3/5 Flashcards
Rules for foreign currency, domestic currency and net inflows or outflows
FC DC Inflow Outflow
Depr Appr Loss Gain
Appr Depr Gain Loss
Rules for price elasticity, implied elasticity, impact of price increase, impact of price decrease.
If demand is elastic, it has an elasticity greater than one, price increase decrease revenue, price decrease increases revenue
If demand is inelastic, it has an elasticity less than one, a price increase increase revenue, a price decrease decreases revenue.
If demand is unit elastic, it has an elasticity of one, and price changes do not change revenue
Design co is considering divesting its figurine and holiday segment ornament segment given its ongoing capital requirements and perceived lack of sufficient creativity in this business. The segment has been profitable but sales and margins have declined. What is the best course of action for management?
-spin off the segment.
-sell off the segment.
-complete an equity carve out
-maintain the segment
spin off the segment.
by a spin off you create a new business. This new business can get a capital infusion and receive new management.
a sell off is possible but the if it was core to the business then it would not be ideal.
an equity carve out is less ideal than spin off. equity carve out requires issuing an IPO and supervision by the parent.
maintain is not an because it needs capital investment and needs better management.
Veracity of data refers to the
trustworthiness of your data
Variety of data refers to the
type or source of data
Velocity of data refers to the
speed or flow
Volume of data refers to the
size of data set
The company received a one-time order for 50 units of finished pipe. The company can make or buy. It purchased 200 units of unfinished pipe at $80. However, after buying the pipe it realized it was obsolete and wrote off the inventory.
Costs per unit
Cost to buy 120
Threading labor 65
Perforating labor 45
Depr - machine 5
Depr - building 6
Inspection 50
Insurance 4
Plant manager salary 8
What is the fixed OH per unit of standard finished pipe manufactured?
Depr. machine, Depr Building, Insurance on machine, plant manager salary
5 + 6 + 4 + 8 = 23
The company received a one-time order for 50 units of finished pipe. The company can make or buy. It purchased 200 units of unfinished pipe at $80. However, after buying the pipe it realized it was obsolete and wrote off the inventory.
Costs per unit
Cost to buy 120
Threading labor 65
Perforating labor 45
Depr - machine 5
Depr - building 6
Inspection 50
Insurance 4
Plant manager salary 8
What are the relevant costs per unit to fulfill the custom order by manufacturing the pipe?
Just the labor costs. Fixed costs are applicable to both options. materials costs are not relevant. Inspection is not relevant as they only need to inspect bought pipes.
65 + 45 = 110
The company received a one-time order for 50 units of finished pipe. The company can make or buy. It purchased 200 units of unfinished pipe at $80. However, after buying the pipe it realized it was obsolete and wrote off the inventory.
Costs per unit
Cost to buy 120
Threading labor 65
Perforating labor 45
Depr - machine 5
Depr - building 6
Inspection 50
Insurance 4
Plant manager salary 8
What are the relevant costs per unit to fulfill the order by buying the finished pipe?
cost of mats and inspection
120 + 50 = 170
The company received a one-time order for 50 units of finished pipe. The company can make or buy. It purchased 200 units of unfinished pipe at $80. However, after buying the pipe it realized it was obsolete and wrote off the inventory.
Costs per unit
Cost to buy 120
Threading labor 65
Perforating labor 45
Depr - machine 5
Depr - building 6
Inspection 50
Insurance 4
Plant manager salary 8
What are the total sunk costs for the custom order?
50 units x $80 = 4000
The company received a one-time order for 50 units of finished pipe. The company can make or buy. It purchased 200 units of unfinished pipe at $80. However, after buying the pipe it realized it was obsolete and wrote off the inventory.
Costs per unit
Cost to buy 120
Threading labor 65
Perforating labor 45
Depr - machine 5
Depr - building 6
Inspection 50
Insurance 4
Plant manager salary 8
What is the difference between the total relevant costs between making or buying the pipe?
make 65 + 45 = 110
buy 120 + 50 = 170
170 - 110 = 60
60 x 50 = 3,000
The company received a one-time order for 50 units of finished pipe. The company can make or buy. It purchased 200 units of unfinished pipe at $80. However, after buying the pipe it realized it was obsolete and wrote off the inventory.
Costs per unit
Cost to buy 120
Threading labor 65
Perforating labor 45
Depr - machine 5
Depr - building 6
Inspection 50
Insurance 4
Plant manager salary 8
Prior to the decision the customer asked to expedite the order. In order to meet the request the company will incur $1,200 additional labor and $800 in shipping.
What would be the relevant per unit costs in your make vs buy decision.
The $800 in shipping would be incurred whether you make or buy.
If you make then labor increases by 1,200. This would be
1200 / 50 = $24 per unit
