Answer: The larger the percentage of stock in a portfolio, the greater the risk, but the greater the average return.
Explanation:
Stock in general is more risky than most financial instruments but this risk is accompanied with greater returns. This is why it is generally advisable to diversify stock in a portfolio.
As already mentioned, stock is risky but rewarding. It therefore follows that the more stock is in a portfolio, the risker the portfolio but the greater the average return.
If the average propensity to consume is 0.75, and the marginal propensity to consume is 0.70, if income rises by $4,000, consumption will increase by _____. (Remember when we use APC versus MPC. Use only one for this question).
Answer:
$2,800
Explanation:
The computation of the increase in consumption is shown below:
= Marginal propensity to consume × rise in income
= 0.70 × $4,000
= $2,800
Hence, the consumption would be increased by $2,800
We simply applied the above formula i.e. marginal propensity to consume is multiplied with the rise in income so that the correct answer could come
Here are comparative statement data for Duke Company and Lord Company, two competitors. All balance sheet data are as of December 31, 2020, and December 31, 2019.
2020 2019 2020 2019
(Duke Company) (Duke Company) (Lord Company) (Lord
Company)
Net sales $1,896,000 $561,000
Cost of goods sold 1,020,048 297,330
Operating expenses 257,856 79,662
Interest expense 7,584 3,927
Income tax expense 54,984 6,171
Current assets 322,500 $310,000 83,500 $78,000
Plant assets (net) 520,800 500,300 139,800 123,000
Current liabilities 64,200 75,600 34,400 29,600
Long-term liabilities 108,400 90,400 28,400 26,000
Common stock, $10 par 498,000 498,000 122,500 122,500
Retained earnings 172,700 146,300 38,000 22,900
Prepare a vertical analysis of the 2017 income statement data for duke company and Lord company.
Answer:
Please attached detailed solution.
Explanation:
• Prepare a vertical analysis of the 2017 income statement data for Luke and Lord company.
Please see as attached detailed solution to the above question.
Budgets are prepared in which of the following orders? Group of answer choices sales budget, production budget, direct materials purchases budget sales budget, cash budget, production budget production budget, cost of goods sold budget, direct labor budget production budget, sales budget, direct labor budget
Answer:
Sales Budget,
Production Budget,
Direct Materials Purchases Budget
Explanation:
The budgets are prepared so that the company could get to know how much revenue earned and the expenses to be incurred during a particular period of time. It gives an idea of how much would be earned and how much would be incurred
Here, in the following orders, the budgets could be prepared
Sales Budget,
Production Budget,
Direct Materials Purchases Budget
At what percentage of credit card usage, does it start affecting your score in a negative way?
Answer:
3%
Explanation:
ratio of 80 or 90 percent or more highly negative impact on your credit score.
Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $152,000 Credit sales, $452,000 Selling and administrative expenses, $112,000 Sales returns and allowances, $32,000 Gross profit, $492,000 Accounts receivable, $130,000 Sales discounts, $16,000 Allowance for doubtful accounts credit balance, $1,400 Flyer prepares an aging of accounts receivable and the result shows that 3% of accounts receivable is estimated to be uncollectible. How much is bad debt expense
Answer:
$2,500
Explanation:
The computation of bad debt expense is shown below:-
Total Bad Debt = $130,000 × 3%
= $3,900
Balance of allowance for doubtful accounts after Bad debt Expense = Total bad debt - Allowance for doubtful account credit balance
= $3,900 - $1,400
= $2,500
So, we have applied the above formula.
The same is to be considered
Required information Problem 17-3A Applying activity-based costing LO P1, P3, A1, A2, C3 [The following information applies to the questions displayed below.] Craft Pro Machining produces machine tools for the construction industry. The following details about overhead costs were taken from its company records. Production Activity Indirect Labor Indirect Materials Other Overhead Grinding $ 320,000 Polishing $ 135,000 Product modification 600,000 Providing power $ 255,000 System calibration 500,000 Additional information on the drivers for its production activities follows. Grinding 13,000 machine hours Polishing 13,000 machine hours Product modification 1,500 engineering hours Providing power 17,000 direct labor hours System calibration 400 batches Job 3175 Job 4286 Number of units 200 units 2,500 units Machine hours 550 MH 5,500 MH Engineering hours 26 eng. hours 32 eng. hours Batches 30 batches 90 batches Direct labor hours 500 DLH 4,375 DLH Problem 17-3A Part 5 Required: 5. If the company uses a plantwide overhead rate based on direct labor hours, what is the overhead cost for each unit of Job 3175? Of Job 4286? (Do not round intermediate calculations. Round "OH Cost per unit" answers to 2 decimal places.)
Answer:
Craft Pro Machining
The overhead cost for each unit of the jobs:
Job 3175 Job 4286
Number of units 200 units 2,500 units
Direct labor hours 500 DLH 4,375 DLH
Plantwide overhead rate = $371.28205
Overhead allocation $185,641.03 $1,624,358.97
Unit overhead cost $928.21 $649.74
Explanation:
a) Data and Calculations:
Production Activity Indirect Labor Indirect Materials Other Overhead Grinding $ 320,000
Polishing $ 135,000
Product modification 600,000
Providing power $ 255,000
System calibration 500,000
Total overhead cost $1,810,000
Additional information on the drivers for its production activities follows.
Grinding 13,000 machine hours
Polishing 13,000 machine hours
Product modification 1,500 engineering hours
Providing power 17,000 direct labor hours
System calibration 400 batches
Job 3175 Job 4286
Number of units 200 units 2,500 units
Machine hours 550 MH 5,500 MH
Engineering hours 26 eng. hours 32 eng. hours
Batches 30 batches 90 batches
Direct labor hours 500 DLH 4,375 DLH 4,875 DLH
Plantwide overhead rate based on direct labor hours:
= Total overhead costs/Total direct labor hours
= $1,810,000/4,875
= $371.28205
Between January 2010 and January 2016, U.S. employment increased by 12.1 million workers, but the number of unemployed workers declined by only 7.3 million. True or False: The labor force has remained unchanged.
Answer:
False, the labor forced increased
Explanation:
labor force = total number of people actively working (employed) or searching for jobs (unemployed)
lets say L = the total labor force in 2010
by 2016, L had increased by 12.1 million and decreased by 7.3 million
net change of L = 12.1 - 7.3 = 4.8 more million people were part of the labor force in 2016 than in 2010.
Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfare is $450. If the Chicago-Atlanta round-trip air fare were $350, should you use the coupon to go to Miami?
Answer:
You should use the discount coupon to pay for the Chicago-Miami trip. Not considering the personal motivations for the trip, the coupon is worth $500. The cost of flying is $600, so you will only pay $100 yourself. You will be spending $900 + $1000 = $1,000 in total.
The opportunity cost of using the coupon is $350 (the cost of the round trip to Atlanta). Even if you add the $350 to the $1,000 expense, the total is $1,350, less than your $1,400 maximum budget.
Owners of a local restaurant are concerned about their ability to provide quality service as they continue to grow and attract more customers. They have collected data from Friday and Saturday nights, their busiest times of the week. During these time periods about 75 customers arrive per hour for service. Given number of tables and chairs, and the typical time it takes to serve a customer, the owners estimate they can serve on average about 100 customers per hour. Use Exhibit 5.6. During these nights, are they in the zone of service, the critical zone, or the zone of nonservice?
Answer:
the critical zone
Explanation:
So, we have the following information or data from the question/problem, they are:
=> In order to improve on the restaurant service and give more quality, customers data were collected in from Friday and Saturday nights which happens to be the local restaurant's busiest times of the week.
=> From the data collected it was shown that 75 customers arrive per hour for service.
=> After getting the data above the owners of the local restaurant estimated that they can serve on average about 100 customers per hour.
In order to improve on the restaurant service and give more quality, the utilization rate must be calculated. Therefore the utilization rate is arrival rate divided by service rate that is to say;
The utilization rate = arrival rate/ service rate.
The utilization rate = 75/100 = 0.75 = 75%.
The next step is to draw the diagram showing the relationship between rate of service utilization and service rate.
So, from the graph we have that with the 75%, the zone that it falls to is the CRITICAL ZONE.
A lawn company intends to use the sales of lawn fertilizer to predict the sales of lawn mower. The store manager estimates a probable six-week lag between fertilizer sales and mower sales. The pertinent data are
Answer:
Period ; Fertilizer ; Sales
1 ; 1.6 ; 10
2; 1.3 ; 8
3; 1.8 ; 11
4; 2.0 ; 12
5; 2.2 ; 12
6; 1.6 ; 9
7; 1.5 ; 8
8; 1.3 ; 7
9; 1.7 ; 10
10; 1.2 ; 6
Explanation:
Correlation is 0.960
R-Squared is 0.921
This is positive correlation which means both variables will move in same direction.
Slope is 6.153
Intercept is -0.649
Regression line will be formed with x intercept as fertilizers and y intercept as Lawn Mowers sold.
Retepson, Inc. has been in business for over 50 years. Retepson is best known for its Guide to Colleges line of books designed for high school students seeking admission to undergraduate programs. Basic information about a program is included in the books at no charge to the colleges, but colleges may purchase additional advertising space in the books for a fee. Traditionally, Retepson has made money by selling advertising in its books and by charging students for the books themselves. Recently, however, profits are down, and the company is considering whether it needs to change its corporate culture. Which of the following, if true, supports the conclusion that Retepson's culture should emphasize innovation?
a) Anyone with Internet access can find any of the information included in the Guide to Colleges series.
b) At the time that Retepson was founded, there was no easy way for students to find out basic information about a wide range of undergraduate programs.
c) Most large colleges have found that the wide circulation of the Guide to Colleges line of books makes it worthwhile to purchase additional advertising space.
d) Retepson's sales force has been able to prevent imitators from duplicating its success.
e) Students seeking admission to selective colleges often adopt innovative approaches to their application essays in order to stand out from the group of applicants.
Answer:
a) Anyone with Internet access can find any of the information included in the Guide to Colleges series.
Explanation:
when we say innovation what we mean is a new idea, a new method, or a new way of doing things.
option A is the answer because using the internet to search for information is a form of innovation that has would bring about immense amount of changes from the former way of doing things. the internet itself is an innovative medium and it serves different purposes.
if anyone with internet can easily access information, then such an innovative ideas should be emphasized
Prepare adjusting entries for the following transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)
1. Unrecorded interest accrued on savings bonds is $410.
2. Property taxes incurred but not paid or recorded amount to $800.
3. Unearned service revenue of $4,000 was collected in advance. By year end $700 was still unearned.
4. Prepaid insurance had a $750 debit balance prior to adjustment. By year end, 60 percent was still unexpired.
5. Salaries incurred by year end but not yet paid or recorded amounted to $650.
Answer:
1. Dr Interest Receivable 410
Cr Interest Revenue 410
2. Dr Property Tax Expense 800
Cr Property Taxes Payable 800
3. Dr Unearned Service Revenue 3,300
Cr Service Revenue 3,300
4. Dr Insurance Expense 300
Cr Prepaid Insurance 300
5. Dr Salaries and Wages Expense 650
Cr Salaries and Wages Payable 650
Explanation:
Preparation of Journal entries
1. Dr Interest Receivable 410
Cr Interest Revenue 410
2. Dr Property Tax Expense 800
Cr Property Taxes Payable 800
3. Dr Unearned Service Revenue 3,300
Cr Service Revenue 3,300
($4,000 – $700)
4. Dr Insurance Expense 300
Cr Prepaid Insurance 300
[$750 x (100%-60%)]
5. Dr Salaries and Wages Expense 650
Cr Salaries and Wages Payable 650
What is a "closing balance?
a.) The amountof money you have at the end of the statement period
b.)The amount of money you have when you close your account
c.)The amount of money you owe at the end of the statement period
d.)The amount of money waiting to be transferred out of your account
Faster pls
Answer:
The answer is A
Explanation:
A closing balance is the amount of money a business has at the end of a specific time period.
According to the information above, which of the following is an appropriate analysis of the sales from the paper supplier? Select the correct answer below: From the data, the paper supplier had continued increasing sales over the 11 days. From the data, the paper supplier had continued decreasing sales over the 11 days. From the data, the paper supplier had decreasing sales from day 0 to day 5. After day 5, the sales increased. From the data, the paper supplier had increasing sales from day 0 to day 5. After day 5, the sales decreased.
Answer:
From the data, the paper supplier had decreasing sales over the 11 days.
Explanation:
The sales of the paper supplier have been declined over the 11 days. This might be because the demand for the paper is reduce due to lock down offices are closed and mostly work is done online on the soft copies. The paper supply has been increased and demand is decreased resulting in the price fall.
Teakap, Inc., has current assets of $1,456,312 and total assets of $4,812,369 for the year ending September 30, 2016. It also has current liabilities of $1,041,012, common equity of $1,500,000, and retained earnings of $1,468,347. What is the value of long term debt?
Answer:
$803,010
Explanation:
Calculation for the value of long term debt
First step is to find the Stockholders' equity
Stockholders' equity = $1,500,000 + $1,468,347 Stockholders' equity= $2,968,347
Last step is to find the Long-term debt
Using this formula
Value of Long-term debt= Total assets – Current liabilities – Stockholders' equity
Let plug in the formula.
Value of Long-term debt= $4,812,369 – $1,041,012 – $2,968,347
Value of Long-term debt = $803,010
Therefore the Value of Long-term debt
will be $803,010
Waterway Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 21% of sales. The income statement for the year ending December 31, 2020, is as follows.
WATERWAY BEAUTY CORPORATION
Income Statement For the Year Ended December 31, 2020
Sales $79,000,000
Cost of goods sold
Variable $32,390,000
Fixed 8,750,000 41,140,000
Gross margin $37,860,000
Selling and marketing expenses
Commissions $16,590,000
Fixed costs 10,607,200 27,197,200
Operating income $10,662,800
The company is considering hiring its own sales staff to replace the network of agents. It will pay its salespeople a commission of 9% and incur additional fixed costs of $9,480,000.
Under the current policy of using a network of sales agents, calculate the Bonita Beauty Corporation's break-even point in sales dollars for the year 2017. (Round intermediate calculations to 2 decimal places e.g. 10.25 and final answers to 0 decimal places, e.g 2,510.)
Break-even point: $ _ _ _ _ _ _
Answer:
$50,940,000
Explanation:
Calculate the Bonita Beauty Corporation's break even point in sales dollars for the year 2017.
Please see as attached, detailed solution to the above question.
United Parcel Service, Inc. (Ticker: UPS (Links to an external site.)) estimates its cost for a distribution center at $18.63 million. Management has decided to invest $1.1 million a quarter to fund the project. Assuming that the firm can earn a return of 6.25 percent, compounded quarterly, on its savings, how long does the firm have to wait before expanding its operations
Answer:
It will take 182.44 quarters to reach $18,630,000.
Explanation:
Giving the following information:
Future Value= $18,630,000
Initial Investment= $1,100,000
Interest rate= 0.0625/4= 0.01563
To calculate the time required to reach the objective, we need to use the following formula:
n= ln(FV/PV) / ln(1+i)
n= ln(18,630,000 / 1,100,000) / ln (1.01563)
n= 182,44
It will take 182.44 quarters to reach $18,630,000.
Bond Ratings. Companies pay rating agencies such as Moody’s and S&P to rate their bonds, and the costs can be substantial. However, companies are not required to have their bonds rated in the first place; doing so is strictly voluntary. Why so you think they do so?
Answer:
Bond Ratings
Companies employ rating agencies such as Moody's and S&P to rate their bonds despite the substantial costs and their voluntariness because ratings by these agencies add a badge of honor to the bonds. It gives investors some level of assurance that the bonds will be honored at maturity and that the pricing is right, given the company's credit risk.
Explanation:
Credit risk rating agencies assess the credit risk of a company or financial product as formal and credit-worthy benchmarks for investment decisions. While companies pay huge costs to have these ratings conducted by the big three, including Moody's, S&P, and Fitch, the main value goes to the potential investors who require the information to decide whether to invest in the rated companies.
Carolyn is looking over opinions based primarily on research studies. She has found that there are 31 of them in total. What organization is Carolyn researching?
Answer:
d. APB
Explanation:
Carolyn is looking over published accounting opinions based primarily on research studies. What organization is Carolyn researching?
These are the options for the question
a. CAP
b. AICPA
c. SEC
d. APB
We are informed Carolyn who is looking over published accounting opinions based primarily on research studies. The organization Carolyn researching is Accounting Principle Board.
APB( Accounting Principle Board) belongs to a body of American institute of Certified public accountant in US.
it was been run and organised by American Institute of Public Accountants. APB can be regarded as organization which is a forerunner of
Financial Accounting Standards Board. This APB usually offer discounts on professional training with them as well insurance on journal subscription to their member. They are good in offering research on Accounting and finance.
A U.S. business sells milk to consumers in France. Which situation would
most likely cause demand for milk to decline in France?
A. A popular French nutrition author claims that milk is bad for
people's health.
B. French consumers expect the price for milk to increase in the
future.
C. Cheese and other products made from milk become more popular
in France
D. The French population grows steadily due to years of economic
prosperity
The situation that cause the demand for falling in france should be option A. A popular French nutrition author claims that milk is bad for people's health.
The reason why it cause demand for milk:
The various consumers believes on expert's suggestion to select between products. Marketers know this, and that is why they incorporate doctors and other professionals in advertisements. Should the popular nutrition author provides a negative opinion on milk products, the demand for milk in France will decline.
learn more about demand here: https://brainly.com/question/18282855
Answer:
A
Explanation:
Just took the quiz
The ratio of total cash, marketable securities, accounts receivable, and short-term notes to current liabilities is:
Answer:
Acid-test ratio
Explanation:
Acid-test ratio I finance can also be regarded as quick ratio, it gives the measurement of how an organization can utilize her quick asset as well as cash to settle her liabilities at at that current period.
It can be calculated theoretically using this expresion;
Quick ratio= (Current Asset- Inventory)/Current Liabilities
It should be noted that acid-test ratio gives The ratio of total cash, marketable securities, accounts receivable, and short-term notes to current liabilities. It enables to know shot term liquidity of a particular company.
a. Why do some price controls help create black markets?
b. What is a black market you have personally seen?
Answer:
Price ceiling creates black markets
Price ceiling is when the government or an agency of the government sets the maximum price of a good or service. Price ceiling is binding if it is set below equilibrium price.
When a binding price floor is established, producers would earn less profits and as a result they would stop selling their products in the free markets. This would lead to scarcity and a result a black market can emerge. Goods would be sold at a higher price in the black markets than it would in the free markets.
So, black markets can arise as a result of price ceiling and the need of producers to earn higher profits
b. During the war, when there was a rationing of meat. Farmers declared less animal births to authorities and sold the undeclared livestock in the black market.
Also, in less developed countries e.g. Nigeria, when there is scarcity of fuel. Black markets arise where fuel are sold for higher prices
Explanation:
If merchandise is sold on account to a customer for $10,000, terms FOB shipping point, 1/10, n/30, what is the amount to be recorded as an accounts receivable on the date of the sale?
a. $10,000
b. $10,050
c. $9,950
d. none of the above
Answer: a. $10,000
Explanation:
The amount to be recorded as an Accounts Receivable on the date of the sale is the actual amount that the merchandise was sold for which is $10,000.
The discount of 1% if paid within 10 days will only apply if the customer pays within that time and if this is done, the discount will be deducted from the amount paid to the company and debited to the Sales discount account.
Item18 Time Remaining 22 minutes 25 seconds00:22:25 eBookItem 18Item 18 Time Remaining 22 minutes 25 seconds00:22:25 Moore Company purchased an item for inventory that cost $20 per unit and was priced to sell at $34. It was determined that the cost to sell is $22 per unit. Using the lower of cost or net realizable value rule, what amount should b
Answer:
$12
Explanation:
Moore Company purchased an item for inventory that cost $20 per unit and was priced to sell at $34. It was determined that the cost to sell is $22 per unit. Using the lower of cost or net realizable value rule, what amount should be?
Cost per Unit = $20
Sale per unit = $34
Disposal cost = $22
Net realizable value per unit = Sale per unit - Disposal cost
Net realizable value per unit = $34 - $22
Net realizable value per unit = $12
Using the LCM method, $12 should be reported on the balance sheet for inventory.
A project that will last for 10 years is expected to have equal annual cash flows of $103,900. If the required return is 8.4 percent, what maximum initial investment would make the project acceptable? Multiple Choice $638,392.96 $595,833.43 $1,534,047.75 $655,213.49 $684,772.10
Answer:
PV= $684,772.1
Explanation:
Giving the following information:
A project that will last for 10 years is expected to have equal annual cash flows of $103,900. If the required return is 8.4 percent.
First, we need to calculate the future value of the cash flows:
FV= {A*[(1+i)^n-1]}/i
A= annual cash flow
FV= {103,900*[(1.084^10) - 1]} / 0.084
FV= $1,534,047.75
Now, we can determine the present value:
PV= FV/(1+i)^n
PV= 1,534,047.75 / (1.084^10)
PV= $684,772.1
All against Common Sense. Back in mid 80s, the US economy was very bad. It was much worse than it is now. At that time, to the surprise of many people, US automakers raised the prices of their cars. The common sense says that when the sales are slow, we lower prices and offer better deals to customers. Why do you think that the US car manufacturers increase the prices?
Answer:
Explanation:
This most likely happened because in the 80's the economy was so bad that even by lowering their prices the middle-class families would still not be able to afford to buy a car. The only individuals able to afford a car would be those who are wealthy. Therefore, by increasing prices and targetting wealthy individuals, the US car manufacturers could become profitable with much fewer sales and prevent the manufacturing plant from going under. Since wealthy individuals would not mind much the increased prices because they can still afford it without making much of a dent in their wealth.
Rust Pipe Co. was established in 1994. Four years later the company went public. At that time, Robert Rust, the original owner, decided to establish two classes of stock. The first represents Class A founders' stock and is entitled to twelve votes per share. The normally traded common stock, designated as Class B, is entitled to one vote per share. In late 2010, Mr. Stone, an investor, was considering purchasing shares in Rust Pipe Co. While he knew the existence of founders’ shares were not often present in other companies, he decided to buy the shares anyway because of a new technology Rust Pipe had developed to improve the flow of liquids through pipes. Of the 1,900,000 total shares currently outstanding, the original founder's family owns 52,725 shares. What is the percentage of the founder's family votes to Class B votes? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
Answer:
34.25%
Explanation:
Votes per share = 12
Shares owned = 52725
Now we are to calculate the total value of the total number of of votes
Total votes = votes per share * shares owned
= 12*52725
Total = 632700
Value of votes of class B
Total shares outstanding - founders family shares
= 1900000 - 52725
= 1847275
The question requires us to calculate percentage of the founder's family votes to Class B votes
632700/1847275
= 0.3425
= 34.25%
in creating the master budget, the second budget a company prepares is the production budget. a. True b. False
Answer:
In creating the master budget, the second budget a company prepares is the production budget.
a. True
Explanation:
When a company prepares the master budget, it first prepares the sales budget, followed by the production budget. The production budget calculates the costs of materials, labor, and overhead based on the number of units to be manufactured within the budget period. The units of products are derived from the sales forecast and the planned amount of ending finished goods inventory.
0.5 points eBookPrintReferences Check my work Check My Work button is now enabledItem 3Item 3 0.5 points Agee Storage issued 37 million shares of its $1 par common stock at $12 per share several years ago. Last year, for the first time, Agee reacquired 1 million shares at $10 per share. Assuming that Agee retires shares it reacquires (restores their status to that of authorized but unissued shares), by what amount will Agee’s total paid-in capital decline if it now reacquires 1 million shares at $16 per share? (
Answer:
Decline in Agee's total paid up capital is $14,000,000
Explanation:
Computation of decline in Paid-Up capital
Particulars Amount
Cash paid for first repurchase $10,000,000
(1 million shares*$10)
Value of first purchase $12,000,000
(1 million * $12
Benefit on first repurchase $2,000,000
Cash paid for second repurchase = $16,000,000
(1 million shares * $16)
Value of second repurchase $12,000,000
(1 million * $12)
Reduction in Total paid-in-capital $14,000,000 ($2 million + $12 million)
Which of the following statements would be most likely to minimize expected fixing costs? a. A machine should always be calibrated at the midpoint between the upper and lower spec limits. b. A machine should be calibrated closer to the upper spec limit than the lower spec limit if the cost of fixing output that is too high is greater than the cost of fixing output that is too low. c. A machine should be calibrated closer to the lower spec limit than the upper spec limit if the cost of fixing output that is too high is greater than the cost of fixing output that is too low.
Answer: c. A machine should be calibrated closer to the lower spec limit than the upper spec limit if the cost of fixing output that is too high is greater than the cost of fixing output that is too low.
Explanation:
If the cost of fixing output that is too high is greater than the cost of fixing output that is too low then it make sense to calibrate the machine closer to the lower spec limit.
This way if the machine produces less output than is required, it can be fixed at a lower cost than if the machine had been set to the upper spec and produces output that is too high.