Galavic Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin plant

E4-8 Galavic Corporation manufactures snowmobiles in its Blue Mountain, Wisconsin plant. The following costs are budgeted for the first quarter's operations.

Machine setup, indirect materials $ 4,000
Inspections 16,000
Tests 4,000
Insurance, plant 110,000
Engineering design 140,000
Depreciation, machinery 520,000
Machine setup, indirect labor 20,000
Property taxes 29,000
Oil, heating 19,000
Electricity, plant lighting 21,000
Engineering prototypes 60,000
Depreciation, plant 210,000
Electricity, machinery 36,000
Custodial (machine maintenance) wages 19,000

Classify the above costs of Galavic Corporation into activity cost pools using the following: engineering, machinery, machine setup, quality control, factory utilities, maintenance. Next, identify a cost driver that may be used to assign each cost pool to each line of snowmobiles.

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North Shore Railroad operates between Chicago and upper Michigan and Wisconsin

North Shore Railroad operates between Chicago and upper Michigan and Wisconsin. Dallas Ingold, purchasing manager of North Shore Railroad, anticipates the price of diesel fuel will increase over the next few months. On September 4th, Ingold purchased an out-of-the-money November call option for $1,100. The option has a notional amount of 80,000 barrels and a strike price of $2.16 per barrel. Diesel fuel spot rates and option values at selected dates follow:

Spot Rate Option
Date per Barrel Value
September 30 $2.17 $1,130
October 31 2.13 1,026
November 27 2.19 2,400

a. For each of the above dates, calculate the intrinsic value and the time value of the option.
b. How much is the Intrinsic Value on September 4th.

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