The following information provides the amount of cost incurred in August for the cost items indicated. During August, 8,100 units of the firm's single product were manufactured.
| Raw materials | $ | 41,800 | |
| Factory depreciation expense | 41,000 | ||
| Direct labor | 99,900 | ||
| Production supervisor's salary | 6,200 | ||
| Computer rental expense | 4,200 | ||
| Maintenance supplies used | 700 | ||
Required:
a. How much cost would you expect to be incurred for each of these items during September when 9,200 units of the product are planned for production? (Do not round intermediate calculations.)
Raw Materials =
Factory depreciation expense =
Direct labor =
Production Supervisor's Salary=
Computer rental expense =
Maintenance supplies used=
Total cost=
b-1. Calculate the average total cost per unit for the 8,100 units manufactored in August. (Do not round intermediate calculations. Rount your answer to 2 decimal places.) Average cost per unit =
b-2. It is meaningful to use the average total cost figure in part b-1 to predict the cost in subsequent months. True or False?
In: Accounting
In: Accounting
In: Accounting
The Cost of Capital: Cost of New Common Stock
If a firm plans to issue new stock, flotation costs (investment
bankers' fees) should not be ignored. There are two approaches to
use to account for flotation costs. The first approach is to add
the sum of flotation costs for the debt, preferred, and common
stock and add them to the initial investment cost. Because the
investment cost is increased, the project's expected return is
reduced so it may not meet the firm's hurdle rate for acceptance of
the project. The second approach involves adjusting the cost of
common equity as follows:
The difference between the flotation-adjusted cost of equity and
the cost of equity calculated without the flotation adjustment
represents the flotation cost adjustment.
Quantitative Problem: Barton Industries expects
next year's annual dividend, D1, to be $2.50 and it
expects dividends to grow at a constant rate g = 4.8%. The firm's
current common stock price, P0, is $23.00. If it needs
to issue new common stock, the firm will encounter a 4.9% flotation
cost, F. Assume that the cost of equity calculated without the
flotation adjustment is 12% and the cost of old common equity is
11.5%. What is the flotation cost adjustment that must be added to
its cost of retained earnings? Round your answer to 2 decimal
places. Do not round intermediate calculations.
%
What is the cost of new common equity considering the estimate
made from the three estimation methodologies? Round your answer to
2 decimal places. Do not round intermediate calculations.
%
In: Finance
8 identify and describe cost behaviour characteristics for the different cost elements of a product or service
In: Accounting
A proposed cost- saving device has an installed cost of $735,000. The device will be used in a five year project but is classified as a three year MACR property for tax purposes. The required initial net working capital investment is $55,000, the tax rate is 22 percent and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $85,000. What level of pretax cost savings do we require for this project to be profitable?
In: Finance
| Calculate the cost per equivalent unit of material and conversion cost for January - using the Weighted Average Approach | |||||||||||||||
| Units | Materials | Conversion | |||||||||||||
| Work in process January 1 | 2,500 | 50% | 35% | ||||||||||||
| Work in process January 31 | 45% | 25% | |||||||||||||
| Materials cost in work in process January 1 | $25,000 | ||||||||||||||
| Conversion costs in work in process January 1 | $10,000 | ||||||||||||||
| Units started in production | 12,000 | ||||||||||||||
| Units transferred to the next department | 8,000 | ||||||||||||||
| Materials cost added during January | $20,000 | ||||||||||||||
| Conversion costs added during January | $7,500 | ||||||||||||||
| Complete the grey cells that required information. | |||||||||||||||
| Beginning Inventory | |||||||||||||||
| Units Started this Period | |||||||||||||||
| Units to be accounted for | |||||||||||||||
| Direct Materials | Conversion Costs | ||||||||||||||
| Units in process January | |||||||||||||||
| Units completed & transferred out | |||||||||||||||
| Ending Inventory | |||||||||||||||
| Units accounted for | |||||||||||||||
| Direct Materials | Conversion Costs | ||||||||||||||
| Beginning Inventory | |||||||||||||||
| Current Costs | |||||||||||||||
| Total Costs | |||||||||||||||
| Equivalent Units | |||||||||||||||
| Materials | Conversion | ||||||||||||||
| Units completed and transferred out | |||||||||||||||
| Work in process, January 31: | |||||||||||||||
| Equivalent units of production in work in process | |||||||||||||||
| Total Cost | Materials | Conversion | |||||||||||||
| Cost to be accounted for: | |||||||||||||||
| Work in process, January 1 | |||||||||||||||
| Costs added in January | |||||||||||||||
| Total Cost | |||||||||||||||
| Equivalent units | |||||||||||||||
| Cost per equivalent unit | |||||||||||||||
In: Accounting
|
The Cost of Capital: Weighted Average Cost of Capital The firm's target capital structure is the mix of debt, preferred stock, and common equity the firm plans to raise funds for its future projects. The target proportions of debt, preferred stock, and common equity, along with the cost of these components, are used to calculate the firm's weighted average cost of capital (WACC). If the firm will not have to issue new common stock, then the cost of retained earnings is used in the firm's WACC calculation. However, if the firm will have to issue new common stock, the cost of new common stock should be used in the firm's WACC calculation. Quantitative Problem: Barton Industries expects
that its target capital structure for raising funds in the future
for its capital budget will consist of 40% debt, 5% preferred
stock, and 55% common equity. Note that the firm's marginal tax
rate is 40%. Assume that the firm's cost of debt, rd, is
7.2%, the firm's cost of preferred stock, rp, is 6.7%
and the firm's cost of equity is 11.2% for old equity,
rs, and 11.56% for new equity, re. What is
the firm's weighted average cost of capital (WACC1) if
it uses retained earnings as its source of common equity? Round
your answer to 3 decimal places. Do not round intermediate
calculations. What is the firm’s weighted average cost of capital
(WACC2) if it has to issue new common stock? Round your
answer to 3 decimal places. Do not round intermediate
calculations. |
In: Finance
“The cost of equity can never be cheaper than the cost of debt considering an equity investor is the last taker of funds, should the worse come to worst for the issuer. And he requires compensation for such risk”.
Critically evaluate the remark above from the viewpoint of global finance.
In: Finance
Explain the concept of marginal cost. How does the marginal cost of a good relate to its industry supply curve (under perfect competition)?
In: Economics