Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. Calculate unit product costs for both methods, prepare both income statements and then show why there is a difference between the two methods. Quarter 1 Quarter 2 Beginning inventory - 1,500 Units produced 18,500 18,775 Units sold 17,000 18,750 Ending inventory 1,500 1,525 Selling price per unit $145.00 Variable costs per unit: Direct materials $30.00 Direct labor $25.00 Var. MOH $10.00 Var. S&A per unit $14.50 Fixed costs: Fixed MOH $600,000 Fixed Selling and Admin. $210,000

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Pennewell publishing inc. (pp) is a zero growth company. it currently has zero debt and its earnings before interest and taxes (ebit) are $80,000. pp's current cost of equity is 10%, and its tax rate is 40%. the firm has 10,000 shares of common stock outstanding selling at a price per share of $48.00. refer to the data for pennewell publishing inc. (pp). pp is considering changing its capital structure to one with 30% debt and 70% equity, based on market values. the debt would have an interest rate of 8%. the new funds would be used to repurchase stock. it is estimated that the increase in risk resulting from the added leverage would cause the required rate of return on equity to rise to 12%. if this plan were carried out, what would be pp's new value of operations? a. $484,359 b. $521,173 c. $584,653 d. $560,748 e. $487,805