**Scenario Overview:**Assume that if Sandhill Water accepts Clifton’s offer, the company can use the freed-up manufacturing facilities to manufacture a new line of growing lights. The company estimates it can sell 93,050 of the new lights each year at a price of $13. Variable costs of the lights are expected to be $10 per unit. The timer unit supervisory and clerical staff would be transferred to this new product line.**Task:**Calculate the total relevant cost to make the timer units and the net cost if they accept Clifton's offer.---**Input Fields:**- **Total relevant cost to make:** $ [Enter Value] - **Net relevant cost if they accept Clifton's offer:** $ [Enter Value] Sandhill Water Co. is a leading producer of greenhouse irrigation systems. Currently, the company manufactures the timer unit used in each of its systems. Based on an annual production of 44,500 timers, the company has calculated the following unit costs. Direct fixed costs include supervisory and clerical salaries and equipment depreciation.- Direct materials: $12- Direct labor: $7- Variable manufacturing overhead: $3- Direct fixed manufacturing overhead: $10 (30% salaries, 70% depreciation)- Allocated fixed manufacturing overhead: $10**Total unit cost:** $42Clifton Clocks has offered to provide the timer units to Sandhill at a price of $34 per unit. If Sandhill accepts the offer, the current timer unit supervisory and clerical staff will be laid off.

Assume that if Sandhill Water accepts Clifton's offer, the company can use the freed-up manufacturing facilities to manufacture a new line of growing lights. The company estimates it can sell 93,050 of the new lights each year at a price of $ 13. Variable costs of the lights are expected to be $ 10 per unit. The timer unit supervisory and clerical staff would be transferred to this new product line. Calculate the total relevant cost to make the timer units and the net cost if they accept Clifton's offer. Total relevant cost to make Net relevant cost if they accept Clifton's offer %24 %24

Assume that if Sandhill Water accepts Clifton's offer, the company can use the freed-up manufacturing facilities to manufacture a new line of growing lights. The company estimates it can sell 93,050 of the new lights each year at a price of $ 13. Variable costs of the lights are expected to be $ 10 per unit. The timer unit supervisory and clerical staff would be transferred to this new product line. Calculate the total relevant cost to make the timer units and the net cost if they accept Clifton's offer. Total relevant cost to make Net relevant cost if they accept Clifton's offer %24 %24

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

The new machine would require two skilled operators (one per shift), each receiving $24.00 an hour (including benefits), and contract maintenance of $110,000 a year, and would incur power costs of $37,000 yearly. In addition, the automatic machine was expected to save at least $40,000 yearly through improved labor efficiency in other areas of the production. Certain aspects of the Viva purchase decision were difficult to quantify. First, Steven was unsure whether the tough collective-bargaining agreement his company had with the employees' union would allow him to lay off the 24 operators of the semiautomated machines. Reassigning the workers to other jobs might be easier, but the only positions needing to be filled were unskilled jobs, which paid $12.00 an hour. The extent of any labor savings would depend on negotiations with the union. Second, Steven believed that the Viva would result in even higher levels of product quality and lower defect rates than the company was now boasting.…
You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $490 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units In year 3. The project has a 3-year life. Variable costs amount to $270 per unit and fixed costs are $100,000 per year. The project requires an initial Investment of $138,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $26,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. What change in NWC occurs at the end of year 1? (Enter a decrease as a negative amount using a minus sign.) Decrease of
The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a bid price; that is, set the project NPV to zero and solve for the variable in question. Martin Enterprises needs someone to supply it with 155,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost $1,950,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that, in five years, this equipment can be salvaged for $165,000. Your fixed production costs will be $280,000 per year, and your variable production costs should be $10.90 per carton. You also need an initial investment in net working capital of $145,000. The tax rate is 25 percent and you require a return of 14 percent on your investment. Assume that the price per carton is $17.50.…
The maker of Winglow is purchasing a new stamping machine. Two options are being considered, Rooney and Blair. The sales forecast for Winglow is 8,000 units for next year. If purchased, the Rooney will increase plant fixed costs by $20,000 and reduce variable costs by $5.60 per unit. The Blair will increase fixed costs by $5,000 and reduce variable costs by $4.00 per unit. If variable costs are now $20 per unit, which machine should be purchased?
Knarly Knife Kompany is thinking about launching a new kitchen knife set. Relevant fixed costs for this launch would be $1.3 million. The knife sets would sell for $55 each, earning a contribution margin of $22.93 per set. Suppose Knarly introduces the new knife set and sells exactly 45,600 knife sets. What would be Knarly's profit or loss on the launch, in dollars? (If it is a loss, be sure to include a negative sign. Rounding: whole dollar.) Answer is: -254,392, but HOW is that the answer? Please explain.
Jason is interested in finding the breakeven point for a new pump it plans to produce. The price of the pump is $250 and the variable cost ratio is 50% of the price. Jason calculated that the fixed costs will be about $400,000. What is the breakeven point of operations?
Mehmet Group wants to produce the M machines used in the casting industry in the Big Industry. The planned annual production and sales amount is 20,000 units and the sales price is calculated as "cost x 1.35". Information about this investment and production is given below. What is the sales price per unit of this project? What is the present and future value of the project's profit? TABLE: Workshop building and outbuildings 1.000.000 Usd Machine facilities 4,000,000 usd Staff is 380,000 usd and increasing by 40,000 usd every year Energy 180,000 usd and increasing by 15% every year Financing expenses 750,000 usd and decreasing by 10% each year Management and sales expenses decrease by 280,000 usd and 10,000 usd every year Raw material and auxiliary material 1.700 usd per unit Operation cost is 200,000 usd each year Major repair-maintenance is 150,000 usd in the 10th year Scrap value 8,000,000 usd in the 20th year Economic life 20 years Capital cost 25%
How would I do this problem?
Waterways is thinking of mass-producing one of its special-order sprinklers. To do so would increase unit variable costs for all sprinklers by an average of $0.70. The company also estimates that this change could increase the overall number of sprinklers sold by 10%, and the average unit sales price would increase $0.20. Waterways currently sells 490.000 sprinkler units at an average unit selling price of $28.60. The manufacturing costs are $7,866,260 variable and $2.011,486 fixed. Selling and administrative costs are $2,644.240 variable and $809,370 fixed. If Waterways begins mass-producing its special-order sprinklers, how would this affect the company? (Round ratio answers to O decimal places, e.g. 5X and net income answers to 2 decimal places, e.g. 5,275.25.) Contribution margin ratio Net income Current New % Effect Decrease Increase eTextbook and Media Save for Later Attempts: unlimited Submit Answer
Shue Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $24,700, and the company expects to sell 1,640 per year. The company currently sells 1,990 units of its existing model per year. If the new model is introduced, sales of the existing model will fall to 1,660 units per year. The old board retails for $23,100. Variable costs are 53 percent of sales, depreciation on the equipment to produce the new board will be $1,035,000 per year, and fixed costs are $3,250,000 per year. If the tax rate is 24 percent, what is the annual OCF for the project? Note: Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32. OCF
Waterways has discovered that a small fitting it now manufactures at a unit cost of $1.00 could be bought elsewhere for $0.81 per unit. Waterways has unit fixed manufacturing costs of $0.20 that cannot be eliminated by buying this unit. Waterways needs 465,000 of these units each year.If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now buys from another company. Waterways uses approximately 400 of these units each year. The cost of the unit is $12.33. To aid in the production of this unit, Waterways would need to purchase a new machine at a cost of $2,344, and the unit cost of producing the units would be $9.40. Without considering the possibility of making the timing unit, evaluate whether Waterways should buy or continue to make the small fitting. The company should (make or buy?) the fitting. Incremental cost / (savings) will be
Mueller Corp. manufactures flash drives that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mueller can buy a newer production machine that will increase fixed costs by $8,000 per year, and will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mueller's break-even point in units?