How a company can compete on cost, quality, time and flexibility

Which financial investments are valued at amortized cost? Explain the rationale.

You are considering a project that requires an initial investment of $110,000 with a cost of capital of 8%. You expect the project to have a five-year life, and produce cash flows of $19,000 in year 1, $38,000 in year 2, $58,000 in year 3, $29,000 in year 4 and $10,000 in year 5.

What is this project’s Discounted Payback Period?

Group of answer choices

A. 3.96 years

B. 2.91years

C. 3.65 years

D. 3.28 years

The cost of adding a new communication node at a location not currently included in the network is of concern to a major manufacturing company. To try to predict the price of new communication nodes, data were obtain on a random sample of existing nodes.

We have information on the following variables:

?: Installation cost of the node, in U.S. dollars (COST)

?1: Number of ports available for access (NUMPORTS)

?2: Bandwidth (BANDWIDTH)

?3: Port speed (PORTSPEED)

Use MINITAB to answer the following questions.

COST NUMPORTS BANDWIDTH PORTSPEED
52388 68 58 653
51761 52 179 499
50221 44 123 422
36095 32 38 307
27500 16 29 154
57088 56   141 538
54475 56 141 538
33969 28 48 269
31309 24 29 230
23444 24 10 230
24269 12 56 115
53479 52 131 499
33543 20 38 192
33056 24 29 230

Perform a global F-test by completing the following steps:

a. The null hypothesis is ?0: ?1 = ?2 = ?3 = 0, what is the alternative hypothesis?

b. What is the p-value for this test?

c. Is there evidence that at least one explanatory variable (number of ports, bandwidth, or port speed) is useful in explaining the variation in the installation cost for communication nodes? (Circle one) i. Yes ii. No

d. What is the value of the MSE for the full model?

(Individual or component costs of​ capital)  Compute the cost of capital for the firm for the​ following:

a.  A bond that has a ​$1,000 par value​ (face value) and a contract or coupon interest rate of 10.2 percent. Interest payments are $51.00 and are paid semiannually. The bonds have a current market value of $1,130 and will mature in 10 years. The​ firm's marginal tax rate is 34 percet.

b.  A new common stock issue that paid a $1.81 dividend last year. The​ firm's dividends are expected to continue to grow at 6.8 percent per​ year, forever. The price of the​ firm's common stock is now $27.45.

c.  A preferred stock that sells for $143 pays a dividend of 9.3 ​percent, and has a​ $100 par value.  

d.  A bond selling to yield 12.1 percent where the​ firm's tax rate is 34 percent.

a. The​ after-tax cost of debt is .... ​%. ​(Round to two decimal​ places.)

b.  The cost of common equity is......​%. ​(Round to two decimal​ places.)

c.  The cost of preferred stock is ....%. ​(Round to two decimal​ places.)

d.  The​ after-tax cost of debt is ......​%. ​(Round to two decimal​ places.)

Objective

This assignment examines the importance of the cost of quality to an organization. Through this, we will gain a better understanding of how we can measure the cost of quality in an organization and what benefits can be gained from the cost of quality.

Scenario

This is a true story that dominates the global media in 2019/20 and shook an established and trusted company to its core. More details are easily available online but the following summary was taken from Wikipedia.

The Story

Boeing is a major airline manufacturer. The introduction of it’s new Boeing 737 Max plan resulted in 346 deaths.

The Challenge

In March 2019, aviation authorities around the world grounded the Boeing 737 Max passenger aircraft after two new airplanes crashed within five months of each other, killing all 346 people aboard. After the first accident, Lion air Flight 610 on October 29, 2018, investigators determined that the MAX's new Maneuvering Characteristics Augmentation System  (MCAS), which was omitted from flight manuals and crew training, automatically and repeatedly forced the aircraft to nosedive.

The Response

In April 2019, Boeing admitted that MCAS played a role in both accidents. In October, the Indonesian authorities concluded that problems with airplane design, certification, maintenance, and flight crew actions contributed to the Lion Air accident. In November 2019, the FAA revoked Boeing's authority to issue airworthiness certificates for individual MAX airplanes. In December 2019, the U.S. House of Representatives criticized the FAA and Boeing for their inaction despite known risks.

in December 2019, Boeing ousted its CEO over mismanagement of the crisis. Airlines canceled 183 orders for the MAX in 2019. In January 2020, Boeing halted production until regulators clear the airliner to fly again. Boeing revealed derogatory messages between its employees, sent during certification, about the MAX design, FAA regulation, and Lion Air's request for flight simulator training. Boeing estimated the grounding and production suspension will result in an additional $6.3 billion to produce the aircraft, reducing the margin of the 737 program in the future, with $18.4 billion in total future losses arising from the grounding.

Deliverables

Analyze the above scenario using the 4 Costs of Quality given below:

• Appraisal cost
• Prevention cost
• Internal failure cost
• External failure cost

Your detailed analysis and report should reflect:

• Root cause(s) of the issue
• What should have been done to prevent the current situation?
• What was done to turn the situation around?
• How did Boeing officials manage this crisis?

​(Individual or component costs of​ capital)  Compute the cost of capital for the firm for the​ following:

a. A bond that has a ​$1 comma 000 par value​ (face value) and a contract or coupon interest rate of 10.9 percent. Interest payments are ​$54.50 and are paid semiannually. The bonds have a current market value of ​$1 comma 126 and will mature in 10 years. The​ firm's marginal tax rate is 34 percent.

b. A new common stock issue that paid a ​$1.78 dividend last year. The​ firm's dividends are expected to continue to grow at 7.5 percent per​ year, forever. The price of the​ firm's common stock is now ​$27.87.

c. A preferred stock that sells for ​$146​, pays a dividend of 8.8 ​percent, and has a​ $100 par value.  

d. A bond selling to yield 12.4 percent where the​ firm's tax rate is 34 percent.

The wage for workers in a competitive market is initially $10 and rent, the cost of capital (also rented in a competitive market), is initially $5. Now suppose that wages decrease to $8 and rent decreases to $2.

a) Describe how the scale effect changes a firm's use of labor and capital.

b) Describe how the substitution effect changes a firm's use of labor and capital.

c) Overall will a firm hire more or fewer workers? Will a firm rent more or less capital?

d) Will a firm change its production technology given the changes in w and r?

A decentralized organization is one in which:

A local chain department store grants each of its store managers the authority to make buying decisions for their stores. Granting managers this kind of authority is found in which type of organization?

A local chain electronics store does not allow its store or district managers to make important decisions about their stores. The main role of store managers is to supervise employees and make sure day-to-day transactions run smoothly while district managers supervise store managers and report profitability data back to top-level management. Not allowing store or district managers decision-making authority is most likely to be found in which type of organization?

When a few individuals at the top of an organization retain decision-making authority, the organization is referred to as a(n):

Which of the following statements regarding the structure of organizations is false?

Which of the following is an advantage of decentralization?

Which of the following is not an advantage of decentralization?

Which of the following is often not a disadvantage of decentralization?

Which of the following is a disadvantage of decentralization?

"Responsibility accounting" is the concept that says:

A budget for a single unit of a product or service is called as a:

Which of the following statements is true regarding the budgeted cost for direct materials?

Variance analysis compares:

Which of the following statements is false regarding task analysis?

Task analysis:

A(n) ____ is attainable only when near-perfect conditions exist.

In most companies, machines break down occasionally and employees are often less than perfect. Which type of standard acknowledges these characteristics when determining the standard cost of a product?

Hathaway Inc. produces and sells golf umbrellas to local resorts. Hathaway anticipates April to be a busy month with the sale of 2,000 umbrellas. The company has prepared the following static budget for April:

During April, Hathaway actually produced and sold 2,300 umbrellas. What should be Hathaway's net operating income in April based on a flexible budget?

Hoppe Inc. manufactures widgets. Management has determined that each widget has a standard materials cost of $3.50 when 2.5 ounces of raw material at a cost of $1.40 per ounce are used. The static budget for the month of December showed an estimated production of 4,000 widgets in December. During December, 4,300 widgets were actually produced. The actual cost for each widget was $3.60 when 2.25 ounces of raw material at a cost of $1.60 per ounce were purchased and used. What should be the total direct materials cost according to Hoppe's flexible budget for December?

Violetta Inc. manufactures plastic storage boxes. Management has determined that each medium-sized box has a standard materials cost of $1.20 when 4 pounds of raw material at a cost of $.30 per pound are used. The static budget for the month of March showed an estimated production of 15,000 boxes in March. During March, 17,000 boxes were actually produced. The actual cost for each box was $1.56 when 3.9 pounds of raw material at a cost of $.40 per pound were purchased and used. What should be the total direct materials cost according to Violetta's flexible budget for March?

QUESTION 1

1. When the direct write-off method of recognizing bad debt expense used, which of the following accounts would NOT be used?

   		Bad Debt Expense
   		Accounts Receivable
   		Allowance for Bad Debts
   		All of the above are used in the direct write-off method

1 points   

QUESTION 2

1. When the allowance method of recognizing bad debt expense is used, the entries at the time of collection a a small account previously off would:

   		Increase net income
   		Increase Allowance for Bad Debts
   		Decrease net income
   		Decrease Allowance for Bad Debts

1 points   

QUESTION 3

1. Deuce Company uses the allowance method to estimate the losses form uncollectible receivables. Net sales for the year are $120,000 and the company estimates its bad debts as 1 percent of net sales. If there is already a $1,200 debit balance in Allowance for Bad Debts, how should be recorded as Bad Debt Expense?

   		$1,200
   		$2,400
   		$24,000
   		No entry is required

1 points   

QUESTION 4

1. Following are the account balances from the December 31 trial balance of Hark Company. If 10% of the Accounts Receivable is estimated to be uncollectible, the entry to record the estimate of bad debts would include a debit to Bad Debt Expense for:

   	DB
   Accounts Receivable	20,000
   Allowance fro Bad Debts	800
   Sales Revenue	135,000

   		$2,000
   		$2,080
   		$2,800
   		$1,200

1 points   

QUESTION 5

1. A promissory note dated Dec. 1, 2012 bearing interest at a rate of 8% and due in 60 days is sent ot a creditor. The face value of the note is $10,000. The entry for accrued interest at December 31, 2012 by the issuer of the note includes a:

   		Debit to interest expense of $67
   		A credit ot interest payable of $133
   		Credit to interest expense of $67
   		Debit to interest payable of $133

1 points   

QUESTION 6

1. The entry (or entries) requried to record a sales return by a customer when using the perpetual inventory method would consist of:

   		A debit to Sales Revenue and a credit to Accounts Receivable
   		A debit to Sales Returns and Allowances and a credit to Accounts Receivables
   		Debits to Sales Returns and Allowances and Inventory and credits to Accounts Receivable and Costs of Goods Sold
   		Debits to Sales Returns and Allowances and Cost of Goods Sold and credits to Accounts Receivable and Inventory

1 points   

QUESTION 7

1. Which of the following will result if the current year's ending inventory amount is understated in the cost of goods calculation:

   		Cost of goods sold will be overstated
   		Total assets will be overstated
   		Net income will be overstated
   		Both A and C

1 points   

QUESTION 8

1. Which of the following would be true if inventory costs were increasing?

   		LIFO would result in lower net income and lower ending inventory amounts than would FIFO
   		FIFO would result in lower net income and higher ending inventory amounts than would LIFO
   		LIFO would result in a lower net income amount but a higher ending inventory amount that would FIFO
   		None of the above

1 points   

QUESTION 9

1. Given the following sale and purchasing information, what is the ending iinventory, if the periodic FIFO costing alternative is used? The beginning inventory on hand was 100 units at $1 each.

   1st Purchase	700 units @ $2
   2nd Purchase	1,000 units @ $3
   3rd Purchase	500 units @ $4
   4th Purchase	500 units @ $5
   Total units purchased	2,700
   1st Sale	400 units @$7
   2nd Sale	750 units @$8
   3rd Sale	500 units @$9
   4th Sale	500 units @$10
   Total units sold	2,150

   		$400
   		$500
   		$1,250
   		$3,100

1 points   

QUESTION 10

1. Using the following purchases and sales, what is the ending inventory if the periodic LIFO costing alternative is used? The beginning inventory iis 100 units on hand at $2 each.

   1st Purchase	500 units @$2
   2nd Purchase	1,000 units @ $3
   3rd Purchase	500 units @ $4
   4th Purchase	500 units @ $5
   Total units purchased	2,500
   1st Sale	600 units @$7
   2nd Sale	750 units @$8
   3rd Sale	500 units @$9
   4th Sale	500 units @$10
   Total units sold	2,350

   		$400
   		$500
   		$1,250
   		$3,100

1 points   

QUESTION 11

1. Using the following information, what is the average cost per unit available for sale during the year if the periodic inventory method is used (round to nearest cent)? The beginning inventory on had was 100 units at $1 each.

   1st Purchase	500 units @$2
   2nd Purchase	1,000 units @ $3
   3rd Purchase	500 units @ $4
   4th Purchase	500 units @ $5
   Total units purchased	2,500
   1st Sale	600 units @$7
   2nd Sale	750 units @$8
   3rd Sale	500 units @$9
   4th Sale	500 units @$10
   Total units sold	2,350

   		$2.61
   		$3.10
   		$3.53
   		$3.31

1 points   

QUESTION 12

1. A firm had a beginning inventory balance of $1,000, net purchases of $35,000 and sales of $40,000. Its gross margin percentage was 25%. Using the gross margin method, the ending inventory balance is:

   		$1,000
   		$7,000
   		$6,000
   		$10,000

1 points   

QUESTION 13

1. Which of the following is NOT usually depreciated, depleted or amortized?

   		Furniture
   		Land
   		Mineral deposits
   		Patents

1 points   

QUESTION 14

1. Depreciation can best be described as a method of

   		Allocating the costs of assets over their useful life
   		Accumulating funds for the replacement of assets
   		Reducing the carrying cost of assets to current market value
   		Deriving tax benefits

1 points   

QUESTION 15

1. The book value of an asset is the:

   		Original cost of the asset
   		Market value of the asset
   		Total of all expenses associated with the asset
   		Acquisition cost of the asset less any accumulated depreciation on the asset

1 points   

QUESTION 16

1. On January 1, 2012 Powers Press purchased equipment at a cost of $6,300. The equipment had an estimated useful life of three years or 15,000 hours. The equipment will have a $600 salvage value at the end of its life. The depreciation expense for the year ending December 31, 2012 using the straight-line method would be:

   		$1,900
   		$1,883
   		$475
   		$471

1 points   

QUESTION 17

1. On January 1, 2006, Powers press purchased equipment at cost of $6,300. The equipment had an estimated useful life of three years or 15,000 hours. The equipment will have a $600 salvage value at the end of its life. The equipment was used for 3,250 hours in 2012. The depreciation epense for the year ending December 31, 2012 using the units of production method would be:

   		$1,900
   		$1,235
   		$3,250
   		$1,365

1 points   

QUESTION 18

1. On January 1, 2011, Kinnear Company purchased equipment at a cost of $20,000. The equipment had useful life of 5 years and a salvage value of $2,000. Kinnear Company use the straight-line depreciation method for all its assets. Given this information, if the company sells the equipment for $13,600 on December 31, 2006, it will have a(n):

   		$2,000 loss
   		$2,000 gain
   		$800 loss
   		$800 gain

1 points   

QUESTION 19

1. The balance sheet category "intangible assets" includes:

   		Patents, trademarks and franchises
   		Equipment, land and buildings
   		Investments, receivables and customer lists
   		Goodwill, inventory and furnishings

1 points   

QUESTION 20

1. On March 3, 2006, Binford Tools acquired the following assets from Mace Harware for $360,000. How much goodwill should be recorded for this transactions?

   	Book Value	Fair Market Value
   Accounts Receivable	58,000	33,000
   Inventory	92,000	76,000
   Equipment	139,000	182,000
   Patent	13,000	8,000

   		$61,000
   		$58,000
   		$39,000
   		0