Compact Appliances Uses a Standard Part in the Manufacture of Several

question 121

Multiple Choice

Compact Appliances uses a standard part in the manufacture of several of its radios.The cost of producing 40,000 parts is $110,000,which includes fixed costs of $50,000 and variable costs of $60,000.The company can buy the part from an outside supplier for $4.00 per unit,and avoid 40% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $12,000 profit.If Compact Appliances makes the part,what will its operating income be?

• A)$68,000 greater than if the company bought the part
• B)$68,000 less than if the company bought the part
• C)$178,000 greater than if the company bought the part
• D)$92,000 greater than if the company bought the part

Distinguish between different types of hedges and their accounting treatment, understanding the concept of hedge effectiveness.

Recognize the formal requirements for documenting hedging relationships and assessing their effectiveness.

Understand the different types of hedges and their applications in financial reporting.

Compute and analyze the impact of currency translation on loans and interest expenses.

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Definitions:

Producer Surplus

The financial gap between the price sellers are willing to accept for goods or services and the price they eventually get.

Price Floor

A legal minimum on the price at which a good can be sold.

Consumer Surplus

The variation in the comprehensive amount consumers are willing to layout for a good or service and the actual layout.

Total Surplus

The sum of consumer and producer surplus, representing the overall benefit to society from the production and consumption of goods and services.