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Thanks.
1. Is it true that when a company decides to issue the shares for the first time then they can issue the shares at whatever price they want or think that people would be willing to pay for a share?
2. When a company issue the shares in the market then the money received from each shareholder paying for the share is called share capital which is actually the money received and owed to-or-from the shares?
4. Once a company issued the shares in the market then the shareholders who are willing to buy-and-sell the shares would trade them at a certain price which has nothing to the company and any money received from selling a share and money paid for buying a share would be getting in-or-out of the pockets of the shareholders?
5. The market would earn the difference between the buying price and selling price of the shares. For eg if a share is sold $5 but it the buyer has paid $4 then the house will get the $1 difference, is that right?
6. Is it also true that the difference between issue price and nominal price is the share premium but can you also elaborate what is share discount and why would a company issue a share at discounted price?
We compare the new investment whether it is attractive to the company as a whole we always take additional profit and additional capital investment to compare with target ROI. correct?
Please explain why do we take additional profit and additional capital investment?
And we compare the new investment whether it is attractive to the manager we always compare ROI without new investment with ROI with new investment. correct?
It was asked in Sept / Dec 2020 and mentioned in the examiner report. I could not understand this either.
I don’t really understand that is why I asked you earlier. Please help me here.
That’s the right question and I need your word if I say it this way…
If we are making only one product then the general fixed costs of all the products include but specific fixed cost include only to the product we are making should be involved in calculations because although if we don’t make the second product the general fixed cost will stay the same for the period but the specific fixed cost is specifically incurred only if we produce that second product. Therefore, it shouldn’t be included in calculations.
Thanks for your reply 🙂 please say whether these points & the explanation of all of them are correct or not?
1) Fixed OH Expenditure is calculated comparing budgeted hours with standard rate and actual hours with actual rate to see whether the fixed overhead cost more or less in actual than what we were expecting in budgeted.
2) Fixed OH Efficiency is calculated comparing standard hours and actual hours with standard rate to see whether the labour works faster or slower in actual than expected in standard.
3) Fixed OH Capacity is calculated comparing budgeted hours and actual hours with standard rate to see whether the labour work more or less hours than expected in standard.
4) Fixed OH Volume is calculated comparing budgeted hours and standard hours with standard rate to see whether the company absorbs more or less Fixed OH than expected.
5) Fixed OH Capacity & Fixed OH Volume variances are favourable if we have more hours in actual since we have worked more labour hours in actual due to which we have higher fixed cost.
6) Is it also true that when we compare budgeted cost with standard cost we actually consider standard cost as actual and if standard is more than budgeted then it is favourable variance?
Thanks for your help but i’ve a one little question regarding cost variance.
You are right in saying that when looking at cost variances we always compare the actual cost with the standard cost for the actual production. We do not compare with the originally budgeted totals.
BUT this is not the case with Fixed Overhead variances where actual cost are compared with budget cost such as in case of:
1) Fixed OH Expenditure is calculated comparing budgeted hours with standard rate and actual hours with actual rate to see whether the fixed overhead cost more or less in actual than what we were expecting in budgeted.
2) Fixed OH Efficiency is calculated comparing standard hours and actual hours with standard rate to see whether the labour works faster or slower in actual than expected in standard.
3) Fixed OH Capacity is calculated comparing budgeted hours and actual hours with standard rate to see whether the labour work more or less hours than expected in standard.
4) Fixed OH Volume is calculated comparing budgeted hours and standard hours with standard rate to see whether the company absorb more or less Fixed OH than expected.
5) Fixed OH Capacity & Fixed OH Volume variances are favourable if we have more hours in actual since we have worked more labour hours in actual due to which we have higher fixed cost.
6) Is it also true that when we compare budgeted cost with standard cost we actually consider standard cost as actual and if standard is more than budgeted then it is favourable variance?
But what is the difference between both budgeted and standard costs?
Sorry for too long question but it really troubles me thats why I asked you!
(1) The whole point of comparing actual cost with standard cost for actual production is that in actual we have either produced more or less than the budgeted production which obviously increases the costs so we need a standard cost based on actual production so that in actual and standard we have the same number of production units to compare with.
(2) Sales volume variance compares the actual cost with the standard cost for budget production (and not actual production) which worries me because I believe that standard cost is always calculated through actual production units multiplied with standard cost per unit.
But in sales volume we calculate standard costs like this:
(Budgeted Production x Std cost per unit)Why??
I have seen your lecture and that is why I come here to ask you because I was confused.
Yes 🙂 I saw your lecture but could you please help with this question I cannot really work out here!
[Question]
There are two products R and S that a company is making:
Production units:
R: 80,000—S: 60,000Batch size units:
R: 100——-S: 50Machine setup per batch:
R: 3———-S: 3
Processing time per unit (min)
R: 3——— S: 5Overhead costs for two activities:
Machine set-up $180,000
Processing $108000
