Answer: the grapevine
Explanation:
The options are:
a.social media
b.the company newsletter
c.the grapevine
d.upward communication
Since we are informed that even though the information about recent happenings in the company is confidential, that every employee in the company knows about what's happening and is anticipating major changes in the firm in the near future, we can say this is an informal means of communication which is also referred to as a grapevine.
Other options given in the question are wrong as they don't fit in into the question. Therefore, the correct answer is "grapevine".
The following labor standards have been established for a particular product: Standard labor hours per unit of output 4.3 hours Standard labor rate $ 17.80 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 6,300 hours Actual total labor cost $ 112,770 Actual output 1,400 units Required: a. What is the labor rate variance for the month
Answer:
See below
Explanation:
With regards to the above, labor rate variance is computed as;
Direct labor rate variance = (Standard rate - Actual rate) × Actual quantity
Given that;
Standard labor rate per hour = $17.8
Actual hours worked = 6,300
Actual total labor cost = $112,770
Actual rate = $112,770/6,300 = $17.9
Therefore,
Direct labor rate variance = ($17.8 - $17.9) × 6,300
= $630 unfavourable
What are some of the ‘temptations’ a room attendant needs to resist when he/she has access to a guest’s room?
Touching any personal items, stealing, snooping, etc. are some of the ‘temptations’ a room attendant needs to resist when he/she has access to a guest’s room.
What is the role of the room attendant?To ensure that visitors have a pleasant and comfortable stay, room attendants are in charge of cleaning and maintaining guest rooms. They make sure that every room is welcoming and spotless, and they respond to all visitor inquiries courteously and intelligently. At a number of locations, including hotels, restaurants, parking garages, outdoor facilities, and retail stores, attendants carry out a range of customer support and service activities.
They help clients, offer information, and guarantee a well-run business. To make sure that guests are satisfied, we treat everyone with civility, respect, and a helpful, kind attitude. ensuring a high level of conduct in conformity with standardized rules. cleaning the staff housing areas as instructed by the housekeeper.
Learn more about room attendants here:
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6) Custom home operates three different departments. The company makes decorative comforters, pillowcases, and tablecloths in a small factory. The company expects to make 2,000 comforters during the current year. With respect to the comforters, how would the factory supervisory salaries be classified
Answer: B. Indirect and fixed
Explanation:
Direct costs in the production of 2,000 comforters would be those that were needed to convert the materials needed in the production to finished comforters such as clothing and assembly labor.
A factory supervisor is not directly involved in this process as their job is simply to monitor workers. They are therefore an indirect cost. The salaries do not change based on the level of production so these costs are fixed as well.
On October 1, 2018, Taylor signed a one-year contract to provide handyman services on an as-needed basis to King Associates, with the contract to start immediately. King agreed to pay Taylor $4,800 for the one-year period. Taylor is confident that King will pay that amount, but payment is not scheduled to occur until 2019. Taylor should recognize revenue in 2018 in the amount of Group of answer choices
Answer:
$1,200
Explanation:
Calculation to determine what Taylor should recognize as revenue in 2018
Recognized Revenue =($4,800 × 3/12 of the contract duration)
Recognized Revenue =$1,200
Therefore Taylor should recognize revenue in 2018 in the amount of $1,200
The relationship between a product line and product mix is Multiple Choice there is no significant difference other than minor product variations of color, size, or form. product lines refer to consumer products; product mixes refer to business products. product lines include product mixes. product mixes refer to consumer products; product lines refer to industrial products. product mixes include product lines.
Answer:
product mixes include product lines.
Explanation:
The product line is a group of products that are interrelated as they satisfy the needs and also they are used together and are sold to the similar customer group via similar outlets
It involved the product line that are offered by the company
Therefore according to the given situation, last one is correct answer
And, the same would be relevant
Hamrick Industries makes and sells two products. The demand for both products is unlimited. Product A has a contribution margin of $7.70 per unit. Product B has a contribution margin of $2.64 per unit. The same machines are used to produce both products. Product A requires 0.33 machine hours and product B requires 0.20 machine hours. Which product should the company make and sell
Answer:
C. Product A because the contribution margin per MH is $23.33.
Explanation:
The computation is shown below:
Particulars Product A Product B
Contribution margin per unit $7.70 $2.64
Divide by machine hours per unit 0.33 0.20
Contribution margin per MH $23.33 $13.20
The company should make and sell the product A as in this the contribution margin per machine hour would be high as compared with the product B
Hawk Corporation purchased 10,000 Diamond Corporation bonds in 2018 for $56 per bond and classified the investment as securities available-for-sale. The value of the Diamond investment was $86 per bond on December 31, 2019, and $100 per bond on December 31, 2020. During 2021, Hawk sold all of its Diamond investment at $144 per bond. In its 2021 income statement, Hawk would report:
Answer: $880,000 as gain
Explanation:
Unrecognized gain in 2019:
= 86 - 56
= $30 per bond
Unrecognized gain in 2020:
= 100 - 86
= $14 per bond
Gain from sale:
= (Unrecognized gain 2019 + Unrecognized gain in 2020 + Gain on sale) * no. of bonds
= (30 + 14 + (144 - 100) ) * 10,000
= $880,000 as gain
Ted borrowed $140,000 from ABC Bank to purchase a home and pledged the home as collateral for the loan. Shortly after purchasing the home, Ted lost his job. He could not find another job and could not pay the monthly mortgage. Ted set fire to the home. The claims adjuster suspected arson, and an investigation proved that Ted intentionally caused the loss. Under the mortgage clause of the Homeowners 3 policy, how will this loss be settled
Answer:
Under the Mortgage clause of the policy, the insurance company will pay out the insurable interest it would have paid to Ted, to ABC bank.
Ted will now owe the insurance company whatever it was that they paid to the bank and they will be able to legally go after him to pay off that amount using any legal means necessary.
Assume the following: The standard price per pound is $2.00. The standard quantity of pounds allowed per unit of finished goods is 4 pounds. The actual quantity of materials purchased and used in production is 50,000 pounds. The actual purchase price per pound of materials was $2.25. The company produced 13,000 units of finished goods during the period. What is the materials spending variance
Answer:
Direct material price variance= $12,500 unfavorable
Explanation:
Giving the following formula:
The standard price per pound is $2.00.
The actual quantity of materials purchased and used in production is 50,000 pounds.
The actual purchase price per pound of materials was $2.25.
To calculate the direct material price (spending) variance, we need to use the following formula:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (2 - 2.25)*50,000
Direct material price variance= $12,500 unfavorable
The aggregate demand curve is downward sloping because as the price level increases the purchasing power of wealth decreases purchasing power of wealth decreases A demand for imports decreases demand for imports decreases B demand for interest-sensitive expenditures increases demand for interest-sensitive expenditures increases C demand for domestically produced substitute goods increases demand for domestically produced substitute goods increases D real value of fixed assets increases
Answer:
A
Explanation:
The aggregate demand curve is a graph that represents the total quantity of all goods and services demanded by the economy at different price levels.
The aggregate demand curve slopes downward because
wealth effect on consumptionthe interest rate effect on investmentthe international trade effect on net exports.If price level decreases, wealth decreases. As a result, import becomes more expensive and export decreases. This leads to a downward slope of the demand curve
The following lots of Commodity Z were available for sale during the year. Beginning inventory 8 units at $50 First purchase 19 units at $51 Second purchase 51 units at $57 Third purchase 15 units at $57 The firm uses the periodic system, and there are 25 units of the commodity on hand at the end of the year. What is the ending inventory balance at the end of the year according to the LIFO method
Answer:
The ending inventory balance at the end of the year according to the LIFO method is $1,267.
Explanation:
The Last-In, First-Out (LIFO) method is an inventory method under which the last unit to arrive in inventory is assumed to be sold first.
Since the firm uses the periodic system under which the inventory account is updated at the end of the accounting period, we have:
Ending inventory balance = 8 units at $50 from the beginning inventory + 17 units at $51 per units from the First purchase = (8 * $50) + (17 * $51) = $1,267
Exercise 11-13 On January 1, Monty Corp. had 97,500 shares of no-par common stock issued and outstanding. The stock has a stated value of $6 per share. During the year, the following occurred. Apr. 1 Issued 22,500 additional shares of common stock for $18 per share. June 15 Declared a cash dividend of $1 per share to stockholders of record on June 30. July 10 Paid the $1 cash dividend. Dec. 1 Issued 1,500 additional shares of common stock for $18 per share. 15 Declared a cash dividend on outstanding shares of $4.90 per share to stockholders of record on December 31. (a) Prepare the entries, on each of the three dividend dates.
Answer:
June 15 - Declared a cash dividend of $1 per share
Debit : Dividends $120,000
Credit : Dividends for Shareholders $120,000
July 10 - Paid the $1 cash dividend
Debit : Dividends for Shareholders $120,000
Credit : Cash $120,000
Dec 15 - Declared a cash dividend
Debit : Dividends $595,350
Credit : Dividends for Shareholders $595,350
Explanation:
When a dividend is declared, raise a Liability - Shareholders for Dividends and an Equity item - Dividends.
When the dividend is paid, de-recognize the Liability - Shareholders for Dividends and recognize a Cash Outflow.
Dividends Calculations :
June 15
Dividends = (97,500 + 22,500) x $1.00 = $120,000
Dec 15
Dividends = (97,500 + 22,500 + 1,500) x $4.90 = $595,350
What do you think is more important, the presentation of a speech or its content? Discuss your answer.
Answer:
presentation of its content
Explanation:
I think this is more important , for example when you are presenting a project for class, your teacher wouldnt really want to see what you say. Instead they look for the creativity and the effort put into the content.
17) Siri Co makes wicker and wooden picnic baskets. It requires approximately one hour of labor to make one basket of either type. Wicker baskets are produced in batches of 100 units and require 0.5 machine hours per basket. Wooden baskets are produced in batches of 50 units and require 0.75 machine hours per basket. Setup is required for each batch. During the most recent accounting period, the company made 8,000 wicker baskets and 2,000 wooden slat baskets. Setup costs amounted to $24,000 for the baskets produced during the period. If activity-based costing is used to allocate overhead costs to the two products, the amount of setup cost assigned to the wicker baskets will be: A. $19,200 B. $16,000 C. $17,455 D. $12,000
Answer: B. $16,000
Explanation:
Wicker baskets are made in 100 unit batches and a setup is required for each batch.
If 8,000 wicker baskets were made, the number of batches and setups was:
= 8,000 / 100
= 80 wicker basket setups
If 2,000 wooden slat baskets were made, the number of batches and setups was:
= 2,000 / 50
= 40 wooden slat basket setups
Cost allocated to wicker basket setup = Wicker basket setups / (Wicker basket setups + Wooden slat baskets setups) * Setup costs for the period
= 80 / (80 + 40) * 24,000
= $16,000
Rodarta Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's predetermined overhead rate for fixed manufacturing overhead is $4.70 per machine-hour and the denominator level of activity is 4,900 machine-hours. In the most recent month, the total actual fixed manufacturing overhead was $23,190 and the company actually worked 4,830 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 4,850 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month
Answer:
$329 unfavorable
Explanation:
The fixed manufacturing overhead volume variance shows how much the actual production differs from the budgeted production.
Fixed manufacturing overhead volume variance is computed as;
= Actual output at budgeted rate - Budgeted fixed overhead
= (4,830 × $4.70) - ($4.70 × 4,900)
= $22,701 - $23030
= $329 unfavorable
Therefore, the overall fixed manufacturing volume variance for the month is $329 unfavorable
Real estate property taxes generally range from 1 to 4 percent of the value of the home.
a. True
b. False
Answer:
true
Explanation:
it is true about the number of percentage
Payroll Taxes Champaign Inc., a company that provides educational consulting services to large universities across the nation, has a gross payroll of $62,000 for the pay period. The entire payroll is subject to Social Security and Medicare taxes. Champaign must also withhold $7,440 in federal income tax from the employees and pay state unemployment tax of $75. Assume that the Social Security tax rate is 6.2%, and Medicare tax rate is 1.45%.
Required:
Provide the necessary journal entries for Champaign to record these payroll taxes (round to nearest penny).
Answer:
Date Account Title Debit Credit
XX-XX Wages Expense $62,000
Federal Income Tax Withholding Payable $7,440
Social Security Taxes Payable (Employee) $3,844
Medicare Taxes Payable (Employee) $ 899
Cash $49,817
Working
Social Security Taxes Payable (Employee) = 6.2% * 62,000 = $3,844
Medicare Taxes Payable (Employee) = 1.45% * 62,000 = $899
Date Account Title Debit Credit
XX-XX Social Security Taxes Expense (Employer) $3,844
Medicare Taxes expense (Employer) $899
State Unemployment tax expense $75
Social Security Taxes Payable (Employer) $3,844
Medicare Taxes Payable (Employer) $899
State Unemployment tax Payable $75
Explain one guideline that will help a speaker use or create an effective presentational aid. Provide examples.
Use the following information to answer the next two questions: On January 1, 2018, Jimbo Enterprises purchased new equipment for its training center. The equipment cost $220,000. Jimbo paid $25,000 down and is required to pay the rest in semiannual installments for the next 8 years. Jimbo's cost of borrowing is 4%.
Required:
a. What is the amount of the semiannual payment Jimbo will make every six months?
b. What is the total amount of interest expense Jimbo will pay over the life of the loan?
Answer:
total loan (PV) = $220,000 - $25,000 = $195,000
n = 8 x 2 = 16
rate = 4% / 2 = 2%
FV = 0
Using a financial calculator, the payment = $14,361.77
Total amount of money paid during the 8 years = $229,788.39
Total interests paid = $229,788.39 - $195,000 = $34,788.39
Onslow Co. purchased a used machine for $240,000 cash on January 2. On January 3, Onslow paid $8,000 to wire electricity to the machine and an additional $1,600 to secure it in place. The machine will be used for six years and have a $28,800 salvage value. Straight-line depreciation is used. On December 31, at the end of its fifth year in operations.
Requried:
Prepare journal entries to record the machine’s disposal under each separate situation: (a) it is sold for $24,500 cash; (b) it is sold for $98,000 cash; and (c) it is destroyed in a fire and the insurance company pays $35,000 cash to settle the loss claim.
Answer:
A Dec-31
Dr Cash 24,500
Dr Accumulated Depreciation 184,000
Dr Loss on Sale of Used Machine 41,100
Cr Machine 249,600
B. Dec-31
Dr Cash 98,000
Dr Accumulated Depreciation 1,84,000
Cr Profit on Sale of Used Machine 32,400
Cr Machine 249,600
C. Dec-31
Dr Cash 35,000
Dr Accumulated Depreciation 1,84,000
Dr Loss on Machine destroyed in Fire 30,600
Cr Machine 249,600
Explanation:
A. Preparation of the journal entries to record the machine’s disposal if it is sold for $24,500 cash
Dec-31
Dr Cash 24,500
Dr Accumulated Depreciation 184,000
Dr Loss on Sale of Used Machine 41,100
(249,600-24,500-184,000)
Cr Machine 249,600
(240,000+8,000+1,600)
B. Preparation of the journal entry to record the machine’s disposal if it is sold for $98,000 cash
Dec-31
Dr Cash 98,000
Dr Accumulated Depreciation 184,000
Cr Profit on Sale of Used Machine 32,400
(249,600-98,000-184,000)
Cr Machine 249,600
(240,000+8,000+1,600)
C. Preparation of the journal entry to record the machine’s disposal if it is destroyed in a fire and the insurance company pays $35,000 cash
Dec-31
Dr Cash 35,000
Dr Accumulated Depreciation 184,000
Dr Loss on Machine destroyed in Fire 30,600
(249,600-35,000-184,000)
Cr Machine 249,600
(240,000+8,000+1,600)
Working:
Cost of machine = 240,000+8,000+1,600
Cost of machine= $249,600
Depreciation (Straight-Line method) = Cost - Salvage / no of years
Depreciation= (249,600-28,800)/6 yr
Depreciation=$36,800
Accumulated Depreciation of 5 Years =($36,800*5)
Accumulated Depreciation of 5 Years =$184,000
There were initially two satellite radio providers in the U.S. market, Sirius and XM Radio. The firms merged to form one firm, and the federal government did not challenge the merger. Although the merger created a single seller in this market, the existence of a monopoly may not have much impact on U.S. consumers. Which of the following statements are plausible reasons for the limited impact of the merger?
a. The merged firm will operate at higher capacity and may be able to reduce costs through economies of scale and perhaps learning-by-doing, which will benefit U.S. consumers.
b. Although there will only be one seller of satellite radio, there are other forms of radio broadcasts available to U.S. consumers and demand for satellite radio may be relatively elastic.
c. There are very large fixed costs in providing satellite radio, and the industry may be a natural monopoly. One seller may be able to operate at lower cost than two sellers.
d. all of the above
Answer: a. The merged firm will operate at higher capacity and may be able to reduce costs through economies of scale and perhaps learning-by-doing, which will benefit U.S. consumers.
Explanation:
A merger occurs when two companies comes together and becomes one. This is done in order to expand the recah of a company, gain a market share, and also expand into new segments.
The plausible reasons for the limited impact of the merger will be because the merger will lead to the operation at a higher capacity which will ensure that there's cost reduction through economies of scale which will be beneficial to the consumers.
As nations learn to specialize in production, they will trade with other nations when what happens?
A) They have absolute advantage in trade.
B) They have comparative advantage in trade.
C) They will not trade with another country.
D) When they lose their advantage in that area of trade.
Answer:
the answer is B
Explanation:
Took the test wish me luck
_is any place where goods are produced or distributed or services areproduced
After a major earthquake, the San Francisco Opera Company is offering zero coupon bonds to fund the needed structural repairs to its historic building. Buster Norton is considering the purchase of several of these bonds. The bonds have a face value of $2,000 and are scheduled to mature in 10 years. Similar bonds in the market have an annual YTM of 12 percent. If Mr. Norton purchases three of these bonds today, how much money will he receive 10 years from today at maturity
Answer:
Buster Norton and the Bonds of San Francisco Opera Company
If Mr. Norton purchases three of these bonds today, in 10 years from today at maturity, he will receive:
= $6,000.
Explanation:
a) Data and Calculations:
Face value of each zero coupon bond purchased = $2,000
Number of bonds purchased by Norton = 3
Value of bond investments at maturity = $6,000 ($2,000 * 3)
Maturity period of the San Francisco Opera Company bonds = 10 years
Annual Yield to Maturity of similar bonds in the market = 12%
From an online financial calculator:
Present value of bonds = $1,932 (with each as $644 ($1,932/3))
N (# of periods) 10
I/Y (Interest per year) 12
PMT (Periodic Payment) 0
FV (Future Value) -6000
Results
PV = $1,931.84
Total Interest $4,068.16
ABC developed a new horse transport device and incurred research and development costs of $250,000. Rather than continue with their own research, ABC decided to purchase a patent for a similar design from Vail, Inc. for $350,000. What are the total assets and expenses for these developments
Answer:
Total Assets $350,000
Expenses $250,000
Explanation:
The company (ABC) has spent on research and development costs of $250,000. These costs are associated on the assets which are currently under development and benefit of which would be derived in the near future. Therefore, in the accounting treatment these costs will be recorded as expense.
The patent is considered as an intangible asset. This is due to the fact that they do not have any physical substance and provides benefit in the long run for the company who owns them. Their treatment in which case would be same as any intangible asset. ABC should treat the purchasing of patents as asset.
Hence, research and development costs incurred for new horse transport is expenses at $250,000 and the purchasing of patents would be recorded as an asset at $350,000.
at is Dantzler's horizon, or continuing, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. $ fill in the blank 2 million What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round your intermediate calculations. $ fill in the blank 3 million Suppose Dantzler has $119 million of debt and 5 million shares of stock outstanding. What is your estimate of the current price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250. $ fill in the blank 4
Answer:
a. Horizon Value = $856 million
b. Firm’s value today = Value of Firm = $641.61 million
c. Current Price per Share = $32.72
Explanation:
Note: This question is not complete. The complete question is therefore provided before answering the question as follows:
Dantzler Corporation is a fast-growing supplier of office products. Analysts project the following free cash flows (FCFS) during the next 3 years, after which FCF is expected to grow at a constant 7% rate. Dantzler's WACC is 12%.
Year FCF ($ millions)
0 -
1 -$18
2 $25
3 $40
a. What is Dantzler's horizon, or continuing, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. million
b. What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round your intermediate calculations. million
c. Suppose Dantzler has $20 million of debt and 19 million shares of stock outstanding. What is your estimate of the current price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250.
The explanation of the answers is now given as follows:
a. What is Dantzler's horizon, or continuing, value? (Hint: Find the value of all free cash flows beyond Year 3 discounted back to Year 3.) Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. million
Horizon Value = Year 3 FCF * (100% + Constant growth rate) / (WACC – Constant growth rate) = $40 * (100% + 7%) / (12% - 7%) = $856 million
b. What is the firm's value today? Round your answer to two decimal places. Enter your answer in millions. For example, an answer of $13,550,000 should be entered as 13.55. Do not round your intermediate calculations. million
Value of Firm = (Year 1 FCF /(100% + WACC)^1) + (Year 2 FCF / (100% + WACC)^2) + ((Year 3 FCF + Horizon value) / (100% + WACC)^3)
Value of Firm = (-18/(100%+12%)^1+(25/(100%+12%)^2)+((856+40)/(100%+12%)^3))
Value of Firm = $641.61 million
c. Suppose Dantzler has $20 million of debt and 19 million shares of stock outstanding. What is your estimate of the current price per share? Round your answer to two decimal places. Write out your answer completely. For example, 0.00025 million should be entered as 250.
Current Price per Share = (Value of Firm – Debt) / Number of shares of stock outstanding = (641.61 - 20) / 19 = $32.72
What is the basic aim of the National Labor Relations Act?
A. Protecting workers' rights to organize and join a union
B. Requiring HR departments to engage in labor relations
C. Requiring employers to provide safe working conditions
D. Requiring employers to provide equal employment opportunity
Answer:
A - Protecting workers rights to organize and join a union
Explanation:
The general aim of the NLRA (National Labor Relations Act) was to protect workers from employers to revoke the rights of the employee to join or organize a union. Now, workers are able to freely join unions or organize them without being punished according to the NRLA.
Hope this helps.
The accountant for Mandarin Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:
Retained earnings balance at the beginning of the year $ 1,069,000
Net income for the year 355,000
Cash dividends declared for the year 67,000
Retained earnings balance at the end of the year 1,757,000
Cash dividends payable at the beginning of the year 15,000
Cash dividends payable at the end of the year 18,500
What is the amount of cash dividends paid that should be reported in the financing section of the statement of cash flows?
a) $100,500.
b) $3,500.
c) $63,500.
d) $70,500.
e) $67,000.
Answer:
C. $63,500
Explanation:
With regards to the above, information, the amount of cash dividends paid that should be recorded is computed as;
= Cash dividends payable at the beginning of the year + Cash dividends declared for the year - Cash dividends payable at the end of the year
= $15,000 + $67,000 - $18,500
= $63,500
Therefore, cash dividends paid that should be recorded in the financing section of the statement of cash flow is $63,500
A gourmet coffee shop in downtown Oakland is open 200 days a year and sells an average of 75 pounds of Kona coffee beans a day. Demand can be assumed to be distributed normally with a standard deviation of 15 pounds per day. After ordering (fixed cost = $16/order), beans are always shipped from Hawaii within exactly 4 days. Per-pound annual holding costs for the beans are $4.6. What is the EOQ for Kona coffee beans?
Answer:
EOQ for Kona coffee beans is 323 pounds
Explanation:
Economic Order Quantity (EOQ) is calculated to determine the optimal order quantity for business in order minimise their costs such as warehousing, overstocking and logistics cost. It is calculated using the following formulae:
EOQ = √[(2(setup costs)(demand rate))] / holding costs
Where demand rate is the demand, a company receives for a product each year. In this case the shop opens 200 days a year and sells average 75 pounds of coffee beans a day. Which in total is 15,000 pounds of coffee beans in a year. This is the annual demand for Kona Coffee beans.
The Setup costs also referred to as the Order Cost, is the cost of order per purchase which includes the shipping and handling cost. This is given as $16/order.
Holding cost also referred to as the carrying cost, is the cost for holding the inventory. In the given question, the holding cost is $4.6 per pound.
EOQ = √{(2) (16) (15,000)} / 4.6
EOQ = 323 pounds
Use the following information to calculate the dollar cost of using a money market hedge to hedge 200,000 British pounds of payables due in 180 days. Assume the firm has no excess cash. Assume the spot rate of the pound is $2.02, and the 180-day forward rate is $2.00. The British interest rate is 5 percent, and the U.S. interest rate is 4 percent over the 180-day period.
a. $351,210.
b. $381,210.
c. $371,210.
d. $400,152.
Answer:
Dollar cost of Money market hedge= $400,152.38
Explanation:
The money market hedge would be set up as follows:
Step 1: Deposit in Pounds
Deposit an amount in Pounds equals to
Amount to be deposited= Payable/(1+deposit rate)
= 200,000 pound/(1.05)= 190,476.19 pounds
Step 2 : Convert the sum
Convert 190,476.19 pounds at the spot rate of $2.02
Dollar amount = 190,476.19 × 2.02
= $ 384,761.90
Step 3: Borrow at home (US)
Borrow $ 384,761.90 for 180 days at an interest rate of 4%
Amount due (inclusive of interest) = Amount borrowed × 1.04
=$ 384,761.90 × 1.04
= $ 400,152.38
Dollar cost of Money market hedge= $400,152.38
