Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Management Expert

A.  Material Sampling -Analyzing Direct Material Costs

You are reviewing a cost proposal, which includes an $800,200 direct material estimate. After Initial examination of the proposal, you note that there are 500 material items, but you also note  that 20 high-cost items account for $620,000 of the total. The remaining $180,200 is spread across 480 relatively small purchases.

1. Examination of the 20 high-cost items (estimated at $620,000) shows that all are properly priced except one item. That item is overpriced by $20,000.  What must be your objective for these 20 items?

2. After analyzing the sample of the remaining 480 items, you find that the sample is overpriced by six percent. Using this six percent decrement factor, what cost must you compute for those items?  Remember that the average sample tern cost is 106 percent of what it ought to be.

3. Given your answers to problems 1 and 2, what should you estimate for total material cost? Mason Inventory- Analyzing Direct Material Costs. Given the following inventory data from Mason Corporation, what would be the inventory value Charged to job one (quantity of parts needed is 175) using FIFO, LIFO, and weighted average methods:
Receipt Date         Number of Units         Value             Extended Value
1/1/X I                       100                 $10.00             $1, 000
2/1/Xl                         50                 $11.00             $ 550
4/ 1/X1                       75                 $12.00             $ 900
6/1/X1                       150                 $13.00             $1, 950
9/1/X1                        75                 $14.00             $1,050
                                450                                      $5,450

1. What will be the inventory value charged using FIFO?

2. What wil be the inventory value charged using LIFO?

3. What will be the inventory value charged using weighted average?

You are preparing to negotiate with Far-Out Products for a contract to perform research and  development. For one work task, Far-Out is proposing 1800 labor hours and $80,000 of material. Both the technical analyst 2nd the auditor have examined the material cost. Both agree that there  is a relationship between labor hours and material cost. Both also agree in the accuracy of the  data below from recent similar projects (all data adjusted for inflation):

Project            Labor-Hours Expended         Material Dollars Expended

1                               1,000                            $ 50,000
2                               1,100                            $ 52,000
3                               1,900                            $ 74,000           
4                               2,000                            $ 73,500
5                               1900                             $ 74,400
Total                          7900                              323,900

1. Using the data, the auditor recommended a cost estimating relationship (CER) developed  using a simple average, $41 per labor hour ($323,900/7909). Using the auditor’s analysis,  what will you estimate of material cost for this task?

2. Using the same data, the technical analyst developed a CER using regression analysis.  The equation is $24,117 + ($25.74 x number of labor hours) with an R2 of .988. Using the analyst's analysis, is, what would be your estimate of material cost for the task?

3. Which estimate appears more accurate? Why?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M91434

Have any Question? 


Related Questions in Financial Management

A share of a venture s preferred stock is convertible into

A share of a venture s preferred stock is convertible into 1.5 shares of its common stock. The dividend on the preferred stock is $.50 per share. If the firm s common stock is currently trading at $9.75, what is the conv ...

Construct a calendar spread using the august and october

Construct a calendar spread using the August and October 170 calls that will profit from high volatility. Close the position on August 1. Use the spreadsheet to find the profits for the possible stock prices on August 1. ...

Municipal bond pays a return of 4 and a corporate bond pays

Municipal Bond pays a return of 4% and a corporate bond pays a 7% return. At what tax rate will you be indifferent between the two types of bonds?

In august 2001 it was discovered the mcdonaldrsquos

In August 2001, it was discovered the McDonald’s Monopoly game was a fraud. Simon Marketing, which ran the game on behalf of McDonald’s, was responsible for the fraud. During the investigation to uncover the fraud, the F ...

You have been asked to develop a pro forma statement of

You have been asked to develop a pro forma statement of cash flow for West Office Plaza. The information given to you is listed below. Recurring CAPEX/Improvement Allowance $700,000 a. Develop a pro forma statement of ca ...

A new software start-up lutoj inc is developing a new smart

A new software start-up, Lutoj, Inc., is developing a new smart home software product. Lutoj believes sales must reach $5 million in Year 3 for the product to be viable. Lutoj’s operating margin (EBIT/Sales) is 20%, the ...

Explain how the decision of the federal reserve bank fed to

Explain how the decision of the Federal Reserve Bank (Fed) to raise interest rates would be expected to affect each component of the weighted average cost of capital (WACC). What mistakes are commonly made when estimatin ...

Given an 11 rate of return the amount that must be put into

Given an 11% rate of return, the amount that must be put into an investment account at the end of each of the next ten years in order to accumulate $60,000 to pay for a child’s education is closest to: A. $2,500 B. $3,58 ...

Emily scott head of a small business consulting firm must

Emily Scott, head of a small business consulting firm, must decide how many M.B.A.s to hire as full-time consultants for the next year. (Emily has decided that she will not bother with any part-time employers.) Emily kno ...

1 a condominium is purchased for 80000 with a down payment

1. A condominium is purchased for $80,000 with a down payment of $12,000 at an annual interest rate of 9% for 15 years. Calculate the unpaid balance after 10 years of making payments. 2. What would be the market value of ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro