Saturday, 15 November 2014

Guinta Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, O48C and G94Z, about which it has provided the following data:

Guinta Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, O48C and G94Z, about which it has provided the following data:

 O48CG94Z
  Direct materials per unit$24.80   $56.30  
  Direct labor per unit$24.10   $63.20  
  Direct labor-hours per unit 0.70    2.40  
  Annual production (units) 38,800    18,300  


The company's estimated total manufacturing overhead for the year is $3,224,840 and the company's estimated total direct labor-hours for the year is 71,080.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

  Activities and Activity MeasuresEstimated
Overhead Cost
  Supporting direct labor (DLHs)$426,480     
  Setting up machines (setups) 723,840     
  Parts administration (part types) 2,074,520     
 

  Total$3,224,840     
 





   ActivitiesO48CG94ZTotal
   Supporting direct labor27,160    43,920    71,080    
   Setting up machines800    3,360    4,160    
   Parts administration2,460    1,880    4,340    


Required:
a.
Determine the unit product cost of each of the company's two products under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" sign in your response.)

           O48C           G94Z
  Unit product cost$   $   


b.
Determine the unit product cost of each of the company's two products under activity-based costing system. (Round your intermediate calculations and final answers to 2 decimal places. Omit the "$" sign in your response.)

           O48C             G94Z
  Unit product cost$   $   


 
Explanation:

Friday, 26 September 2014

Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid–ask spreads amount to 2.7% of the value of the trade. If the portfolio turnover rate is 50%, by how much is the total return of the portfolio reduced by trading costs? (Round your answer to 1 decimal place.)

Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid–ask spreads amount to 2.7% of the value of the trade. If the portfolio turnover rate is 50%, by how much is the total return of the portfolio reduced by trading costs? (Round your answer to 1 decimal place.)

  Fall in returns %  


Explanation:
The turnover rate is 50%. This means that, on average, 50% of the portfolio is sold and replaced with other securities each year. Trading costs on the sell orders are 2.7%; the buy orders to replace those securities entail another 2.7% in trading costs. Total trading costs will reduce portfolio returns by: 2 × 0.027 × 0.5 = 0.027 or 2.7%

The Investments Fund sells Class A shares with a front-end load of 6% and Class B shares with 12b-1 fees of .5% annually as well as back-end load fees that start at 5% and fall by 1% for each full year the investor holds the portfolio (until the fifth year). Assume the portfolio rate of return net of operating expenses is 10% annually.

The Investments Fund sells Class A shares with a front-end load of 6% and Class B shares with 12b-1 fees of .5% annually as well as back-end load fees that start at 5% and fall by 1% for each full year the investor holds the portfolio (until the fifth year). Assume the portfolio rate of return net of operating expenses is 10% annually.

a. If you plan to sell the fund after four years, are Class A or Class B shares the better choice for you?
   
  Class B

b. What if you plan to sell after 15 years?
   
  Class A


Explanation:

Consider a mutual fund with $203 million in assets at the start of the year and with 10 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $5 million. The stocks included in the fund's portfolio increase in price by 7%, but no securities are sold, and there are no capital gains distributions. The fund charges 12b-1 fees of 0.75%, which are deducted from portfolio assets at year-end.

Consider a mutual fund with $203 million in assets at the start of the year and with 10 million shares outstanding. The fund invests in a portfolio of stocks that provides dividend income at the end of the year of $5 million. The stocks included in the fund's portfolio increase in price by 7%, but no securities are sold, and there are no capital gains distributions. The fund charges 12b-1 fees of 0.75%, which are deducted from portfolio assets at year-end.

a.
What is net asset value at the start and end of the year? (Enter your answers in dollars rounded to 3 decimal places.)
 
  Net Asset Value
  Start of the year $       
  End of the year       

   
b.
What is the rate of return for an investor in the fund? (Use rounded "Net Asset Value". Round your answer to 2 decimal places.)
 
  Rate of return %  


Explanation: