Answers
Answer:
Step 1: Identify the activities that generate costs
Step 2: Now we will find cost pools and their relevant cost drivers
Step 3: Assign the cost of each activity (cost pool) on a fair basis which is cost drivers
cost assigned to total products of A = (cost pool/total units of relevant cost driver consumed) *units of cost driver consumed by total # of Products A
Step 4: Divide the Answer from the step 3 by total units of product A produced to calculate unit cost
Step 5: Add prime cost per unit to it to calculate total unit cost of the product A
Explanation:
The costs in the ABC system are allocated to unit product on more fair basis than the tradition absorption costing which only assume one fair basis for allocation of overhead costs. ABC critisises traditional costing technique for using only one basis for absortion of Overheads.
Suppose both Mr. A and Mr. B drank 5 glasses of juices. Each glass of juice costs $4. According to the Traditional absorption costing technique each individual must pay:
(5 Juices/2)*$4=$10
But ABC says its unfair, use a more appropriate basis for cost allocation. So upon investigating we came to know that Mr. A drank 3 glasses of juice and Mr. B drank 2 glasses of juice. So Mr. A must pay $12(3*$4) and Mr. B must pay $8(2*$4). This is more appropriate or fair basis of absorbing the overhead cost to each individual and is Activity Based Costing.
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Answers
Answer:
1. Which firm has a greater FCF (free cash flow)?
- (A) Firm A
2. What is firm A’s (annual) tax shield?
- (B) $0.8
3. What is firm B’s (annual) tax shield?
- (C) $3.2
Explanation:
since firm A's debt is $20, its value is $100, then its equity = $80
since firm B's debt is $80, its value is $100, then its equity = $20
Firm A's cash flow = (EBIT - interest expense) x (1 - tax rate) = [$10 - ($20 x 10%)] x 0.6 = $4.80
Firm B's cash flow = (EBIT - interest expense) x (1 - tax rate) = [$10 - ($80 x 10%)] x 0.6 = $1.20
Firm A's annual tax shield = taxable interest x tax rate = ($20 x 10%) x 40% = $0.80
Firm B's annual tax shield = taxable interest x tax rate = ($80 x 10%) x 40% = $3.20
Final answer:
Firm B has a greater FCF compared to Firm A. Firm A has a tax shield of $0, and Firm B has a tax shield of $3.2.
Explanation:
1. Firm B has a greater Free Cash Flow (FCF) compared to Firm A. FCF is calculated as EBIT(1-TC) + TC(D-RD), and in this case, Firm B has a higher outstanding debt which leads to a higher tax shield, resulting in a greater FCF for Firm B.
2. Firm A's annual tax shield can be calculated by subtracting the debt payments from the earnings before interest and taxes (EBIT) and then multiplying the result by the tax rate. In this case, the annual tax shield for Firm A is $0, as the interest expense is greater than the taxable income.
3. Firm B's annual tax shield can be calculated in the same way as Firm A's. In this case, the annual tax shield for Firm B is $3.2. This is because the debt payments are lower than the taxable income and result in a tax shield.
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Answers
Answer:
True
Explanation:
As long as the statement holds that ''each company's profit depends on whether Little Kona enters...'' and the response of the existing monopoly to charge a low price to keep its market share; then both little Kona and Big Brew have a dominant strategy in this game.
They both will become a duopoly which implies that there will be two players in the industry and the price of Big Brow will be greatly influenced by the presence of Little Kona. Big Brow could charge as high as $8 if Little Kona is absent but as low as $2 if Little Kona is enters the industry.
Obviously they both have a dominant strategy, considering further that the entrance of Little Kona changes the industry structure from monopoly to duopoly
Answers
Answer:
a) rate of return = 0.095 = 9.5%
b) rate of return = 0.147143 = 14.7143%
Explanation:
a) using the constant growth model:
therefore
b) using the working from above, we showed that
given g= 10%, P0=28 and D0=1.2
B automatie reordering
C group decision making
D the need to make a prohi
Answers
In business, buying price is very important because of the need to make a profit. Option (D) is correct.
Businesses must turn a profit, the buying price is crucial. The costs at which a business purchases goods and services determine in large part whether it will be profitable. The cost of producing goods or rendering client services is determined by the price at which they are purchased. The company might not be able to turn a profit when it sells goods or services if the purchase price is too high.
The corporation might not be able to cover the cost of production if the purchase price is too low, which could result in a loss. In order to ensure that they can turn a profit, businesses must therefore carefully analyze the purchasing price of goods and services.
Therefore, Option (D) is correct.
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b.A better divisional performance measure would be the rate of return on investment
c.A better divisional performance measure would be the residual income.
d.None of these choices would be included.
e.All of these choices (a, b & c) would be included.
Answers
Answer:
Option D
Explanation:
In simple words, method of performance division is considered to be effective when it depicts a true picture, not because it gives a sound position of the organisation as waned by the managers.
Thus, reticulation should not be done. Also, Divisional performance should be judged by some other aspects like time taken to perform the job or wastage done by them etc.
Answers
Answer:
5.9 months
Explanation:
Market department monthly budget = $42,000
Since the finance department uses a third of the budget used by the market department, the total monthly budged for both departments is:
The number of months that until a budgeted amount of $328,000 is used is given by:
It will take 5.9 months until the budgeted amount is used up