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The executive vice president of Robotics, Inc., is concerned because the cost of materials has not been in line with the budget for several periods, even after implementing an EOQ model. The company has the normal direct material variance computations of price and efficiency at the end of each month. The price variance of the direct materials used is usually near expectations. The vice president does not understand how the budget differences are always larger than the material price variances.
Required:
What explanation can you give for the evaluation problems presented?
After-Tax Cash Inflows
The amount of money that flows into a business after all tax obligations have been accounted for, reflecting the net cash earnings.
IRR
A financial metric used to estimate the profitability of potential investments, equal to the discount rate that makes the net present value of all cash flows both in and out of the investment equal to zero.
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