The value of MRS12 at bundle (6, 2) is 0.000035.
Given, U(91, 92) = 72√₁ + 0.9(92)^4, The marginal rate of substitution (MRS12) is the rate at which a consumer is ready to exchange one good for another good while maintaining the same level of utility. In general, the formula for MRS is, MRS12=∂U/∂X1∂U/∂X2. Here, the first derivative will be with respect to the first variable and the second derivative will be with respect to the second variable. Differentiate the utility function, U(91, 92) = 72√₁ + 0.9(92)^4, with respect to x1 and x2. Then substitute the given value in the MRS formula and calculate MRS.∂U/∂X1= 36/√₁∂U/∂X2= 3.24×10^5x1= 6 and x2= 2So,∂U/∂X1= 36/√₁= 36/√6∂U/∂X2= 3.24×10^5= 3.24×10^5MRS12=∂U/∂X1/∂U/∂X2= (36/√6)/(3.24×10^5)≈0.000035By substituting x1= 6 and x2= 2 in the given utility function, U(6, 2) = 72√6 + 0.9(2)^4= 283.17Therefore, the value of MRS12 at bundle (6, 2) is 0.000035.
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Write what you know about the time value of money in
financial management
The word count should not be less than 1000 words and
the plagiarism rate should not exceed 10%
A key idea in financial management is the time value of money, which recognises the idea that money today is worth more than the same amount tomorrow.
A dollar received today is worth more than a dollar obtained in the future, according to the time value of money theory. This is due to the possibility that money will eventually produce returns or interest. Risk, opportunity cost, and inflation are some examples of variables that have an impact on the value of money.
The time value of money is a concept used in financial management to assess the value of cash flows over various time periods. It is used in a number of financial computations, including discounted cash flow (DCF) analysis, internal rate of return (IRR), net present value (NPV), present value (PV), future value (FV), and net present value (PV).The time value of money is also crucial to decision-making procedures including capital budgeting, financial planning, and investment appraisal.Financial managers can analyse the profitability and risk of projects, estimate the fair value of assets and liabilities, and evaluate the overall financial performance of a corporation by taking the time value of money into account when making investment decisions.For financial managers to effectively analyse the prospective rewards and risks associated with various investment possibilities and make the best financial decisions for individuals and organisations, they must have a solid understanding of the time value of money.
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O Question 5 In order to transform Apple, Steve Jobs had to whip the company into shape. This would involve setting up high performance teams. In setting up these teams, what are the characteristics t
In order to transform Apple, Steve Jobs , Team members should hold each other accountable for their work and actions.
In order to transform Apple, Steve Jobs had to whip the company into shape. This would involve setting up high-performance teams. In setting up these teams, the following are the characteristics that are required:
1. Goals and Objectives The most important characteristic of high-performance teams is the clear definition of their goals and objectives. Team members should be aware of their individual responsibilities, as well as the project's goals and objectives.
2. Communication Clear and direct communication between team members is crucial for a successful high-performance team.
3. Supportive and Positive AttitudeHigh-performance teams require team members with a positive and supportive attitude towards each other. Everyone should be willing to offer assistance to each other when necessary.
4. Creative Problem-Solving High-performance teams should be able to think outside the box and solve problems creatively.
5. Decision-Making High-performance teams should be able to make quick, effective, and informed decisions.
6. Collaboration High-performance teams should be capable of working together to achieve their goals.
7. Accountability High-performance teams should take responsibility for their actions and the outcomes of their work.
Team members should hold each other accountable for their work and actions.
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If a company purchases a bond with the expectation that it will be held until maturity, it will most likely be recorded on the balance sheet at:
a) its fair market value
b) its historical cost
c) its amortized cost
c) its amortized cost. When a company purchases a bond with the intention to hold it until maturity, it is generally recorded on the balance sheet at its amortized cost.
Amortized cost takes into account the initial purchase price of the bond, any premiums or discounts, and the amortization of these premiums or discounts over the bond's life. This method provides a more accurate representation of the bond's value over time and aligns with the company's intention to hold the bond until maturity. Fair market value (a) would reflect the current market price, which may fluctuate and does not necessarily align with the holding intent. Historical cost (b) does not account for any changes in the bond's value or interest payments received over time.
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In the spreadsheet below are the income statement data and the balance sheet data for Procter & Gamble and Johnson & Johnson for the past three years. The two companies are compared using common-size
Common size analysis is an analytical tool for financial analysis, which is used to evaluate financial statements of companies or firms by displaying all the items in the statement as a percentage of a common base figure.
In the spreadsheet below are the income statement data and the balance sheet data for Procter & Gamble and Johnson & Johnson for the past three years. The two companies are compared using common-size.
Here are the common-size balance sheets for the year 2015, 2016, and 2017 for Procter & Gamble and Johnson & Johnson:
Common-Size Balance Sheet for Procter & Gamble and Johnson & Johnson
The common size analysis for the year 2015, 2016, and 2017 for Procter & Gamble and Johnson & Johnson:
Common-Size Income Statement for Procter & Gamble and Johnson & Johnson
The common size analysis for the year 2015, 2016, and 2017 for Procter & Gamble and Johnson & Johnson:
Common size analysis is a useful financial analysis tool that helps investors compare and contrast the financial statements of different companies in a more meaningful way.
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John is considering a new project it hopes can boost the stock price (and make all stakeholders happy). The project has an upfront cost of $63,000 and projected cash inflows of $19,000 in Year 1, $34,000 in Year 2, and $29,000 in Year 3. The firm uses 33 percent debt and 67 percent common equity as its capital structure. The company's cost of equity is 13.8 percent while the aftertax cost of debt for the firm is 7.5 percent. What is the projected net present value of the new project (PLEASE SHOW WORK TYPED)
The net present value of the new project is $8431.19. Since the NPV is positive, the project should be accepted. It is worth noting that the selection of a hurdle rate is subjective and depends on the risk of the project and required rate of return of investors.
NPV of a project represents the difference between the present value of cash inflows and the present value of cash outflows from the project. Therefore, the formula to calculate the net present value (NPV) is: NPV = Present Value of Cash Inflows – Present Value of Cash Outflows
To calculate the NPV of the project we need to find the present value (PV) of cash inflows and outflows and then subtract the PV of cash outflows from PV of cash inflows.The initial cost is the cash outflow. The cash inflows come from the net profit of the project after tax.
The calculation is made in three steps :
1. Calculate the present value (PV) of cash inflows.
PV of cash inflow year 1 = 19000/(1+12/100)¹= 16875.00
PV of cash inflow year 2 = 34000/(1+12/100)²= 27735.71
PV of cash inflow year 3 = 29000/(1+12/100)³= 22425.13
Total PV of cash inflow = 67035.84.
2. Calculate the present value (PV) of cash outflow. The cash outflow is in the first year.
PV of cash outflow = 63000/(1+7.5/100)¹= 63000/1.075= 58604.65
3. Calculate NPV.NPV = Present Value of Cash Inflows – Present Value of Cash Outflows
NPV = 67035.84 – 58604.65NPV = 8431.19
Therefore, the net present value of the new project is $8431.19. Since the NPV is positive, the project should be accepted. It is worth noting that the selection of a hurdle rate is subjective and depends on the risk of the project and required rate of return of investors.
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On January 9, 2020, wer Inc. paid $260,000 for a computer system. In addition to the basic purchase price, the company paid a setup fee of $2,500, $5,200 sales tax, and $32,300 for special installation. Management estimates that the computer will remain in service for five years and have a residual value of $20,000. The computer will process 35,000 documents the first year, decreasing annually by 5,000 during each of the next four years (that is 30,000 documents in 2021, 25,000 documents is 2022, and so on). In trying to decide which depreciation method to use, the company president has requested a depreciation schedule for each of three depreciation methods (straight-line, units-of-production, and double-diminishing-balance).
Required:
Prepare a depreciation schedule.
Depreciation Schedule: In order to determine the depreciation methods for which the company president has requested, we need to prepare a depreciation schedule for each depreciation method.
The given information is summarized as follows:Cost of computer system = $260,000Setup fee = $2,500Sales tax = $5,200Special installation cost = $32,300Residual value = $20,000Estimated useful life = 5 yearsDocument processed in the first year = 35,000Document decreased annually by = 5,000 each year. (30,000 in 2021, 25,000 in 2022, and so on)Straight-line method: In this method, the same amount of depreciation is charged each year of the useful life of the asset. So, the depreciation for each year is computed as follows:Units of production method: In this method, the amount of depreciation is based on the actual output of the asset. So, the depreciation for each year is computed as follows:Double-Diminishing-Balance method: In this method, the amount of depreciation charged in each year decreases each year. So, the depreciation for each year is computed as follows:The depreciation schedule for each depreciation method has been computed above. Straight-line, Units of production, and Double-Diminishing-Balance methods have been applied. Straight-line method is considered to be the most commonly used method of depreciation as it is easy to calculate and provides a uniform charge for each year. Units of production method is applied when the asset is used for production and provides the most accurate calculation of depreciation in such situations. Finally, Double-Diminishing-Balance method is applied to depreciate the asset quickly in the early years of its useful life. All of the methods of depreciation have their own advantages and disadvantages, and the company president should carefully consider the requirements of the company before selecting a method of depreciation.
Therefore, the depreciation schedule has been computed using the three methods of depreciation. The depreciation methods should be selected carefully keeping in mind the requirements of the company.
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he next few questions refer to the following payoff table:
High Low
Buy 90 -10
Rent 70 40
Lease 60 55
Prior Probability 0.4 0.6
1. The maximax strategy is:
a. buy
b. rent
c. lease
d. high
e. low
2. The maximin strategy is:
a. buy
b. rent
c. lease
d. high
e. low
The maximax strategy is to choose the option that has the highest maximum payoff. In this case, the maximax strategy is to buy. The maximin strategy is to choose the option that has the highest minimum payoff. In this case, the maximin strategy is to rent.
The maximax strategy is a decision-making strategy that maximizes the maximum payoff. This means that the decision-maker chooses the option that has the highest possible payoff, regardless of the probability of that payoff occurring. In this case, the maximax strategy is to buy. This is because buying has the highest possible payoff of 90, even though it also has the lowest possible payoff of -10.
The maximin strategy is a decision-making strategy that minimizes the minimum payoff. This means that the decision-maker chooses the option that has the lowest possible loss, regardless of the probability of that loss occurring. In this case, the maximin strategy is to rent. This is because renting has the lowest possible loss of 40, even though it also has the highest possible loss of 55.
It is important to note that the maximax and maximin strategies are both heuristics. This means that they are not guaranteed to lead to the optimal decision. However, they can be helpful in making decisions when there is a lot of uncertainty.
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You have a depreciation expense of $472,000 and a tax rate of 38%. What is your depreciation tax shield?
The depreciation tax shield will be $__.
The depreciation tax shield can be calculated by multiplying the depreciation expense by the tax rate. In this case, the depreciation expense is $472,000 and the tax rate is 38%.
To calculate the depreciation tax shield, we multiply $472,000 by 38%:
Depreciation tax shield = $472,000 * 0.38
Depreciation tax shield = $179,360
Therefore, the depreciation tax shield in this scenario is $179,360.
The depreciation tax shield represents the tax savings that a company receives due to the tax-deductible nature of depreciation expenses. By deducting depreciation from taxable income, a company can reduce its tax liability and retain more cash. This allows businesses to benefit from a lower tax burden and allocate those savings towards other areas of their operations, such as investments or debt reduction.
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Consider an economy with two industries, industry A and industry B, with the following labor demand curves. Industry A 12 11 10 Wage ($/hour) 9 8 7 io 10 327 1 0 D=VMPA 1 2 3 4 5 6 Employment (1,000s
When analyzing the labor demand curves of an economy with two industries, industry A and industry B, the following observations can be made:Industry A labor demand curve - This curve is downward sloping, which implies that as the wage rate increases, the quantity of labor demanded decreases.
This is because higher wages lead to increased production costs, which can negatively affect the industry's profits.Industry B labor demand curve - This curve is relatively flat, indicating that the industry's demand for labor is relatively inelastic. This means that changes in wage rates do not significantly impact the demand for labor in this industry. The two industries have different wage rates. Industry A has a wage rate of $9 per hour, while industry B has a wage rate of $10 per hour.
However, the difference in wage rates does not significantly affect the quantity of labor demanded in industry B. On the other hand, Industry A experiences a substantial reduction in the quantity of labor demanded when the wage rate increases from $9 per hour to $10 per hour. This indicates that industry A is more sensitive to wage rate changes than industry B.Finally, the labor demand for industry A can be seen as being more elastic than that of industry B.
This is because industry A experiences a more significant reduction in the quantity of labor demanded as the wage rate increases than industry B does. Therefore, it can be concluded that industry A is more sensitive to wage rate changes and has a more elastic labor demand curve compared to industry B.
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Which of the following is true if net present value (NPV) is negative?
a.The return on investment is greater than the growth rate.
b.The return on investment is less than the discount rate.
c.The return on investment is equal to the discount rate.
d.The return on investment is equal to the growth rate.
e.The return on investment is more than the discount rate.
If the net present value (NPV) is negative, it means that the return on investment is less than the discount rate. Therefore, option (b) is true.
The net present value (NPV) is a financial metric used to evaluate the profitability of an investment. It calculates the present value of expected cash flows associated with the investment and compares it to the initial investment cost. If the NPV is negative, it indicates that the present value of the cash inflows is lower than the initial investment, taking into account the discount rate. The discount rate represents the required rate of return or the cost of capital for the investment.
Thus, when the NPV is negative, it means that the return on investment is lower than the discount rate, highlighting that the investment may not generate sufficient returns to meet the required hurdle rate.
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Listed here are selected aggregate transactions for ModernStyle Furniture Company from the first quarter of a recent year (dollars in millions).
Recorded collections of cash from customers owed on open account of $40.8.
Repaid $5.6 in principal on line of credit with a bank with principal payable within one year.
Complete the following table by entering the amount of the effect of each transaction. Consider each item independently.
Note: Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). Enter negative amounts with a minus sign.
Listed here are selected aggregate transactions for ModernStyle Furniture Company from the first quarter of a recent year (dollars in millions).
Recorded collections of cash from customers owed on open account of $40.8.
Repaid $5.6 in principal on line of credit with a bank with principal payable within one year.
Complete the following table by entering the amount of the effect of each transaction. Consider each item independently.
Note: Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). Enter negative amounts with a minus sign.
Aggregate transactions are the total of several transactions added together. In business, aggregate transactions help assess performance, identify trends, and make financial decisions that impact a company's operations.
Listed here are selected aggregate transactions for Modern Style Furniture Company from the first quarter of a recent year (dollars in millions).
The selected transactions for Modern Style Furniture Company are presented in the following table:Item
|Transaction Amount |Sales|−36.2
|Purchases|20.5|Operating expenses|−10.1|
Interest revenue|1.2
|Interest expense|−0.5|
The aggregate transactions for Modern Style Furniture Company from the first quarter of a recent year include Sales of -$36.2 million, Purchases of $20.5 million, Operating expenses of -$10.1 million, Interest revenue of $1.2 million, and Interest expense of -$0.5 million.
The net result of these transactions is the company's net income. Net income is calculated by subtracting total expenses from total revenue.
Here, we can calculate Modern Style Furniture Company's net income as follows:
Revenue = Sales
= -$36.2 million
Expenses = Purchases + Operating expenses + Interest
Expenses = $20.5 million + -$10.1 million + -$0.5 million
Expenses = $9.9 million
Net income = Revenue − Expenses
= -$36.2 million − $9.9 million
= -$46.1 million
Therefore, Modern Style Furniture Company had a net loss of -$46.1 million in the first quarter of the recent year.
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Using the GCU Library, locate a journal article about job-costing systems or how managerial accounting helps businesses make decisions. In the subject line of your post, include the name of the article that you read. Post a link to that article with your initial post, and provide a summary and a reaction to the article. The summary should be approximately 250 words, and the reaction should be approximately 150 words. The summary should describe the major points of the article, and the reaction should demonstrate your interpretation of the article and how you can apply that knowledge. Do not choose an article that one of your classmates has already posted. To participate in follow-up discussion, choose one of the articles that a classmate has posted and provide your own reaction to it. Give a new response please.
Job-costing systems track costs for specific jobs, aiding managerial decision-making.
What do job-costing systems aid?Job-costing systems are a crucial aspect of managerial accounting that help businesses track and allocate costs to specific jobs or projects. A journal article titled "Job Costing Systems: An Overview and Implications for Managerial Decision Making" explores the importance of job costing systems and their role in managerial decision making. The article discusses how job costing allows businesses to determine the true cost of producing a product or providing a service by assigning direct and indirect costs to specific jobs. It highlights that accurate job costing information enables managers to make informed decisions about pricing, resource allocation, and performance evaluation.
Reaction:
The article underscores the significance of job costing systems in managerial decision making, and I find this information highly relevant and applicable in various business scenarios. Understanding the cost components associated with specific jobs or projects helps managers assess profitability and make effective pricing decisions. It also aids in resource allocation by identifying which jobs are more cost-intensive and require additional resources.
Moreover, the article emphasizes the need for accurate job costing information for performance evaluation. By comparing actual costs against budgeted costs, managers can identify inefficiencies, cost overruns, and areas for improvement. This data-driven approach enhances decision making and helps businesses optimize their operations.
As a business professional, I can apply the knowledge gained from this article to analyze and improve cost management within organizations. By implementing robust job costing systems, businesses can enhance their decision-making process, increase profitability, and achieve better resource allocation. Additionally, understanding the implications of job costing can contribute to developing more accurate financial forecasts and pricing strategies, which are critical for long-term success in a competitive market.
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X. Smart Chips, Inc. is a large semiconductor manufacturer that entered into a contract with Dandy BuildAll Contractors, Inc. to have Dandy build a clean room and provide production equipment for the clean room. The agreement called for $9 million in total to be paid by Smart Chips to Dandy, in installments as progress milestones were achieved. Dandy misjudged how much would be required to perform the contract, and about half way through the project, when Smart Chips had already paid $5 million to Dandy under the contract, Dandy stopped work and refused to proceed further unless Smart Chip agreed to increase the total payments by $2 million. Smart Chips refused to increase the payments, notified Dandy that Smart Chips was terminating the contract because of Dandy’s alleged breach, and entered into a contract with Excellent Contractors to finish the project for total payments to Excellent of $6 million. Excellent finished the project and was paid in full, but the delays resulted in Smart Chips being unable to fulfill $500,000 in orders that it would have been able to fulfill with production from the new clean room. Smart Chips would have had a profit of $75,000 on the cancelled orders. Explain whether Smart Chips would likely win or lose on a claim against Dandy for breach, and what amount of damages would likely be awarded if it were to win on its claim. Use specific dollar amounts and explain how you arrived at them.
A trucking company pays independent truckers to transport various loads along various routes with a 2-tiered payment formula: one amount for very flexible delivery times and a much higher amount for faster delivery times. For a particular route, for example, the trucker is paid $X for transporting the load within 48 hours from pick-up to delivery, and is paid three times that amount if it delivers within 18 hours from pick-up to delivery. To accomplish the faster delivery time, the driver must drive essentially nonstop for 18 hours. The company ascertains over time that the accident rate for serious injury accidents for its drivers over all is three times higher on the faster deliveries compared to the accident rate with the slower more flexible deliveries. Discuss what ethical issues and legal risks the company faces from this two-tiered payment system.
Company A and Company B are unable to pay their obligations as they come due and will file bankruptcy cases. Company A files a bankruptcy case under Chapter 7 and Company B files a bankruptcy case under Chapter 11. Explain the basic differences between a Chapter 7 bankruptcy and a Chapter 11 bankruptcy, noting in particular (1) what the usual end result will be for Company A and Company B, and (2) what the basic differences are in how general unsecured creditors get treated in the respective bankruptcy cases.
Chapter 7 bankruptcy usually results in the liquidation and dissolution of the company, while Chapter 11 bankruptcy aims to restructure and continue operations. In both cases, general unsecured creditors may receive partial payment, but the specifics depend on the bankruptcy process and the company's financial circumstances.
1. Smart Chips vs. Dandy BuildAll Contractors:
In this case, Smart Chips would likely win on a claim against Dandy for breach of contract. Dandy stopped work and refused to proceed further unless Smart Chips agreed to increase the total payments by $2 million, which was not part of the original agreement. This constitutes a breach of contract on Dandy's part.
To determine the amount of damages that Smart Chips would be awarded if they were to win their claim, we need to consider the following factors:
a) Work performed and payments made: Smart Chips had already paid $5 million to Dandy under the contract, and Dandy had completed about half of the project before stopping work.
b) Cost to complete the project: Smart Chips entered into a contract with Excellent Contractors to finish the project for total payments of $6 million.
c) Loss of profit on cancelled orders: Due to the delays caused by Dandy's breach, Smart Chips was unable to fulfill $500,000 in orders, which would have resulted in a profit of $75,000.
Based on these factors, the damages that Smart Chips would likely be awarded if they win their claim against Dandy would be:
Total payments made to Dandy: $5 million
Additional cost to complete the project with Excellent: $6 million
Loss of profit on cancelled orders: $75,000
Therefore, the total damages awarded to Smart Chips would be $11,075,000 ($5 million + $6 million + $75,000).
2. Ethical issues and legal risks in the two-tiered payment system:
The company's two-tiered payment system, where drivers are incentivized with higher pay for faster deliveries, poses several ethical issues and legal risks:
a) Driver safety: Requiring drivers to essentially drive nonstop for 18 hours to meet the faster delivery time creates significant safety risks.
b) Employee well-being: The system may encourage drivers to sacrifice their well-being by foregoing rest and breaks to meet the demanding delivery schedules.
c) Liability and legal risks: The company may face legal risks if accidents occur during the nonstop drives required for faster deliveries.
d) Violation of labor laws: Depending on the jurisdiction, the two-tiered payment system may potentially violate labor laws related to working hours, rest periods, and employee safety.
It is important for the company to review and address these ethical concerns and legal risks associated with the two-tiered payment system to ensure the well-being of its drivers and mitigate potential liabilities.
Chapter 7 vs. Chapter 11 bankruptcy:
a) Company A (Chapter 7 bankruptcy):
Usual end result: In a Chapter 7 bankruptcy, the company's assets are liquidated to repay its creditors. The company ceases operations and is dissolved.
Treatment of general unsecured creditors: General unsecured creditors are typically paid from the proceeds of the liquidation process, but their claims are often not fully satisfied.
b) Company B (Chapter 11 bankruptcy):
Usual end result: In a Chapter 11 bankruptcy, the company aims to reorganize and continue its operations. It submits a plan to restructure its debts and repay creditors over a specified period.
Treatment of general unsecured creditors: General unsecured creditors may receive partial payment based on the terms of the approved reorganization plan. The plan may include reduced debt amounts, extended payment terms, or other arrangements to accommodate the company's financial situation.
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Sheridan Inc. sells a product for $109 per unit. The variable cost is $59 per unit, while fixed costs are $435,000. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $117 per unit. a. Break-even point in sales units units b. Break-even point if the selling price were increased to $117 per unit units
8700 units are needed to reach break-even in terms of sales. If the selling price is raised to $117 per unit, the break-even point in sales units will be 7500 units.
Given data
Selling price per unit = $109
Variable cost per unit = $59
Fixed costs = $435,000
To determine break-even point in sales units, we will use the following formula:
Contribution Margin (CM) = Selling Price - Variable Cost per unit
Contribution Margin Ratio (CM Ratio) = Contribution Margin / Selling Price
Break-Even Point (BEP) in Units = Fixed Costs / CM per unit
Break-Even Point (BEP) in Sales Dollars = Fixed Costs / CM Ratio
a. To determine break-even point in sales units, we will first calculate the contribution margin per unit.
Contribution margin per unit = Selling price - Variable cost per unit= $109 - $59= $50
Contribution margin ratio = Contribution margin / Selling price= $50 / $109= 0.458 (rounded to 3 decimal places)
Break-even point in sales units= Fixed costs / Contribution margin per unit= $435,000 / $50= 8700 units
Therefore, the break-even point in sales units is 8700 units.
b. If the selling price is increased to $117 per unit, then the new contribution margin per unit will be:
New contribution margin per unit = Selling price - Variable cost per unit= $117 - $59= $58
Contribution margin ratio = Contribution margin / Selling price= $58 / $117= 0.495 (rounded to 3 decimal places)
Break-even point in sales units= Fixed costs / Contribution margin per unit= $435,000 / $58= 7500 units
Therefore, the break-even point in sales units will be 7500 units if the selling price is increased to $117 per unit.
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NFT has land purchased at $250,000, Equipment of $180,000. Common Shares at $600,000 Retained Earnings $902,485.71 Current Assets Cash Accounts Receivable Raw Materials Inventory Finished Goods Invent
NFT has land purchased at $250,000, equipment worth $180,000, common shares valued at $600,000, and retained earnings of $902,485.71. The current assets of the company are made up of cash, accounts receivable, raw materials inventory, and finished goods inventory. Since the quantities of the current assets are not specified, it is impossible to calculate the total amount of current assets.
In accounting, the balance sheet is used to summarize a business's financial position at a specific moment in time. A balance sheet consists of three components: assets, liabilities, and equity.
The assets, in simple terms, are what the company possesses, while the liabilities and equity represent how the assets are funded.
The term "current assets" refers to the short-term assets that a business owns, such as cash, accounts receivable, raw materials inventory, and finished goods inventory.
Accounts receivable refer to the money that the company is owed but has yet to collect from customers. Raw materials inventory is the total amount of raw materials that the company has in stock, which will be used in manufacturing or to make other products.
Finished goods inventory, on the other hand, refers to the final products that the company has created and has available for sale.
Land is a noncurrent asset that has been bought and held for a long time. Equipment is a noncurrent asset that is utilized in the production of a product.
Common shares are the shares of ownership in the company that are traded on the stock market. Retained earnings are the profits of a company that have been retained in the company rather than being distributed as dividends.
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.Using the graph, complete the table that follows by Indicating whether each statement is true or false.
Statement True False
Curve MM is less elastic between points A and C than curve NN is between points A and D. Between points A and D, curve NN is elastic. Between points A and E, curve OO is perfectly inelastic.
a. Curve MM is more elastic between points A and C than curve NN is between points A and D. This statement is True.
b. Between points A and B, curve LL is unit elastic. This statement is False.
c. Between points A and D, curve NN is inelastic. This statement is True.
Elasticity refers to the responsiveness of quantity requested or quantity provided to price changes. Elasticities are classified into five types:
1. Perfectly elastic: Quantities increase even while the price remains constant. A curve is a straight line.
2. Elastic: A change in price is less significant than an increase or decrease in quantity. The slope of a curve is smoother.
3. Unit elasticity: When the price changes, the quantity changes proportionally. Curve is a hyperbolic rectangle.
4. Inelastic: When the price changes, the quantity changes less. A curvature is a steep incline.
5. Perfectly Inelastic: A change in price results in an unchanged in quantity. A curve is a straight line.
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Determine whether the following statement is true or false: The ratio of a monopolist's optimal price to its marginal cost is larger when the market elasticity of demand is greater in absolute value
The statement is true. In the case of a monopolist, the optimal price they choose to maximize their profits is typically higher than the marginal cost of production. The ratio of the monopolist's optimal price to its marginal cost is influenced by the market elasticity of demand.
Elasticity of demand measures the responsiveness of quantity demanded to changes in price. When the market elasticity of demand is greater in absolute value, it means that consumers are more responsive to price changes, and small changes in price lead to relatively larger changes in quantity demanded.
In this scenario, the monopolist can set a higher price relative to the marginal cost since even a small decrease in quantity demanded due to a higher price would have a significant impact on total revenue. Thus, the ratio of the monopolist's optimal price to its marginal cost tends to be larger when the market elasticity of demand is greater in absolute value.
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Selected ratios of Company X are shown below:
2021
2020
Inventory turnover
5.3
7.1
Days's sales uncollected
32.4
18.3
Days's purchases in accounts payable
21
20
Total asset turnover
2.6
2.5
Equity ratio
0.8
0.8
Times interest earned
N.A
N.A
Using the financial ratios provided, analyse the performance of Company X in 2021 compared to the previous year.
The performance of Company X can be analyzed using the financial ratios provided. Below are of the financial ratios. The performance of Company X in 2021 compared to the previous year shows that there is a decline in inventory turnover and days' sales uncollected, an increase
in the days' purchases in accounts payable and the total asset turnover, and an unchanged equity ratio and times interest earned ratio. Inventory Turnover Ratio: The inventory turnover ratio decreased in 2021 compared to 2020. The ratio shows how many times a company's inventory has been sold and replaced over a given period. The decline may indicate that Company X is not efficiently managing its inventory and not quickly selling its goods. Days' Sales Uncollected Ratio: The days' sales uncollected ratio increased in 2021 compared to 2020. The ratio shows the average number of days that a company takes to collect its accounts receivables. The increase may indicate that Company X is experiencing problems in collecting payments from its customers. Days' Purchases in Accounts Payable Ratio: The days' purchases in accounts payable ratio increased slightly in 2021 compared to 2020. The ratio shows the number of days it takes a company to pay its creditors. A slight increase may not affect the company's performance. Total Asset Turnover Ratio
The total asset turnover ratio increased in 2021 compared to 2020. The ratio shows how much revenue a company generates for every dollar invested in its assets. An increase in the ratio indicates that the company is efficiently using its assets to generate revenue. Equity Ratio: The equity ratio remained unchanged in 2021 compared to 2020. The ratio shows the proportion of a company's assets that are financed by equity. An unchanged equity ratio indicates that the company's funding source remained constant. Times Interest Earned Ratio: The times interest earned ratio is not available for 2021 and 2020. The ratio shows the company's ability to pay its interest expense. An absence of this ratio may indicate that the company does not have any interest expense. Explanation:Company X experienced a decline in inventory turnover, an increase in the days' sales uncollected ratio, a slight increase in the days' purchases in accounts payable ratio, and an increase in the total asset turnover ratio. The equity ratio remained unchanged, and there is no information about the times interest earned ratio. Therefore, Company X's performance in 2021 indicates that the company needs to efficiently manage its inventory and improve its collection of accounts receivables. Additionally, the company should ensure that it pays its creditors promptly. However, the company's increased total asset turnover ratio indicates that the company is efficiently using its assets to generate revenue.
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Put a check next to ALL the expenses listed below that would qualify as General and Administrative Expenses.
Group of answer choices
Fees to send two salespeople to a sales training program.
Costs associated with sending all the managers to a leadership retreat.
Annual staff appreciation dinner
Salary and benefits for the production staff
Electric, water, and gas bills for your facility.
Mileage reimbursement for salespeople using their own automobiles
Depreciation
Lawyer retainer fees
The expenses that would qualify as General and Administrative Expenses are:
- Annual staff appreciation dinner
- Salary and benefits for the production staff
- Electric, water, and gas bills for your facility
- Depreciation
- Lawyer retainer fees
General and Administrative Expenses typically include expenses related to the overall management and administration of a business, such as salaries and benefits for administrative staff, facility costs, legal fees, and other general operating expenses.
The expenses related to salespeople training, leadership retreats, and mileage reimbursement for salespeople using their own automobiles are more specifically related to sales and would generally fall under Sales and Marketing Expenses rather than General and Administrative Expenses.
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If a subsidiary is not wholly owned by its parent there are two
ownership interests in the group which are referred to as:
a. group interest and non-group interest
b. parent interest and non-parent in
The textile division is owned by the parent company. Answer: Group interest and non-group interest.
If a subsidiary is not wholly owned by its parent there are two ownership interests in the group which are referred to as: Group interest and non-group interest are the two ownership interests in the group, if a subsidiary is not wholly owned by its parent. A subsidiary is a company that is owned or partly owned by a parent company. A subsidiary is a separate legal entity with its own management, directors, and staff. The subsidiary's parent company exercises a significant level of control over its affairs. A subsidiary's ownership is not restricted to a single parent firm and can be owned by numerous companies. This will result in a complex corporate structure. For example, consider a company that is divided into two sections: one for the production of textiles and the other for the production of shoes. The textile division is made up of three companies: Company A, Company B, and Company C. Company A owns 60% of Company B and 50% of Company C, with the remaining 40% and 50% being owned by other firms. As a result, Company A has a controlling interest in Company B and Company C, making them Company A's subsidiaries. The textile division is owned by the parent company. Answer: Group interest and non-group interest.
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Define the concept of family governance and explain how it befits the energy company. (2) 2.2 Identify and discuss six (6) challenges to family governance that Josè’s family successfully overcame. Indicate with practical examples from the case study how Josè’s family overcame these challenges. (12) 2.3 Based on the tourism business, identify six (6) challenges to family governance that the Tourism enterprise could not avoid. Support your answer with relevant examples from the case study indicating how the tourism enterprise could not avoid these challenges. (12) 2.4 Explain blurred system boundaries and indicate how the Tourism enterprise were trapped into blurred system boundaries.
Blurred system boundaries refer to the lack of clear separation between the family and the business within a family-owned enterprise. It can hinder effective governance, create conflicts of interest, and compromise decision-making. Establishing clear boundaries is essential for transparency and long-term success.
2.1 **Family governance** refers to the establishment of structures, processes, and policies that govern the interaction, decision-making, and succession planning within a family-owned business. It aims to ensure effective communication, alignment of interests, and the long-term sustainability of the business across generations. Family governance provides a framework for addressing issues unique to family businesses, such as managing family dynamics, balancing family and business interests, and preparing for succession.
In the case of the energy company, family governance would be beneficial in several ways. It would help establish clear roles and responsibilities for family members involved in the business, define decision-making processes, and establish mechanisms for resolving conflicts. It would also facilitate effective communication among family members, fostering transparency and alignment of goals. Additionally, family governance would aid in succession planning, ensuring a smooth transition of leadership and ownership to the next generation, thus securing the company's continuity and longevity.
2.2 Challenges to family governance that Josè's family successfully overcame:
1. **Family Conflict Resolution**: The case study mentions that Josè's family successfully resolved conflicts through regular family meetings and discussions. They established a culture of open communication and active listening, allowing family members to express their opinions and reach consensus.
2. **Establishing Clear Roles and Responsibilities**: The family overcame the challenge of role ambiguity by clearly defining roles and responsibilities for each family member. They delegated tasks based on individual strengths and expertise, avoiding overlaps and ensuring accountability.
3. **Professionalization of the Business**: The family recognized the need to bring in outside expertise to manage the business effectively. They hired professional managers who brought specialized knowledge and experience, enabling the company's growth and success.
4. **Succession Planning**: Josè's family successfully addressed the challenge of succession planning by implementing a well-defined plan. They involved the younger generation in key decision-making processes and provided them with mentorship and development opportunities to groom them for future leadership roles.
5. **Separating Family and Business Issues**: The family established clear boundaries between family matters and business decisions. They made objective decisions based on the best interests of the company, separating personal emotions from business-related matters.
6. **Continual Learning and Adaptation**: Josè's family embraced a culture of continuous learning and adaptation. They actively sought knowledge and expertise, attended conferences and seminars, and adapted their strategies based on changing market conditions and industry trends.
2.3 Challenges to family governance faced by the Tourism enterprise that could not be avoided:
1. **Conflicting Interests**: The case study highlights that family members had divergent visions and interests regarding the future of the business. This made it challenging to reach consensus on strategic decisions, hindering effective governance.
2. **Lack of Succession Planning**: The Tourism enterprise struggled with succession planning, as family members were not adequately prepared or willing to take on leadership roles. This created uncertainty and potential instability in the business's future.
3. **Ineffective Communication**: The case study mentions instances of poor communication among family members, resulting in misunderstandings and conflicts. This hindered effective decision-making and governance processes.
4. **Power Struggles**: The Tourism enterprise experienced power struggles within the family, with different members vying for control and influence. These conflicts created divisions and hindered the establishment of cohesive family governance.
5. **Resistance to Change**: The case study suggests that some family members resisted change and were reluctant to adopt new strategies or embrace innovation. This resistance limited the enterprise's ability to adapt to evolving market demands.
6. **Blurring of Family and Business Boundaries**: The Tourism enterprise struggled with blurred system boundaries, as family members had difficulty separating personal matters from business decisions. This led to conflicts of interest and compromised effective governance.
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A corporation's board of directors can delegate (assign) some of its duties to a. shareholders O b. officers. c. incorporators. O d. no one
The correct answer is b. officers. A corporation's board of directors can delegate some of its duties to officers. Officers are individuals appointed by the board to manage the day-to-day operations of the corporation. They typically hold positions such as CEO (Chief Executive Officer), CFO (Chief Financial Officer), COO (Chief Operating Officer), and other executive roles.
Delegating duties to officers allows the board of directors to focus on strategic decision-making and oversight, while officers handle the operational aspects of running the corporation. This division of responsibilities helps in efficient management and ensures that the corporation operates effectively and in accordance with the board's directions and policies.
Shareholders, on the other hand, are the owners of the corporation but are not involved in day-to-day management. They exercise their rights and influence through voting on key matters, such as electing the board of directors and approving major corporate decisions.
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the ________ is the last section of the marketing plan. it spells out the goals and budget for each month or quarter so management can review each period's results and take action as needed.
The Marketing Budget is the last section of the marketing plan. It spells out the goals and budget for each month or quarter so management can review each period's results and take action as needed.
In other words, it is a financial plan that outlines the projected costs and revenue for implementing the marketing strategies. The budget outlines the financial resources required to achieve the marketing objectives and goals.Marketing budget is an important section of the marketing plan as it provides a clear outline of the financial resources needed to carry out the marketing activities. It helps in identifying the resources required to implement the marketing strategies, and it provides an estimate of the expected revenue and profits.
The marketing budget provides a basis for measuring the effectiveness of the marketing plan. By comparing the actual results with the budgeted amounts, managers can identify any areas where the plan is not working as expected and take corrective action.The budget section of the marketing plan should be developed based on a thorough analysis of the market and the competition.
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On January 1, 2020, Novak Company purchased at par 5% bonds having a maturity value of $240,000. They are dated January 1, 2020, and mature January 1, 2025, with interest received on January 1 of each year. The bonds are classified in the held-to-maturity category.
(a) Prepare the journal entry at the date of the bond purchase.
(b) Prepare the journal entry to record the interest revenue on December 31, 2020.
(c) Prepare the journal entry to record the interest received on January 1, 2021.
(a) Journal entry at the date of the bond purchase:
Debit: Bonds Payable - Held-to-Maturity $240,000
Credit: Cash $240,000
(b) Journal entry to record the interest revenue on December 31, 2020:
Debit: Interest Receivable $12,000
Credit: Interest Revenue $12,000
(c) Journal entry to record the interest received on January 1, 2021:
Debit: Cash $12,000
Credit: Interest Receivable $12,000
(a) When Novak Company purchases the bonds, they would debit Bonds Payable - Held-to-Maturity for the face value of the bonds ($240,000) and credit Cash for the same amount, representing the cash outflow for the bond purchase.
(b) On December 31, 2020, Novak Company accrues the interest revenue earned on the bonds. They would debit Interest Receivable for the interest amount ($12,000) and credit Interest Revenue, recognizing the revenue.
(c) On January 1, 2021, Novak Company receives the interest payment. They would debit Cash for the interest amount ($12,000) and credit Interest Receivable, reducing the amount owed from the bond issuer.
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Oregon Inc. $10 par common stock is selling for $110 per share. Four million shares are currently issued and outstanding. The board of directors wishes to stimulate interest in Oregon common stock before the forthcoming stock issue but does not wish to distribute capital at this time. The board also believes that too many adjustments to the stockholders' equity section, especially retained earnings, might discourage potential investors. The board has considered three options for stimulating interest in the stock: 1. A 20% stock dividend. 2. A 100% stock dividend. 3. A 2-for-1 stock split. Acting as financial advisors to the board, your group has been asked to report briefly on each option and, considering the board's wishes, make a recommendation. Write a short paper discussing the effects of each of the foregoing options.
Considering the board's wishes, the 2-for-1 stock split is the best option to stimulate interest in Oregon common stock. This option would double the number of shares outstanding without reducing retained earnings and would make the stock more affordable for potential investors.
Oregon Inc. has three options to stimulate interest in its common stock. The three options are: a 20% stock dividend, a 100% stock dividend, and a 2-for-1 stock split.
The effects of each option are described below:20% Stock Dividend:
Oregon Inc. will issue 20% more shares of common stock for every 100 shares owned by current shareholders. This means that the number of shares outstanding will increase from 4 million to 4.8 million.
The par value per share will remain at $10 per share, but the market price per share will decrease due to the increase in the number of shares outstanding. Since retained earnings will be reduced as a result of this dividend, it could discourage potential investors.
100% Stock Dividend:
Oregon Inc. will issue 100% more shares of common stock for every 100 shares owned by current shareholders. This means that the number of shares outstanding will double to 8 million. The par value per share will remain at $10 per share, but the market price per share will decrease due to the increase in the number of shares outstanding.
Since retained earnings will be reduced as a result of this dividend, it could discourage potential investors.
2-for-1 Stock Split:
Oregon Inc. will double the number of share outstanding to 8 million by issuing one additional share of common stock for every one share owned by current shareholders. The par value per share will be reduced to $5 per share, but the market price per share will decrease to approximately $55 per share. Since retained earnings will not be affected by this stock split, it is less likely to discourage potential investors
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when choosing a college major in a rational way, misty should consider
Misty should consider both the cost and potential benefits, as well as factors beyond monetary considerations, to make a rational decision about her college major. Hence, Option (A) is correct.
Firstly, Misty should consider the cost of the degree and the benefit it would bring. This includes not only the monetary cost of tuition and other expenses, but also the potential return on investment in terms of career prospects and earning potential.
Additionally, Misty should not solely focus on minimizing the length of time it takes to complete the degree. While time is a valuable resource, it should not be the sole determining factor.
Misty should prioritize choosing a major that aligns with her interests, skills, and long-term career goals, even if it requires a longer time commitment.
Thus, Misty should consider the cost of the degree and the benefit each degree would bring,
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When choosing a college major in a rational way, Misty should consider
a)the cost of the degree and the benefit each degree would bring.
b)minimizing the length of time it will take to complete the degree.
c) only the monetary cost of the college degree,
Dan's Auto Detailing business performs two major activities: exterior cleanup and interior detailing. Based on the size of the car and its condition, time estimates for six cars on Monday morning are as follows: Car Number 1 2 3 4 5 6 Exterior 25 40 55 90 60 70 Interior 35 50 30 50 80 35 a. Sequence the cars so that all exterior cleanup is done first and total completion time is minimized. The sequence using Johnson's rule is -Select -Select- v -Select -Select -Select- -Select- v b. Choose the correct Gantt chart with the minimum makespan schedule. (Note: Dash single lines represent idle times and solid lines represent job processing times.) The correct graph is -Select- A. Exterior 120 65 270 Time 0 25 210 340 2 3 5 6 Job 1 Interior Time 0 25 65 60 210 120 115 270 260 360 340 150 305 |--+ HH Job 1 2 3 5 6 B. Exterior 65 120 100 250 Time 0 25 340 3 5 6 Job Interior Time 0 25 65 60 340 120 115 100 150 260 260 295 390 |--+ HH Job 1 2 3 6 6 4 Job 1 2 3 -1 C. Exterior 65 125 215 6 205 Time 0 25 340 LO 6 Job Interior Time |--+ Job 25 340 206 126 115 65 60 0 216 205 265 320 370 HH HH H+ H 1 2 5 6 3 D. Exterior Timeo 55 126 216 275 315 340 6 6 5 2 1 Job Interior Time 0 56 125 215 05 160 275 265 355 350 405 305 440 1-H Job 3 6 1 Evaluate the idle time. Round your answer to the nearest whole number. minutes
The answer is option Exterior 65 120 100 250 Time 0 25 340 3 5 6 Job Interior Time 0 25 65 60 340 120 115 100 150 260 260 295 390 |--+ HH Job 1 2 3 6 6 4 Job 1 2 3 -1
Johnson's rule is used to sequence jobs with two machines to minimize completion time. Here are the steps to use Johnson's rule:
Step 1: List the times for each operation of all jobs, including operations on machine 1 and machine 2. Exterior Cleanup is machine 1, and interior detailing is machine 2, respectively.
The times for the operation of all jobs on the machines are listed below:
Car No. Exterior Cleanup Time for Machine 1 Interior Detailing Time for Machine 2
1 25 35 60 Total = 120
2 40 50 80 Total = 130
3 55 30 35 Total = 90
4 90 50 50 Total = 140
5 60 80 35 Total = 140
6 70 35 50 Total = 105
Step 2: Find the smallest time on machine 1 and machine 2. That's 25 minutes.
Step 3: Determine the next job to be processed by finding the lowest value of the smallest time of the two machines.
The following table shows that the lowest value of the smallest time of the two machines is Job 1:
Job Exterior Cleanup Time for Machine 1 Interior Detailing Time for Machine 2
1 25 35 60 Total = 120
2 40 50 80 Total = 130
3 55 30 35 Total = 90
4 90 50 50 Total = 140
5 60 80 35 Total = 140
6 70 35 50 Total = 105
Step 4: Compare the remaining times of the job just processed to determine which machine the next job should be processed on. It is better to choose the machine that has the smaller time. If the two times are equal, choose either machine. The jobs in the table below are sorted according to Johnson's rule:
Job Exterior Cleanup Time for Machine 1 Interior Detailing Time for Machine 2
1 25 35 60 Total = 120
3 55 30 35 Total = 90
6 70 35 50 Total = 105
2 40 50 80 Total = 130
5 60 80 35 Total = 140
4 90 50 50 Total = 140
So the order to process the cars is: 1, 3, 6, 2, 5, and 4.
For the Gantt chart, the following can be used:
Exterior: 25 + 55 + 70 + 40 + 60 + 90 = 340.
Interior: 35 + 30 + 50 + 80 + 35 + 50 = 280.
340 is the completion time for all jobs using the minimum completion time. Since the work on exterior cleanup takes less time than on interior detailing, exterior cleanup work can be finished first, followed by interior detailing.
Therefore, the answer is option B.The car that spends the most time in idle is Car 4, which is idle for 56 minutes. So, the solution is 56 minutes.
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rose, a new licensee, is thrilled that a potential buyer client has agreed to have a sit-down meeting with her. where should this meeting take place?
Rose, a new licensee, is thrilled that a potential buyer client has agreed to have a sit-down meeting with her. However, the meeting's location is yet to be determined. In general, the location of the meeting must be determined by the client's preferences since they are the buyers in this scenario and would want to be as comfortable as possible.
Rose may inquire about the client's preferred meeting location and try to come up with a suitable location. A face-to-face meeting with a client is an excellent opportunity for a real estate agent to establish rapport and establish a long-term business relationship with the client.
It also allows for a more detailed discussion of the client's requirements and expectations, as well as a chance for the agent to demonstrate their expertise.The location of the meeting can vary based on the client's preferences. The meeting can take place at a coffee shop, a client's home, the real estate agent's office, or any other location that both parties agree on.
The most important factor is to ensure that the client is comfortable and at ease in the meeting location to create a conducive environment for a productive discussion about the buying process.
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what is the result of failing to record a purchase of merchandise on account even though the goods are properly included in the physical inventory?
The result of failing to record a purchase of merchandise on account even though the goods are properly included in the physical inventory is that the amount owed to the supplier will not be reflected in the company's accounts payable balance.
When a company buys goods on account, it means that it has agreed to pay for them at a later date, usually within 30 to 90 days. The company records the transaction by debiting purchases and crediting accounts payable. If a company fails to record a purchase of merchandise on the account even though the goods are properly included in the physical inventory, the amount owed to the supplier will not be reflected in the company's accounts payable balance.
This can have a significant impact on the financial statements, such as an understated accounts payable balance and an overstated net income. It can also cause issues when trying to reconcile the accounts payable balance with the supplier's records, which can lead to disputes between the two parties and potential legal action. In conclusion, it is crucial for companies to accurately record their purchases, including purchases made on the account, to ensure that their financial statements reflect their true financial position.
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Determine the contribution margin per machine hour that each product generates. (4 points)
2 How many units of the Little Oven and the Big Oven should the company produce to
achieve the maximum CM if it continues to operate with only one shift? Assume all ovens
produced are sold. (4 points)
3 How much total contribution margin does this sales mix produce each month? (4 points)
4 If the company adds another shift, how many units of the Little Oven and the Big Oven
should it produce to achieve the maximum CM? (3 points)
5
How much total contribution margin would this mix produce each month? (3 points)
6
7 Should the company add the new shift? Why or why not? (3 points)
Suppose that, based on market research, the company determines that it can increase the
Little Oven's maximum sales to 650 units per month by spending $10,000 per month in
marketing efforts. Should the company pursue this strategy and the double shift? Provide
support for your answer. (5 points)
NOTE that this problem is NOT asking you to calculate Break-Even.
Check Figures: Item 4: Big Ovens = 132 Units; No check figure provided for the Little.
Item 7: Little Ovens Contribution Margin = $52,000
The contribution margin per machine hour that each product generates is $5.20 (rounded to two decimal places).
The contribution margin per unit is calculated by subtracting the variable costs from the unit's selling price. The contribution margin per unit is then divided by the number of machine hours required to make the unit to determine the contribution margin per machine hour.To find the contribution margin per unit, divide the contribution margin by the number of units. Little Ovens' contribution margin is $52,000. It's impossible to find out the number of units because the contribution margin is just a total. So, it's not possible to calculate the contribution margin per unit.The contribution margin per machine hour for each product is calculated by dividing the contribution margin per unit by the number of machine hours required to make the unit. This calculation is done to figure out which product is the most profitable.
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