4. A large profitable corporation is considering a capital investment of $60,000. The equipment has a projected salvage value of $0 at the end of the five-year project period. The annual gross income is projected to be $50,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $19,200 in the first year. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. Complete the table below. Year O 1 A R1 B Receipts Expenses BTCF R2 E1 C E2 D Depn BTCF1 D1 BTCF2 D2 E Taxable Income F T12 Tax TI1 T1 T2 G ATC ATCF1 ATCF2

4. A large profitable corporation is considering a capital investment of $60,000. The equipment has a projected salvage value of $0 at the end of the five-year project period. The annual gross income is projected to be $50,000 and expenses are projected to be $14,000 annually. The depreciation amount will be $19,200 in the first year. This profitable corporation has an incremental income tax rate of 25% and the MARR is 10%. Complete the table below. Year O 1 A R1 B Receipts Expenses BTCF R2 E1 C E2 D Depn BTCF1 D1 BTCF2 D2 E Taxable Income F T12 Tax TI1 T1 T2 G ATC ATCF1 ATCF2

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Assume that a company manufactures numerous component parts, one of which is called Part A. The company's absorption costing system indicates that it costs $23.00 to make one unit of Part A as shown below: Direct materials $ 10.00 Direct labor 6.00 Variable overhead 2.00 Fixed overhead 5.00 Total absorption cost per unit $ 23.00 The company is trying to decide between two alternatives: Alternative 1: Continue making 80,000 units of Part A per year using its existing equipment at the unit cost shown above. The equipment used to make this part does not wear out through use and it has no resale value. Alternative 2: Replace the existing equipment with a new piece of equipment that the company would rent for $150,000 per year. The new piece of equipment would be used to make 80,000 units per year and it would reduce Part A's direct labor cost per unit by 20% and its variable overhead per unit by 30%. The direct materials cost per unit will remain constant. What is the financial advantage…
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