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D.Ray MBA
D.Ray MBA, MBA
Category: Homework
Satisfied Customers: 223
Experience:  MD/MBA with 5 years of experience in tutoring and education
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Verify some answers

Customer Question

Verify some answers?
Submitted: 5 years ago.
Category: Homework
Expert:  Kerry replied 5 years ago.

Hello

How can we help you?

Kerry

Customer: replied 5 years ago.

I have a question

 

1: Which of the following would not be included among the costs of carrying inventory:

 

Obsolesecence, Opportunity cost of capital, which I think is correct or raw material cost or risk of pilferage?

Expert:  D.Ray MBA replied 5 years ago.
Hi Unified,
In addition to being an MD, I am fortunately an MBA as well.

Inventory Carrying Cost is the amount it costs to maintain and store unsold inventory. It is made up of 4 parts:
1) Capital Costs - The investment needed to create/acquire the inventory, and the
2) Inventory Service Costs - The price of keeping the inventory in saleable condition
3) Storage Space Costs - The cost of having somewhere to keep the inventory
4) Inventory Risk Costs - Loss of inventory due to spoilage,obsolescence, theft, etc.

You are correct in thinking that opportunity cost of capital is not part of Inventory Carrying Cost. That would be another description of your discount rate, or hurdle rate that would be used to determine your NPV (and other calculations)
Customer: replied 5 years ago.

 

 

If opportunity cost is not part of the caarrying cost then why did you choose raw material which I saw listed as part oc arrying cost. I have a PHD in public administration and am picking up an MBA to compliment my business experience and I would like to cultivate a direct access to someone with your intellectual ability for these questions. How is that done?

 

So Opportunity cost is correct. I want to ask you several additional question which I will behappy to pay for how do I do this?

Customer: replied 5 years ago.
I made a mistake in this posting I was looking at two different questions I liked the intelligence of your last answer and I want to ask you a fe more.
Expert:  D.Ray MBA replied 5 years ago.
I would be happy to work with you in the future with your questions, but as far as I know, there isn't a method of consistently interacting with the same expert on this website. You can send me a personal message if you find a way, and I would be happy to respond. Another option might be to post the follow-up questions here, under this same thread, and provide bonuses for the additional issues.
Customer: replied 5 years ago.

 

 

I am going to list several questions then I will add to the bonus section:

 

1. Mangements use of resources can best be evaluated by focussing on measures of liquidity, activity, leverage or book value. I thought activity?

 

2. what precentage of contribution margin is profit on units sold in excess of breakeven?

I believe it is a 100% other options 50% of the CM ratio, equal to variable cost ratio, equal to gross profit ratio?

Expert:  D.Ray MBA replied 5 years ago.
1. I agree with your answer. Liquidity is typically a measure used by lenders/bond holders to determine repayment capacity, leverage is a measure used to determine how much of your financing is through lending and is important in determining tax shields, and book value is primarily focused on accounting figures which are intended for external use and do not necessarily reflect the long term focus of quality management decision making.

2. Contribution margin is the marginal profit per unit sale. Since the marginal profit (amount of profit produced by the sale of the next item) is 100% on all items sold after breakeven, your answer is correct.

I hope that this has helped. I have received several coments from JustAnswer moderators letting me know that it is against the sites policy to answer miscategorized questions until their category is corrected. I think that the homework or finance category (rather than health care) would be most appropriate for future questions of this nature.

Best of luck to you!
Customer: replied 5 years ago.

 

Can I ask for Dr. Ray when I post Finance? I like and relate to your professional and thorough answers. Your intelligence shines through you answers.

 

Lets go through the tutor and I will make one list of questions for verification and we will agre on a price. I want to verif about 10 questions.

Expert:  D.Ray MBA replied 5 years ago.
I checked into this and if you accept the answers from this posting and then request me as an expert under the "General Expert" category for your next posting, then it should notify me via email of your question and I will have priority in responding (I think that my expert name for that mini-profile is D.Ray). If you address the question specifically to me that will help also.
Customer: replied 5 years ago.

 

Is it possible that I list my questions in this response and then push accept and a bonus so you are paid for your services and I take the next 20 minutes making a list of the questions for you. We are here I am confident in your ability why not do it now?

Expert:  D.Ray MBA replied 5 years ago.
Hi Unified,
I've received no less than 8 notifications and comments about this question. I would be happy to answer more of your questions, but because of the response from other experts and moderators, I can't continue with this thread. Sorry for the inconvenience!
D.Ray MBA, MBA
Category: Homework
Satisfied Customers: 223
Experience: MD/MBA with 5 years of experience in tutoring and education
D.Ray MBA and 5 other Homework Specialists are ready to help you
Customer: replied 5 years ago.

 

 

Ok but you are the guy I want to do business with. I thought I could use a tutor tab?

Expert:  D.Ray MBA replied 5 years ago.
I'll definitely keep an eye out for your postings and the request notifications. Unfortunately, I'm not aware of any tutor tab, although that may be a good suggestion to the JustAnswer team as a future addition.
Customer: replied 5 years ago.

Lets do follow up and I will pay you Verfication:

 

Example of cost with fixed behaviour: advertising costs, which i fell is correct, slaes commission, raw materials electricity?

 

2. What is true statement:regarding absorption costs and direct costs? absorption costing includes fixed overhead in product costs whereas direct costing does not not (I think this is correct)

 

3. what is most likely prediciton after a firm reduces its regular dividend payment? Investment is expected to increase (Correct?); earnings decline; decrease in retained earnings; share price increase?

 

4. assume total year in college equals $20,000 how much would parents need to invest 21 years ago in account paying 8% compounded annually of the following amounts as options I chose $3,973, versus 952, 1,600, 1723, what is the correct formula?

 

5. which would would reduce the carrying cost inventory from the following? I chose general interest rate decrease in the economy versus inventory spoilage, inventory going out of style, interest rate increase in the economy?

 

6. the concept of matching revenues and expenses refers to expenses for a period equal the revenues for the period? Is this correct?

Customer: replied 5 years ago.

 

Ok this is it these are my questions I am waiting for your answers which I trust and I will compensate you for the answers

 

Regards

Expert:  D.Ray MBA replied 5 years ago.
1. Advertising cost does not change based on sales volume, and therefore it is a fixed cost. The others are sales volume dependent, and therefore are variable costs.

2. Direct costs can be identified specifically with a particular project and can be directly assigned to activities associated with that project, so overhead is not a direct cost. Cost absorbtion, in comparison is the application of the costs of outputs that pass through the process. Overhead is an example of a cost that is absorbed.

3. A reduction in dividends typically causes a significant decline in stock price, and therefore is usually a last-ditch effort on the part of management, signaling a likely decline in profit. Investment typically declines after a reduction in dividends.

4. This is a future value calculation. The question is asking what initial payment would be necessary to lead to a future value of $20K @ 8% x21 years. Your answer is correct, based on the formula (FV)*((1+i)^-t)

5. Inventory spoilage would increase carrying costs, as would obsolescence of inventory (going out of style). Rising interest rates also increase the expense of holding inventory, since you could be gaining more with the cash in hand.

6. the concept of matching revenues and expenses refers to the matching principle. What this means is that expenses are not recognized until the associated revenue is also recognized (eg. you don't expense inventory until it is sold). We would hope that in a successful business expenses for a period do not equal the revenues for the period, since this would mean no profits are realized (P=R-E)

Hope this helps!
Customer: replied 5 years ago.

Let me clarify my understanding:

 

1. Advertising cost is a cost likley to have a fixed behaviour: Correct? yes or no

 

2. Absorption costing includes fixed overhead in product costs whereas direct costing does not would be correct? yes or no

 

3. earnings are expected to decline retained earnings are expected to decrease, which would be th ebetter anser since share value will not increase and investment is less likely? Investment would not increase with a drop of dividends because of expansion?

 

4 ok

 

5. interest rate reduction ok

 

6. The concept of matching revenue and expenses refers to the fact that:. Woud=ld d fit best your explanation?

 

which would be most correct: a expenses for a period equal the revenues for the period, b. allcosts incrurred in the process of earning revenue during a period are recorded as an expense in that period, c. all cash disbursements during a period are substracted from cash receipts during the period, d. costs incurred in the process of earning revenue during a period are deffered and expenses in a future period.

 

Expert:  D.Ray MBA replied 5 years ago.
1. Yes
2. Yes
3. The direct answer would be declining earnings, which would then cause reduced retained earnings
6. Yes. D seems to be the most fitting answer.

Let me know if this is more clear.
D.Ray MBA, MBA
Category: Homework
Satisfied Customers: 223
Experience: MD/MBA with 5 years of experience in tutoring and education
D.Ray MBA and 5 other Homework Specialists are ready to help you
Customer: replied 5 years ago.

Dr. Ray,

 

you have been very professional and I have respect for your intelligent and patient responses.

 

For your information Lori from justAns.com responded and said that I could request a specific expert to answer questions. I am pursuing this because I have confidence in your insights.

 

Thank you again for the clarifications.

Expert:  D.Ray MBA replied 5 years ago.
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