A company has a process that results in 980 kilograms of Product X that can be sold for $9 perkilogram. An alternative would be to process Product X further at a cost of $1960 and then sell itfor $16 per kilogram. Should management sell Product X now or should Product X be processedfurther and then sold?Process further; the company will be better off by $4900.Sell now; the company will be better off by $4900.Process further; the company will be better off by $6860.Sell now; the company will be better off by $8820.

Incremental Analysis :— This analysis shows the comparison between two different alternatives. A…

Answered: A company has a process that results in…

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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Chade Corp. is considering a special order brought to it by a new client. If Chade determines the variable cost to be $9 per unit, and the contribution margin of the next best alternative of the facility to be $5 per unit, then if Chade has: a. Full capacity, the company will be profitable at $4 per unit. b. Excess capacity, the company will be profitable at $6 per unit. c. Full capacity, the selling price must be greater than $5 per unit. d. Excess capacity, the selling price must be greater than $9 per unit
A manager must decide how many machines of a certain type to buy. The machines will be used to manufacture a new gear for which there is increased demand. The manager has narrowed the decision to two alternatives: buy one machine or buy two. If only one machine is purchased and demand is more than it can handle, a second machine can be purchased at a later time. However, the cost per machine would be lower if the two machines were purchased at the same time. The estimated probability of low demand is .30, and the estimated probability of high demand is .70. The net present value associated with the purchase of two machines initially is $79,200 if demand is low and $130,600 if demand is high. The net present value for one machine and low demand is $99,000. If demand is high, there are three options. One option is to do nothing, which would have a net present value of $124,680. A second option is to subcontract; that would have a net present value of $115,650. The third option is to…
"We ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. "At a price of $21 per drum, we would be paying $7.05 less than it costs us to manufacture the drums in our own plant. Because we use 65,000 drums a year, that equals an annual cost savings of $458,250." Antilles Refining's current cost to manufacture one drum is given below (based on 65,000 drums per year): Direct materials Direct labor Variable overhead Fixed overhead ($3.50 general company overhead, $1.95 depreciation, and $0.90 supervision) Total cost per drum A decision about whether to make or buy the drums is especially important at this time because the equipment used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $175,500 per year. Alternative 2: Purchase the drums from an…
Miles Co. can further process Product B to produce Product C. Product B is currently selling for P60 per pound and costs P42 per pound to produce. Product C would sell for P82 per pound and would require an additional cost of P13 per pound to produce. What is the differential revenue of producing and selling Product C? (Per pound)
Two alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm's customers prefer local suppliers. The selling price of the product is $375 per unit in either case. Use the following information to determine which location yields the higher total profit per year: Location Jackson Dayton Annual Fixed Cost $2,100,000 $3,000,000 Variable Cost per Unit $45 $80 Forecasted Demand per Year 40,000 units 39,000 units The annual profit from Jackson is $8575000. (Enter your response as an integer.)
Carmen Co. can further process Product J to produce Product D. Product J is currently selling for $20.60 per pound and costs $15.40 per pound to produce. Product D would sell for $36.90 per pound and would require an additional cost of $10.10 per pound to produce. What is the differential cost of producing Product D?
Crane Company is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Crane Company would sell it for $135. The cost to assemble the product is estimated at $20 p unit and Crane Company believes the market would support a price of $167 on the assembled unit. What is the correct decisio using the sell or process further decision rule? O Process further, the company will be better off by $32 per unit. O Sell before assembly, the company will be better off by $ per unit. O Sell before assembly, the company will be better off by $20 per unit. O Process further, the company will be better off by $12 per unit. Save for Later Attempts: 0 of 1 used Submit Answer
Johnston Company wants to double production of Product X from 1,000 units to 2,000 units. The variable manufacturing cost per unit is $10. The variable nonmanufacturing cost per unit is $20. There are no fixed costs. The selling price per unit is $50. What is the incremental cost of the proposed change? A) $10,000 B) $20,000 C) $30,000 D) $60,000
A bicycle manufacturer currently produces 388,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2.10 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them.Direct in-house production costs are estimated to be only $1.60 per chain. The necessary machinery would cost $203,000 and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a ten-year straight-line depreciation schedule. The plant manager estimates that the operation would require $38,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the ten years. Expected proceeds from scrapping the machinery after ten years are $15,225. If the company pays tax at a rate of 20% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce…
17. A company has a process that results in 21000 pounds of product A…

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