Bond carries a part that is popular in the manufacture of automatic sprayers. Demand for this part is 4,000 units per year; order costs amount to P30 per order, and holding costs total P1.50 per unit. Bond currently places four orders per year with its suppliers. Management is considering the implementation of an economic order quantity model in an effort to better manage its inventories. Compute total annual inventory costs if Bond follows the EOQ policy.
Q: What is the future value of a $900 annuity payment over five years if interest rates are 8 percent?…
A: Future Value: The future value is the amount that will be received at the end of a certain period.…
Q: Your organisation is considering expanding the Human Resources Department at an initial cost of…
A: Income = Net Income + Depreciation = 7000 + 5000 = £12,000 Payback Period means the time period it…
Q: Parra Company completed its income statement and comparative balance sheet for the current year and…
A: Cash flow from operating activities consists of cash inflows and cash outflows that relate to day to…
Q: Suppose that the CAPM holds and that BP’s stock has a beta of 2. If the expected market return is…
A: Required rate of return on stock may ne calculated using CAPM formula as given below Required rate…
Q: A way of spreading out the risk associated with expensive and/or dangerous business ventures among…
A: There are certain businesses that can have high risk high return profile. The business might be…
Q: Based on the information provided above, apply Gordon’s growth model to compute the dividend growth…
A: Gordon Growth Model: This model makes an assumption that the dividend grows at a constant rate and…
Q: 6. Find the amount at the end of 15 years if P 55 000 is invested at an interest rate of 5%…
A: Future value can be calculated as: = Present value * (1 + rate)^periods
Q: A 3-year, 1000 par value bond with a 3% annual coupon is trading to yield 4%. What is the current…
A: Current yield is the rate of return an investor earning on the current value of its investment, in…
Q: For each of the following monetary policy tools: A. The BSP buys securities in the open market. B.…
A: Monetary policy is the policy that is related to money and this policy is set by the central bank to…
Q: Funding risk is the risk that a firm will not be able to meet its short-term financial obligations…
A: Funding risk is the kind of risk wherein we can say any company not able to raise sufficient capital…
Q: Mr Price, has no debt outstanding and a total market value of R150,000. Earnings before interest and…
A: The Earnings per Share is calculated by dividing Earnings available to equity shareholders by number…
Q: If the Canadian dollar to U.S. dollar exchange rate is 1.30 and the British pound to U.S. dollar…
A: 1 US dollar = 1.30 Canadian dollar 1 US dollar = 0.77 British pound We need to find Canadian dollar…
Q: A project has cash flows of -$35,000, $0, $10,000, and $42,000 for Years 0 to 3, respectively. The…
A: If the IRR of project is greater than required rate of return then we will accept the project and…
Q: Reed River Apiary is considering which of two mutually exclusive project it should undertake to…
A: Internal rate of return (IRR) is the rate of return at which NPV of the project becomes zero. That…
Q: Debt payments of $1,650 and $2,400 are due in five months and nine months, respectively. What single…
A: Time value of money (TVM) refers to the method used to measure the amount of money at different…
Q: The beta of Treasury bills is: Multiple Choice: A) +1.0 B) +0.5 C) −1.0 D) 0.0
A: Beta is a systematic risk of a security (i.e. bond, stock, treasury bills etc.) or portfolio (i.e.…
Q: Dowling Sportswear is considering building a new factory to produce aluminum baseball bats. This…
A: NPV is the difference between present value of the future cashflows from the project discounted at…
Q: Critically explain why the arguments leading to put-call parity for European options cannot be used…
A: Arguments leading to put call parity of European options cannot be used to give a similar result for…
Q: Using the corporate valuation model approach, what should be the company's stock price today?
A: Free cash flow = (EBIT*(1-T)) + Depreciation exp. - Capital expenditure - Changes in working capital…
Q: Question 1 You recently went to work for Ndejiku Company, a supplier of auto repair parts used in…
A: The payback period is used to calculate the time required to cover the initial investment. The net…
Q: 12 You will bid to supply 3 jets per year for each of the next three years to the Navy. To get set…
A: We have to bid for 3 Jets per year for next 3 year to the Navy - 3*3 = 9 Jets in total $60 Million…
Q: Complete the following, using ordinary interest. (Use Days in a year table.) (Do not round…
A: Ordinary Interest: Ordinary Interest is computed based on the 360 days per year (or 30 days a…
Q: ABC common stock is expected to have extraordinary growth in earnings and dividends of 22% per year…
A: Current dividend = $4 Growth rate for 2 years = 22% Growth rate after 2 years = 3% Required rate of…
Q: How long must $4200 be in a bank at 8% interest compounded annually to become $10,576.31? a. 11…
A: Time may be calculated using the following formula Final Amount (Principal +Interest) = P (1+r)t…
Q: Solve for the unknown interest rate in each of the following: (Do not round intermediate…
A: Future Value refers to the value of the current asset or investment or of cash flows at a specified…
Q: The YTM on a three year bond is 5%. What is the average expected short rate over the life of the…
A: The yield to maturity (YTM) is the annual percentage rate of return on a bond provided the investor…
Q: Better plc is comparing two mutually exclusive projects, whose details are given below. The…
A: Given, Two projects A and B with cashflows The cost of capital is 12%
Q: You can buy a piece of land today that you except will be worth $15000 in 9 years. Assuming your…
A: To calculate the value of property today we will use present value formula as follows: Present…
Q: 6. Construct an amortization schedule for a loan of RM5,000 to be amortized annually for 4 years at…
A: Loan (mortgage) amortization schedule refers to a schedule which is prepared to shows the periodic…
Q: Joe Pierce has been offered the opportunity of investing $178,556.90 now. The investment will earn…
A: Initial investment = $178,556.90 Interest rate = 0.08 Accumulated value = $500,000 Period = ?…
Q: Why did bank failures increase, with a lag, after deposit insurance became available to banks? What…
A: Risk-based deposit insurance has premiums that reflect how sensibly banks invest their customers'…
Q: 1 A i). What is leasing? ii). Discuss five important benefits of leasing. iii). Discuss five…
A: Leasing is a process according in which a business or firm can obtain the use of fixed assets in…
Q: In 1999, the euro was trading at $0.82 per euro. If the euro is now trading at $0.99 per euro, what…
A: To calculate the percentage change in euro's value we will use following formula Percentage change…
Q: ABC Inc expects to have EPS (earning per share) of $5 in the coming year. The firms plan to pay all…
A: The Current Price per Share will be calculated by Gorden's Model. The current price per share is…
Q: Comparing labor productivity , suppose the United States has an absolute advantage over Costa Rica…
A: A country should take competitive advantage of the items in which it is specialized by exporting…
Q: Suppose Bank is trading share at 17$ today. The company pays dividend of 0.25. The analysts claimed…
A: Expected return = (Target Price - Current price + dividend) / Current price
Q: 4. In a CDS the accrual payment is a payment made by CDS and occurs when the to CDS defaults a.…
A: Reference entity is the entity that issues bond CDS buyer is the holder of Reference entity bonds.…
Q: Marcie Mays plans to have $350,000 in retirement fund 30 years from now. What monthly ordinary…
A: Future value of ordinary annuity Annuity is a series of equal payments at equal interval for a…
Q: Bernard co. has 7% coupon bonds on the market that have 13 years left to maturity. The bonds will…
A: Current bond price will be equal to present value of Maturity Value and present value of interest…
Q: BCD Company offer its investors option contracts to buy their shares at a price of P50. Currently,…
A: Given, The spot price is P60 Risk free rate is 8.25%
Q: If the interest rate is 12% compounded annually, approximately how many years will it take the…
A: In the problem we need future value triple as compare to present value therefore to calculate the…
Q: A)A US corporate bond has a coupon rate of 4% and a face value of $1000 and will mature in 4 years.…
A: Bonds are generally long-term financial debt instruments raised by the company. Company periodically…
Q: What is the CAPM? What does it tell you?
A: Capital asset pricing model (CAPM) is a model or method which is used by the company to define the…
Q: 2. A loan is being repaid with 20 annual payments of P1,000 at the end of each year. Atter the tenth…
A: Here, Annual Payment is P1,000 Number of Payments is 20 Semi Annual Payments after 10 payments is X…
Q: Company A's historical returns for the past three years are 6 percent, 15 percent, and 15 percent.…
A: The capital asset pricing model is a financial concept that is widely used. In this model, the…
Q: True or False a.) Generally, even though the acquisitions are recent, the net realizable value of…
A: Synergy: Synergy occurs when two entities combine together their resources to accomplish more…
Q: 4. If at the beginning of the 6th year the nominal rate drops to 12% compounded quarterly, what is…
A: Mortgage amortization refers to a schedule which is prepared to shows the periodic loan payments,…
Q: Suppose that the CAPM holds and that BP’s stock has a beta of 2. the required rate of return on BP…
A: Stocks refer to the concept which denotes the security that represents the holder's ownership in the…
Q: ABC Inc expects to have EPS (earning per share) of $5 in the coming year. The firms plan to pay all…
A: EPS next year = $5 All earning is paid as dividend, hence growth rate (g) = 0 Dividend next year…
Q: ABC Corporation has a developing market for its product. Good financial risk management will allow…
A: Financial risk management is the protection of the financial interests of a company from any…
Step by step
Solved in 2 steps
- Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?Pietro expects to produce 50,000 units and sell 49,300 units. Beginning inventory of finished goods is 42,500, and ending inventory of finished goods is expected to be 34,000. Required: 1. Prepare a statement of cost of goods sold in good form. 2. What if the beginning inventory of finished goods decreased by 5,000? What would be the effect on the cost of goods sold?Sterling Corporation has an EOQ of 5,000 units. The company uses an average of 500 units per day. An order to replenish the part requires a lead time of five days. Required: 1. Calculate the reorder point, using Equation 20.3. 2. Graphically display the reorder point, where the vertical axis is inventory (units) and the horizontal axis is time (days). Show two replenishments, beginning at time zero with the economic order quantity in inventory. 3. What if the average usage per day of the part is 500 units but a daily maximum usage of 575 units is possible? What is the reorder point when this demand uncertainty exists?
- This year, Hassell Company will ship 4,000,000 pounds of chocolates to customers with total order-filling costs of 900,000. There are two types of customers: those who order 50,000 pound lots (small customers) and those who order 250,000 pound lots (large customers). Each customer category is responsible for buying 1,500,000 pounds. The selling price per pound is 2 per lb for the 50,000 pound lot and 3 per lb for the larger lots, due to differences in the type of chocolate. ABC would likely assign order-filling costs to the customer type as follows: a. 450,000, small; 450,000, large (using pounds as the driver) b. 360,000, small; 540,000, large (using revenue as the driver) c. 750,000, small; 150,000, large (using number of orders as the driver) d. 450,000, small; 450,000, large (using customer type as the driver)Click the Chart sheet tab. On the screen is a column chart showing ending inventory costs. During a deflationary period, which bar (A, B, or C) represents FIFO costing, which represents LIFO costing, and which represents weighted average? Explain your reasoning. On January 4 following year-end, Rio Enterprises received a shipment of 60 units of product costing 580 each. These units had been ordered by Del in December and had been shipped to him on December 27. They were shipped FOB shipping point. Revise the FIFOLIFO3 worksheet to include this shipment. Preview the printout to make sure that the worksheet will print neatly on one page, and then print the worksheet. Save the completed file as FIFOLIFOT. Using the FIFOLIFO3 file, prepare a 3-D bar (stacked) chart showing the cost of goods sold and ending inventory under each of the four inventory cost flow assumptions. No Chart Data Table is needed. Use the values in the Calculations Section of the worksheet for your chart. Enter your name somewhere on the chart. Save the file again as FIFOLIFO3. Print the chart.Kimball Company has developed the following cost formulas: Materialusage:Ym=80X;r=0.95Laborusage(direct):Yl=20X;r=0.96Overheadactivity:Yo=350,000+100X;r=0.75Sellingactivity:Ys=50,000+10X;r=0.93 where X=Directlaborhours The company has a policy of producing on demand and keeps very little, if any, finished goods inventory (thus, units produced equals units sold). Each unit uses one direct labor hour for production. The president of Kimball Company has recently implemented a policy that any special orders will be accepted if they cover the costs that the orders cause. This policy was implemented because Kimballs industry is in a recession and the company is producing well below capacity (and expects to continue doing so for the coming year). The president is willing to accept orders that minimally cover their variable costs so that the company can keep its employees and avoid layoffs. Also, any orders above variable costs will increase overall profitability of the company. Required: 1. Compute the total unit variable cost. Suppose that Kimball has an opportunity to accept an order for 20,000 units at 220 per unit. Should Kimball accept the order? (The order would not displace any of Kimballs regular orders.) 2. Explain the significance of the coefficient of correlation measures for the cost formulas. Did these measures have a bearing on your answer in Requirement 1? Should they have a bearing? Why or why not? 3. Suppose that a multiple regression equation is developed for overhead costs: Y = 100,000 + 100X1 + 5,000X2 + 300X3, where X1 = direct labor hours, X2 = number of setups, and X3 = engineering hours. The coefficient of determination for the equation is 0.94. Assume that the order of 20,000 units requires 12 setups and 600 engineering hours. Given this new information, should the company accept the special order referred to in Requirement 1? Is there any other information about cost behavior that you would like to have? Explain.
- Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.Chassen Company, a cracker and cookie manufacturer, has the following unit costs for the month of June: A total of 100,000 units were manufactured during June, of which 10,000 remain in ending inventory. Chassen uses the first-in, first-out (FIFO) inventory method, and the 10,000 units are the only finished goods inventory at June 30. Under the absorption costing concept, the value of Chassens June 30 finished goods inventory would be: a. 50,000. b. 70,000. c. 85,000. d. 145,000.
- Evans Company had total sales of 3,000,000 for fiscal 20x5. The costs of quality-related activities are given below. Required: 1. Prepare a quality cost report, classifying costs by category and expressing each category as a percentage of sales. What message does the cost report provide? 2. Prepare a bar graph and pie chart that illustrate each categorys contribution to total quality costs. Comment on the significance of the distribution. 3. What if, five years from now, quality costs are 7.5 percent of sales, with control costs being 65 percent of the total quality costs? What would your conclusion be?Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?Play-Disc makes Frisbee-type plastic discs. Each 12-inch diameter plastic disc has the following manufacturing costs: For the coming year, Play-Disc expects to make 300,000 plastic discs, and to sell 285,000 of them. Budgeted beginning inventory in units is 16,000 with unit cost of 4.75. (There are no beginning or ending inventories of work in process.) Required: 1. Prepare an ending finished goods inventory budget for Play-Disc for the coming year. 2. What if sales increased to 290,000 discs? How would that affect the ending finished goods inventory budget? Calculate the value of budgeted ending finished goods inventory.