QUESTION 3 a. Outline the main types of overhead costs and provide two (2) examples of...

 

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QUESTION 3 a. Outline the main types of overhead costs and provide two (2) examples of each [4 Marks] b. Outline the budgeting process illustrating how you would classify each cost & create a single budget for the following: i. A company with 5 persons paid minimum wage, health & insurance at 30% of salary, bonus and food cost at 10% and 5% respectively. ii. Light, water, HVAC of $50, $45, $20 respectively iii. Depreciation on assets at 10% of asset value. iv. Maintenance cost at 6.8% of asset value. [8 Marks] c. A 120-metric-ton telescoping crane that cost $320,000 is owned by Upper State Power. Salvage is estimated at $75,000. i. Compare book values for MACRS and standard SL depreciation over a 7-year recovery period. ii. Explain how the estimated salvage is treated using MACRS MACRS % years 1 to 8 (14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, 4.47) respectively [3 marks] d. Projects A and B have first costs of $5,000 and $9,000, respectively. Project A has net annual benefits of $2,500 during each year of its 5-year useful life, after which it can be replaced identically. Project B has net annual benefits of $3,300 during each year of its 10 years life. Use present worth analysis, an interest rate of 30% per year and a 10-year analysis period to determine which project to select. (P/F,30%,5) = 0.2693, (P/A,30 %,5) = 2.436, (P/F,30 %, 10) =0.0725, (P/A,30 %, 10) = 3.092 QUESTION 3 a. Outline the main types of overhead costs and provide two (2) examples of each [4 Marks] b. Outline the budgeting process illustrating how you would classify each cost & create a single budget for the following: i. A company with 5 persons paid minimum wage, health & insurance at 30% of salary, bonus and food cost at 10% and 5% respectively. ii. Light, water, HVAC of $50, $45, $20 respectively iii. Depreciation on assets at 10% of asset value. iv. Maintenance cost at 6.8% of asset value. [8 Marks] c. A 120-metric-ton telescoping crane that cost $320,000 is owned by Upper State Power. Salvage is estimated at $75,000. i. Compare book values for MACRS and standard SL depreciation over a 7-year recovery period. ii. Explain how the estimated salvage is treated using MACRS MACRS % years 1 to 8 (14.29, 24.49, 17.49, 12.49, 8.93, 8.92, 8.93, 4.47) respectively [3 marks] d. Projects A and B have first costs of $5,000 and $9,000, respectively. Project A has net annual benefits of $2,500 during each year of its 5-year useful life, after which it can be replaced identically. Project B has net annual benefits of $3,300 during each year of its 10 years life. Use present worth analysis, an interest rate of 30% per year and a 10-year analysis period to determine which project to select. (P/F,30%,5) = 0.2693, (P/A,30 %,5) = 2.436, (P/F,30 %, 10) =0.0725, (P/A,30 %, 10) = 3.092

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A There are three main type of overhead cost 1 Fixed cost 2 variable cost 3 semivariable cos... View the full answer