also, issuing equity improves your balance sheet and enables you to take on more debt. Having more equity could also mean cheaper debt (better interest rates). Debt is considered “senior” to equity, in theory losses should hit investors first and creditors later, so having a larger equity cushion means lower credit risk.
If the company suffered some hard times, they are already starved for cash and on top of that creditors would likely want to reduce their exposure - a perfect storm that could put the company out of business due to lack of liquidity, even when the business model is good in the long term (but who has a crystal ball, eh?). Raising more equity may be their only option.
Asteria earned a $27,000 salary as an employee in 2020. How much should her employer have withheld from her paycheck for FICA taxes
Answer:
$2,070
Explanation:
Calculation to determine How much should her employer have withheld from her paycheck for FICA taxes
Social security tax 6.2%
Medicare tax which is 1.45%
Social security tax = $27,000 x 6.2%
Social security tax = $1,674
Medicare tax = $27,000 x 1.45%
Medicare tax =$391.5
FICA taxes Paycheck withheld= - $1,674 + $391.5
FICA taxes Paycheck withheld=$2,065.5
FICA taxes Paycheck withheld=$2,070 (Approximately)
Therefore How much should her employer have withheld from her paycheck for FICA taxes will be $2,070
Assuming that all entries have been posted, prepare correcting entries for each of the following errors.
a. The following entry was made to record the purchase of $774 in supplies on account:
Supplies 142 774
Cash 101 774
b. The following entry was made to record the payment of $475 in wages:
Rent Expense 521 475
Cash 101 475
c. The following entry was made to record a $396 payment to a supplier on account:
Supplies 142 196
Cash 101 196
Answer and Explanation:
The correcting journal entries are shown below:
a. Cash Dr $774
To account payable $774
(Being purchase of supplies on account is recorded)
b. Wages expense Dr $475
To rent expense $475
(Being wages expense is recorded)
c. Account payable $396
To Supplies $196
To cash $200
(being cash paid is recorded)
These 3 correcting entries should be recorded
What is a plan implemented by a company promising value to its customers and converting customer payments into a profit called
Answer:
Business model
Explanation:
A business plan can be defined as a formally written document that comprises of the financial and operational objectives (plans) of a business firm.
Basically, a business plan is a roadmap or guide that outline the goals of a business, methods on how to achieve those goals, and the timeframe required to achieve those goals.
Similarly, a business model can be defined as a plan developed and implemented by a company while expressly promising value to its customers and converting the payments made by customers for goods or services into a profit.
Consider the following gasoline sales time series data. Click on the datafile logo to reference the data.
Week Sales (1000s of gallons)
1 16
2 20
3 20
4 23
5 18
6 17
8 19
9 23
10 19
11 14
12 21
a. Using a weight of 1/2 for the most recent observation, 1/3 for the second most recent observation, and 1/6 the most recent observation, compute a three-week weighted moving average for the time series (to 2 decimals). Enter negative values as negative numbers.
Week
Time-Series Value Weighted Moving
Average Forecast Forecast
Error
(Error)2
1
2
3
4
5
6
7
8
9
10
11
12
Total
b. Compute the MSE for the weighted moving average in part (a).
MSE =
Do you prefer this weighted moving average to the unweighted moving average? Remember that the MSE for the unweighted moving average is 8.90.
Prefer the unweighted moving average here; it has a (greater/smaller) MSE.
c. Suppose you are allowed to choose any weights as long as they sum to 1. Could you always find a set of weights that would make the MSE at least as small for a weighted moving average than for an unweighted moving average? (Yes/ No)
Answer:
a) attached below
b) MSE for weighted moving average = 14.5
c) Yes
Explanation:
a) Computing a three-week weighted moving average using
1/2 for most recent , 1/3 for second most recent and 1/6 for third most recent observation
Given data :
Week Sales (1000s of gallons)
1 16
2 20
3 20
4 23
5 18
6 17
7 19
8 23
9 19
10 14
11 21
solution attached below
B) Determine MSE for the weighted moving average
MSE = ∑ (error)^2 / 8
= 116.0289 / 8 = 14.50
The MSE for unweighted moving average ( 8.90 ) is smaller than the MSE for weighted moving average
C) Yes I will find a weight that makes at least the MSE for weighted moving average than unweighted moving average
The weekly total cost of baking pies at Tasty Tortes is given by TC = 0.01 Q 1.5. Tasty’s marginal cost of producing 10,000 pies a week is:
Answer: $1.50
Explanation:
TC = 0.01Q⁰.⁵
You get marginal cost when you differentiate the total cost.
MC = dTC / dQ
= 1.5 * 0.01 * Q¹.⁵ ⁻ ¹
= 0.015 * Q⁰.⁵
When Q is 10,000, the marginal cost is:
= 0.015 * 10,000⁰.⁵
= $1.50
Imagine that the Brazilian aircraft manufacturer Embraer purchases a 10 percent share of a Canadian aircraft distribution company, in order to facilitate the marketing and sales of its aircraft in Canada. This is an example of
Answer: Forward Integration
Explanation:
Forward integration is a process where a company takes over the control of another company that is further along in the value chain so that it might be able to sell or distribute is goods more effectively. For example, an oil company taking over a petroleum products company.
In this scenario, the Brazilian company purchased a huge part of a company further along in distribution in order to facilitate better sales so this is forward integration.
You would like to use the periodic review model to compute the desired order quantity for a company. You know that vendor lead time is 5 days and the number of days between reviews is 20. Which of the following is the standard deviation of demand over the review period and lead time (sT L) if the standard deviation of daily demand is 8?
a. 40
b. 200
c. 8
d. 25
e. 100
Answer:
a. 40
Explanation:
The computation of the standard deviation of the demand is shown below:
= 8 × √(5+20)
= 8 × √25
= 8 × 5
= 40
Hence, the standard deviation of the demand is 40
Therefore the first option is correct and the same is to be considered
Llewelyn Company purchased 1,000 shares of its own $10 par value common stock when the market price of the stock was $36 per share. What journal entries would be used to record the purchase of treasury stock?
Answer: Increase the treasury stock account and decrease the cash account by $36,000.
Explanation:
The journal entries that would be used to record the purchase of treasury stock will be to increase the treasury stock account and decrease the cash account by $36,000.
Note that the $36000 was calculated as:
= 1,000 shares × $36 per share
= $36,000
The following information is given about two fixed coupon bonds from Company A and Company B, both of which have several years left until maturity. Both bonds have a par value of $1,000. Based on this information, which of the following is most accurate?
Company A Company B
Coupon = 4% Coupon = 8%
Yield = 6% Yield = 6%
A. Company A’s bond is priced higher than Company B’s and Company B’s bond is traded at a premium
B. Company A’s bond is priced lower than Company B’s and Company B’s bond is traded at a premium
C. Company A’s bond is priced higher than Company B’s and Company B’s bond is traded at a discount
D. Company A’s bond is priced lower than Company B’s and Company B’s bond is traded at a discount
Answer: B. Company A’s bond is priced lower than Company B’s and Company B’s bond is traded at a premium
Explanation:
Discount bond ⇒ Bond coupon rate is less than yield which leads to bond having a lower than par price.
Premium bond ⇒ Bond coupon rate is more than yield which leads to bond having higher than par price.
Company A therefore has a discount bond that has a low price compared to Company B which has a premium bond which means that its price is relatively high.
Company B's bond is therefore priced higher than Company A's bond.
Assume you set up a sole proprietorship and your lawyer tells you that as the owner, you could stand to lose your personal wealth if the business goes bankrupt. This means a sole proprietorship:
Answer:
Faces unlimited liability
Explanation:
From the question we are informed about instance, whereby you set up a sole proprietorship and your lawyer tells you that as the owner, you could stand to lose your personal wealth if the business goes bankrupt. In this case, it means a sole proprietorship Faces unlimited liability. Unlimited liability can be regarded as full legal responsibility that is been assumed for all business debts by business owners as well as partners . This liability cannot be regarded as capped, here there could be paying of obligations through the seizure as well as well as sale of personal assets of the owners, and this quit not the same as that of limited liability business structure.
On May 1, a two-year insurance policy was purchased for $12,000 with coverage to begin immediately. What is the amount of insurance expense that would appear on the company's income statement for the first year ended December 31
Answer:
$4,000
Explanation:
The accrual concept is of the opinion that expense should be recognized when incurred and not necessarily when the expense is paid for.
The insurance payment made was for two years, hence, at the end of the first year ended 31 December, which is the 8 months after the payment has been made, hence, 8-month insurance expense would be recognized in the first year.
May 1-December 31=8 months
insurance expense=two-year payment*8 months/2 years
insurance expense=$12,000*8/24
insurance expense for the first year=$4,000
During its first year of operations, Mario Lupo formed Lupo Company as a corporation and personally invested $15,000 in the business in exchange for common stock. Lupo Company also paid dividends of $2,000. The company earned $35,000 of revenues and incurred $23,000 of expenses. At the end of the year, the company's equity totaled:_____.
a. $13,000.
b. $15,000.
c. $25,000.
d. $75,000.
Answer:
c. $25,000
Explanation:
Calculation to determine At the end of the year, the company's equity totaled:
First step is to calculate the Net income using this formula
Net income= Revenues- Expense
Let plug in the formula
Net income= 35000-23000
Net income=12000
Second step is to calculate Net income added to capital using this formula
Net income added to capital = Net income-Cash dividend
Let plug in the formula
Net income added to capital=12000-2000
Net income added to capital=10000
Now let determine the Ending company total equity using this formula
Ending company total equity= Opening invested capital + Net income added to capital
Let plug in the formula
Ending company total equity=15000+10000
Ending company total equity=$25000
Therefore At the end of the year, the company's equity totaled:$25,000
Given the following information, determine the activity rate for setups.
Activity Pool Activity Base Budgeted Amount
Setups 10,000 $180,000
Inspections 24,000 $120,000
Assembly (DLH) 80,000 $400,000
a. $58.00
b. $0.75
c. $5.09
d. $18
Answer:
Set up= $18 per set up
Explanation:
Giving the following information:
Activity Pool Activity Base Budgeted Amount
Setups 10,000 $180,000
To calculate the activity rate, we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Set up= 180,000 / 10,000
Set up= $18 per set up
The impact of interest rate changes in the PV of $100 due in 20 years compared to the PV of $100 due in one year are:
a. smaller because interest rate changes have a greater impact on the near-term cash flows than distant cash flows.
b. the same because the cash flow is the same.
c. greater because interest rate changes have a greater impact on distant cash flows than near-term cash flows.
d. sometimes less and sometimes more depending on the interest rate.
Answer: c. greater because interest rate changes have a greater impact on distant cash flows than near-term cash flows.
Explanation:
Interest rate changes have a greater impact on distant cashflows because those cashflows will be exposed to the interest rates for longer. This means that they will be subjected to more discounting than a cashflow that is due in one year which would be subject to only a single year of discounting.
For instance, assume the required rate of return for two investments is 10%. One investment yields $10,000 in 20 years and another yields $10,000 in 2 years .
The present value of both are:
= 10,000 / (1 + 10%)²⁰ = 10,000 / ( 1 + 10%)²
= $1,486.43 = $8,264.46
Notice the difference. The longer term investment was more exposed to interest rate effects.
Assume that you have been hired by a large international bank that is looking to develop a smartphone app to help college students with their finances, credit scores, and investments. The new product development process for the app is just beginning, and you are looking at ways that social media usage can be improved during each step of the process. Whatever new product type a firm plans to develop, it will likely follow a formal new-product development (NPD) process. Organizations increasingly use social media to evaluate potential new products. Social media are especially valuable for small businesses and nonprofit organizations, which typically have less money to spend on the NPD process. Match each social media marketing action with the appropriate step of the new-product development process.
Answer:
Determining that smartphone apps and social media aps are important parts of a bank's future plans to reach young consumers. ⇒ New Product Strategy.
Tweeting out the availability of a new smartphone app that helps young professionals manage their financial lives better. ⇒ Product launch.
Inviting younger "fans" of the bank's social media sites to have a free trial of the new smartphone app. ⇒ Test marketing.
Having a Faceb-ook discussion with consumers on what they would ideally like to have from a bank smartphone app. ⇒ Idea generation.
Creating a prototype of the smartphone app. ⇒ Product development.
Using Tw-itter to ask followers what they are willing to pay for smartphone apps. ⇒ Business analysis.
Developing a social media site that allows college students to review and provide feedback on new product ideas. ⇒ Idea screening.
state any three examples of non-insurable risks??
Answer:
any three examples of non-insurable risks are:
Residential overland water
War.
Acts of a foreign enemy.
Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of:
Answer:
-1.0
Explanation:
Diversification in a portfolio can be regarded as spreading of investments by investors so that risk can be minimized. The correlation coefficient "r" that exist between two securities allows us to know how return that's gotten from one security is related to returns from another security. For instance, it is possible for two securities within same sector to move in the same direction, i.e it is possible to be positively correlated, in this sense when price of one goes up , the other price also goes up this might not be with the same margin.
As regards negative correlation, there is movement of security returns in opposite directions, in this sense there is least relationship between the securities. Hence with r= 1 there is movement of the two stocks in opposite direction hence Maximum diversification.
It should be noted that Maximum diversification benefit can be achieved if one were to form a portfolio of two stocks whose returns had a correlation coefficient of -1.0
the company's revenue for the month totaled $950,000 from credit sales, and its cost of goods sold for the month is $540,000. Prepare summary journal entries dated October 31 to record its October production
Answer:
Date Account Title Debit Credit
Oct. 31 Accounts Receivable $950,000
Sales $950,000
Date Account Title Debit Credit
Oct. 31 Cost of goods sold $540,000
Finished goods inventory $540,000
This year Andrews achieved an ROE of 10.7%. Suppose management takes measures that decrease Asset turnover (Sales/Total Assets) next year. Assuming Sales, Profits, and financial leverage remain the same, what effect would you expect this action to have on Andrews's ROE
Answer:
Andrews's ROE would decrease
Explanation:
Return on equity is an example of a profitability ratio.
Profitability ratios measure the ability of a firm to generate profits from its asset
Return on equity = net income / average total equity
Using the Dupont formula, ROE can be determined using:
ROE = Net profit margin x asset turnover x financial leverage
ROE = (Net income / Sales) x (Sales/Total Assets) x (total asset / common equity)
If asset turnover decreases and other ratios remain constant, ROE declines
Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 32,000 direct labor-hours would be required for the period’s estimated level of production. The company also estimated $557,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris’s actual manufacturing overhead cost for the year was $679,453 and its actual total direct labor was 32,500 hours.
Required:
Compute the company’s plantwide predetermined overhead rate for the year.
Answer:
Predetermined manufacturing overhead rate= $19.41 per direct labor hour
Explanation:
To calculate the predetermined manufacturing overhead rate we need to use the following formula:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= (557,000 / 32,000) + 2
Predetermined manufacturing overhead rate= $19.41 per direct labor hour
Narcissistic leaders tend to have which of the following traits that are positively associated with both leader emergence and effectiveness?
A. Agreeableness and creativity.
B. Extraversion and openness to experience.
C. Openness to experience and agreeableness.
D. Agreeableness and extraversion.
E. Creativity and extraversion.
Which increases GDP the most: 1 pound of dried beans or one pound of New York strip steak?
Answer:
To determine which increases GDP the most, 1 pound of dried beans or one pound of New York strip steak, the value of each of these foods must be considered. Thus, knowing that in general meat has a much higher market value than beans (in supermarkets, 1 pound of beans costs about $ 2 or $ 3, while 1 pound of New York strip steak costs about $ 13), 1 pound of New York strip steak increases GDP the most.
Presented below are three revenue recognition situations.
a. Groupo sells goods to MTN for $908,000, payment due at delivery.
b. Groupo sells goods on account to Grifols for $797,000, payment due in 30 days.
c. Groupo sells goods to Magnus for $499,000, payment due in two installments, the first installment payable in 18 months and the second payment due 6 months later. The present value of the future payments is $462,200.
Required:
Indicate the transaction price for each of these transactions and when revenue will be recognized.
Answer:
Groupo
Transaction Price When to recognize revenue
a. $908,000 Delivery Time
b. $797,000 30 days' time
c. $462,200 18 months and 24 months' time
Explanation:
a) Data and Analysis:
a. $908,000 Delivery Time
b. $797,000 30 days' time
c. $462,200 18 months and 24 months' time
b) For the goods sold on installment sales, the payments are also deferred. Therefore, the seller does not recognize any gain until installments are received. Since installment sales encompass much longer time periods compared to credit sales, there are no discounts offered for early payments. The seller in an installment sales maintains an ownership interest in the goods sold until the buyer pays the balance due in full.
Consider public policy aimed at smoking.
a. Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $2 and the government wants to reduce smoking by 20 percent, by how much should it increase the price?
b. If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking one year from now or five years from now?
c. Studies also find that teenagers have a higher price elasticity of demand than do adults. Why might this be true?
Answer:
1. government shoud increase price by 50%. so it would be $3
2. larger effect 5 years from now
3. this is true due to their limited finance compared to adults
Explanation:
1. prices elasticity = % change in quantity demanded ÷ % change in price
price elasticity = 0.4
% change in dmd = 20%
% change in price = ?
[tex]0.4=\frac{0.20}{?}[/tex]
we cross multiply
? = 0.20/0.4
= 0.5
= 50%
so if the government wants to reduce smoking by 20%, it has to increase the price of cigarettes by half of its price= $2 + $1 = $3
2. goods usually have more elastic demand as time goes on. So if cigarette price is permanently raised, it would have a bigger effect five years from now. This is based on the fact that the people may not feel short run effect of the increase as they would in the long run. But gradually given this increase, people may start to gradually reduce their smoking.
3. The effect of the change in price would be more felt on the teenagers. this is due to the fact that they have limited financial strength compared to adults. Also they are new to smoking compared to the adults and are more likely to be less involved in the habit.
The tool within the "Assessing Opportunities" step of the Strategic Sourcing Process that graphically orders categories of numerical data in descending order so that the most important categories are easily recognized is called a:
Answer:
Pareto chart
Explanation:
A Pareto chart can be regarded as bar graph, The lengths of the bars are been arranged having longest bars on the left, on the right is the shortest bar, with this arrangement the chart visually gives a depiction about which situations are more significant. The lengths of the bars gives a representation of frequency or representation of cost i.e time or money. It should be noted that Pareto chart is the tool within the "Assessing Opportunities" step of the Strategic Sourcing Process that graphically orders categories of numerical data in descending order so that the most important categories are easily recognized.
The tool within the "Assessing Opportunities" step of the Strategic Sourcing Process that graphically orders categories of numerical data in descending order so that the most important categories are easily recognized is called a Pereto chart
A Pareto chart is simply known to be a type of chart that has bars and a line graph. It is the point where individual values are shown in descending order by bars, and the cumulative total is shown by the line.
It serves mainly to show the most important among a said large amount or set of factors.Pareto charts show the step by step frequency counts of data.Conclusively, the charts are used to show areas to focus on first in process improvement.
Learn more from
https://brainly.com/question/17989104
Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 177,000 kilometers during a year, the average operating cost is 12.3 cents per kilometer. If a truck is driven only 118,000 kilometers during a year, the average operating cost increases to 15.5 cents per kilometer.
Required:
a. Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation.
b. Express the variable and fixed costs in the form Y = a + bX.
c. If a truck were driven 147,000 kilometers during a year, what total cost would you expect to be incurred?
Description Term or Phrase 1. An assessment of whether financial statements follow GAAP. 2. Amount a business earns in excess of all expenses and costs associated with its sales and revenues. 3. A group that sets accounting principles in the United States. 4. Accounting professionals who provide services to many clients. 5. Principles that determine whether an action is right or wrong.
Answer: See explanation
Explanation:
1. An assessment of whether financial statements follow GAAP. = Audit
2. Amount a business earns in excess of all expenses and costs associated with its sales and revenues. = Net income
3. A group that sets accounting principles in the United States. = Financial Accounting Standard Board (FASB)
4. Accounting professionals who provide services to many clients. = Public accountant
5. Principles that determine whether an action is right or wrong.= Ethics
An assessment of whether financial statements follow GAAP: This is known as an "audit" or "financial statement audit." It involves an examination of financial statements to ensure that they have been prepared in accordance with Generally Accepted Accounting Principles (GAAP), which are the standard accounting principles and guidelines used in the United States.
What are the responses to other questions?2. Amount a business earns in excess of all expenses and costs associated with its sales and revenues: This is referred to as "profit" or "net income." It represents the remaining funds after deducting all expenses, including operating costs, taxes, interest, and other relevant expenditures, from the total revenues generated by the business.
3. A group that sets accounting principles in the United States: This group is called the "Financial Accounting Standards Board" (FASB). FASB is an independent, private-sector organization responsible for establishing and improving accounting standards in the United States. Their goal is to ensure transparency and consistency in financial reporting.
4. Accounting professionals who provide services to many clients: These professionals are known as "public accountants" or "certified public accountants" (CPAs). They offer accounting and financial services to various clients, including individuals, businesses, nonprofit organizations, and government entities. CPAs are typically licensed and regulated by state boards of accountancy.
5. Principles that determine whether an action is right or wrong: These are referred to as "ethical principles" or "ethical standards." They provide guidance on what is considered morally right or wrong in the context of accounting and business practices. Ethical principles in accounting include integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. They serve as a framework for accountants to maintain ethical conduct and make informed decisions.
learn more about GAAP: https://brainly.com/question/28345482
#SPJ6
On January 1, Able Company purchased equipment costing $135,000 with an estimated salvage value of $10,500, and an estimated useful life of five years. Using the straight-line method, what is the amount that should be recorded as depreciation on December 31?
a. $135,000
b. $24.900
c. $124,500
d. $27,000
Answer:
Depreciation = $24900
Explanation:
Below is the calculation of depreciation:
Cost of equipment = $135000
Salvage value = $10500
Useful life = 5 years
Depreciation = (Cost of machine - salvage value) / useful life
Depreciation = (135000 - 10500) / 5
Depreciation = $24900
What was the result in Riley v. Iron Gate Self Storage, the case in which Larry Riley rented a self-storage unit from Iron Gate with an agreement limiting the value of stored contents to $5,000 and a corresponding liability limit of $5,000
Answer:
Larry Riley v. Iron Gate Self Storage
The result in the above-mentioned case was that judgment was entered in favor of Iron Gate.
Explanation:
The known facts are that after missing payments, Iron Gate auctioned Riley's storage unit items off, causing Riley to sue Iron Gate, in which he alleged to have suffered a $1.5 million in damages, whereas the storage unit was only allowed to hold $5,000. In its ruling, the court determined that self-storage facilities are not an essential or necessary public service. Therefore, it dismissed any procedural unconscionability. Thus, judgment was entered in favor of Iron Gate.
Shawn Incorporated planned to produce 3,000 units of its single product, Megatron, during November. The standard specifications for one unit of Megatron include six pounds of material at $0.30 per pound. Actual production in November was 3,100 units of Megatron. The accountant computed a favorable materials price variance of $380 and an unfavorable materials quantity variance of $120. Based on these variances, one could conclude that:_________
Answer: The actual cost of materials was less than the standard cost
Explanation:
Net materials cost variance = Favorable materials price variance + Favorable materials quantity variance
= 380 + (-120 unfavorable)
= 380 - 120
= $260 favorable
As the materials cost variance is favorable, it means that the actual cost of materials was less than what was budgeted for it or rather its standard cost.
