Big Dig Cats just bought a new loader including tires for $125,000. The tires are valued at $6,000. In 6 years it is estimated to have a salvage value of $35,000. It is used approximately 2,200 hours per year. Additionally, tax = 1.7%, insurance = 1.1%, and interest = 2.5%. Also, the total average operating cost is $35.55/hr, and the overhead cost is $1,700/year. a. Find the IT charge rate in $/hr using the AAV formula. b. Calculate the total cost per hour.

Big Dig Cats just bought a new loader including tires for $125,000. The tires are valued at $6,000. In 6 years it is estimated to have a salvage value of $35,000. It is used approximately 2,200 hours per year. Additionally, tax = 1.7%, insurance = 1.1%, and interest = 2.5%. Also, the total average operating cost is $35.55/hr, and the overhead cost is $1,700/year. a. Find the IT charge rate in $/hr using the AAV formula. b. Calculate the total cost per hour.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: le production. You will need an Initlal $5,900,000 investment In threadıne nt to get the project…

A: Given, Initial investment is $5,900,000 Required return is 9% Tax rate of 21% Salvage value is…

Q: Legend Service Center just purchased an automobile hoist for $27,600. The hoist has an 8-year life…

A: Payback period :— It is the time period in years required to recover all cash outflow from cash…

Q: A farmer bought a new harvester for $120,000. The harvesters operating expenses averaged $10,000 per…

A: The objective of the question is to calculate the after-tax net present worth of the investment in…

Q: Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they…

A: Npv is also known as Net present value. It is a capital budegting technique which helps in decision…

Q: Moonshine Corporation is considering purchasing one of two machines. Machine A has a useful life of…

A: Equivalent Annual Cost is a financial metric used to estimate the capital cost of investment…

Q: A high-precision programmable router for shaping furniture components is purchased by Henredon for…

A: Present worth is the difference between the present value of cash inflows and the present value of…

Q: . Prepare a depreciation schedule for six years using the straight-line method.

A: Under straight line method depreciable value of asset is equally depreciated over the estimated life…

Q: Tim Smunt has been asked to evaluate two machines. After some investigation, he determines that they…

A: Original cost of A = $12,000Original cost of B = $24,000Labor per year for A = $2,000Labor per year…

Q: Fanning Freight Company owns a truck that cost $50,000. Currently, the truck's book value is…

A: The relevant cost analysis is performed to compare the different alternatives available with the…

Q: Legend Service Center just purchased an automobile hoist for $33,900. The hoist has an 8-year life…

A: The question is based on the concept of Financial Accounting.

Q: Briggs Excavation Company is planning an investment of $688,600 for a bulldozer. The bulldozer is…

Q: Briggs Excavation Company is planning an investment of $108,600 for a bulldozer. The bulldozer is…

A: Net present value is important method of selection of projects based on time value of money.Net…

Q: Jones Excavation Company is planning an investment of $348,200 for a bulldozer. The bulldozer is…

A: The net cash inflow is the computed after deducting the total cash outflow from the total cash…

Q: Answer the following 3 questions based on the above information. 1) Calculate the after tax present…

A: Marginal tax rate :marginal tax rate is the tax rate that has been applied on one's highest dollar…

Q: XYZ Company invests $2,000,000 for a new machine. The new machine will generate an annual income of…

A: For calculation of IRR two rates are estimated with close range, in which one rate should have…

Q: The organization you are employed by is investing in new machinery for their warehouse. The $1.2…

A: Rate of return refers to the percentage of earnings from the investment made for the given period.…

Q: Barron Chemical uses a thermoplastic polymer to enhance the appearance of certain RV panels. The…

A: Rate of return refers to the minimum return that is earned by the investors over the amount of…

Q: A granary purchases a conveyor used in the manufacture of grain for transporting, filling, or…

A: The question is based on the concept of replacement decision of a machine based on maintenance and…

Q: AB Partnership admits C as a new partner. The statement of financial position before the admission…

A: The partnership comes into existence when two or more persons agree to do the business and further…

Q: Legend Service Center just purchased an automobile hoist for $36,800. The hoist has an 8-year life…

A: Introduction:- The payback period is calculated by dividing the amount of the investment by the…

Q: B2B Co. is considering the purchase of equipment that would allow the company to add a new product…

A: Calculation Net present value:

Q: Barron Chemical uses a thermoplastic polymer to enhance the appearance of certain RV panels. The…

A: Rate of return = IRR = the rate at which NPV is nil. The cash flows are: Year Costs Revenues…

Q: Meman

A: The objective of the question is to determine whether Walton Freight Company should replace its old…

Q: Roadrunner Freight Company owns a truck that cost $42,000. Currently, the truck’s book value is…

A: Calculation of relevant cost:

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Big Dig Cats just bought a new loader including tires for $125,000. The tires are valued at $6,000. In 6 years
it is estimated to have a salvage value of $35,000. It is used approximately 2,200 hours per year.
Additionally, tax = 1.7%, insurance = 1.1%, and interest = 2.5%. Also, the total average operating cost is
$35.55/hr, and the overhead cost is $1,700/year.
a. Find the IT charge rate in $/hr using the AAV formula.
b. Calculate the total cost per hour.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking, and HVAC equipment with newer models in one entire center built 10 years ago. 10 years ago, the original purchase price of the equipment was $700,000 and the operating cost has averaged $220,000 per year. Determine the equivalent annual cost of the equipment if the company can now sell it for $224,000. The company's MARR is 17% per year. The equivalent annual cost of the equipment is determined to be $
A small company heats its building and spends $8,400 per year on natural gas for this purpose. Cost increases of natural gas are expected to be 8% per year starting one year from now (i.e., the first cash flow is $9,072 at EOY one). Their maintenance on the gas furnace is $335 per year, and this expense is expected to increase by 12% per year starting one year from now (i.e., the first cash flow for this expense is $375.20 at the EOY one). If the planning horizon is 13 years, what is the total annual equivalent expense for operating and maintaining the furnace? The interest rate is 18% per year. Click the icon to view the interest and annuity table for discrete compounding when i = 8% per year. Click the icon to view the interest and annuity table for discrete compounding when i = 12% per year. Click the icon to view the interest and annuity table for discrete compounding when i = 18% per year. The total annual equivalent expense for operating and maintaining the furnace is $ two…
Payash Freight Company owns a truck that cost $31,000. Currently, the truck's book value is $23,000, and its expected remaining useful life is four years. Payash has the opportunity to purchase for $24,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,900 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $14,000. Required Calculate the total relevant costs. Should payash replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out?
Your company is considering the purchase of a new 623K Wheel Tractor-Scraper. Use the following information to calculate the hourly owning costs, hourly operating costs, and total owning and operating costs. - Delivered price (with tires): $420,000 - Cost of Tires: $30,000 and their life is determined by the average operation in zone B. - Salvage value is zero - the equipment is new and it is anticipated to be used for 5 years, until end of its service life. - Anticipated operating hours per year: 2,000 hrs/yr - Simple interest rate for purchase loan: 12% - Annual cost of Insurance: $5,500 (See optional method) - Property tax rate: 2% - Fuel use will be average value in medium range - Cost of fuel: $3.10 per gallon - Hourly Maintenance Cost: $5.00 per hour - Repair cost: $11.00 per hour - Operator cost (with fringes): $75 per hour - No undercarriage or special wear items costs…
Briggs Excavation Company is planning an investment of $932,100 for a bulldozer. The bulldozer is expected to operate for 3,000 hours per year for eight years. Customers will be charged $140 per hour for bulldozer work. The bulldozer operator costs $32 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $30,000. The bulldozer uses fuel that is expected to cost $42 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.352 2.991 6 4.917 4.355 4.111 3.784 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. Determine the equal annual net cash flows from operating the bulldozer. Use a minus sign to indicate cash outflows.…
Andres Gimenez is considering purchasing the DoublePlay 3000 machine. The machine will cost Ahmed $100,000 and he estimates it will last two years after which he will sell the machine for $30,000. The machine is considered specialty equipment under MACRS depreciation and depreciated over 4 years as shown below. The tax rate is 40%. Revenue Fixed Costs SG&A expenses Depreciation I EBIT Taxes Year 1 Year 2 $125,000 $ 125,000 $ 40,000 $ 40,000 20,000 20,000 33,333 44,450 $ 31,667 $ 20,550 8,220 12,667 Net Income $19,000 $ 12,330 1. What is the net present value of the investment, assuming an interest rate of 10%? 2. What is the internal rate of return of the investment?
Please show work