Answer:
the relationship depends on the individual investment
Answer:
The relationship depends on the individual investment
Unobserved effects versus idiosyncratic errors
Suppose you have two years' worth of panel data on wages and work experience of adults; however, the data set has no further information on the characteristics of the individuals in the data set. Specifically, you have cross-sectional wage and work experience data on individuals in 2006, and cross-sectional data on those same individuals in 2012. You plan to use the following fixed effects model to analyze the effects of work experience on wages:
log (wage it ) = βo + 80 yr10, + B1 experit + ai + uit
where
wage it = yearly wage of individual i at time t, in dollars
yrl0, =1 in the year 2010 (t = 2), and =0 otherwise (t = 1)
exper = years of work experience of individual i, at time t
ai = unobserved (time-invariant) effect
uit = idiosyncratic error
Two other factors that can influence wage, which you have not controlled for in your model, are height and industry of employment.
Use the following table to indicate which term in the fixed effects model captures the effect of height, which term captures the effect of industry of employment, and which term captures the effect of work experience.
ai uit β1
Work experience
Height
Industry of employment
Answer:
The terms that capture the effect of industry of employment and work experience are:
Industry of employment = uit
Work experience = β1
Height = ai
Explanation:
a) Data:
ai uit β1
Work experience
Height
Industry of employment
b) Explanation
The "idiosyncratic error" (uit) describes the unobserved factors that impact the dependent variable. For example, industry of employment, and this factor vary from one-time period to the next.
The unobserved (time-invariant) effect (ai) refers to the height of the industry of employment, which does not vary over time.
Finally, work experience is depicted by β1, which is a factor that changes with time.
A company has the following selected account balances: Sales $ 250,000 Sales Discounts 1,500 Sales Returns and Allowances 2,300 Sales Salaries Expense 56,000 Store Supplies Expense 15,000 Advertising Expense 8,000 Cost of Goods Sold 125,000 What is the gross profit that would appear on a multiple-step income statement: multiple choice $121,200 $167,200 $42,200 $246,200
Answer:
$121,200
Explanation:
Calculation to determine the gross profit that would appear on a multiple-step income statement
First step is to determine the Net sales
Sales $ 250,000
Less Sales Discounts ($1,500)
Less Sales Returns and Allowances ($2,300 )
Net sales $246,200
Now let determine the Gross profit using this formula
Gross profit=Net sales-Cost of Goods Sold
Let plug in the formula
Gross profit=$246,200-$125,000
Gross profit=$121,200
Therefore the gross profit that would appear on a multiple-step income statement is $121,200
The primary purpose of finance is to __________. a.) pay off debt as quickly as possible b.) keep track of a business's cash flow c.) study the effects of the economy on businesses d.) manage assets in a way that maximizes returns
Answer: d.) manage assets in a way that maximizes returns
Explanation:
Finance refers to the activities which are associated with debt, credit, investment, banking, capital markets, etc.
Finance has to do with the management of money and the acquisition of needed funds. The primary purpose of finance is to manage assets in a way that maximizes returns.
Is it true that in a short-run production process, the marginal cost curve eventually slopes upward because firms have to pay workers a higher wage rate as they produce more output? Explain your answer.
Answer:
Yes, This is True.
Explanation:
Marginal cost is the cost of one additional unit. The marginal cost curve will slope upwards because firm will pay more wage to the worker who produce more output. This can be regarded as the increase in output leads to increased wage rate. The marginal cost curve will be upward sloping because there will be addition to the marginal cost due to increase in one unit of output.
The following information pertains to Trenton Glass Works for the year just ended.
Budgeted direct-labor cost: 70,000 hours (practical capacity) at $16 per hour
Actual direct-labor cost: 80,000 hours at $17.50 per hour
Budgeted manufacturing overhead: $997,500
Actual selling and administrative expenses: 439,000
Actual manufacturing overhead:
Depreciation $ 233,000
Property taxes 23,000
Indirect labor 80,000
Supervisory salaries 202,000
Utilities 58,000
Insurance 32,000
Rental of space 301,000
Indirect material (see data below) 79,000
Indirect material:
Beginning inventory, January 1 48,000
Purchases during the year 95,000
Ending inventory, December 31 64,000
Calculate the overapplied or underapplied overhead for the year. (Round your intermediate calculations to 2 decimal places.)
Answer:
Over-applied Overhead $134,000
Explanation:
The computation of the overhead applied or under applied overhead is given below:
Depreciation $233,000
Property tax $21,000
indirect labor $80,000
Supervisory salaries $202,000
utilities $58,000
Insurance $32,000
Rental of space $301,000
Indirect material $79,000
Total OH incurred $1,006,000
OH applied $1,140,000
(80000 hours at 14.25 per hour) ($997,500 ÷ 70,000)
Over-applied Overhead $134,000
Managers in international businesses will need to evaluate the attractiveness of a country as a market or location for a facility or investment.
a. True
b. False
Answer:
a. True
Explanation:
A manager can be defined as an individual who is saddled with the responsibility of providing guidance, support, supervision, administrative control, as well as acting as a role model or example to the employees working in an organization by being morally upright. Thus, he or she supervises and ensures his subordinates (employees) are working effectively and efficiently with the organization's goals and objectives.
Generally, managers working in international businesses are expected to evaluate the attractiveness of a country as a market or location for a facility or investment before going ahead to the endorse and approve it for any business having long-term plan, goals and objectives in mind.
Some examples of the factors a manager should look out for in determining the attractiveness of a country includes freedom of expression, government policies, power supply, taxation, ease of doing business, climate, etc.
XYZ has two divisions: South and West. Overall net operating income is $26,900. South Division's segment margin is $42,800 and West Division's segment margin is $29,900. What is the amount of the common fixed expense not traceable to the individual divisions
Answer:
$45,800
Explanation:
Common fixed expense = South Division's segment margin + West Division's segment margin - Overall net operating income
= $42,800 + $29,900 - $26,900 = $45,800
= $45,800
The amount of the common fixed expense not traceable to the individual divisions is $45,800.
Criticize different types of selection and supply categories
Answer:
Following are the responses to the given question:
Explanation:
This item type of provision requires that the learner organizes information. The students need to take proper or more options in certain test items. Every item has a single correct answer. Every student needs to learn the very same thing and depend on the red recall of facts. It requires the very same thing.
The decision is based on the basic qualifications for the job. Every supply pool is examined and categorized according to the requirements. The pool of talent is evaluated to obtain the best match. If the biggest game between the selected pool isn't available, the recruiter might consider relaxing certain requirements in the plan to enlarge the pool.
You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of .5 percent per year, compounded monthly for the first six months, increasing thereafter to 17.3 percent compounded monthly. Assume you transfer the $6,300 balance from your existing credit card and make no subsequent payments. How much interest will you owe at the end of the first year
Answer:
$738.39
Explanation:
Interest is compounded for first 6 months
Amount at the end of 6 months = $6,300 * (1+0.05/12)^6
Amount at the end of 6 months = $6,300 * 1.025262
Amount at the end of 6 months = $6,459.15
Therefore, 17.3%
Amount at the end of 12 months = $6,459.15*(1+0.173/12)^6
Amount at the end of 12 months = $6,459.15*1.0896782
Amount at the end of 12 months = $7,038.39
Interest owed = Amount owed - Principal
Interest owed = $7,038.39 - $6,300
Interest owed = $738.39
XYZ Inc., manufactures and sells two products: Product B7 and Product Z5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:
Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours
Product B7 300 5.0 1,500
Product Z5 800 3.0 2,400
Total direct labor-hours 3,900
The direct labor rate is $15.10 per DLH. The direct materials cost per unit is $136.20 for Product B7 and $204.40 for Product Z5. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Activity cost pools Activity measures Estimated overhead cost Expected activity
Product B7 Product Z5 Total
Labor-related DLHs $39,585 1,500 2,400
Production orders Orders $26,884 500 600
Order size MHs $462,768 4,600 4,700
The unit product cost of Product Z5 under activity-based costing is closest to: ____________
Answer:
XYZ Inc.
The unit product cost of Product Z5 under activity-based costing is closest to:
= $999.62.
Explanation:
a) Data and Calculations:
Product B7 Product Z5 Total
Expected Production 300 800
Per Unit 5.0 3.0
Total Direct Labor-Hours 1,500 2,400 3,900
Direct labor rate per DLH $15.10 $15.10
Total direct labor costs $22,650 $36,240
Direct materials per unit $136.20 $204.40
Total direct materials costs $204,300 $490,560
Activity cost pools Activity Estimated Expected activity
measures overhead cost Product B7 Product Z5 Total
Labor-related DLHs $39,585 1,500 2,400 3,900
Production orders Orders $26,884 500 600 1,100
Order size MHs $462,768 4,600 4,700 9,300
Rates
Labor-related $10.15 ($39,585/3,900)
Production orders 24.44 ($26,884/1,100)
Order size 49.76 ($462,768/9,300)
Product Z5
Labor-related $24,360 ($10.15 * 2,400)
Production orders $14,664 (24.44 * 600)
Order size $233,872 ($49.76 * 4,700)
Total overhead $272,896
Product Z5
Direct materials $490,560
Direct labor 36,240
Overhead 272,896
Total costs $799,696
Unit cost = $999.62 ($799,696/800)
Mendez Company is considering a capital project that costs $16,000. The project will deliver the following cash flows: Year 1 Year 2 Year 3 Year 4 Year 5 $8,000 $6,000 $5,000 $6,000 $5,000 Using the incremental approach, the payback period for the investment is:
Answer:
2.4 years
Explanation:
Years Cash Cumulative Cashflow
1 8000 8000
2 6000 14000
3 5000 19000
4 4000 25000
5 5000 30000
30000
Payback period = 2 years + (16,000 - 14,000) / 5,000
Payback period = 2 years + 0.4 years
Payback period = 2.4 years
if the inventory turnover ratio cast co is 5x and its gross profits and sales are $270 million and $1,200 million respectivelly then the inventory account for cast is
a.$180 million
b.$182 million
c.$186 million
d.$196 million
Answer:
c.$186 million
Explanation:
Calculation to determine what the inventory account for cast is
Using this formula
Inventory account for cast =Sales - Gross profit/Inventory turnover ratio cast
Where,
Sales=$1,200 million
Gross profit=$270 million
Inventory turnover ratio cast =5x
Let x be the inventory account for cast
Let plug in the formula
5x=$1,200 million-$270 million
5x=$930 million
x=$930 million/5
x=$186 million
Therefore the inventory account for cast is $186 million
According to the Level-5 leadership pyramid, managers can become executives who are capable of building lasting greatness into the organization through a combination of willpower and humility. At what level of the pyramid does this occur
Answer:
Level 5
Explanation:
pyramid organizational structure is structure usually from 1 to 5 having , one leader at the top, along with
small executive leadership team which is at below level with tiers of managers that have their leading down to the bottom level of team of employees.
Level 5 leaders always shows
powerful mixture of personal humility as well as indomitable will. These set of people that fall under this heirachy are incredibly ambitious, though
their ambition comes as first and foremost as regards the cause, for the organization as well as its purpose and not themselves. It should be noted that According to the Level-5 leadership pyramid, managers can become executives who are capable of building lasting greatness into the organization through a combination of willpower and humility. This occur At
level 5 of the pyramid.
Answer:
Level 5
Explanation:
Leadership pyramid is a depiction of the control structure at different levels of management in an organic.
The five levels of leadership are:
Level 1 - Self awareness
Level 2 - Relationship
Level 3 - Vision
Level 4 - Strategy
Level 5 - Action.
When a manager can become executives who are capable of building lasting greatness into the organization through a combination of willpower and humility, they have attained the final level of the pyramid where they can influence the actions of their employees
In the equation below assume U and A are know.
Rearrange the equation so that you would solve for R in terms of the Greek letter sigma)
U = R − 1 2 A σ 2
A. R = U − 1 2 A σ 2
B. R = 1 2 A σ 2 U
C. R = U 1 2 A σ 2
Answer:
[tex]R = U + {1}{2}A\sigma^2[/tex]
Explanation:
Given
[tex]U = R - \frac{1}{2}A\sigma^2[/tex]
Required
Solve for R
We have:
[tex]U = R - {1}{2}A\sigma^2[/tex]
Add [tex]{1}{2}A\sigma^2[/tex] to both sides
[tex]U + {1}{2}A\sigma^2 = R - {1}{2}A\sigma^2 + {1}{2}A\sigma^2[/tex]
Evaluate like terms
[tex]U + {1}{2}A\sigma^2 = R[/tex]
Hence:
[tex]R = U + {1}{2}A\sigma^2[/tex]
Suppose you purchase the winning lottery ticket after watching your favorite movie. From this experience, you believe that watching your favorite movie will help you win the lottery again. Which of the following concepts is most relevant?
a. exclusion of a relevant variable
b. scarcity the fallacy of composition
c. opportunity cost
d. post hoc ergo propter hoc fallacy
e. violation of ceteris paribus
Answer:
D
Explanation:
post hoc ergo propter hoc fallacy is a Latin word which means - after this, therefore because of this.
It is an example of a fallacy where if an event B occurs after an event A. So, people associate the occurrence of event B with A.
In this question, a person believes that because he watched his favourite movie (event A), he won the lottery (event B). He has come to associate watching his favourite movie as a prerequisite with winning the lottery. this is not necessarily true
What type of plan does a property manager implement to manage renters who do NOT pay their rent in a timely way
Answer:
collection plan
Explanation:
The rent collection plan is a system that is used for the enforcement of rent, in terms of late rent payment as well as lease terms. This is more than just telling the tenant when the rent is due. It has all of the information on all the ways that rent could be paid and also the repercussions for late rent payment or a situation whereby the rent is not even paid at all.
Use the information provided in the journal entry to post the transaction to the t-account. Post in DR/CR order.
Date Accounts and Explanation Debit Credit
Nov. 1 Cash 45,000
Common Stock 45,000
Received cash from selling shares of stock
Date Accounts and Explanation Debit Credit
Nov. 4 Truck 21,200
Notes Payable 21,200
Bought a compary truck by signing
Date Accounts and Explanation Debit Credit
Nov. 8 Salaries Expense 14,500
Cash 14,500
Paid cash for salaries ,500
Date Accounts and Explanation Debit Credit
Nov. 12 Office Supplies 9,200
Accounts Payable 9,200
Purchased office supplies on account
Date Accounts and Explanation Debit Credit
Nov. 13 Cash 7,500
Unearned Revenue 7,500
Collected cash for future services
Date Accounts and Explanation Debit Credit
Nov. 12 Office Supplies 9,200
Accounts Payable 9,200
Purchased office supplies on account
Date Accounts and Explanation Debit Credit
Nov. 13 Cash 7,500
Unearned Revenue 7,500
Collected cash for future services
Answer:
Following are the journal entry to the given question:
Explanation:
Cash
[tex]1-Nov. \ \ \ \ \ \ \ \ \ \$45,000\\\\[/tex]
Common stock
[tex]\$45,000\ \ \ \ \ \ \ \ \ 1-Nov.[/tex]
Truck
[tex]4- Nov. \ \ \ \ \ \ \ \ \ \$21,200\\\\[/tex]
Notes payable
[tex]4- Nov. \ \ \ \ \ \ \ \ \ \$21,200\\\\[/tex]
Salaries expense
[tex]8-Nov. \ \ \ \ \ \ \ \ \ \$14,500\\\\[/tex]
Cash
[tex]8- Nov. \ \ \ \ \ \ \ \ \ \$14,500\\\\[/tex]
Office supplies
[tex]12-Nov. \ \ \ \ \ \ \ \ \ \$9,200\\\\[/tex]
Accounts payable
[tex]12- Nov. \ \ \ \ \ \ \ \ \ \$9,200\\\\[/tex]
Cash
[tex]13- Nov. \ \ \ \ \ \ \ \ \ \ \ \ \$7,500\\\\[/tex]
Unearned revenue
[tex]13- Nov \ \ \ \ \ \ \ \ \ \$7,500[/tex]
Kathy plans to move to Maryland and take a job at McCormick as the Assistant Director of HR. She and her husband Stan plan to buy a house in Garrison, MD and their budget is $500,000. They have $100,000 for the down payment and McCormick will pay for closing costs. They are considering either a 30-year mortgage at 4.5 percent annual rate or a 15 year mortgage at 4 percent.
Required:
Calculate the monthly payment for each using the PMT function.
Answer:
Total budget = $500,000
Down payment = $100,000
Loan amount = $400,000
Case 1
Annual rate = 4.5%
Number of payment = (30*12 month) 360
Loan amount = $400,000
Monthly payment = PMT(Rate, Nper, Value of loan)
Monthly payment = PMT(4.5%, 360, 400,000)
Monthly payment = $2,026.74
Case 2
Annual rate = 4%
Number of payment = (15*12 month)180
Loan amount = $400,000
Monthly payment = PMT(Rate, Nper, Value of loan)
Monthly payment = PMT(4%, 180, 400,000)
Monthly payment = $2,958.75
Tia and Sam are partners who solely own T and S Florist. As owners, they can:______.
a. claim the organization as their legal property.
b. can't sell the company.
c. claim only limited liability.
d. avoid taking any legal responsibility for T and S.
e. decide not to pay a dividend to their stockholders.
Answer:
A
Explanation:
Your Company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $5,000 using straight-line depreciation. The cost of capital is 14%, and the firm's tax rate is 30%. Estimate the present value of the tax benefits from depreciation.
Answer:
14865.93
Explanation:
Calculation to Estimate the present value of the tax benefits from depreciation.
First step is to calculate the Annual depreciation expense
Annual depreciation expense = [100000 - 5000]/10
Annual depreciation expense = 9500
Second step is to calculate the Tax benefit
Tax benefit = 9500(.30)
Tax benefit = 2850
Now let calculate the PV of tax benefit
Using financial calculator
PMT = 2850
FV = 0
N = 10
i = 14
PV=?
Hence
PV = 14865.93
Therefore the present value of the tax benefits from depreciation is 14865.93
A more efficient means of processing algae to produce an anticancer drug is discovered. As a result, the supply curve for the drug will: __________
a. shift to the right, increasing the price of the drug.
b. shift to the left, increasing the price of the drug.
c. shift to the right, decreasing the price of the drug
d. shift to the left, decreasing the price of the drug.
Answer:
c
Explanation:
As a result of an increase in efficiency in production, there would be an increase in supply. As a result, there would be an outward shift of the supply curve. When the supply curve shifts outward, supply increases and prices of drugs fall.
On the other hand, if there is an inward shift of the supply curve, the supply of drugs would fall and the price of drugs would increase
Please check the attached image showing a graph of a decrease in supply
Suppose that an investor buys a 100-share call option for $250. It has an exercise price of $60. The underlying price per share of the stock at expiration is $66. What then is the amount of profit or loss, ignoring brokerage fees
Answer:
$350
Explanation:
Call option is profitable when Stock price expires above the Strike price of the option.
Strike price of call = $60
Stock price at expiration = $66
Total profit = Size*(Stock price-Strike price) - Premium paid
Total profit = 100*($66-$60) - $250
Total profit = 100*$6 - $250
Total profit = $600 - $250
Total profit = $350
Thus, the amount of profit (ignoring brokerage fees) is $350.
On January 1, Year 1, Michael sold a property with a remaining useful life of 20 years to Wei Co. for $800,000. On the same date, Michael leased back the property from Wei for 18 years. The lease was properly classified by Michael as a finance lease. Michael is not sure how to recognize the $800,000 received from Wei Co. on January 1, Year 1.
Required:
Which section of the Accounting Standards Codification best helps Michael Co. determine how the initial proceeds of $800,000 received from Wei Co. (buyer-lessor) are recognized?
Answer:
The section of the Accounting Standards Codification that best helps Michael Co. to determine how the initial proceeds of $800,000 received from Wei Co. (buyer-lessor) are recognized is:
ASC 606.
Explanation:
This section that will help Michael Co. to determine if the transaction qualifies as a sale, which is treated under ASC 606, Revenues from Contracts with Customers. Thereafter, the lease classification criteria in ASC 842 are evaluated. After the evaluation, if none of the criteria from ASC 842 are met to account for the lease as a finance or capital lease, the seller-lessee would classify the lease as an operating lease. This implies that the transaction qualifies as a sale and leaseback transaction.
Open communication occurs best when:
a. people feel their opinions are valued.
b. people feel they will be rewarded, or at least not punished, for their opinions.
c. both a and b
d. neither a nor b
What will happen when the country's
currency is undervalued?
Answer:
Ur answer is that When the U.S. dollar is undervalued, the cost of a basket of goods in the United States is lower than the cost in Mexico when evaluated at the current exchange rate. To a U.S. tourist, Mexican goods and services would seem more expensive on average. Thus an undervalued currency will buy less in other countries.
Explanation:
Hope i helped , have a nice day , and if it is possible to give me brainlest please , thank you in advance :)
The annual demand of product Z is 3400 units. The shop that sells product Z is open for business 40 weeks per year and 4 days per week. The lead time for product Z is 4 days. Assuming constant demand, calculate the reorder point. Hint: first calculate the total number of days the shop is open for business per year before calculating the reorder point. [Select the appropriate range in which your answer falls.]
Answer:
85 units
Explanation:
Annual demand = 3,400 units
Using 40 weeks per year & 4 days per week, the no of days per year = 160 days (40*4)
Average daily demand (d) = Annual demand / Number of days per year
Average daily demand (d) = 3400/160
Average daily demand (d) = 21.25 units
Lead time (L) = 4 days
Reorder point = Average daily demand (d) * Lead time (L)
Reorder point = 21.25 * 4
Reorder point = 85 units
You own a portfolio equally invested in a risk-free asset and two stocks. If one of the stocks has a beta of 1.27 and the total portfolio is equally as risky as the market, what must the beta be for the other stock in your portfolio
Answer:
the beta be for the other stock in your portfolio is 1.73
Explanation:
The computation of the beta be for the other stock in your portfolio is shown below:
Given that
risk free asset contains the beta of 0
And,
market beta = 1
Now
1 = 1 ÷ 3 × 0 + 1 ÷ 3 × 1.27 + 1 ÷ 3 × beta
The beta of other stock = 1.73
hence, the beta be for the other stock in your portfolio is 1.73
Here we assume that one-third should be invested in all 3 things each
Establishing ________ pertaining to apprenticeship standards, union member tasks, and which job duties union members would be required to do was one of the most important activities of the AFL.
Answer:
work rules.
Explanation:
In the United States of America, the American Federation of Labor (AFL) was established by union members as an association or umbrella body for trade unions on the 8th of December, 1886 in Columbus, Ohio. It was formed due to the dispute that arose with craft unions while they were still part of the Knights of labour.
Establishing work rules pertaining to apprenticeship standards, union member tasks, and which job duties union members would be required to do was one of the most important activities of the AFL.
Dennis is a member of the management team of a company that, until recently, was extremely profitable. As a result of a continuing recession; however, there has been a significant drop in profits, although the company is still making profits. The 196 non-permanent employees are low-skilled, but all of them have been with the company for at least 3 years. The lowest-paid worker earns at least double the minimum wage and the company provides all its employees the benefits required by law.
Dennis will soon be attending a meeting of the management team to decide how many employees to retain. Dennis feels that the firm’s value lies in its employees, regardless of rank. Indeed, it was this culture of inclusiveness that led Dennis to join the firm in the first place. Dennis believes that employee retention is more than an issue of short-term profit maximization.
Required:
How can he give voice to his values in the upcoming meeting?
Answer:
Dennis can give voice to his values in the upcoming meeting by suggesting that management does not retrench any of the low-skilled staff since employee retention is valued more than short-term profits. Again, he can suggest that instead of retrenching some employees, all employees can have their salaries reduced minimally after due consultations.
Explanation:
Since the company is still making profits, employees can be consulted and an agreement reached with management to reduce or remove some benefits during the recession. This move ensures that no employee is laid out. Retrenching employees during periods of recession always exacerbates the recessionary problems instead of resolving them.
A production process consists of a three step operation. The scrap rate is 10% for the first step and 6 percent for each of the other two steps.
a. If the desired daily output is 450 units, how many units must be started to allow for loss due to scrap?
b. If the scrap rate for each step could be cut in half, how many units would this save in terms of the scrap allowance?c. If the scrap represents a cost of $10 per unit, how much is it costing the company per day for the original scrap rate?
Answer:
a. The number of units that must be started to allow for loss due to scrap is 566 units.
b. The number of units that this would save in terms of the scrap allowance is 63 units.
c. The scrap is costing the company $1,160 per day.
Explanation:
a. If the desired daily output is 450 units, how many units must be started to allow for loss due to scrap?
Let x represent the original quantity.
Therefore, we have:
Scrap from the first step operation = 0.10x
Remaining quantity after the first step operation = Original quantity - Scrap of the first step operation = x – 0.10x = (1 – 0.10)x = 0.90x
Scrap from the second step operation = Remaining quantity after the first step operation * 0.06 = 0.90x * 0.06 = 0.054x
Remaining quantity after the second step operation = Remaining quantity after the first step operation - Scrap from the second step operation = 0.90x - 0.054x = (0.90 - 0.054)x = 0.846x
Scrap from the third step operation = Remaining quantity after the second step operation * 0.06 = 0.846x * 0.06 = 0.05076x
Remaining quantity after the third step operation = Remaining quantity after the second step operation - Scrap from the third step operation = 0.846x - 0.05076x = (0.846 - 0.05076)x = 0.79524x
Since the desired daily output is 450 units, we can solve for x as follows:
0.79524x = 450
x = 450 / 0.79524 = 565.866908103214, or 566 units
Therefore, the number of units that must be started to allow for loss due to scrap is 566 units.
b. If the scrap rate for each step could be cut in half, how many units would this save in terms of the scrap allowance?
Scrap rate of first operation is = 10%/2 = 5%, or 0.05
Scrap rate of second and third operations = 6%/2 = 3%, or 0.03 each
Let x also represent the original quantity.
Therefore, we have:
Scrap from the first step operation = 0.05x
Remaining quantity after the first step operation = Original quantity - Scrap of the first step operation = x - 0.05x = (1 – 0.05)x = 0.95x
Scrap from the second step operation = Remaining quantity after the first step operation * 0.03 = 0.95x * 0.03 = 0.0285x
Remaining quantity after the second step operation = Remaining quantity after the first step operation - Scrap from the second step operation = 0.95x - 0.0285x = (0.95 - 0.0285)x = 0.9215x
Scrap from the third step operation = Remaining quantity after the second step operation * 0.03 = 0.9215x * 0.03 = 0.027645x
Remaining quantity after the third step operation = Remaining quantity after the second step operation - Scrap from the third step operation = 0.9215x - 0.027645x = (0.9215 - 0.027645)x = 0.893855x
Since the desired daily output is 450 units, we can solve for x as follows:
0.893855x = 450
x = 450 / 0.893855 = 503.437358408243, or 503 units
Number units to save = Calculated x from part a above - Calculated x in part 2 here = 566 – 503 = 63
Therefore, the number of units that this would save in terms of the scrap allowance is 63 units.
c. If the scrap represents a cost of $10 per unit, how much is it costing the company per day for the original scrap rate?
Quantity to be introduced at the original scrap rate = Calculated x from part a above = 566
Remaining quantity after the third step operation = 450
Scrap = Quantity to be introduced at the original scrap rate - Remaining quantity after the third step operation = 566 – 450 = 166 units
Total cost of scrap = Scrap * Cost of each unit of scrap = 166 * $10 = $1,160
Therefore, the scrap is costing the company $1,160 per day.