Lido Company's standard and actual costs per unit for the most recent period, during which units were actually produced, are given below: Remember, you need to compute these variances based on the units which were actually produced. From the foregoing information, compute the following variances. Show whether the variance is favorable F or unfavorable U:
Management typically uses this ratio to decide whether the company should use debt or equity to finance new purchases. This ratio is very comprehensive because it averages all sources of capital; including long-term debt, common stock, preferred stock, and bonds; to measure an average cost of borrowing funds.
It is also extremely complex. Figuring out the cost of debt is pretty simple. Bonds and long-term debt are issued with stated interest rates that can be used to compute their overall cost.
Equity, like common and preferred shares, on the other hand, does not have a readily available stated price on it.
|Albutte Inc. which uses the weighted average method - Explicitpapers||Order Now accounting quiz week2 1.|
|Inside Methods of Valuing Inventory||The former represents the weighted value of cost of equity-linked capital, while the later represents the weighted value of cost of debt-linked capital.|
|How it works (Example):||To maximize profits, companies need the right amount of inventory items at all times.|
|Login / Register||Remember, you need to compute these variances based on the units which were actually produced. From the foregoing information, compute the following variances.|
|Variance Analysis - Lido Company||Every picture passes through two departments: This problem focuses on the Assembly Department.|
Instead, we must compute an equity price before we apply it to the equation. Estimating the cost of equity is based on several different assumptions that can vary between investors. Wow, that was a mouthful. The WACC calculation is pretty complex because there are so many different pieces involved, but there are really only two elements that are confusing: After you have these two numbers figured out calculating WACC is a breeze.
Cost of Equity The cost of equity, represented by Re in the equation, is hard to measure precisely because issuing stock is free to company. It simply issues them to investors for whatever investors are willing to pay for them at any given time.
When the market it high, stock prices are high. When the market is low, stock prices are low. So how to measure the cost of equity? We need to look at how investors buy stocks. They purchase stocks with the expectation of a return on their investment based on the level of risk.
This expectation establishes the required rate of return that the company must pay its investors or the investors will most likely sell their shares and invest in another company.
If too many investors sell their shares, the stock price could fall and decrease the value of the company. I told you this was somewhat confusing.
Think of it this way. Cost of Debt Compared with the cost of equity, the cost of debt, represented by Rd in the equation, is fairly simple to calculate.
We simply use the market interest rate or the actual interest rate that the company is currently paying on its obligations. Keep in mind, that interest expenses have additional tax implications. Interest is typically deductible, so we also take into account the amount of tax savings the company will be able to take advantage of by making its interest payments, represented in our equation Rd 1 — Tc So what does all this mean?
To put it simply, the weighted average cost of capital formula helps management evaluate whether the company should finance the purchase of new assets with debt or equity by comparing the cost of both options.INSTANT DOWNLOAD. Solution Guide / Answer Key: ACCOUNTING.
Banerjee Inc. uses the weighted-average method in its process costing system. The following data concern the operations of the company's first processing department for a recent month.
Weighted average costing is one among many different types of inventory cost accounting methods that companies use. Other common methods include the more common last-in, first-out, or LIFO method.
Baroche Inc. uses the weighted-average method in its process costing lausannecongress2018.comr The following data concern the operations of the company's first processing department for a recent month. d.5/5(1). According to the Weighted Average method process, the ending inventory for the material that Vanstraten Inc.
Assembly Department used should be calculated first. Equivalent units in the ending Work In Process = UNDER MATERIALS, (Equivalent units in ending WIP) * (Cost of equivalent unit) = ; this is the equivalents units in the ending WIP. Process costing Process costing is a method of costing used mainly in manufacturing where units are continuously mass-produced through one or more processes.
Examples of this include the manufacture of erasers, chemicals or processed Use the weighted average (WA) method . Baroche Inc. uses the weighted-average method in its process costing system.
The following data concern the operations of the company's first processing department for a recent month. Required.