3. GB Motor Company produced 600,000 bikes at a price of $440 each. The company made a profit of $60 million that year. The CEO of the company told a journalist that he intended to reduce the price of their bikes to $360, and he expected to sell 900,000 bikes at that price. c) What would the average total cost of producing 900,000 bikes have to be for GB Motor Company to make as much profit selling 900,000 bikes as it made selling 600,000 bikes? Is this smaller or larger than the average total cost of producing 600,000 bikes?

3. GB Motor Company produced 600,000 bikes at a price of $440 each. The company made a profit of $60 million that year. The CEO of the company told a journalist that he intended to reduce the price of their bikes to $360, and he expected to sell 900,000 bikes at that price. c) What would the average total cost of producing 900,000 bikes have to be for GB Motor Company to make as much profit selling 900,000 bikes as it made selling 600,000 bikes? Is this smaller or larger than the average total cost of producing 600,000 bikes?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Ayden's Toys, Inc.. just purchased a $530,000 machine to produce toy cars. The machine will be fully depreciated by the straight-line method over its 5-year economic life. Each toy sells for $30. The variable cost per toy is $14 and the firm incurs fixed costs of $390,000 per year. The corporate tax rate for the company is 24 percent. The appropriate discount rate is 12 percent. What is the financial break-even point for the project? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Financial break-even point units
Chocoholics Anonymous wants to modernize its production machinery. The company's sales are $9.22 million per year, and the choice of machine won't impact that amount. The required return is 10 percent and the tax rate is 35 percent. Both machines will be depreciated on a straight-line basis. Machine Amaretto costs $1,950,000 and will last for 5 years. Variable costs are 39 percent of sales, and fixed costs are $131,000 per year. Machine Baileys costs $4,610,000 and will last for 7 years. Variable costs for this machine are 31 percent of sales and fixed costs are $103,000 per year. Required: (a)If the company plans to replace the machine when it wears out on a perpetual basis, what is the EAC for machine Amaretto? (Do not round your intermediate calculations.) HINT: In EAC problems you first need to find the NPV. Using this NPV you can then calculate the annuity (annual cost) that has the same present value/cost. The lecture videos include a detailed example of this calculation.…
Healthy Foods Inc. sells 50-pound bags of grapes to the military for $10 a bag. The Fixed costs of this operation are $80,000. while the variable costs of grapes are $.10 per pound. A. What is the degree of the operating leverage at 20,000 bags and at 25,000 bags? Why does the degree of operating leverage change as the quantity sold increases? B. If Healthy Foods has an annual interest expense of $10,000 calculate the degree of financial leverage at both 20,000 and 25,000 bags. C. What is the degree of combined leverage at both sales levels?
7. At Aspen Trucking Company, the average driver out of its 200 driver employees travels 1,600 miles per week (50 weeks per year) and it charges customers $2.15 per mile. Aspen provides each driver a $95,000 big rig and pays the driver $0.58 per mile. It estimates that the direct cost, other than the driver, for operating a truck is $0.75 per mile. Jack, the sales manager has been working on several ways to grow the revenue of the business by 10%. Since he has had to turn away business, Jack has now decided that the best way to do that is a combination of adding drivers and equipment along with a price increase of 2.5% next year. He knows that a first time driver will only be 75% productive in his or her first year and it will cost $5,500 to recruit each one. Assuming he can get all needed drivers hired by the first working day of the year, what will Aspen’s first year approximate cash flow be from this growth initiative? Please solve with excel. Group of answer choices a.…
Price Corporation is considering selling to a group of new customers and creating new annual sales of $240,000. 3% will be uncollectible. The collection cost on all accounts is 6% of new sales, the cost of producing and selling is 83% of sales, and the firm is in the 22% tax bracket. What is the profit on new sales?
4. Your friend wants to sell his shawarma business in mall of Dhahran. The rent of shop, machine, and all other expenses are amounting to $100000 for 10 years that you need to pay at day one. Annual operating costs for the business will be $1000. The cost of raw material per shawarma is $2. If the average number of customers per year is 275444. What should be the minimum price of shawarma to avoid any loss if the MARR is 12%/year. a) $3.876 b) $1.089 C) $2.068 d) $4.009
Please help me with this accounting homework question, I am having so much trouble.
A CNC mill was purchased 4 years ago for $50,000. The current market value is $26,000, which will decline as follows over the next 5 years: $20,000, $16,250, $ 14,000, $12,000, and $8500. The O&M costs are estimated to be $6000 this year. These costs are expected to increase by $2000 per year starting year 2. MARR = 10% The marginal cost for defender in year 2 Group of answer choices $13,750 $ is 14,600 $ 13,875 $15,400 $12,400
2. Company XYZ sells CDs. The price of its new CD is $15. Fixed costs are $1,500,000 per year. Variable costs are $9. The company expects to sell 300,000 units this year. a. How many DVDS will the company need to sell to break even? b. If the forecasts are correct, how much will company XYZ make or lose this year (before taxes)?
If the Rhine Company ignores the possibility that other firms may enter its market, it should set a price of $10,000 for its product, which is a power tool. But if it does so, other firms will begin to enter the market. During the next two years it will earn $4 million per year, but in the following two years it will earn $1 million per year. On the other hand, if it sets a price of $7,000, it will earn $2.5 million in each of the next four years because no entrants will appear. If the interest rate is 8 percent, should the Rhine Company set a price of $7,000 or $10,000? a. NPV $10.0M for $7,000 price b. NPV $10.0M for $10,000 price c. NPV $7.3M for $7,000 price d. NPV $8.7M for $10,000 price