A chemical engineer working for a large chemical products company was asked to make a recommendation about which of three mutually exclusive revenue alternatives should be selected for improving the marketability of personal care products used for conditioning hair, cleansing skin, removing wrinkles, etc. The alternatives (X, Y, and Z) were ranked in order of increasing initial investment and then compared by incremental rate of return analysis. The rate of return on each increment of investment was less than the company’s MARR of 17% per year. The alternative to select is: (a) DN (b) Alternative X (c) Alternative Y (d) Alternative Z

A chemical engineer working for a large chemical products company was asked to make a recommendation about which of three mutually exclusive revenue alternatives should be selected for improving the marketability of personal care products used for conditioning hair, cleansing skin, removing wrinkles, etc. The alternatives (X, Y, and Z) were ranked in order of increasing initial investment and then compared by incremental rate of return analysis. The rate of return on each increment of investment was less than the company’s MARR of 17% per year. The alternative to select is: (a) DN (b) Alternative X (c) Alternative Y (d) Alternative Z

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 2P: Southland Corporation’s decision to produce a new line of recreational products resulted in the need...

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Nation's Capital Fitness, Incorporated, operates a chain of fitness centers in the Washington, D.C., area. The firm's controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of an equation, in the form of Y= a + bX, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: Month January February March April May June July August September October November December Total Average Hours of Maintenance Service Variable maintenance cost 560 480 280 470 350 460 320 430 490 380 350 340 4,910 409 $ Maintenance Costs $ 5,110 4,240 2,730 4,300 3,030 4, 120 PR 6-38 (Algo) Part 2 What is the variable component of the maintenance cost? 2. Using your answer to requirement 1, what is the variable component of the maintenance cost? Note: Round your answer to 2 decimal places. 3,000 3,590…
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Carizick Co manufactures gaming products. It has created a new games console called the QpBox which is about to be launched. Demand for the QpBox is anticipated to be high. The product life cycle of the QpBox is expected to be three years with 300,000 units forecast to be sold during its first year. Sales volumes are expected to decrease by 75,000 units in each subsequent year. Production volumes will be based on expected demand levels. The following costs for the QpBox have been determined: Design and development Pre-launch advertising Advertising in Year 2 Packaging Manufacturing cost $120m $0.5m $0.4m $3 per unit $80 per unit At a recent board meeting, the finance director said that Carizick Co should look to maximise the profitability of the QpBox over its life cycle. The marketing director made the comment that Carizick Co should focus on extending the maturity phase of the life cycle only as this stage is where the QpBox is most profitable. Contract with Zone Co Carizick Co has…
Nation’s Capital Fitness, Inc. operates a chain of fitness centers in the Washington, D.C., area. The firm’s controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern of the firm’s equipment maintenance costs must be determined. The accounting staff has suggested the use of an equation, in the form of Y = a + bX, for maintenance costs. Data regarding the maintenance hours and costs for last year are as follows: (image below) Required:1. Using the high-low method of cost estimation, estimate the behavior of the maintenance costs incurred by Nation’s Capital Fitness, Inc. Express the cost behavior pattern in equation form.2. Using your answer to requirement (1), what is the variable component of the maintenance cost?3. Compute the predicted maintenance cost at 590 hours of activity.4. Compute the variable cost per hour and the fixed cost per hour at 600 hours of activity. Explain why the fixed cost per hour could be…
Suppose that you have been given a summer job as an Intern at Issac Alrcams, a company that manufactures sophisticated spy cameras for remote-controlled millitary reconnalssance alrcraft. The company, which is privately owned, has approached a bank for a loan to help finance its growth. The bank requires financlal statements before approving the loan. Requlred: Classify each cost listed below as elther a product cost or a perlod cost for the purpose of preparing financial statements for the bank. Costs Product Cost or Period Cost 1. Depreciation on salespersons' cars. 2. Rent on equipment used in the factory. 3. Lubricants used for machine maintenance. 4. Salaries of personnel who work in the finished goods warehouse. 5. Soap and paper towels used by factory workers at the end of a shift. 6. Factory supervisors' salaries. 7. Heat, water, and power consumed in the factory. 8. Materials used for boxing products for shipment overseas. (Units are not normally boxed.) 9. Advertising costs.…
Fitness Fanatics is a regional chain of health clubs that evaluates its club managers based on return on investment (ROI). The company's Springfield Club reported the following results for the past year: The following questions are to be considered independently. 1. Assume the club manager can reduce expenses by $2,920 without any change in sales or average operating assets. What would be the club's return on investment (ROI)?
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Blue is the controller at the Acme Shoe Company, a large manufacturing companylocated in Franklin, Pennsylvania. Acme has many divisions, and the performance ofeach division has typically been evaluated using a retum on investment (ROI)formula. The return on investment is caleulated by dividing profit by the book value of total assets.In a meeting yesterday with Bob Burn, the compuny president, Blue warned that thisreturn on investment measure might not be accurately rellecting how well thedivisions are doing. Blue is concerned that by using profits and the book value ofussets, division managers might be engaging in some short-term finagling to show the highest possible return. Bob concurred and asked what other numbers they could use to evaluate division performance.Blue said,T'm not sure, Bob. Net income isn't a good number for evaluationpurposes. Becuse we allocate a lot of overhead costs to the divisions on what somemanagers consider an arbitrary basis, net income won't work as a…
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