True or false: The cost of capital is the investor’s cost in the form of interest payments and dividends.

True or false: Total common equity is the difference between retained earnings and paid in capital.

True or false: Debt may be more advantageous than equity because equity can improve the company’s financial position as measured by various analytical ratios.

True or false: The weighted average is the sum of the W × R products.

True or false: If company FGH has three loans, $600,000 at 3%; $800,000 at 4%; and $1,500,000 at 8%, the weighted average of the loans is 5.8%.

True or false: When using the WACC formula to determine the capital costs of a new project, you can compare it to ROIC to determine whether the return will be sufficient to pay for the capital.

True or false: The value of common stock is more stable than preferred stock because the dividends are normally a fixed amount every year.

True or false: Firms use capital for expansion.

True or false: There are three sources of capital.

True or false: The value that certain kinds of dividends are calculated on is referred to as a par value.

The text discusses the concepts of Cost of Debt and the Cost of Equity. Discuss with your class colleagues your understanding of each and if you were to acquire a new asset, which one would you prefer to use to pay for the asset and why.

describe the flow of manufacturing cost in a Job Order Cost System.

Which of the following is a mixed cost?

a) a cost that is $32.00 per unit when production is 80,000 and $40.00 per unit when production is 128,000.

b) a cost that is $64.00 per unit when production is 80,000 and $64.00 per unit when production is 128,000.

c) a cost that is $32.00 per unit when production is 80,000 and $32,000 per unit when production is 128,000.

d) a cost that is $32.00 per unit when prodcution is 80,000 and $26,000 per unit when production is 128,000.

15.1 Case in Point: Newell Rubbermaid Leverages Cost Controls to Grow

Newell Company grew to be a diversified manufacturer and marketer of simple household items, cookware, and hardware. In the early 1950s, Newell Company’s business consisted solely of manufactured curtain rods that were sold through hardware stores and retailers like Sears. Since the 1960s, however, the company has diversified extensively through acquisitions of businesses for paintbrushes, writing pens, pots and pans, hairbrushes, and the like. Over 90% of its growth can be attributed to these many small acquisitions, whose performance Newell improved tremendously through aggressive restructuring and its corporate emphasis on cost cutting and cost controls. Usually within a year of the acquisition, Newell would bring in new leadership and install its own financial controller in the acquired unit. Then, three standard sets of controls were introduced: an integrated financial accounting system, a sales and order processing and tracking system, and a flexible manufacturing system. Once these systems were in place, managers were able to control costs by limiting expenses to those previously budgeted. Administration, accounting, and customer-related financial accounting aspects of the acquired business were also consolidated into Newell’s corporate headquarters to further reduce and control costs.

While Newell Company’s 16 different lines of business may appear quite different, they all share the common characteristics of being staple manufactured items sold primarily through volume retail channels like Wal-Mart, Target, and Kmart. Because Newell operates each line of business autonomously (separate manufacturing, research and development [R&D], and selling responsibilities for each), it is perhaps best described as pursuing a related, linked diversification strategy. The common linkages are both internal (accounting systems, product merchandising skills, and acquisition competency) and external (distribution channel of volume retailers). Beyond its internal systems and processes, Newell was also able to control costs through outcome controls. That is, business managers were paid a bonus based on the profitability of their particular unit—in fact, the firm’s strategy is to achieve profits, not simply growth at the expense of profits. Newell managers could expect a base salary equal to the industry average but could earn bonuses ranging from 35% to 100% based on their rank and unit profitability.

In 1999, Newell acquired Rubbermaid, a U.S.-based manufacturer of flexible plastic products like trash cans, reheatable and freezable food containers, and a broad range of other plastic storage containers designed for home and office use. While Rubbermaid was highly innovative (over 80% of its growth has come from internal new product development), it had difficulty controlling costs and was losing ground against powerful customers like Wal-Mart. Newell believed that the market power it wielded with retailers like Wal-Mart would help it turn Rubbermaid’s prospects around. The acquisition deal between these two companies resulted in a single company that was twice as big and became known as Newell Rubbermaid Inc. (NYSE: NWL). In 2010, Fortune named Newell Rubbermaid the number 7 “Most Admired Company” in the home equipment and furnishings category.

1. How do the controls Newell uses fit its strategy?

The following cost functions were developed for manufacturing overhead costs: Manufacturing Overhead Cost Cost Function Electricity $200 + $20 per direct labor hour Maintenance $400 + $30 per direct labor hour Supervisors' salaries $20,000 per month Indirect materials $16 per direct labor hour

If June production is expected to be 2,000 units requiring 3,000 direct labor hours, what is the estimated manufacturing overhead costs? Also discuss the role of direct labor hours in determining the predetermined overhead rates.

The following cost functions were developed for manufacturing overhead costs: Manufacturing Overhead Cost Cost Function Electricity $200 + $20 per direct labor hour Maintenance $400 + $30 per direct labor hour Supervisors' salaries $20,000 per month Indirect materials $16 per direct labor hour

If June production is expected to be 2,000 units requiring 3,000 direct labor hours, what is the estimated manufacturing overhead costs? Also discuss the role of direct labor hours in determining the predetermined overhead rates.

Using the lower-of-cost-or-market approach applied on an individual-item basis, compute the inventory valuation that should be reported for each product on December 31, 2017

Briefly explain the following terms: