What Are the Four Important Requirements When Structuring a Valid

question 25

Essay

What are the four important requirements when structuring a valid SPE? How were they abused by Enron?

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Definitions:

Fixed Manufacturing Overhead

Costs that do not change with the level of manufacturing output, including salaries of managers and depreciation of factory equipment.

Direct Labor-Hours

The total hours of labor directly involved in producing goods or providing services.

Direct Labor Rate

The cost per hour for labor directly involved in the production of goods or services.

Production Budget

A budget outlining the number of units that must be produced within a period to meet both sales and inventory demands.