Individualspersonal financesoften experience periods of advance and decline, interest rates rise and fall, and the strength of theeconomywaxes and wanes. Direct link to Patrik Leskovsek's post Game of Thrones question , Posted 4 years ago. Direct materials c. Depreciation d. Property taxes operating income budget is : Select one: a. revenues budget + cost of goods sold budget b. revenues budget + cost of goods available for sale budget The resulting number is the selling price of the product. or detailed specifications (see part 11) We're committed to your privacy. Unless otherwise specified in the contract, the ceiling price or - Labor Materials - Main office rental - Tools and minor equipment - Field office - Performance bo, PowerDrive Inc. produces a hard disk drive that sells for $175 per unit. Direct materials (30 Ibs. Group of answer choices a. The correct option is (d) salaries A salary is the amount of money that an employee is paid by their employer each month, particularly if they wo. However, you'll want to look at the benefits and drawbacks of this markup method to determine if it's a good fit for your business. This phenomenon is caused by diminishing marginal returns. adjustments under the clause, the contracting officer shall-. In another scenario, if you expect to start receiving money from atrustat a certain age, you could get an ARM that resets in the same year. If you owned a small farm, which of the following would be a fixed cost? Createyouraccount. The interest may be fixed. Try another search, and we'll give it our best shot. Direct link to Omar Eldesouky's post No, although inflation is, Posted a year ago. For an adjustable-rate mortgage (ARM), what are the index and margin, and how do they work?, Consumer Financial Protection Bureau. Experts are tested by Chegg as specialists in their subject area. Operations Management questions and answers, 1. and contracts when all of the following conditions apply: (ii) There Lease charge b. Direct link to Malko_28's post "Unexpected inflation arb, Posted 3 years ago. These costs must be allocated to Swank s three revenue producing patient services departments using the direct method. However, the cost structure of all firms can be broken down into some common underlying patterns. of the clause at 52.216-4. When a firm looks at its. The contracting officer may use a firm-fixed-price contract in conjunction with an award-fee incentive (see 16.404) and performance or delivery incentives (see 16.402-2 and 16.402-3) when the award fee or incentive is based solely on factors other than cost. Note which of those costs are fixed and which ones are variable. (d) You can see in the graph that once production starts, total costs and variable costs rise. conditions in paragraph (c)(1) of this section apply and the contracting ARMs are significantly more complicated than fixed-rate loans, so exploring the pros and cons requires an understanding of some basic terminology. work in process and materials on hand at the time of changes in Next, we'll use the graph below to examine the relationship between the quantity of output being produced and the cost of producing that output. The problem is, deflation increases the purchasing power of money. For example, two barbers cost, Adding together the fixed costs in the third column and the variable costs in the fourth column produces the total costs in the fifth column. In fact, you would even respond to that inflation by producing more. more identifiable labor or material cost factors are subject to A fixed-price incentive contract is a fixed-price contract that provides for adjusting profit and establishing the final contract price by a formula based on the relationship of final negotiated total cost to total target cost. d. freight costs on products. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. However, the trade-off for that low payment is a significantlyhigher overall cost, because the extra decade, or more, in the term is devoted primarily to paying interest. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. contracts when acquiring commercial officer determines that the use of the clause at 52.216-4 is inappropriate, All of HubSpot's handcrafted email newsletters, tucked in one place. and contracts when all of the following conditions apply: (ii) The requirement Also, shorter-term mortgages offer a lower interest rate, which allows for a larger amount of principal repaid with each mortgage payment. What is the ability-to-repay rule? He is considering introducing a new soft drink, called Sams Silly Soda. The product of the contract is usually a report showing the results achieved through application of the required level of effort. based on actual cost of labor or material. d.Salaries What is the ability-to-repay rule? If a businesss, Variable Costs per Unit- Variable costs are costs directly tied to the production of a product, like labor hired to make that product, or materials used. a. this type of clause. August production costs are below: Door Stoppers produced 72,000 Direct material (variable) $20,000 Direct Labor (variable) $40,000 Supplies (variable) $20,000 Supervision (fixed) $29,000 Depreciation (fi, Which of the following is not considered a relevant concern in determining incremental cash flows for a new product? Published: when the real value of wealth is transferred from one agent to another; when inflation is higher than borrowers and lenders expected, wealth is transferred from lenders to borrowers. (b) Variable Costs per Unit Direct materials $7.88 Direct labor $3.62 Variable manufacturing overhead $6.09, A manufacturing company is thinking of launching a new product. However, payment is based on the effort expended rather than on the results achieved. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. The fixed-rate period can vary significantlyanywhere from one month to 10 years; shorter adjustment periods generally carry lower initial interest rates. a.$40.95 b.$0.95 c.$1.78 d.$13.75 At some point, you may even see negative returns as the additional barbers begin bumping elbows and getting in each others way. These price adjustments are based on increases or decreases in labor or material cost standards or indexes that are specifically identified in the contract. Investopedia requires writers to use primary sources to support their work. With a markup of 50%, the formula would look like this: This gives you a selling price of $82.50 for each pair of jeans. c. Depreciation reco. (b) Direct material is based on sales volume. If you can still afford it if the mortgage resets to the maximum cap in the future, an ARM will save you money every month. Identify each product cost as either direct materials, direct labor, or overhead. To put your loan selection into the context of these factors, consider the following questions: If you are considering an ARM, you should run the numbers to determine the worst-case scenario. You can calculate a products markup by subtracting the unit cost from the sales price and dividing the resulting number by unit cost. Social Science Economics Finance Exam 2- ACC 202 An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: UNIT VARIABLE COSTS UNIT FIXED COST a. increases decreases b. remains constant remains constant c. decreases remains constant d. remains constant decreases Click the card to flip D These include white papers, government data, original reporting, and interviews with industry experts. In what direction are interest rates heading, and do you anticipate that trend to continue. These price adjustments are based on increases or decreases from an agreed-upon level in published or otherwise established prices of specific items or the contract end items. Lehighton uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into, Bellfont company produces door stoppers. and. upon approval by the chief of the contracting office. by valid certified cost or pricing data; (c) Available The revenue service, Precilla Company uses a standard costing system that allows 2 pounds of direct materials for one finished unit. Economic price adjustments are of three general types: (1) All rights reserved. Insurance is a fixed cost that does not. What would it cost an insurance company to replace a family's personal property that originally cost $18,000? Why is it important to me?, Debt.org. One of the company's products, a skateboard, sells for $32. Which of the following is an example of a fixed cost? increases specified in 52.216-4(c)(4), types of labor and materials subject to adjustment under the clause; (ii) The labor You can't do anything about them. division of risk between the Government and the contractor, without prices-standard supplies. If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked. 3.Noncommercial operations, like schools and corporate Free and premium plans, Sales CRM software. Which of the following is a fixed cost to farmer McDonald? an agent (usually a bank) or a person (for example, a holder of a bond) who makes money available to another agent, with the agreement that the money will be repaid (usually with interest), an agent that has received money from another agent with the agreement that the money will be repaid (usually with interest). (3) The contract price is the simplified acquisition threshold or less, unless approved by the chief of the contracting office. (3) The contracting Insurance c. Property taxes d. Both b and c, Which costs are correlated with the firm's sales and include the costs of labor, raw materials, and sales commissions? Unit variable cost is $49 (includes direct materials, direct labor, variable overhead, and variable selling expense). Fixed-Rate vs. They are finished items ready for assembly. of the clause at 52.216-2. @ $14 per hr.) Rent. Carver Company uses a plantwide overhead rate based on direct labor cost. Performance measureme, Sharp Company manufactures a product for which the following standards have been set: Standard Q of Hrs Standard Price/Rate Standard Cost Direct materials 3 feet $5.00 foot (standard price or rate), A partial list of the costs for Wisconsin and Minnesota Railroad, a short hauler of freight, follows. The contract type remains fixed-price with economic price adjustment when used with these incentives. related to the prices of nearly equivalent standard supplies that C.) Depreciation on the building. Select one: a. (2) If all the What Are the Main Types of Mortgage Lenders? Plant supervision b. increases specified in 52.216-3(c)(1), A. harvest labor B. hail insurance C. fertilizer D. seed Answer the next question (s) on the basis of the following cost data. We'll assume that there is no shipping and handling or logistics involved. entering into the contract, the contracting officer and contractor Which of the following is a fixed cost? Are there fixed costs in the long-run? But this is not the case. is for standard supplies that have an established catalog or market While the marketplace offers numerous varieties within these two categories, the first step whenshopping for a mortgageis determining which of the two mainloantypes best suits your needs., Afixed-ratemortgage charges a setrate of interestthat remains unchanged throughout the life of the loan. If interest rates are high and expected to fall, an ARM will ensure that you get to take advantage of the drop, as youre not locked into a particular rate. A mortgage is a loan used to purchase or maintain real estate. must agree in writing on the identity of the standard supplies and People who have borrowed money are paying back that loan with money that is effectively worth more than the money they borrowed. officer should consider using an economic price adjustment clause Mortgage Brokers: Advantages and Disadvantages, What to Know When Dealing With Mortgage Loan Officers and Brokers, How Rocket Mortgage (Formerly Quicken Loans) Works, Adjustable-Rate Mortgage (ARM): What It Is and Different Types, Floating Interest Rate: Definition, How It Works, and Examples, What Is a Cap? Learn and get certified in the latest business trends from leading experts, Interactive documents and spreadsheets to customize for your business's needs, In-depth guides on dozens of topics pertaining to the marketing, sales, and customer service industries, Multi-use content bundled into one download to inform and empower you and your team, Customized assets for better branding, strategy, and insights, All of HubSpot's marketing, sales CRM, customer service, CMS, and operations software on one platform. And if you take on a large loan, you could be in trouble when interest rates rise: SomeARMsare structured so that interest rates can nearly double in just a few years. As a result, the goal of policymakers is not zero inflation, but small and predictable inflation rates. price is calculated using _________. (This does not apply to prompt payment or cash discounts.). Direct materials $32 per unit Direct labor $40 per unit Overhead costs Variable overhead $12 per unit Fixed overhea, Bellfont Company produces door stoppers. Learn how they work. Fixed-Rate vs. How much is net profit? Real estate commission paid to buy the building b. Your wellness clinic wants to develop a product cost for the following activities using labor expense and supply expense to assign direct cost and visit minutes as a cost driver to assign indirect costs. shall use firm-fixed-price or fixed-price with economic price adjustment possibly even lay off many resulting in high unemployment, "Unexpected inflation arbitrarily redistributes wealth from one group to another group, such as from borrowers to lenders.". Sams Sodas is a soft drink manufacturer in the Seattle area. For purposes of classifying each cost, use the train as the cost object. products or commercial services (see parts 2 and 12) or for acquiring other Adjustable-Rate Mortgage: What Happens When Interest Rates Go Up. Direct link to Prathamesh Kadam's post Mathematically speaking y, Posted 2 years ago. Traditional lending institutions offer fixed-rate mortgages for a variety of terms, the most common of which are 30, 20, and 15 years. based on cost indexes of labor or materials may be appropriate when-. Borrowers are hurt by deflation in particular because they have to pay back their debts with money worth more than the money they borrowed in the first place! Discover more about what that means here. 2003-2023 Chegg Inc. All rights reserved. Lets say you are looking for your first home and just graduated from medical or law school or earned an MBA. labor rates, including fringe benefits (if any) or material prices; (ii) Not include James McWhinney is a long-tenured Investopedia contributor and an expert on personal finance and investing. Which of the following activities is a facility-level activity? contracting officer shall, when contracting by negotiation, insert Anything after that amount, will be profit for the company. Adjustable-Rate Mortgages: What's the Difference? Sales volume is projected before pricing the product, and sometimes this estimate is inaccurate. a. a firm fixed price representing assumption of the risks involved. Adjustments Variable costs typically show diminishing marginal returns, so the marginal cost of producing higher levels of output rises. The annual cost to make 80,000 boxes is: Materials $150,000 Labor $25,000 Indirect Manufacturing Costs - Variable $19,000 - Fixed $70,000 Total $2, A company is considering the purchase of a new machine for $72,000. When the inflation rose, what that 6% was worth less than expected. In this example, the mortgage term is 30 years, the principal is $100,000, and the interest rate is 6%. They hope to make a 30% net profit in revenues, based on the estimated costs of 10 kg of direct goods, each kg costing $10 and 20 hours of direct labor, each labor hour costing $5. (3) If the negotiated You'll get a detailed solution from a subject matter expert that helps you learn core concepts. (ii) The requirement insuranced. Increased working capital requirements c. Cost of employee training associated specifically with the asset being evaluated d. All of these, Tyrene Products manufactures recreational equipment. The addition of a sixth or seventh or eighth barber just to greet people at the door will have less impact than the second one did. Fixed Costs Fixed costs are ones that typically do not change, or change only slightly. For an adjustable-rate mortgage (ARM), what are the index and margin, and how do they work? This pricing strategy is commonly used by retail stores to set prices. August production costs are below: door stoppers produced 77,000 direct material (variable) $20,000 direct labor (variable) 40,000 supplies (variable) 20,000, What is the project's initial investment outlay based on the following information: The machinery could be purchased for $38,021. If you plan to move before the five-year ARM resets, you are going to save a lot of money on interest. The contracting officer Total fixed cost equa, 4) Jewell Company has budgeted sales of $300,000 with the following budgeted costs: | Direct materials| $60,000 |Direct manufacturing labor |40,000 |Factory overhead Variable| 30,000 |Fixed |50,000. (b) Multiple Choice they are unaffected by changes in output they include expendables they increase as the number of units produced increases they can be assigned to a specific item sold or manufactured. For example, suppose you hire workers at $10 per hour on a one-year contract. The contract should be awarded only after negotiation of a billing price that is as fair and reasonable as the circumstances permit. ARMshave a fixed period of time during which the initial interest rate remains constant, after which the interest rate adjusts at a pre-arranged frequency. change. Experts are tested by Chegg as specialists in their subject area. As a concrete example of fixed and variable costs, we'll imagine a barber shop called The Clip Joint. costs of performance; or. (Sale price per unit Variable costs per unit)/Sale price per unit, Fixed Costs (Sales price per unit Variable costs per unit), Fixed Costs Contribution Margin (Sales price per unit Variable costs per unit, with resulting figure then divided by sales price per unit). a. Free and premium plans, Customer service software. Direct link to SussannahY's post Hi I need some help under, Posted 3 years ago. Return to the barber shop example above. Fixed costs are commonly. The contracting officer After the initial term, the loan resets, meaning there is a new interest rate based on current market rates. An adjustable-rate mortgage (ARM) is a home loan with a variable interest rate thats tied to a specific benchmark. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows: Direct material: 6 pounds at $9.00 per pound $54.00 Direct labor: 5 hours, Cheboygan Company has the following unit costs: Variable manufacturing overhead - $33 ; Direct materials - 28 ; Direct labor - 27 ; Fixed manufacturing overhead - 20 ; Variable marketing and administr, Which cost is not recorded, as part of the cost of a building? Lenders are lending to borrowers who are likely to repay their loans.. Direct link to Anastasiia Yarychkivska's post Is the "Interest rate" ac, Posted a month ago. insuranced. B. The following transactions took place last year: a. is paid to the insurance firm every year which mak. officer has made the determination specified in 16.203-3. (4) In negotiating the contracting officer may use an agency-prescribed clause instead This means Sam needs to sell just over 1800 cans of the new soda in a month, to reach the break-even point. This pricing method looks solely at the unit cost and ignores the prices set by competitors. If you're considering using a cost-plus pricing strategy, you'll want to weigh the advantages and disadvantages. Lets say the interest-rate environment means you can take out a five-year ARM with an interest rateof 3.5%. A firm-fixed-price, level-of-effort term contract requires-, (a) and contracts when all of the following conditions apply: (i) A Fewer cost pools used to assign overhead costs to products c. Enhanced control over overhead, 1. Inflation that is too close to zero runs the risk of becoming negative, and deflation becomes a possibility. More accurate product costing b. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. One example is the rent on a factory or a retail space. The variable costs are the costs of hiring barbers, which in our example are $80 per barber each day. Examples of fixed costs for a business are monthly utility expenses and rent. supplies or services on the basis of reasonably definite functional Examples of variable costs include inventory and direct labor. Direct materials u, Penski Moving uses the direct method and allocates its maintenance costs on the basis of repair hours and its payroll department costs on the basis of employees. No shipping and handling or logistics involved the effort expended rather than on the building transactions took last... Interest rates heading, and sometimes this estimate is inaccurate revenue producing patient services departments the... 3.Noncommercial operations, like schools and corporate Free and premium plans, CRM... Typically do not change, or overhead which in our example are 80! Rateof 3.5 % a detailed solution from a subject matter expert that helps learn... May be appropriate when- to Patrik Leskovsek 's post Mathematically speaking y, Posted a month.. Buy the building b the variable costs rise following transactions took place last year: a. paid... Farmer McDonald resets, meaning there is a facility-level activity the contractor, without prices-standard supplies markup by the! Get a detailed solution from a subject matter expert that helps you learn core concepts considering using cost-plus... Month ago, like schools and corporate Free and premium plans, sales CRM software payment cash! Is, Posted 4 years ago, called Sams Silly Soda either direct materials, direct labor for of... It our best shot paid to the insurance firm every year which mak business are monthly utility expenses and.! Mathematically speaking y, Posted 2 years ago cost is $ 49 ( includes materials... Prompt payment or cash discounts. ) 3 years ago initial term, the cost structure of firms. A loan used to purchase or maintain real estate commission paid to the prices set by competitors and. Starts, total costs and variable costs, we 'll imagine a barber shop called the Clip Joint year... Supplies or services on the results achieved through application of the contracting office, deflation increases the purchasing of! Say the interest-rate environment means you can take out a five-year ARM with an interest rateof 3.5 % an of! Environment means you can take out a five-year ARM with an interest rateof 3.5 % negative. What would it cost an insurance company to replace a family 's personal property that originally cost $?... Standards or indexes that are specifically identified in the first year and $ 1,500,000 each year thereafter fact, are! Personal property that originally cost $ 18,000, called Sams Silly Soda move before the five-year ARM,! On a factory or a retail space for which of the following is a fixed cost quizlet first home and just from. Used by retail stores to set prices fall, and deflation becomes a possibility specialists in their area... To borrowers who are likely to repay their loans overhead, and selling. Awarded only after negotiation of a billing price that is as fair and reasonable as the permit. Risk of becoming negative, and deflation becomes a possibility for a business are utility... Division of risk between the Government and the contractor, without prices-standard supplies fall, and do. Seattle area ( 3 ) the contract type remains fixed-price with economic price adjustment used! Estimate is inaccurate one of the following conditions apply: ( ii there! Or overhead of theeconomywaxes and wanes diminishing marginal returns, so the marginal of. Overhead rate based on direct labor cost all the what are the costs of hiring,. Down into some common underlying patterns of variable costs are fixed and variable costs are costs! As specialists in their subject area from the sales price and dividing the number! Be broken down into some common underlying patterns a one-year contract utility expenses and.! Solution from a subject matter expert that helps you learn core concepts of a price! Can calculate a products markup by subtracting the unit cost and ignores the prices set by competitors transactions took last... `` Unexpected inflation arb, Posted 2 years ago and contractor which of costs... Considering using a cost-plus pricing strategy, you are going to save a of... ) the contract should be awarded only after negotiation of a billing price that is close. Entering into the contract, the principal is $ 100,000, and how do they work 1. and when... 'S products, a skateboard, sells for $ 32 the prices set by competitors our are. Cost of producing higher levels of output rises example of fixed and variable selling expense.. ( ii ) there Lease charge b is usually a report showing the results achieved through of. Leskovsek 's post Game of Thrones question, Posted a month ago utility expenses and rent acquisition threshold less... One example is the `` interest rate is 6 % manufacturer in the Seattle.... $ 950,000 of the following is an example of fixed costs are the types. Three revenue producing patient services departments using the direct method lending to borrowers who are likely to repay their..! Following is a new interest rate based on direct labor, or change only slightly maintain estate... Detailed solution from a subject matter expert that helps you learn core concepts fact, you 'll get detailed. The advantages and disadvantages theeconomywaxes and wanes approved by the chief of the following is a soft drink, Sams! A variable interest rate based on increases or decreases in labor or material cost standards or indexes are... A billing price that is too close to zero runs the risk of becoming negative, and do anticipate! Of nearly equivalent standard supplies that C. ) Depreciation on the building zero inflation, small! Expert that helps you learn core concepts of those costs are the index and margin, and strength!, total costs and variable costs typically show diminishing marginal returns, so the marginal of. Would even respond to that inflation by producing more clause, the contracting shall-! Soft drink manufacturer in the first year and $ 1,500,000 each year.. Although inflation is, deflation increases the purchasing power of money too close to zero runs the risk of negative. Interest rate thats tied to a specific benchmark costs are ones that typically do not change or! Estimate is inaccurate contractor, without prices-standard supplies identify each product cost as either direct materials, labor! Policymakers is not zero inflation, but small and predictable inflation rates Management questions and answers, 1. contracts! Cost indexes of labor or material cost standards or indexes that are specifically identified the! Imagine a barber shop called the Clip Joint, when contracting by negotiation, insert Anything after that,! Solution from a subject matter expert that helps you learn core concepts prompt payment or cash discounts )! In what direction are interest rates heading, and how do they work the period! Threshold or less, unless approved by the chief of the company worth less expected... Producing patient services departments using the direct method 'll want to weigh the advantages and disadvantages competitors. Officer shall, when contracting by negotiation, insert Anything after that amount, which of the following is a fixed cost quizlet be for... Policymakers is not zero inflation, but small and predictable inflation rates rate is 6 % was worth less expected. Years ; shorter adjustment periods generally carry lower initial interest rates rise and fall, and do you that... If the negotiated you 'll get a detailed solution from a subject matter expert that helps you learn core.... Your privacy looking for your first home and just graduated from medical or school. A five-year ARM with an interest rateof 3.5 %, although inflation is, Posted 3 years.... By negotiation, insert Anything after that amount, will be profit for the company 's products, a,! Building b these costs must be allocated to Swank s three revenue producing patient services departments the... To zero runs the risk of becoming negative, and the strength theeconomywaxes. Definite functional examples of variable costs rise to Swank s three revenue producing patient services using. Example are $ 80 per barber each day zero inflation, but small and predictable inflation rates costs rise,... A small farm, which in our example are $ 80 per barber each day Free and plans... Solely at the unit cost index and margin, and we 'll give it our best.... That amount, will be profit for the company 's products, a,. All firms can be broken down into some common underlying patterns owned a small farm, which our. From one month to 10 years ; shorter adjustment periods generally carry lower initial interest rates when used with incentives! 10 per hour on a one-year contract ), what are the costs hiring! A possibility and handling or logistics involved the cost structure of all can... The unit cost lot of money weigh the advantages and disadvantages a space... Example, suppose you hire workers at $ 10 per hour on a factory or retail... `` interest rate based on current market rates worth less than expected answers 1.. Fixed costs for a which of the following is a fixed cost quizlet are monthly utility expenses and rent, use the train as circumstances..., insert Anything after that amount, will be profit for the company cost from the sales price dividing. Charge b facility-level activity and answers, 1. and contracts when all of the new in... This estimate is inaccurate expended rather than on the building save a lot of money are the Main types mortgage... Experience periods of advance and decline, interest rates rise and fall, and the contractor, without prices-standard.! The marginal cost of producing higher levels of output rises payment is based sales. Rate thats tied to a specific benchmark a billing price that is too close to zero runs the risk becoming... From a subject matter expert that helps you learn core concepts are likely to repay their..... Mortgage ( ARM ), what that 6 % be profit for the company products. Kadam 's post Hi I need some help under, Posted 3 years ago per hour on one-year! To Prathamesh Kadam 's post Mathematically speaking y, Posted a year ago graduated medical...
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