14. A short-term project requires 10,000 hours of unskilled labour and5,000 hours of skilled labour. Both are currently fully utilised.The unskilled workers are paid £10 per hour and would work up to15,000 more hours of overtime at an overtime rate of £15 per hour.Alternatively, additional labour could be recruited at £18 per hour.The skilled workers are paid £30 per hour. They will not workovertime, and no suitable new workers can be recruited. Sufficienthours could be obtained by transferring them from other work whichhas a contribution of £10 per hour (after accounting for labour costs).What is the relevant cost of labour for the proposed project?(a) £425,000(b) £350,000(c) £275,000(d) £200,000

concept. For decision making , only relevant cost are useful. Irrelevant cost and sunk cost are not…

Answered: 14. A short-term project requires…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

A Production line produces $80K a month but 20% of the production is waste. If they invest $40K to bring the waste down to 10% how many months until the investment pays back?
At present the selling price of the product is £5.75 and it incurs the following variable costs: The fixed costs of production are £180,000 and the company currently sells 90,000 units. Direct Labour £1.35 Direct Materials £1.75 Other Direct costs £0.40 Discuss the limitations of break-even analysis.
Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $4.93 million per year. Your upfront setup costs to be ready to produce the part would be $7.95 million. Your discount rate for this contract is 7.9%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm? a. What does the NPV rule say you should do? The NPV of the project is $ million. (Round to two decimal places.)
A company sells beds and can produce 1,000 units per month for a fixed cost of £216,759. The variable cost is £414 per unit and the current demand is 700 units which sell for £968 per unit. The company is approached by a hotel for an order of 200 beds at £614 per unit. Answer the following questions: Is the fixed cost relevant when deciding to accept or reject this special order? How much additional contribution will be generated by accepting this order? Per unit (£): In total (£): Should the company accept this special order from the hotel? Yes No
19. Jurgen is an operator and works for a company producing vacuum formed blister packs. The blister packs he produces sell at 0.60€ each and he must produce 800 blister packs every 8 hr shift. He earns a minimum wage of 184€ per week. One fine day he thinks of buying a garage and equip it with all the necessary plant equipment to manufacture the blister packs. He gathers the below quotations. Can you calculate the ROI, payback period and the breakeven quantity? Vacuum forming machine -24000€ Air compressor -8000€ Garage - 85000€ Plastic sheets cost 240€ per roll and 1 roll makes 16000 blister packs.
Fry Ltd are developing a new type of umbrella for cyclists. Market research has indicated that customers would be willing to pay £80 for the product. The company usually expect a profit margin of 12% on products. Fixed costs for enhancements to production machinery are expected to be £250,000 per year. The company currently has orders for 8000 units this year. Materials are expected to cost £25 per unit. Each product requires 45 minutes of specialist labour to manufacture. The personnel department are having difficulty in recruiting these specialist staff and report that the expected rate of pay is £20- £25 per hour. a) Calculate the maximum hourly rate that Fry Ltd could pay to achieve the Target Cost.
A mill producing steel plate has fixed costs of $100,000 per week and variable costs of $0.09 per pound of steel plate produced. If the steel plate sells for $0.77 per pound, how many pounds must be produced each week for the plant to breakeven? Express your answer in pounds to the nearest 1,000 pounds.
23 )
Your factory has been offered a contract to produce a part for a new printer. The contract would last for three years, and your cash flows from the contract would be $5.17 million per year. Your upfront setup costs to be ready to produce the part would be $8.17 million. Your discount rate for this contract is 8.3% a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm?
21. Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $5.00 million per year. Your upfront setup costs to be ready to produce the part would be $8.00 million. Your discount rate for this contract is 8.0%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm? a. The NPV of the project is $____million. (Round to two decimal places.) What should you do? (Select the best choice below.) b. If you take the contract, the value added to the firm will be $____million. (Round to two decimal places.)
Your factory has been offered a contract to produce a part for a new printer. The contract would last for 3 years and your cash flows from the contract would be $4.83 million per year. Your upfront setup costs to be ready to produce the part would be $8.02 million. Your discount rate for this contract is 8.1%. a. What does the NPV rule say you should do? b. If you take the contract, what will be the change in the value of your firm? Question content area bottom Part 1 a. What does the NPV rule say you should do? The NPV of the project is $XXX enter your response here million. (Round to two decimal places.) Part 2 What should you do? (Select the best choice below.) A. The NPV rule says that you should accept the contract because the NPV less than 0. B. The NPV rule says that you should not accept the contract because the NPV less than 0. C. The NPV rule says that you should not accept the contract because the NPV greater…
18. Questions 18 and 19 are based on the following information: Regine Company manufactures plugs used in its manufacturing cycle at a cost of Ph 36 per unit that includes Ph 8 of fixed overhead. Regine needs 30,000 of these plugs annually and Orlan Company has offered to sell these units to Regine at Ph 33 per unit. If Regine decides to purchase the plugs, Ph 60,000 of the annual fixed overhead applied will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If Regine Company purchases the plugs but does not rent the unused facility, the company would * save Ph 3.00 per unit lose Ph 6.00 per unit save Ph 2.00 per unit lose Ph 3.00 per unit O O

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