Answer:
Explain forecasting
Explanation:
This implies that I will have to let the other person know that it possible to judge how successful a project would be by doing what is called forecasting.
Forecasting allows one to project to a reasonable extent what the success level of a project would be, especially in terms of it's revenue, overall expenses before the project is carried out. A good forecasting tool is Forecast web application which provides future estimates of budget and task duration.
Which financial strategy would you choose to mitigate risk exposure? In your own words, present an example using XYZ company
Answer:
Creating an Insurance fund
Explanation:
An Insurance fund could a very good financial strategy to mitigate risk exposure.
For example, XYZ company is an bank that has over 500, 000 customer base throughout the country. XYZ company has forseen possible financial loses resulting from theft and economic downturn in the future. A safe practice would be to allocate a portion of it's profit– either quarterly or annual profit to an Insurance fund which would mitigate the company from possible financial risks resulting from theft or economic vices.
This financial strategy has proven to be successful in real life in mitigating a company from exposure to risk.
Lewis Company’s standard labor cost of producing one unit of Product DD is 3.20 hours at the rate of $12.50 per hour. During August, 42,600 hours of labor are incurred at a cost of $12.65 per hour to produce 13,200 units of Product DD.
A. Compute the total labor variance.
B. Compute the labor price and quantity variances.
C. Compute the labor price and quantity variances, assuming the standard is 3.5 hours of direct labor at $12.85 per hour.
Answer:
a. $10,890 Favorable
b. The labor price variance and quantity variance are $6,300 Favorable and $4,500 Favorable respectively.
c. The labor price and quantity variance is $8,520 Unfavorable and $46,260 Unfavorable respectively.
Explanation:
a. The computation of Total labor variance
= (Actual hours × Actual rate) - (Standard hours × Standard rate)
= (42,600 × $12.65) - ( 13,200 units × 3.2 × $12.5)
= $538,890 - $528,000
= $10,890F
b. The computation of the Labor price variance
= Actual hours × ( Actual rate - Standard rate)
= 42,600 × ( $12.65 - $12.5)
= 42,000 × $0.15
= $6,300 F
The computation of Labor quantity variance
= Standard rate × ( Actual hours - Standard hours)
= $12.5 per hour × ( 42,600 hours - 42,240 hours )
= $12.5 per hour × 360 hours
= $4,500 F
c. The computation of Labor price variance
= Actual hours × ( Actual rate - Standard rate)
= 42,600 × ( $12.65 - $12.85 )
= 42,600 × - $0.2
= $8,520 Unfavorable
The computation of Labor quantity variance
= Standard rate × ( Actual hours - Standard hours)
= $12.85 per unit × ( 42,600 hours - 46,200 hours)
= $12.85 per unit × - $3,600
= $46,260 Unfavorable.
american snacks inc, a conglomerate, has a strategic alliance with tres bien limite, a french snack-maker. concerned that the different business units what can owners and managers at american snacks do to respond to tres biens concern
Answer: c. Arrange for the alliance to be managed at the corporate level.
Explanation:
To mitigate the risk of the various units of American Snacks partnering with Très Bien competitors, the alliance should be managed at Corporate level. All the different units are subservient at Corporate level therefore managing the alliance from there would mean that the different units cannot partner with rivals because Corporate level decisions are strategic and affect the entire company.
Partnering with rivals would therefore be unfeasible across the entire company.
Which of the following promises is subject to the "strict performance" standard? Assume that performance of the promise is not an express condition of the promisee's duty to perform. cousrse hero
Answer:
A promise to deliver a deed
Explanation:
The term, 'strict performance' is used to describe a contract between two parties. A contract is an agreement between two parties, and it is legally binding. When discharging contracts involving services, 'substantial performance' is required. For example, if I tell a painter to paint my house blue except for the kitchen and storeroom which should be painted white, and he does accordingly but failed in painting the kitchen white, he has performed substantially even though there was a minor breach. The consequences of which would be borne by him.
'Strict performance' is required in contracts where the terms are stated in express terms and the standards are very high. A 'deed' is such a contract because it is a document specifying the legal rights of a person or the ownership of a property. It requires the signatures of the two parties. Therefore, strict performance and adherence to the contractual deed are required.
Duff Inc. paid a 2.34 dollar dividend today. If the dividend is expected to grow at a constant 1 percent rate and the required rate of return is 11 percent, what would you expect Duff's stock price to be 4 years from now?
Answer:
$24.60
Explanation:
The computation of the price for 4 years from now is shown below:
Price = Dividend ÷(Required rate of return - growth rate)
where,
Dividend is
= Dividend × (1 + growth rate)^number of years
= $2.34 × (1 + 0.01)^5
= $2.46
All the other items would remain the same
So, the price is
= $2.46 ÷ (11% - 1%)
= $24.60
TB MC Qu. 8-119 Bramble Corporation is a small wholesaler ...
Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:
Sales are budgeted at $310,000 for November, $290,000 for December, and $280,000 for January.
Collections are expected to be 60% in the month of sale and 40% in the month following the sale.
The cost of goods sold is 65% of sales.
The company would like to maintain ending merchandise inventories equal to 55% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $23,700.
Monthly depreciation is $ 14,700.
Ignore taxes.
Balance Sheet
October 31
Assets
Cash $ 21,500
Accounts receivable 71,500
Merchandise inventory 110,825
Property, plant and equipment, net of 1,095,500
$573,500 accumulated depreciation
Total assets $ 1,299,325
Liabilities and Stockholders' Equity
Accounts payable $ 255,500
Common stock 821,500
Retained earnings 222,325
Total liabilities and stockholders' equity $ 1,299,325
The cost of December merchandise purchases would be:_________.
Answer:
The cost of December merchandise purchases would be $184,825
Explanation:
budgeted sales December $290,000
cost of goods sold 65% of sales revenue = $290,000 x 65% = $188,500
+ desired ending inventory = $280,000 x 65% x 55% = $100,000
total goods required = $288,500
- beginning inventory = $290,000 x 65% x 55% = $103,675
total merchandise purchases = $184,825
Delta Lighting has 30,000 shares of common stock outstanding at a market price of $15 a share. This stock was originally issued at $31 per share. The firm also has a bond issue outstanding with a total face value of $280,000 which is currently selling for 82 percent of par. The cost of equity is 14 percent while the after-tax cost of debt is 6.8 percent. The firm has a beta of 1.48 and a tax rate of 30 percent. What is the weighted average cost of capital?
Answer:
the weighted average cost of capital is 11.57 % .
Explanation:
Market Value of Equity = Number of Common Shares Outstanding × Market Price per share
= 30,000 shares × $15
= $450,000
Market Value of Debt = Face Value × 82%
= $280,000 × 82%
= $229,600
WACC = Ke × (E/V) + Kd × (E/V)
= 14.00 % × ($450,000/ $679,600) + 6.80 % × ($229,600/ $679,600)
= 9.27 % + 2.30 %
= 11.57 %
Titan Mining Corporation has 7.6 million shares of common stock outstanding, 280,000 shares of 4.5% preferred stock outstanding, and 165,000 bonds with a semi-annual coupon rate of 5.9% outstanding, par value $2,000 each. The common stock currently sells for $61 per share and has a beta of 1.15, the preferred stock has a par value of $100 and currently sells for $95 per share, and the bonds have 19 years to maturity and sell for 109% of par. The market risk premium is 7.1%, T-bills are yielding 3.5%, and the company’s tax rate is 25%.
A. What is the firm’s market value capital structure?
B. If the company is evaluating a new investment project that has the same risk as the firm’s typical project, what rate should the firm use to discount the project’s cash flows?
Answer:
A. The Capital structure is : 4.23 % - Equity, 6.59 % - Preferred Shares and 89.17 % - Debt
B. The firm should discount the project’s cash flows at 4.45 %.
Explanation:
Total Market Value = Market Value of Equity + Market Value of Debt + Market Value of Preferred Shares
Market Value of Equity = 280,000 shares × $61
= $17,080,000
Market Value of Preferred Shares = 280,000 shares × $95
= $26,600,000
Market Value of Debt = 165,000 bonds × $2,000 × 109%
= $359,700,000
Total Market Value = $403,380,000
Capital Structure :
Weight of Equity = $17,080,000 / $403,380,000 × 100
= 4.23 %
Weight of Preferred Shares = $26,600,000 / $403,380,000 × 100
= 6.59 %
Weight of Debt = $359,700,000 / $403,380,000 × 100
= 89.17 %
Thus, the market value capital structure is : 4.23 % - Equity, 6.59 % - Preferred Shares and 89.17 % - Debt
Firms use the Weighted Average Cost of Capital (WACC) to discount the project’s cash flows.
Cost of Debt, r
PV = $2000 × 109 % = - $2,100
PMT = ($2,000 × 5.9%) ÷ 2 = $59
n = 19 × 2 = 38
P/YR = 2
FV = $2,000
r = ?
Using a Financial Calculator, Pretax cost of debt, r is 5,47 %
After tax cost of debt = Interest × ( 1 - tax rate)
= 5,47 % × ( 1 - 0.25)
= 4.10 %
Cost of Equity
Cost of Equity = Return on Risk Free Security + Beta × Return on Risk Premium Portfolio
= 3.5 % + 1.15 × 7.1%
= 11.67 %
Cost of Preference Stock
Cost of Preference Stocks = 4.5%
WACC = ke(W/V) + kd(D/V) + kp(P/V)
= 11.67 % × 4.23 % + 4.10 % × 89.17 % + 4.5% × 6.59 %
= 4.45 %
A perpetual bond with a par value of $1,000 and a coupon rate of 8.25% (semiannual coupon) has a current market price of $935. What is its yield to maturity?
Answer:
8.88%
Explanation:
Price of the perpetual bond = Interest / Cost of debt
$935 = 82.50 / Cost of debt
Cost of debt = 82.50 / 935
Cost of debt = 0.08824
Cost of debt = 8.88%
Which of these conditions helped establish the foundation for a market revolution in the United States
Question Completion:
Choices: Rapid improvements in transportation and communication; the production of goods for a cash market; and the use of inventions and innovations to produce goods for a mass market.
Answer:
The condition that helped to establish the foundation for a market revolution in the United States is:
Rapid improvements in transportation and communication
Explanation:
Rapid improvements in transportation and communication spurred innovations. With innovations, capitalism was born. Innovations needed factories for mass production. In turn, according to American History, "factories and mass production increasingly displaced individual artisans and farmers," who survived at subsistent levels. Large farms grew and produced crops for distant markets, no longer only for family and local markets. Most of the crops were further processed, packaged, preserved, and shipped through cheap transportation systems like the Erie Canal, using steamboats. And the rest, they say, is history.
Concert Hall sells season tickets for six events at a price of $78. In pricing the tickets, the planners assigned the leadoff event a value of $23 because the program was an expensive symphony orchestra. The last five events were priced equally; 1,470 season tickets were sold for the 2013 season. Required: a. Calculate the theater's earned revenue after the first three events have been presented.
Answer: $66,150
Explanation:
The leadoff event is priced at $23 out of the $78 and the rest of the 5 events will be priced equally.
This means that after the first event, the other 5 will cumulatively be valued at;
= (78 - 23)/5
= $11
The other events are priced at $11 each.
For the first 3 events therefore;
First event = $23 and the other 2 events are $11 each;
= 23 + 11 + 11
= $45
Tickets sold are 1,470;
Revenue from first 3 = 45 * 1,470
= $66,150
project that has an expected return of 25% and a standard deviation of 30%. What is the project's coefficient of variation
Answer: 1.2
Explanation:
The Coefficient of Variation tells the accuracy of the mean. If it is high then there is a large dispersion around the mean. A smaller figure indicates that the mean is more accurate/ precise.
Coefficient of Variation = Standard Deviation / Expected Return
Coefficient of Variation = 30%/25%
Coefficient of Variation = 1.2
After watching both videos above, explain the importance of understanding intercultural communication. Identify the role that context plays in communication, and include references to high-context and low-context cultures.
Answer:
Intercultural communication is important as it helps in cross culture communication process. It helps in the process where different people belonging to different cultures communicate together on one platform. The communication can be verbal or non verbal among the people who belong to different cultural backgrounds.
Explanation:
High context communication is one in which communication is in such a way that relies heavily on non verbal language and emphasis the cultural values. Low context cultures communication is when people communicate in direct and precise manner. They rely heavily on verbal communication.
Importance of understating communication.
The aspects of communication can be identified by the role-playing of the communication in the case of the high and lower context cultures is done process various cultures and social groups.
Thus answer is intercultural platform helps to explain the value and morals.
The high context culture is found in group and usually relationship people. Here the well-being of the group is considered. While the low content culture is found in the western part of that world here the individualist and communication information in a direct and precise way.This shows us the difference in the ways people adjust to one another's cultural values.Learn more about the importance of understanding.
brainly.com/question/12690189.
The total amount paid on a 35 year loan was $98,000. If the interest rate was 4.1% and compounded monthly, what was the principal
Answer:
Principal = $23,392.45
Explanation:
To solve this, we are required to find a certain amount invested for 35 years at an interest rate of 4.1% compounded annually, yielding $98,000.
The formula for compounded interest is used, and this is done as follows:
[tex]FV=PV(1+\frac{r}{n} )^{nt}\\Where:\\FV=Future\ value\ =\ \$98,000\\PV= Present\ value\ =\ ???\\r= interest\ rate\ = 4.1\%=0.041\\n = number\ of\ compounding\ periods\ per\ year\ = monthly\ = \ 12\\ t= time\ =\ 35\ years[/tex]
[tex]98000=PV(1+\frac{0.041}{12} )^{(12\times35)}\\98000=PV(1+0.003417)^{420}\\98000=PV(1.003416667)^{(420)}\\98000=PV(4.189386)\\PV= \frac{98000}{4.189386} \\\\=PV= \$23,392.45[/tex]
Therefore, the principal is approximately $23,392
Lanning Company sells 160,000 units at $45 per unit. Variable costs are $27 per unit, and fixed costs are $975,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations.
Answer:
Instructions are below.
Explanation:
Giving the following information:
Sales= 160,000 units
Selling price= $45 per unit.
Variable costs are $27 per unit
Fixed costs are $975,000.
First, we need to calculate the contribution margin ratio using the following formula:
contribution margin ratio= (selling price - unitary variable cost) / selling price
contribution margin ratio= (45 - 27) / 45
contribution margin ratio= 0.4
Now, we can calculate the contribution margin per unit:
Contribution margin= selling price - unitary variable cost
Contribution margin= 45 - 27
Contribution margin= 18
Finally, the net operating income:
Net income= units sold*contribution margin - fixed costs
Net income= 160,000*18 - 975,000
Net income= $1,905,000
Mark Ward is a farmer who owns land which borders on the right-of-way of the Northern Railroad. On August 10, 2007, due to the admitted negligence of the Railroad, hay on the farm was set on fire and burned. Ward had had a dispute with the Railroad for several years concerning the ownership of a small parcel of land. The representative of the Railroad has offered to assign any rights which the Railroad may have in the land to Ward in exchange for a release of his right to reimbursement for the loss he has sustained from the fire. Ward appears inclined to accept the Railroad's offer. The Railroad's 2007 financial statements should include the following related to the incident:_________
A. recognition of a loss and creation of a liability for the value of the land.
B. disclosure in note form only.
C. recognition of a loss only.
D. creation of a liability only.
Answer:
A. recognition of a loss and creation of a liability for the value of the land.
Explanation:
This is because, in the financial statement of the Railroad company, it goes to show the financial dealings which the company had within the fiscal year under review. Since, the Northern Railroad Company and Mark Ward has reached an agreement, the best would be the recognition of the loss and create a liability for the value of the land in their financial statement. It will afford the investors to be aware of the assets and liability of the company at the present time.
Rob and Lori purchased a home for $350,000 with an additional $5,000 in related purchase costs and then added a garage at a cost of $25,000. They sold the home for $450,000 and paid $28,000 in selling costs. How much was adjusted basis?
Answer: $380,000
Explanation:
To calculate the adjusted basis, we add the original cost, to the improvement cost and and then deduct depletion and depreciation cost.
From the scenario, since Rob and Lori purchased a home for $350,000 with an additional $5,000 in related purchase costs and then added a garage at a cost of $25,000 and then sold the home for $450,000 and paid $28,000 in selling costs.
The adjusted basis will be:
= $350,000 + $5,000 + $25,000
= $380,000
Suppose that the value of an investment in the stock market has increased at an average compound rate of about 5% since 1912. It is now 2016. a. If someone invested $1,000 in 1912, how much would that investment be worth today?
Answer:
FV= $159,840.60
Explanation:
Giving the following information:
Initial investment= $1,000
Number of years= 2016 - 1912= 104
Interest rate= 5%
To calculate the value of the investment today, we need to use the following formula:
FV= PV*(1+i)^n
FV= 1,000*(1.05^104)
FV= $159,840.60
On November 7, Mura Company borrows $370,000 cash by signing a 90-day, 8%, $370,000 note payable. 1. Compute the accrued interest payable on December 31. 2. & 3. Prepare the journal entry to record the accrued interest expense at December 31 and payment of the note at maturity on February 5.
Answer:
At 31 December, the Interest for 54 days accrues as follows :
Interest expense $17,740 (debit)
Note Payable $17,740 (credit)
On payment February 5, the Interest expense will be capitalized in the Note Payable as follows :
Note Payable $407,473 (debit)
Cash $407,473 (credit)
Explanation:
AT, November 7, When Mura Company borrows the money :
Cash $370,000 (debit)
Note Payable $370,000 (credit)
At 31 December, the Interest for 54 days accrues as follows :
Interest expense $17,740 (debit)
Note Payable $17,740 (credit)
Interest expense calculation = $370,000 × 8% × 54/90
= $17,740
At February 5, the interest for 60 days accrues as follows :
Interest expense $19,733 (debit)
Note Payable $19,733 (credit)
Interest expense calculation = $370,000 × 8% × 60/90
= $19,733
On payment February 5, the Interest expense will be capitalized in the Note Payable as follows :
Note Payable $407,473 (debit)
Cash $407,473 (credit)
Note Payable Calculation = $370,000 + $19,733 + $17,740
$407,473
Coffer Co. is analyzing two projects for the future. Assume that only one project can be selected. Project X Project Y Cost of machine $ 77,000 $ 55,000 Net cash flow: Year 1 28,000 2,000 Year 2 28,000 25,000 Year 3 28,000 25,000 Year 4 0 20,000 If the company is using the payback period method and it requires a payback of three years or less, which project should be selected?
Answer: Project X
Explanation:
Payback period is a method of capital budgeting that judges a project's viability based on when it will be able to pay back the initial investment.
Payback period Project X
Cost of machines is $77,000
= Year 1 + Year 2 + Year 3
= 28,000 + 28,000 + 28,000
= $84,000
Means it paid back within 3 years.
= Year + Year 2
= 28,000 + 28,000
= $56,000
At year 2 how much was left;
= 77,000 - 56,000
= 21,000
= Amount left/ amount paid in year
= 21,000/28,000
= 0.75
= 2 years + 0.75 years
It took 2.75 years to pay off the Project X
Payback period Project Y
Cost of machines is $55,000
= Year 1 + Year 2 + Year 3
= 2,000 + 25,000 + 25,000
= $52,000
Means it did not payback within 3 years.
In 4th year
= 55,000 - 52,000
= $3,000
= 3,000/20,000
= 0.15
It took 3 years + 0.15 year = 3.15 years to pay off.
Project X should be selected as it pays back within 3 years.
If the government wants to raise tax revenue, which of the following items are good candidates for an excise tax? Why?
a. granola bars.
b. cigarettes.
c. toilet paper.
d. automobile tires.
e. bird feeders.
Answer:
B,C
Explanation:
An excise tax is actually a tax that is levied on a good at purchase.
Cigarettes and tissue paper are good candidates for excise duty. This is because of the fact that both goods are inelastic. There would be no decrease in their consumption if an excise tax is placed on them. People would still purchase them. Tissue paper has no substitute while cigarette would still have buyers regardless of an increase in price.
You are the production head and you decide to introduce a new product in your production line. Market survey reveals that price of identical products in market is Rs. 40/unit and you decide to adopt that price. Cost survey shows that firm has to invest Rs. 620 as fixed cost to introduce the new product and variable cost are as follows; Output VC 0 00 100 280 200 480 300 640 400 820 500 1040 600 1300 700 1620 800 2020 900 2620 1000 3420
Answer:
the following table shows the profits generated by each output quantity, assuming selling price is Rs40. Since marginal costs of production are lower than selling price, the more you sell, the higher your profit. Profit is maximized at 1,000 units = Rs35,960
Explanation:
output variable costs fixed costs total revenue profits
0 00 620 0 (620)
100 280 620 4,000 3,100
200 480 620 8,000 6,900
300 640 620 12,000 10,740
400 820 620 16,000 14,560
500 1,040 620 20,000 18,340
600 1,300 620 24,000 22,080
700 1,620 620 28,000 25,760
800 2,020 620 32,000 29,360
900 2,620 620 36,000 32,760
1000 3,420 620 40,000 35,960
You own a portfolio that has a total value of $145,000 and a beta of 1.31. You have another $58,000 to invest and you would like the beta of your portfolio to decrease to 1.19. What does the beta of the new investment have to be in order to accomplish this
Answer: 0.89
Explanation:
The total portfolio beta is a weighted average of the constituent security betas.
145,000 + 58,000 = $203,000
The total portfolio beta of 203,000 should have a beta of 1.19.
Proportion of New investment = 58,000/203,000
= 28.57%
Proportion of old portfolio = 145,000/203,000
= 71.43%
(0.7143 * 1.31) + (0.2857 * x) = 1.19
0.9357 + 0.2857x = 1.19
0.2857x = 0.2543
x= 0.89
if the fed sells $2 million of bonds to the First National bank, what happens to reserves and the monetary base
Answer:
First National bank
ASSETS
Decrease in RESERVE $2 million
Increase in SECURITIES $2 million
Federal Reserve
ASSETS:Decrease in RESERVE $2 million
LIABILITIES:Decrease in SECURITIES $2 million
Decrease in Reserve by $2 million while the Monetary Base Decrease by $2 million
Explanation:
Based on the information given if federal reserve sell the amount of $2 million of bonds to the First National bank, what will happen is that:
1. In First National bank:
Assets
RESERVE will decrease by the amount of $2 million while the SECURITIES will increase by the same amount of $2 million.
2. In Federal reserve :
Assets and Liabilities
Both the RESERVE AND SECURITIES will decrease by the amount of $2 million.
3. The Reserve will decrease by the amount of $2 million while Monetary Base will as well decrease by the same amount of $2 million.
In Summary
First National bank
ASSETS
Decrease in RESERVE $2 million
Increase in SECURITIES $2 million
Federal Reserve
ASSETS:Decrease in RESERVE $2 million
LIABILITIES:Decrease in SECURITIES $2 million
Decrease in Reserve by $2 million while the Monetary Base Decrease by $2 million
In answering the question "Which customers are most likely to click on my online ads and purchase my goods?" you are most likely to use which of the following analytic applications?A) customer profitabilityB) propensity to buyC) customer attritionD) channel optimization
Answer:
B) Propensity to buy.
Explanation:
In answering the question "Which customers are most likely to click on my online ads and purchase my goods?" you are most likely to use the propensity to buy.
Propensity to buy in marketing is a predictive model, which is used to measure or determine the chances of a customer being willing to buy a particular product.
In this scenario, to determine the likelihood of a customer clicking on an online advert and purchasing a seller's goods, after visiting a website or receiving promotional information about, it is ideal to use the propensity to buy analytic approach.
A stock has a beta of 1.15 and a reward-to-risk ratio of 6.15 percent. If the risk-free rate is 3 percent, what is the stock's expected return
Answer:
10.07%
Explanation:
According to CAPM
the stock's expected return = risk free rate + (beta x reward-to-risk ratio )
3% + (6.15% x 1.15) = 10.07%
Kray Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced 6,000 Variable costs per unit: Direct materials $ 40 Direct labor $ 19 Variable manufacturing overhead $ 8 Variable selling and administrative expense $ 2 Fixed costs: Fixed manufacturing overhead $ 144,000 Fixed selling and administrative expense $ 198,000 There were no beginning or ending inventories. The variable costing unit product cost was:
Answer:
The variable costing unit product cost was $69.
Explanation:
Variable Product Costing is a situation whereby only the variable costs of production is taking into account to estimating the cost per unit of a product. This implies that none of the fixed cost will be included in the cost of the product.
Based on the explanation above, the variable costing unit product cost to produce a single product by Kray Inc. can be calculated as follows:
Kray Inc.
Calculation of Variable Costing Unit Product Cost
Particulars Amount ($)
Direct materials 40
Direct labor 19
Variable manufacturing overhead 8
Variable selling and administrative expense 2
Variable cost per unit 69
Therefore, the variable costing unit product cost was $69.
1. What are Regional Trading Blocs (RTBs)? Explain the 4 types of RTBs, making sure that the difference(s) between them is/are clearly stated as we move from one level to another. Discuss three (3) each of the advantages and disadvantages of the European Union to a named member country.
Answer:
Trading blocks are groups of countries who form trade agreements between themselves. Trading blocks can include
Free trade areas – elimination of tariffs between economies in the trading block
Customs union – free trade area + a common external tariff with non-members
Economic union/Single market – Customs union + common rules and regulations.
Different types of trading blocks
free-trade-customs-union
Trading blocks have become increasingly influential for world trade.
They have advantages in enabling free trade between geographically close countries. This can lead to lower prices, increased export potential, higher growth, economies of scale and greater competition.
However, it can lead to compromise as countries pool economic sovereignty. Also, the move to free trade tends to create winners and losers – with some domestic industries losing out to lower-cost imports.
Examples of Global trading blocks
Free_Trade_Areas
Free trade areas
European Union – The most integrated trading block. The EU27 have free trade and common regulations and are part of a customs union.
NAFTA – North Atlantic Free Trade Association. A free trade area between Canada, US and Mexico
ASEAN Free Trade Area Free trade area in South East Asia founded 1992. Includes: Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand, Vietnam, Laos, Myanmar and Cambodia.
SAFTA South Asia free trade area based around the Indian sub-continent. Includes Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
Mercosur – a southern American trading block formed in 1991. Includes full members of Argentina, Brazil, Paraguay and Uruguay. With associate members including Bolivia, Chile, Colombia, Ecuador. Developed from free trade area to become customs union.
African Union 55 countries of the continent of Africa. Created to forge closer political and economic ties. It has aspirations to become a free trade area.
Difference between free trade area and customs union
A customs union has a common external tariff on imports. This means that it doesn’t matter which country the imports enter – because all countries have the same import tariff. This means there doesn’t need to be internal checking on ‘Rules of origin‘. For example, if imports from Africa enter Spain then if goods travel across the border from Spain to France, there is no need to check whether goods are paying the correct import tariff – because the import tariffs are all the same.
A disadvantage of joining a customs union is that a country is not able to pursue its own independent trade deals. However, since trade deals are complicated and take several years, there is an advantage to negotiating trade deals as part of a regional trade block – rather than separate individual countries.
Advantages of trading blocks
Tariff removal leads to trade creation – lower prices for consumers and greater opportunity for exporters.
Increased trade enables increased specialisation – which gives benefits of economies of scale (lower average costs from increased output)
gravity-theory
Catch-up effects. Countries joining a rich trading block can benefit from inward investment and increased trade opportunities. Countries in Eastern Europe have made considerable progress in catching up with average income levels in Western Europe.
Gravity theory of trade suggests that trade with countries in close proximity is the most important due to lower transport and similar cultural and economic ties.
Gives small countries a greater say in global trade agreements
Increased competition. The removal of tariffs creates greater choice for consumers. Therefore domestic firms have a greater incentive to cut costs to remain competitive.
Disadvantages of trading blocks
Joining a customs union may lead to increased import tariffs – which leads to trade diversion. For example, when the UK joined the EEC customs union, it required higher import tariffs on imports from former Commonwealth countries. This led to switch in demand towards higher-cost European countries and caused loss of business for Commonwealth countries
Increased interdependence on economic performance in other countries in trading block. If Eurozone goes into recession, it will affect all countries in the Eurozone. However, this is almost inevitable even if countries are not formally in a trading block due to a close relationship between trade cycles in different countries.
Care Foundation is a voluntary health and welfare organization funded by contributions from the general public. In its Statement of Activities, the annual provision for depreciation should:
Question options:
A) Not be included.
B) Be included as an element of support.
C) Be included as an element of changes in fund balances.
D) Be included as an element of expense.
Answer:
D) Be included as an element of expense
Explanation:
Care foundation is a voluntary health and welfare organization funded by contributions from the public and therefore is a non-profit organization. Non profit organizations use statement of activities and not income statements used by for profit organizations in reporting revenue and expenses for the year. In the case of non profit organizations, statement of activities are reported as statement of expenses for the year.
Under GASB, direct expenses are expenses that can be linked to a program, department or activity and therefore can be directly linked to that function. Depreciation is a direct expense for non profit accounts and should be charged as expense for the relevant year based on the function of the capital asset it can be traced to. For example a capital asset that can be linked to a particular function should charge it's depreciation expenses as direct expenses based on its functions
2. Giving examples, discuss the pros and cons of the globalization debate. Give at least three (3) points each for the pros and cons.
Answer:
The answer is below
Explanation:
Globalization or specifically, Economic Globalization, is a term that (differs from Political and Cultural Globalization) describes the distribution of products, services, technology, information, and jobs across various countries, continents, and cultures.
The advantages or pros of economic globalization includes the following:
1. Economic Globalization is expected to result in free trade that enhances global economic growth; leads to more jobs, makes firms extra competitive, and reduces the prices of products generally.
2. It promotes technological advancement, whereby developed countries utilizes and transfer capital-intensive production and technological advancement to developing countries, through the transfer of labor-intensive production processes.
3. It enhances the quality of life: this is shown when each country involves in a form of division of labor, production, and trade based on their strength and resources. This, in turn, leads to lesser production costs, increases productivity, and results in a better quality of life.
The disadvantages or cons of economic globalization includes the following:
1. Labor markets are exploited in terms of wages and salaries: this occurs whereby workers in developing regions are paid lesser compared to normal or international standards, thus the gap between the upper class and the lower class keeps increasing.
2. Tax Evasion: this occurs when some multinational firms find ways to exploit the tax and operation system of other countries, mostly the less developed and developing countries, so as to avoid paying the necessary taxes.
3. There is also a form of labor exploitation in terms of working conditions, as convicts and child laborers are sometimes encouraged to work in undesirable situations considered to be inhumane where safety standards are overlooked for the purpose of producing cheaper goods.
