BEC REVIEW 10

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Joens1313
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BEC REVIEW 10
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2015-11-01 23:19:15
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BEC REVIEW 10
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  1. The following direct labor information pertains to the manufacture of product Glu:

    Time required to make one unit                    2 direct labor hours
    Number of direct workers                                            50
    Weekly wages per worker                                           $500
    Number of productive hours per week, per worker                     40
    Workers' benefits treated as direct labor costs           20% of wages


    What is the standard direct labor cost per unit of product Glu?
    $30.00

    Hourly wage = $500 per week / 40 hours = $12.50/HR

    Standard Direct Hours per Unit  = 2 (given)Direct Labor Cost per Unit      = 2 hrs x $12.50/hr. = $25

    Workers' benefits = 20% of wages = .2 x $25 = $5

    Standard Direct Labor Cost per Unit = $25 + $5 = $30
  2. What is prepared by the Bureau of Labor Statistics and is the price level of a composite basket of commodities commonly purchased by households for a given period of time relative to a specified base year, in which each commodity is weighted according to its relative importance (measured as the percentage of each commodity to the entire basket)?
    Consumer Price Index (CPI)
  3. What is the Consumer Price Index (CPI)
    It is prepared by the Bureau of Labor Statistics and is the price level of a composite basket of commodities commonly purchased by households for a given period of time relative to a specified base year, in which each commodity is weighted according to its relative importance (measured as the percentage of each commodity to the entire basket).
  4. What is the critical path method used for?
    The critical path method (CPM) is a procedure for planning a project.
  5. What does the internal environment consist of?
    The internal environment consists of

    • strengths,
    • weaknesses,
    • and competitive advantages.
  6. JacKue Co. plans to produce 200,000 pairs of roller skates during January of next year. Planned production for February is 250,000 pairs. Sales are forecasted at 180,000 pairs for January and 240,000 pairs for February. Each pair of roller skates has eight wheels. JacKue's policy is to maintain 10% of the next month's production in inventory at the end of a month. How many wheels should JacKue purchase during January?
    The general inventory reconciliation formula is useful here:


    Beginning inventory + Purchases - Uses = Ending inventory


    This formula can be restated as:

    Purchases = Ending inventory - Beginning inventory + Uses


    The beginning and ending inventory will be 10% of the next month's purchases and can be calculated as follows:

    Beginning inventory = 10% of January's planned production                     = 0.10 x (200,000 pairs of skates x 8 wheels per pair)                     = 160,000 wheels

    Ending inventory = 10% of February's planned production                  = 0.10 x (250,000 pairs of skates x 8 wheels per pair)                  = 200,000 wheels

      Production uses     for January = 200,000 pairs of skates x 8 wheels per pair                 = 1,600,000 wheels

    The necessary January purchases can then be calculated:

    • Purchases = Ending inventory - Beginning inventory + Uses           = 200,000 wheels - 160,000 wheels + 1,600,000 wheels
    •          
    •  = 1,640,000 wheels
  7. A ------------------t is the prediction of outcomes, trends, or expected behavior for the economy, an industry, a particular business, or an item such as sales or market prices using statistical methods.
    A forecast is the prediction of outcomes, trends, or expected behavior for the economy, an industry, a particular business, or an item such as sales or market prices using statistical methods.
  8. What is a forecast?
    A forecast is the prediction of outcomes, trends, or expected behavior for the economy, an industry, a particular business, or an item such as sales or market prices using statistical methods.
  9. ----------------------- is to bring forth, yield, or cause to exist as a result of labor, machining, thought, or knowledge. It is the conversion of inputs into outputs. ----------------- is the act of making a commodity (good or service).
    Production is to bring forth, yield, or cause to exist as a result of labor, machining, thought, or knowledge. It is the conversion of inputs into outputs. Production is the act of making a commodity (good or service).
  10. A company obtained a short-term bank loan of $250,000 at an annual interest rate of 6%. As a condition of the loan, the company is required to maintain a compensating balance of $50,000 in its checking account. The company's checking account earns interest at an annual rate of 2%. Ordinarily, the company maintains a balance of $25,000 in its checking account for transaction purposes. What is the effective interest rate of the loan?
    6.44%

    If a firm borrows $250,000 but is required to maintain $50,000 as a minimum compensating balance, then the firm only has use of $200,000, but is paying 6% interest on the entire $250,000. To determine the effective interest rate, the interest in dollars ($250,000 × 6%, or $15,000) should be divided by the amount of the loan available to the borrower, the effective loan amount, which is only $200,000. However, there are two issues that further complicate this problem. This company ordinarily maintains a $25,000 balance in its checking account. Therefore, the company will only be out $25,000 ($50,000 - $25,000). This means the effective loan amount is $225,000 ($250,000 - $25,000), not $250,000. Also, the company earns checking account interest which partially offsets the loan interest. The applicable amount on which to determine interest is only the part that pertains to this borrowing, the additional $25,000. The interest on this is $500 (2% × $25,000). The effective interest dollar amount for this borrowing is $14,500 ($15,000 - $500). The effective interest rate is now calculated as:$14,500 ÷ $225,000 = .0644, or 6.44% effective interest rate
  11. An in-exchange premise as used when making a fair value calculation assumes that the maximum value of the item(s) being valued would come from:
    An in-exchange premise assumes that the maximum value of the subject item would come from the purchaser's perspective when the item is used alone.
  12. An ----------------------- premise assumes that the maximum value of the subject item would come from the purchaser's perspective when the item is used alone.
    An in-exchange premise assumes that the maximum value of the subject item would come from the purchaser's perspective when the item is used alone.
  13. An------------------premise assumes that the maximum value of the subject item would come from the purchaser's perspective when the item is used in conjunction with other assets as a group.
    An in-use premise assumes that the maximum value of the subject item would come from the purchaser's perspective when the item is used in conjunction with other assets as a group.
  14. --------------------------- is operating income less the “imputed” interest on the assets used to generate the income
    Residual income is operating income less the “imputed” interest on the assets used to generate the income
  15. What is often used as a measure of performance of an investment center in responsibility accounting, and rates performance in terms of dollars rather than a percentage (rate of return): “maximize the dollar return in excess of minimum desired ROI”—i.e., as long as the center earns a profit in excess of the charge for invested capital, it is successful.
    Residual Income is often used as a measure of performance of an investment center in responsibility accounting, and rates performance in terms of dollars rather than a percentage (rate of return): “maximize the dollar return in excess of minimum desired ROI”—i.e., as long as the center earns a profit in excess of the charge for invested capital, it is successful.
  16. A company has income after tax of $5.4 million, interest expense of $1 million for the year, depreciation expense of $1 million, and a 40% tax rate. What is the company's times-interest-earned ratio?
    The times-interest-earned ratio is (Net income before tax + Interest expense) ÷ Interest expense.

    To find net income before tax:Before-tax income - (0.40 × Before-tax income) = After-tax income0.60 × Before-tax income = After-tax income = $5.4 millionBefore-tax income = $5.4 million ÷ 0.60 = $9 million

    • To find the times-interest-earned ratio:
    • Times interest earned = (Net income before tax + Interest expense)                           / Interest expense
    •                       = ($9 million + $1 million) / $1 million = 10.0
  17. ----------------------- measure the degree of protection provided to long-term creditors and investors.
    Leverage ratios measure the degree of protection provided to long-term creditors and investors.
  18. what is a leverage ratio?
    Leverage ratios measure the degree of protection provided to long-term creditors and investors.
  19. ------------------------------- is a leverage coverage ratio that measures the firm's ability to meet interest charges from net operating earnings. It is a measure of solvency.
    Times interest earned is a leverage coverage ratio that measures the firm's ability to meet interest charges from net operating earnings. It is a measure of solvency.
  20. what is times interest earned?
    Times interest earned is a leverage coverage ratio that measures the firm's ability to meet interest charges from net operating earnings. It is a measure of solvency.

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