At the Commencement of the Current Financial Year Rene Silverwater

question 26

Essay

At the commencement of the current financial year Rene Silverwater invested $70,000 in a 2-year 'snowball' fixed deposit providing an interest rate of 5% p.a. with interest paid half-yearly. The interest paid is reinvested back into the fixed deposit which is the basis for the 'snowball' description. On maturity, the investment provides a bonus interest amount of $500 for all investments that have a balance at maturity that exceeds their initial investment by more than 10%. Rene is subject to a 40% marginal tax rate for interest income derived in the first year and 30% for the second year.
Rene has sought your assistance in determining whether he would be eligible for the interest bonus and also to calculate his total after-tax net income from the investment.

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Definitions:

Direct Materials

Raw materials that are directly traceable to the production of a specific good or service.

Manufacturing Cells

A layout design in manufacturing where equipment and workstations are arranged to optimize the production process, often by grouping together different machines used for similar processes.

Lean Production

A manufacturing methodology that focuses on minimizing waste within manufacturing systems while simultaneously maximizing productivity.

Work Centers

Specific locations within a manufacturing operation where specific tasks or groups of tasks are carried out.