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Fixed cost remains unchanged within the relevant range for a given period despite fluctuations in activity, but variable costs vary directly with the activity. Because a portion of the rental revenue is a fixed cost, it will never be zero regardless of sales. Because the total variable cost increases at a reduced rate as sales increase, the per-unit variable cost is not fixed. Furthermore, as sales increase overtime1 the rental revenue increases at a diminishing amount as represented by Curve I.

The 6% discount rate is multiplied times the face amount of the Treasury bill to determine the amount of interest the lender will earn. The interest on this Treasury bill is $3 ($100 x 6% x 5 year), thus the purchase price is $97 ($100--$3).

The relevant range is the range of activity over which unit variable costs and total fixed costs are constant.
The incremental cost of one additional unit of production will be equal to the variable cost.

The cash conversion cycle is the length of time between paying for purchases and receiving cash from the sale of finished goods. It equals the inventory conversion period, plus the receivables collection period, minus the payables deferral period, or75 days (58 days -`- 32 days -- 15 days).

An American option is a contractual arrangement that gives the owner the right to buy or sell an asset at a fixed pence at ark moment in flume before or on a specified date. A European option is exercisable one at the expiration date

Production flow through a constraint is managed using the drum-buffer-rope (DBR) system. The drum (i.e., the beat to which a production process marches) is the bottleneck operation. The constraint sets the pace for the entire process. The buffer is a minimal amount of work-in-process input to the drum that is maintained to ensure that it is always in operation. The rope is the sequence of activities preceding and including the bottleneck operation that must be coordinated to avoid inventory buildup.

The budget has the same structure as the organization itself. The complete budget is made up of a hierarchy of smaller budgets, each representing the plan of a division, department, or other unit in the organizational structure. Successful budgeting requires completion of a plan that states organizational goals before the budgeting process. Prevention and detection of deviations from the budget are the control purposes of budgets.

The internal rate of return (IRR) is the discount rate at which the present value of the cash flows equals the original investment. Thus, the NPV of the project is zero at the IRR. The IRR is also the maximum borrowing cost the firm could afford to pay for a specific project. The IRR is similar to the yield rate/ effective rate quoted in the business media.

It daily cash receipts are $150,000, and the lockbox service will speed collection by four days, the company will have available an additional $600,000 ($150,000 x 4 days). The result is increased interest revenue of $24,000 ($600,000 x 4% interest rate). However, the $2,500 monthly service charges total
$30,000 for the year, which is a $6,000 net loss ($24,000 interest revenue - $30,000 monthly service charges).

Committed costs are those which are required as a result of past decisions.

A cartel is an organization of sellers (e.g., the oil cartel OPEC) who undertake joint action to maximize member's profits by controlling the supply and therefore the price of their product. Under the laws of many nations, such collusive conduct is illegal when engaged in by firma subject to those laws. The reason is that, as a result of the monopolistic and anticompetitive practices of cartels, supply is lower, prices re high, competition is restrained, and the relevant. Industry is less efficient. Accordingly, governmental and international organizations seek to protect consumers and the health of the domestic and global economy through anti-cartel efforts.

Advertising is defined by Philip Kilter (Marketing Management) as "any paid form of no personal presentation and promotion of ideas, goods, or services by an identified sponsor." It may occur on many platforms: television, radio, films, the Internet, packaging, billboards, point-of-purchase displays, brochures, videos, trademarks, and others.

Value engineering is a means of reaching targeted cost levels. It is a systematic approach to assessing all aspects of the value chain cost buildup for a product.

An example of the use of automation and advanced technologies in the manufacturing field is flexible manufacturing, which is the capacity of computer-controlled machinery to perform many different programmed functions. By eliminating machine setup time, strengthening control, and automating handling processes, flexible manufacturing permits the efficient production of small numbers of different products by the same machines. A company can therefore more accurately match output with consumer tastes and avoid long production runs of identical goods.

The company will receive net cash inflows of $50 per unit ($500 selling price -- $450 of variable costs), a total of $200.000 per year for 4.000 units. This amount will be subject to taxation, as will the $10,000 gain on sale of the irwestrnent, resetting in taxable income of $210,000. No depreciation will be deducted in the tenth year because the asset was fully depreciated after 5 years. Because the asset was fully depreciated (book value was $0), the $10,000 received as salvage value is fully taxable. At 40%, the tax on $210,000 is $84,000. After subtracting $84000 of tax expense from the $210,000 of inflows the net inflows amount to
$126,000.

The advertising process maybe defined in terms of the 5 Ms: (1)The mission consists of sales and advertising objectives, (2)the money to be spent is stated in the budget, (3)the message to be communicated is crafted using a creative strategy, (4) the media are chosen to communicate the message, and (5) the measurement of communication and sales determines the effectiveness of the process.

Advertising costs to maintain share decline as a percentage of sales when that share is large. [increasing market share is more costly.

The P-E ratio equals the share price divided by EPS. If the dividends per share equaled $2 and the dividend-payout ratio was 40%, EPS must have been $5 ($2 ?4). Accordingly, the P-E ratio is 4 ($20 share price ?$5 EPS).

Strategic planning is the process of setting overall organizational objectives and drafting strategic plans. It is a process of long-term planning. Setting ultimate objectives for the firm is a necessary prelude to developing strategies for achieving those objectives. Plans and budgets are then needed to implement those strategies.

The total cost to the company will be $21 .200 ($20,000 discount + $1 .200 transaction cost), and the net amount available will be $978,800. The annualized amount of the costs is $84,800 (4 x $21,200).
Accordingly, the annual interest cost will be &66% 84,800_- $978,800).

Closed-end questions yield results that are relatively simple to analyze because the range of answers is finite. Examples are yes/no, multiple-choice, agree/disagree on a given scale, intention-to-buy scale. semantic differential scale (big to little, competent to incompetent, etc.), importance scale, or rating scale.
Open-end questions ask for personalized responses and are most useful when researchers are exploring thought processes. Examples are picture interpretation, word association, sentence or story completion, and thematic apperception jesting (creating a story about a ghen picture). --

The inherent simplifying assumptions used in CVP analysis are the following: Costs and revenues are predictable and are linear over the relevant range; variable costs change proportionally with activity level;
changes in inventory are insignificant in amount fixed costs remain constant over the relevant range of volume; prices remain fixed; production equals sales; there is a relevant range in which the various
relationships are true for a given time span; all costs are either fixed or variable; productive efficiency is constant; costs vary only with changes in sales volume; and there is a constant mix of products (or only
one product).

A theory of constraints (TOO) analysis proceeds from the assumption that only direct materials costs are truly variable in the short run. This is called throughput, or super variable, costing. The relevant margin amount is throughput margin, which equals price minus direct materials. Thus, margin figures of interest to Bombastic Bathrooms are $150 for brass ($250 --$100), $130 for chrome ($220 --$90), $180 for nickel ($375-- $195), and $190 for aluminum ($400 --$210).

Trade credit is a spontaneous source of financing because it arises automatically as part of a purchase transaction. The terms of payment are set by the supplier, but trade credit usually requires payment within a short period of time. Trade credit is an important source of credit for all businesses but especially for buyers, such as small businesses, that might not have access to other credit markets. Like all forms of financing, trade credit is subject to the risk of buyer default.

Carrying costs are incurred to hold inventory. Examples include such costs as warehousing. insurance, the cost of capital invested in inventories, inventory taxes, and the cost of obsolescence and spoilage. Neither shipping costs northe initial cost of the inventory are caring costs. -

Annual cash outflow for taxes is $12,000 {[$70,000 inflows -- $20,000 cash operating expenses `-- ($100,000 ?5) depreciation] x 40%}. The annual net cash inflow is therefore $38,000 ($70,000 --$20,000--
$12,000). The present value of these net inflows for a 5-year period is $136,990 ($38,000 x 3.605 present value of an ordinary annually for 5 years at 12%)1 and the NPV of the investment is $36,990 ($136,990 --
$100,000 investment).

The optimal amount of cash to be raised by selling securities is calculated by a formula similar to that used to determine the economic order quantity for inventory.

The optimal amount of cash to be raised by selling securities is inversely related to the rate of return forgone (opportunity cost) and directly related to the cost of the transaction.

A sunk cost is a cost already incurred or committed to be incurred. Consequently, sunk costs are not relevant to decision making because they cannot be affected by the choices made. The old machine's book value of $24,000 is an outlay made in the past that cannot be changed.

Line stretching may be downmarket to provide lower-priced products. The purpose may be to exploit a growth opportunity, to move against a low-price competitor that has invaded the firm's markets, or to shift out of a declining market. Upmarket stretching may reflect a search for growth, greater profit margins, or positioning as a full-product-line seller. Two-way stretching is a middle market firm's move into the upmarket and downmarket

Direct marketing (a zero-level channel) is the simplest distribution channel. Because direct marketing emanates all intermediaries, it consists only of a producer and an ultimate customer

In the short run, many costs are fixed. Hence, contribution margin (revenues -- all variable costs) becomes the best measure of profitability. Moreover, certain resources are also fixed. Accordingly, when deciding which products to produce at full capacity, the criterion should be the contribution margin per unit of the most constrained resource.
This approach maximizes total contribution margin.

Michael E. Porter, a leader in the field of strategic management, has developed a comprehensive model of the structure of industries and competition. One feature is his analysis of the five competitive forces that determine long-term profitability measured by long-term return on investment. This analysis determines the attractiveness of an industry.

Vasil can quantify the results of its strategic self-assessment by weighting and summing each rating.

Company A will withhold $6,000 ($100,000 x 6%) as a reserve against returns and allowances and $1,400 ($100,000 x 14%) as a commission. The remaining $92,600 will be reduced by interest at the rate of 15% annually. The interest charge will be $2,315, assuming a 360-day year [($92,600 x 15) x (60-day payment period - 360 days)). The proceeds to be received by Gatsby equal $90,285 ($92,600 - $2,315).

Eurodollar are U.S. dollars on deposit in a foreign bank. These deposits are created when a check is drawn on a dollar deposit in a U.S. bank and then deposited in a bank outside the U.S. This amount is then available for lending by the foreign bank to its customers. However, the depositors still hold claims denominated in dollars. Because Eurodollar are outside the direct control of the U.S. monetary authorities, U.S. banking regulations with respect to reserves, insurance, interest ceilings etc. do no apply. The absence of these costs means that Eurodollar deposits rates tend to be higher, not lower, than domestic
U.S. rates on equivalent instruments.

Pricing objectives include profit maximization. Classical economic theory assumes all firms a Lays select the price that results in the highest profit. An alternative objective is target margin moralization. This objective is stated as a percentage ratio of profits to sales.

The factor will advance $100,000 ($125,000 x 80%). This amount is the average balance outstanding throughout the year. Thus, annual interest will be $10,000 ($100,000 x 10%). In addition, the company will pay an annual fee of $30,000 ($125,000 per month x 2% x 12 months), so the total annual net cost is $16,000 ($10,000 ?$30,000 - $24,000 savings). Hence, the annual cost is 16% ($16,000 ?$100,000 loan).

Dividends on cumulative preferred stock accrue until declared; that is, the book value of the preferred stock increases by the amount of any undeclared dividends. Participating preferred stock participates with common shareholders in excess earnings of the company. In other words, 8% participating preferred stock might pay a dividend each year greater than 8% when the corporation is extremely profitable. Therefore, nonparticipating preferred stock will receive no more than is stated on the face of the stock. Preferred shareholders rarely have voting rights. Voting rights are exchanged for preferences regarding dividends and liquidation of assets.

The word beta is derived from the regression equation for regressing the return of an individual security (the dependent variable) to the overall market return. The beta coefficient is the slope of the regression line. The beta for a security may also be calculated by dividing the covariance of the return on the market and the return on the security by the variance of the return on the market.

Tax depreciation is relevant to cash flow analysis because it affects the amount of income taxes that must be paid. However, book depreciation is not relevant because it does not affect the amount of cash generated by an investment.

The basic formula used is PV(1 + j)fl = FV i.e., the present value times one plus the interest rate to the nth power equals the future value at the end of the nth time period. When the present amount is known (e.g., A = $100). as well as the interest rate (e.g., i = 10%) and the number of time pentodes (e.g., n = 2). the future value can be calculated as $100(1 + .10)2 $121. A is typical' used in the formula, but it stands (or the PV or FV (whichever is not on the other side of the equals sign).

Debentures are unsecured bonds. Although no assets are mortgaged as security for the bonds, debentures are secured by the full faith and credit of the issuing firm. Debentures are a general obligation of the borrower. Only, companies with the best credit ratings can issue debentures because only the company's credit rating and reputation secure the bonds.

A secured bond is backed by tangible property, making it the safest type for the investor four listed.

Work reams are not "empowered" to do anything they please. The organization has certain expectations for what is to be accomplished and how the reams are to go about accomplishing these expectations.
Once the organization defines its objectives and sets appropriate policies, the work teams are able to make and implement decisions within those boundaries. Policies in this context are usually quite broad ( e.g. , relating to ethical business conduct) but nevertheless important.

The company planned to produce 100,000 units at $6 each ($4 variable + $2 fixed cost), or a total of $600,000, consisting of $400000 of variable costs and $200,000 of fixed costs. Total production was only 80,000 units at a total cost of $515,000. The flexible budget for a production level of 80,000 units includes variable costs of $320,000 ($4 x 80,000 units). Fixed costs would remain at $200,000. Thus, the total flexible budget costs are $520,000. Given that actual costs were only $515,000, the variance is $5,000 favorable.

Is Correct. Throughput costing, also called super variable costing, recognizes one direct materials costs as being truly variable and thus relevant the calculation of throughput margin.

A flank attack may be directed at a geographic or segmental weakness of the target (an underserved market) or an unmet need (such as the desire for more healthful fast food). A flank attack succeeds when market segments shift. The result is a gap in need fulfillment that the attacker can convert into a strong position in a profitable segment.

The profitability index is the present value of the future net cash inflows divided by the present value of the net initial investment. The present value of the future net cash inflows is $326,556. Hence, the profitability index is 1.089 ($326,556 $300,000).

The margin of safety measures the amount by which sales may decline before losses occur. It is1 the excess of budgeted or actual sales over sales at the BEP. It may be stated in either units sold or sales revenue.

A budget can be many tools in one. It can be used for planning, communications, motivation, and control.
An internal control structure includes the accounting system. For the budgetary process to serve effectively as a control function, it must be integrated with that system and the organizational structure.
The budget provides the standards for evaluating the data generated by the accounting system. Budgets also directly supply certain internal accounting data Examples are standard costs. Relating the budgeting and accounting systems to the organizational structure will therefore enhance control by transmitting data and assigning variances to the proper organizational subunits.

The reorder point is the inventor level at which an order should be placed. This level is the inventory to be sold during the lead time plus any safely stock. If weekly sales are 200 units (10,000 ?50 weeks) and the lead time is 4 weeks, sales during the lead time should be 800 units. Adding the 800 units of expected sales to the 1,300 units of safely stock produces a reorder point of 2,100 units.

A firm considers such factors as price, relationships with suppliers, product demand, avoidable future costs, and economies of scale, opportunity costs, technological efficiency, and the capital-labor ratio when evaluating the purchase of new equipment. The cost of the current facility would not be relevant because it is a sunk cost.

Inventory costs fall into three categories: order or set-up costs, carrying (holding) costs, and stock out costs. Carrying costs include storage costs for inventory items plus opportunity cost (i.e., the cost incurred by investing in inventory rather than making an income-earning investment). Examples are insurance, spoilage, interest on invested capital, obsolescence, and warehousing costs.

Psychic proximity means the nearness of the markets culture, language, and laws to those `the firm's home country. For example1 Portuguese is spoken in Brazil.

Contribution margin is the excess of sales over variable costs. Sales of 10,000 units at $320 each will produce total revenue of $3,200,000. Variable costs will be $104 per Unit, consisting of $44 for direct maternal, $30 for direct labor. $24 for variable overhead, and $6 for selling costs. At $104 per unit, the 10,000 units will have total variable costs of $1,040,000, resulting in a contribution margin of $2,160,000
($3,200,000 -- $1,040,000).

Working capital finance concerns the determination of the optimal level, mix, and use of current assets and current liabilities. The objective is to minimize the cost of maintaining liquidity, while guarding against the possibility of technical in solvency. Technical in solvency is defined as the inability to pay debts as they come due.

Pull market coverage may be achieved by differentiated or undifferentiated marketing. Differentiated marketing covers the market by offering different products in different segments. Sales are higher than under undifferentiated marketing, but costs (product modification1 inventory, manufacturing1 administration1 and promotion) are higher.

Marginal (incremental or differential) analysis determines the differences in costs among decision choices.
Total unit costs are not relevant in marginal analysis because of the inclusion of costs that may not 1[vary among the possible choices considered. In marginal analysis, only the incremental costs are relevant.

The yearly/quarterly/monthly numbers and styles of finished goods called for in the demand forecasts included in the operational plans must turned into specific for completion and availity for shipment to the customer.this is the task of the master production schedule(MPS)

An imputed cost is one that has to be estimated. Its a cost that exists but is not formally recognized in the accounting system and is the result of a process designed to recognize economic reality. An imputed cost is therefore relevant to the decision-making process. For example, the stated interest on a bank loan is not an imputed cost because it is specifically stated and requires a dollar outlay. But the cost of using retained earnings as a source of capital is unstated and has to be imputed.

By issuing commercial paper, the company will receive $100,000 and repay $110,000 every six months.
Thus, for the use of $100,000 in funds, the company pays $10,000 in interest each six-month period, or a total of $20,000 per year. The annual percentage rate is therefore 20% ($20,000 ?$100000).

If 50% of the Suburban Store's sales are at variable cost, its contribution margin (sales-variable costs) must derive wholly form sales of other items. However, eliminating sales at variable cost reduces other sales by 20%. Thus, the effect is to reduce the contribution margin to $28,800 ($36,000x.8). Moreover, fixed costs will be reduced by 15% to $ 34,000 ($40,000x.85). Consequently, the new segment margin is $(5,200) ($34,000 direct fixed costs-$28,800 contribution margin), a decrease of $1,200
[$(5,200)-$(4,000)].

Interest-rate risk is the risk of fluctuations in the value of an asset due to changes in interest rates. One component of interest-rate risk is price risk; for example, the value of bonds declines as interest rates
increase. Reinvestment-rate risk is another component of interest-rate risk. If interest rates decline, lower returns will be available for reinvestment of interest and print pal payments received.

The step of evaluating performance and giving feedback is vital to improve future execution of the prior steps or even the decision model itself. The proper delegation of authority is made to the individual responsible for implementing the action to be taken. Performance measurement is then provided for. This process puts the solution into a feasible framework, which assures it will be carried out. Finally, decisions cannot be fully imolemented until they are effectively communicated.

If it is expensive to switch suppliers, customers will be less motivated to respond to competitor advances.

The payback method calculates the number of years required to complete the return of the original investment. This measure is computed by dividing the net investment required by the average expected cash, 1flow to be generated, resulting in the number of years required to recover the original investment.
Payback is easy to `calculate but has two principal problems: it ignores the time value of money, and it gives no consideration to returns, after the payback period. Thus, it ignores total project profitability'.

The value of the special loan can be calculated by computing the NPV of the loan using Falcon's normal borrowing rate of 6% for 5 periods. NPV equals $25 million minus PV of interest payments minus PV of principal. Thus, the NPV is $2.1 13 million ($25 million --[($25 million x .04 annual interest) x4.212 PV of an annuity for Syrsat6%]-- ($25 millionx747PVof$1 in5yrs. at6%]}.

A by-product is a product of relatively minor importance generated during the production of one or more other products. Its production entails no additional costs. Any amount received above the storage and delivery costs for a by-product allows the seller to reduce the main product's price to make it more competitive.

Relevance is the capacity of information to make a difference in a decision by helping users of that information to predict the outcomes of events or to confirm or correct prior expectations. Thus, relevant costs are those expected future costs that vary with the action taken. All other costs are constant and therefore h no effect on the decision.

Total risk is the risk of a single assets, whereas market is its risk if is held in a large portfolio of diversified securities. total risk therefore includes diversifiable and undiversifiable risk

One factor in the choice of strategy in a declining industry is whether the declining industry is like to .idle profits to the firm, that is, whether industry structure is favorable.

Given a periodic constant cash flow, the payback period is calculated by dividing cost by the annual cash inflows, or cash savings. To achieve a payback period of 3 years, the annual increment in net cash inflow generated by the investment must be $150,000 ($450000 + 3-year targeted payback period). This amount equals the total reduction in cash operating costs minus related taxes. Depreciation is $90000 ($450,000 + 5 years). Because depreciation is a non cash deductible expense, it shields $90,000 of the cash savings from taxation. Accordingly, $60000 ($150000 --$90,000) of the additional net cash inflow must come from after-tax net income. At a 40% tax rate, $60,000 of after-tax income equals $100000 ($60,000 + 60%) of pre-tax income from cost savings, and the outflow for taxes is $40,000. Thus, the annual reduction in cash operating costs required is $190,000 ($150,000 additional net cash inflow required + $40,000 tax outflow).

The firm may create branding partnerships. Global firms often form alliances with local distribution channels to increase the profitability while decreasing their marketing costs.

Of the $500,000 borrowed, the debtor has the use of only $450,000. The compensating balance provision requires a minimum balance that is $50,000 greater than the balance that the company usually maintains.
At 8% on a $500,000 loan, the annual interest expense is $40,000. However, this amount is reduced by the interest earned on the extra $50,000 in the checking account. At 3%, the extra $50,000 earns $1,500 per year. Thus, the net expense is $38,500. The effective interest rate is 8.56% ($38500 ?$450,000)

The bailout payback period is the length of time required for the sum of the cumulative net cash inflow from an investment and its salvage value to equal the original investment. The bailout payback method measures 11the risk to the investor if the investment must be abandoned. The shorter the period, the lower the risk.

Leverage is the amount of the fixed cost of capital, principally debt, in a firm's capital structure relative to its operating income It is also defined as the ratio of debt to total assets or debt to capital. Leverage, by definition, creates financial risk, which relates directly to the question of the cost of capital The more leverage, the higher the financial risk, and the higher the cost of debt capital. An increase in the equity component of the capital structure, however, decreases financial leverage Operating leverage is based on the degree that fixed costs are used in the production process. A company with a high percentage of fixed costs is riskier than a firm in the same industry that relies more on variable costs to produce. When fixed assets increase, operating leverage also increases

Forecasts of many calculated NPVs under various assumptions are compared to see how sensitive NPV is to changing conditions. Changing or relaxing the assumptions about a certain variable or group of variables may drastically alter the NPV. Thus, the asset may appear to be much riskier than was originally predicted. In summary, sensitivity analysis is simply an iterative process of recalculated returns based on changing assumptions.

Exchange-rate risk is the riskthataforeign currency transaction will be negatively exposed to fluctuations in exchange rates. Because 0 & B Company sells goods to German customers and records accounts 1receh, able denominated in Deutsche marks, 0 & B Company is exposed to exchange-rate risk.

The payback period is the time required to recover the initial investment. The net cash inflows used to determine the payback period are not discounted. The initial cost was $105,000, and inflows during the first 2 years were $95,000 ($50,000 + $45,000). Thus, the first $10,000 ($105,000 -- $95,000) of the third year's net cash inflows will complete the recovery' of the initial investment. This amount is one1ourth of the third year's inflows. Hence, the payback period is 2.25 years.

A firm with a decision-support system (DSS) may exploit advanced database technology to analyze vast amounts of data. One approach is online analytical processing, or multidimensional data analysis. It allows a user to have multiple perspectives of the same data. Another approach is data mining. It allows a user to discover hidden relationships in the data, such as associations (links to a given event), sequences of events, classifications (descriptions of the group to which an item belongs, or clusters (new groupings not previously known). Consequently, a firm might detect trends or underserved customer market segments. Data mining requires advanced statistical and mathematical methods, for example, predictive modeling, neural networking, and automatic interaction detection.

The critical path is the longest path because it defines the minimum duration of the project. A-D-E(4+6+5 - 15)is the critical path.

The basic communications model has the following components: (1)the major parties (sender and receiver), (2) tools (message and media), (3) functions (encoding, decoding, response, and feedback), and (4) noise. Noise is anything (i.e., a random and competing message) that interferes with the communication process

A data warehouse contains not only current operating data but also historical inforrnabon from throughout
The organization. Thus, data from all operational systems are integrated, consolidated, and standardized into an organization-wide database into which data are copied periodically. These data are maintained on one platform and can be read but not changed. Graphics and queer' software and inimical tools assist users, accordingly. data mining is facilitated by a data warehouse.

The capital budgeting process is a method of planning the efficient expenditure of the firms 1Jesources on capital projects. Such planning is essential in view of the rising costs of scarce resources

Brand equity is a subjective evaluation. Sub drivers are the customer's awareness of 1 and attitude toward, the brand and the customer's belief about brand ethics. Brand equity is most significant when the product is not differentiated but has emotional appeal.

Scenario development is a qualitative forecasting method that requires preparation of conceptual scenarios of future events given carefully defined assumptions. It entails writing multiple different but equally likely descriptions of future states.

Given that overhead is 40% fixed, $66,000 ($1 10,000 x 60%) is variable, and $44,000 is fixed. Of the latter amount, $25,000 is attributable to the supervisor's salary. The $19,000 remainder is allocated from total company overhead and is unavoidable. Assuming the company will continue to pay the supervisor's salary if an outside firm services the cafeteria, the total fixed overhead is not an avoidable (incremental) cost. Thus, the total avoidable cost of the cafeteria's operation is $241 ,000 ($100,000 food + $75,000 labor + $66,000 VOH). This amount is the savings from hiring an outside firm. Accordingly, it is also the maximum that Laurel should be willing to pay the outside firm.

Because the dividends on preferred stock are not deductible for tax purposes, the effect of income taxes is ignored. Thus, the relevant calculation is to divide the $10 annual dividend by the quantity of funds received at the time the stock is issued. In this case, the funds received equal $96 ($101 selling price -- $5 underwriting fee). Thus, the cost of capital is 10.4% ($10 + $96)

In a gray market, products imported from one country to another are sold by persons trying to make a profit from the difference in retail prices between the two countries. These activities clearly lower the profits in some markets of the multinational firm that was the initial seller. One response is to monitor the practices of distributors and retaliate if necessary. A second response is to charge higher prices to the low-cost distributors to reduce their incentives to participate in a gray market. A third response is to differentiate products sold in different countries, e.g., by adapting the product or offering distinct service features.

Under a theory of constraints analysis, the product with the greatest absolute throughput margin is not of the highest interest. Bottlenecks hold up production, so no matter how great the margin on a product is, if it cannot get through the production process, it cannot earn that margin. The relevant figure is throughput margin per time spent in the constraint. In Bombastic case, the most profitable product using this metric is the nickel fixture ($180?4 hours = $45).

According to the residual theory of dividends, the amount (residual) of earnings paid as dividends depends on the available investment opportunities and the debt-equity ratio at which cost of capital is minimized.
The rational investor should prefer reinvestment of retained earnings when the return exceeds what the investor could earn on investments of equal risk. However, the firm may prefer to pay dividends when investment opportunities are poor and the use of internal equity financing would move the firm away from
its ideal capital structure.

Plant layout in a IT-lean production environment os not arranged by functional department or process but by manufacturing cells (work cells).cells are sets of machines,often group in semicircles,that produce a given product or product type.