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Homework answers / question archive / Question 4 of 9 1 Points Sally purchased a share of stock for $42
Question 4 of 9 1 Points Sally purchased a share of stock for $42. During the year she received $1.8- in dividends. At the end of the year she sold her stock for $40.50. Calculate the holding period return for her investment (excluding taxes). A. 1.9% B. 10% C. 7% D. 0.71% .
Activity Machine setups Material handling Hazardous waste control Budgeted overhead cost $300000 150000 75000 Activity driver No. of setups Weight of raw material Weight of hazardous chemicals used No. of inspections Machine hours Budgeted level for activity driver 100 50000 kilograms 10000 kilograms Cost per unit of activity driver $3000 per setup $3 per kilogram $7.50 per kilogram Quality control Other overhead costs Total 112500 300000 $937 500 1000 20000 $112.50 per inspection $15 per machine hour An order for 1000 boxes of film development chemicals has the following production requirements: Machine setups Raw material Hazardous materials Inspections Machine hours 4 setups 10000 kilograms 2000 kilograms 10 inspections 500 machine hours Required: 1. Calculate the total overhead that should be assigned to the order for development chemicals. 2. What is the overhead cost per box of chemicals?
Machine hours 500 machine hours Required: 1. Calculate the total overhead that should be assigned to the order for development chemicals. 2. What is the overhead cost per box of chemicals? 392 PART TWO COSTS AND COSTING SYSTEMS 3. If Snappy Photographic Supply were to use a plantwide predetermined overhead rate based on machine hours, calculate the rate per hour. 4. Under the approach in requirement 3, how much overhead would be assigned to the order for development chemicals: (a) in total (b) per box of chemicals? 5. Explain why these two product costing systems result in such widely differing costs. Which system do you recommend? Why? 6. Calculate the unit cost of a production order for 100 specially coated plates used in film development. In addition to direct material costing $180 per plate and direct labour costing $60 per plate, the order requires the following: Machine setups Raw material Hazardous materials Inspections Machine hours 2 setups 800 kilograms 300 kilograms 3 inspections 50 machine hours
The Correct Option for the question is (D) 0.71 %
Holding period return : HPR
It is the total return from income and asset appreciation over a period of time expressed as a percentage. HPR is the total return received from holding an asset or portfolio of assets over a period of time, known as the holding period, generally expressed as a percentage. HPR is calculated on the basis of total returns from the asset or portfolio (income plus changes in value). It is particularly useful for comparing returns between investments held for different periods of time.The holding period return formula is:
HPR = ((Income + (end of period value - original value)) / original value) * 100
In the given question,
Income in form of Dividend = $1.8
Original Value ( Share Purchased) = $42
Sale Value ( Value at the end) = $ 40.5
After Substituting the above values in the formula,
HPR =((Income + (end of period value - original value)) / original value) * 100
=(($1.8 +($40.50 - $42) / $42) * 100
= ( $1.8 - $1.5) / $42 * 100
= $0.3 / $42 * 100
= 0.71 %
Part 5 –
In Product Costing, there are two different methods for allocating overhead costs to products (1) Activity based costing (ABC) and (2) Traditional costing.
In both methods, the overhead costs are estimated related to production and then assign the overhead costs to product on suitable basis or based on a cost driver.
Traditional costing is less accurate and simple than ABC. In traditional costing the overhead costs are assigned to product based on an average arbitrary rate. On other hand, ABC is more complex and more accurate than traditional costing.
In ABC method, the overhead costs are assigned to activities first and then to products based on usage of activities on the product.
The ABC costing system is recommended because this method assigned overhead costs to product based on usage of activities by the product which is more accurate.
Part 6 – Calculation of Unit Cost
|
Unit Cost |
|
|
Direct material cost per plate |
$180.000 |
|
Direct labor cost per plate |
$60.000 |
|
Assigned Overhead Costs per plate (Refer note 1) |
$117.375 |
|
Unit Cost per plate |
$357.375 |
Note 1 –
|
Activity |
Actual Production Requirement |
Activity Rate (as given in the question) |
Overhead Costs Assigned |
||
|
Machine Setups |
2 |
setups |
$3,000 |
per setup |
$6,000 |
|
Raw materials |
800 |
Kilograms |
$3 |
per kilogram |
$2,400 |
|
Hazardous Materials |
300 |
Kilograms |
$7.50 |
per kilogram |
$2,250 |
|
Inspections |
3 |
Inspections |
$112.50 |
per inspection |
$338 |
|
Machine Hours |
50 |
Machine Hours |
$15 |
per machine hour |
$750 |
|
Total Overhead Assigned |
$11,738 |
||||
|
Divide by Number of Plates |
100 |
||||
|
Assigned Overhead per plate |
$117.375 |
