Question

nicole owns a small pottery factory . she can make 1000 pieces of pottery per year and sell them for rs. 100 each it costs nicole rs. 20000 for the raw materials to produce the 1000 pices of pottery. she has invested rs. 100000 in her factory and equipment rs. 50000 from her savings and rs 50000 borrowed at 10 percent. ( assume that she could have loaned her money out at 10 percent, too) nicole can work at a competing pottery factory for rs. 40000 per year. then what is accounting cost at nicoles factory?​ ...

Answer 1

Given:

Nicole can make 1000 pieces of pottery per year and sell them for rs. 100 each.

It costs nicole rs. 20000 for the raw materials to produce the 1000 pieces of pottery.

She has invested rs. 100000 in her factory and equipment rs. 50000 from her savings and rs 50000 borrowed at 10 percent.

To find:

The accounting cost at nicole's pottery factory.

Solution:

From given we have,

It costs nicole rs. 20000 for the raw materials to produce the 1000 pieces of pottery.

She borrowed rs 50000 at 10 percent for equipment.

Therefore, we get,

The accounting cost at nicole's pottery factory,

= 20000 + 10% of 50000

= 20000 + 10/100 × 50000

= 20000 + 1/10 × 50000

= 20000 + 5000

= 25000

Therefore, the accounting cost at nicole's pottery factory is Rs. 25000