4b. Michelin is considering going "lights out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of$600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in aBanbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability andconsistency desired to equal or exceed the quality of blend now achieved manually; it will replace all of the manual effort described above. Theincome-tax rate is 25% and the after-tax MARR is 10%.Determine the taxable income for Year 2 (only - not a total) if they decide to continue with manual mixing.

The tax on cash outflow would result in savings in tax and hence it would result in a decrease in…

Answered: area of the business that operates 24/7…

area of the business that operates 24/7 , synthetic rubber, carbon black, oils, an ber for making tires (rubber products). M d now achieved manually; it will replaces

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

Chapter11: Linear Optimization Models

Section: Chapter Questions

Problem 1P: Kelson Sporting Equipment, Inc., makes two types of baseball gloves: a regular model and a catchers...

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4a. Michelin is considering going “lights out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually; it will replace all of the manual effort described above. The income-tax rate is 25% and the after-tax MARR is 10%. Determine the before-tax CF for Year 2 (only - not a total) if they decide to continue with manual mixing.
Michelin is considering going “lights out” in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires. New technology is available that has the reliability and consistency desired toequal or exceed the quality of blend now achieved manually. It requires aninvestment of $3.75 million, with $80,000 per year operational costs and will replace all of the manual effort described above. a. How are the current manual expenditures handled for tax purposes? b. How would the new technology expenditures be handled for tax purposes?
Michelin is considering going “lights out” in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually. It requires an investment of $2.5 million, with $110,000 per year operational costs and will replace all of the manual effort described above. The planning horizon is 8 years and there will be a $300,000 salvage value at that time for the new technology. The income-tax rate is 25% and the after-tax MARR is 10%. Determine the annual cost of purchasing the new technology and the EUAC of the two scenarios
Michelin is considering going “lights out” in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $600,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually. It requires an investment of $2.5 million, with $110,000 per yearoperational costs and will replace all of the manual effort described above. The planning horizon is 8 years and there will be a $300,000 salvage value at that time for the new technology. The income-tax rate is 25% and the after-tax MARR is 10%. a. Determine the annual cost of purchasing the new technology. b. Determine the annual cost of continuing with the manual mixing. c. Determine the amount of the…
Michelin is considering going "lights-out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $560,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually. It requires an investment of $2,300,000, with $95,000 per year operational costs and will replace all the manual effort described above. The planning horizon is 8 years, and there will be a $260,000 salvage value at that time for the new technology. Marginal taxes are 25%, and the after-tax MARR is 10%. The new investment relates to the 7-Year Property Class. Click here to access the TVM Factor Table Calculator Click here to access the MACRS-GDS table. Part a Determine the…
Michelin is considering going "lights-out" in the mixing area of the business that operates 24/7. Currently, personnel with a loaded cost of $520,000 per year are used to manually weigh real rubber, synthetic rubber, carbon black, oils, and other components prior to manual insertion in a Banbary mixer that provides a homogeneous blend of rubber for making tires (rubber products). New technology is available that has the reliability and consistency desired to equal or exceed the quality of blend now achieved manually. It requires an investment of $2,100,000, with $85,000 per year operational costs and will replace all the manual effort described above. The planning horizon is 8 years, and there will be a $220,000 salvage value at that time for the new technology. Marginal taxes are 25%, and the after-tax MARR is 10%. The new investment relates to the 7-Year Property Class.
Woodruff Company is currently producing a snowmobile that uses five specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity capacity and demand (with specialized parts required) and expected activity demand (with only commodity parts required) are provided. Activities Activity Driver ActivityCapacity Current ActivityDemand Expected ActivityDemand Material usage Number of parts 200,000 200,000 200,000 Installing parts Direct labor hours 20,000 20,000 16,000 Purchasing parts Number of orders 7,600 6,498 3,990 Additionally, the following activity cost data are provided: Material usage: $11 per specialized part used; $27 per commodity part; no fixed activity cost. Installing parts: $21 per direct labor hour; no fixed activity cost. Purchasing parts: Four salaried clerks, each earning a $47,000 annual salary; each clerk is capable of processing 1,900…
Theory of constraints, throughput margin, and relevant costs. Washington Industries manufactures electronic testing equipment. Washington also installs the equipment at customers’ sites and ensures that it functions smoothly. Additional information on the manufacturing and installation departments is as follows (capacities are expressed in terms of the number of units of electronic testing equipment): Washington manufactures only 250 units per year because the installation department has only enough capacity to install 250 units. The equipment sells for $55,000 per unit (installed) and has direct material costs of $30,000. All costs other than direct material costs are fixed. The following requirements refer only to the preceding data. There is no connection between the requirements.
What are the flaws in William's analysis? Should production be outsourced? Support your answer with appropriate calculations.
King Bathroom Fixtures (KBF) makes faucets, basins, and so on primarily for home use and sold through major retail chains. The design team at KBF has been working on a unique design to provide reasonable pressure while still conserving water. The market is quite competitive and KBF analysts believe that the fixture could sell for a unit price of $36.40. The cost accounting team at KBF has estimated the following manufacturing costs for the new design. Direct materials $ 19.75 Direct labor 5.90 Manufacturing overhead 8.85 Total $ 34.50 An operating profit of 12 percent of manufacturing costs is required for all new products at KBF without the explicit consent of the top executive team. At KBF, operating margin is defined as revenues less manufacturing costs, all divided by manufacturing costs). Required: a. Suppose KBF uses cost-plus pricing, setting the price equal to manufacturing costs plus 12 percent of manufacturing costs. What price should it charge for the…
Woodruff Company is currently producing a snowmobile that uses five specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity capacity and demand (with specialized parts required) and expected activity demand (with only commodity parts required) are provided. Activities Activity Driver ActivityCapacity Current ActivityDemand Expected ActivityDemand Material usage Number of parts 192,000 192,000 192,000 Installing parts Direct labor hours 90,000 90,000 72,000 Purchasing parts Number of orders 20,000 17,100 10,500 Additionally, the following activity cost data are provided: Material usage: $20 per specialized part used; $16 per commodity part; no fixed activity cost. Installing parts: $14 per direct labor hour; no fixed activity cost. Purchasing parts: Four salaried clerks, each earning a $45,000…
Woodruff Company is currently producing a snowmobile that uses five specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity capacity and demand (with specialized parts required) and expected activity demand (with only commodity parts required) are provided. Activities Activity Driver ActivityCapacity Current ActivityDemand Expected ActivityDemand Material usage Number of parts 270,000 270,000 270,000 Installing parts Direct labor hours 17,000 17,000 13,600 Purchasing parts Number of orders 13,600 11,628 7,140 Additionally, the following activity cost data are provided: Material usage: $23 per specialized part used; $15 per commodity part; no fixed activity cost. Installing parts: $22 per direct labor hour; no fixed activity cost. Purchasing parts: Four salaried clerks, each earning a $48,000 annual salary; each clerk is capable of processing…