Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its inventory to provide a cooler weather option. The tops would sell for $52 each withexpected sales of 3,750 tops annually. By adding the fleece tops, management feels the firm will sell an additional 230 pairs of jeans at $62 a pair and 365 fewer T-shirts at $23 each. The variablecost per unit is $30 on the jeans, $14 on the T-shirts, and $26 on the fleece tops. With the new item, the depreciation expense is $32,000 a year and the fixed costs are $67,000 annually. The taxrate is 40 percent. What is the project's operating cash flow? A) $33, 545B) $26, 630C) $28, 655

Operating cash flow refers to the cash flow generated from the investment or working on a particular…

Answered: Burke's Corner currently sells blue…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Burke's Corner currently selis blue jeans and T-shirts. Management is considering adding fleece tops to its inventory to provide a cooler weather option. The tops would sell for 547 each with expected sales of 3, 500 tops annually. By adding the fleece tops, management feels the firm will sell an additional 205 pairs of jeans at 557 a pair and 340 fewer T-shirts at $18 each. The variable cost per unit is $25 on the jeans, $9 on the T-shirts, and $21 on the fleece tops. With the new item, the depreciation expense is $27,000 a year and the fixed costs are $62, 000 annually. The tax rate is 21 percent. What is the project's operating cash flow?
Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its inventory to provide a cooler weather option. The tops would sell for $50 each with expected sales of 3,650 tops annually. By adding the fleece tops, management feels the firm will sell an additional 220 pairs of jeans at $60 a pair and 355 fewer T-shirts at $21 each. The variable cost per unit is $28 on the jeans, $12 on the T-shirts, and $24 on the fleece tops. With the new item, the depreciation expense is $30,000 a year and the fixed costs are $65,000 annually. The tax rate is 21 percent. What is the project's operating cash flow? Multiple Choice O $27,396 $36,689 $32,959 $23,179 $21,673
The Knot manufactures men’s neckwear at its Spartanburg plant. The Knot is considering implementing a JIT production system. The following are the estimated costs and benefits of JIT production: a. Annual additional tooling costs $250,000 annually. b. Average inventory would decline by 80% from the current level of $1,000,000. c. Insurance, space, materials-handling, and setup costs, which currently total $400,000 annually, would decline by 20%. d. The emphasis on quality inherent in JIT production would reduce rework costs by 25%. The Knot currently incurs $160,000 in annual rework costs. e. Improved product quality under JIT production would enable The Knot to raise the price of its product by $2 per unit. The Knot sells 100,000 units each year. The Knot’s required rate of return on inventory investment is 15% per year. Q. Suppose The Knot implements JIT production at its Spartanburg plant. Give examples of performance measures The Knot could use to evaluate and control JIT…
Miller Books is considering publishing a book about meditation. The fixed costs to publish the book is estimated at $160,000. Variable material costs are estimated at $6 per book. Demand over the life of the textbook is estimated at 4,000 copies. Miller books anticipates that they can sell the books for $46 per unit. a) Write an expression for total revenue b) Write an expression for total cost c) Write an expression for total profit d) Find the break-even point e) Recommend a strategy if Miller will not be able to sell more than 3,500 copies.
Birkenstock is considering adding a new Big Buckle sandal to its current product offerings. Birkenstock expects to price the shoes at $125 per pair. The variable costs to produce one pair are estimated to be: $20 per pair direct materials; $25 per pair direct labor; $5 per pair shipping costs and $5 per pair miscellaneous overhead. The fixed costs for this line of shoes are: $50,000 advertising/promotion; $125,000 manufacturing plant manager salary; $350,000 depreciation expense on manufacturing equipment; and $50,000 other miscellaneous fixed costs. • Birkenstock's best guess is that they will sell 12,000 pairs of Big Buckle sandals in 2021. What is Birkenstock's expected 2021 profit on this product? Type your answer in the first blank below.
Hair Zone manufactures a brand of hair-styling gel. It is considering adding a modified version of the product – a foam that provides stronger hold. Hair Zone’s variable costs and prices to wholesalers are: Hair Zone expects to sell 1 million units of the new styling foam in the first year after introduction, but it expects that 60 per cent of those sales will come from buyers whonormally purchase Hair Zone’s styling gel. Hair Zone estimates that it would sell 1.5 million units of the gel if it did not introduce the foam. If the fixed cost of launching the new foam will be €100,000 during the first year, should Hair Zone add the new product to its line? Why or why not?
McGilla Golf is evaluating a new line of golf clubs. The clubs will sell for $1,030 per set and have a variable cost of $465 per set. The company has spent $165,000 for a marketing study that determined the company will sell 52,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,800 sets of its high-priced clubs. The high-priced clubs sell at $1,530 and have variable costs of $660. The company also will increase sales of its cheap clubs by 12,400 sets. The cheap clubs sell for $465 and have variable costs of $195 per set. The fixed costs each year will be $9,800,000. The company has also spent $1,250,000 on research and development for the new clubs. The plant and equipment required will cost $32,200,000 and will be depreciated on a straight-line basis to a zero salvage value. The new clubs will also require an increase in net working capital of $2,620,000 that will be returned at the end of the project. The tax rate is 25…
Burke's Corner currently sells blue jeans and T-shirts. Management is considering adding fleece tops to its inventory to provide a cooler weather option. The tops would sell for $53 each with expected sales of 4,300 tops annually. By adding the fleece tops, management feels the firm will sell an additional 285 pairs of jeans at $65 a pair and 420 fewer T-shirts at $26 each. The variable cost per unit is $36 on the jeans, $16 on the T-shirts, and $31 on the fleece tops. With the new item, the depreciation expense is $33,000 a year and the fixed costs are $76,000 annually. The tax rate is 35 percent. What is the project's operating cash flow?
Black Diamond Company produces snow skis. Each ski requires 2 pounds of carbon fiber. The company’s management predicts that 5,000 skis and 6,000 pounds of carbon fiber will be in inventory on June 30 of the current year and that 150,000 skis will be sold during the next (third) quarter. A set of two skis sells for $300. Management wants to end the third quarter with 3,500 skis and 4,000 pounds of carbon fiber in inventory. Carbon fiber can be purchased for $15 per pound. Each ski requires 0.5 hours of direct labor at $20 per hour. Variable overhead is applied at the rate of $8 per direct labor hour. The company budgets fixed overhead of $1,782,000 for the quarter. Required 1. Prepare the third-quarter production budget for skis. 2. Prepare the third-quarter direct materials (carbon fiber) budget; include the dollar cost of purchases. 3. Prepare the direct labor budget for the third quarter. 4. Prepare the factory overhead budget for the third quarter.
Mesa Cheese Company has developed a new cheese slicer called Slim Slicer. The company plans to sell this slicer through its catalog, which it issues monthly. Given market research, Mesa believes that it can charge $30 for the Slim Slicer. Prototypes of the Slim Slicer, however, are costing $31. By using cheaper materials and gaining efficiencies in mass production, Mesa believes it can reduce Slim Slicer's cost substantially. Mesa wishes to earn a return of 40% of the selling price. (a) Compute the target cost for the Slim Slicer. Target cost $
Flora’s Flats produces comfortable and portable women’s shoes designed to be worn as a second pair of shoes after a formal event. The company has the following financial information: The company’s sales price is $20 per unit. The variable costs of producing flats is $6 per unit. The company expects to have fixed costs of $10,000 next year. The company expects to sell 1,000 pairs of flats next year. Assume no taxes a. Prepare a budgeted contribution format income statement. b. Compute the margin of safety in both dollar and percentage terms. c. Compute the degree of operating leverage. d. If sales increase by 20% in the following year, how much would net income increase (use the degree of operating leverage to compute your answer).
Claxton Chicken Exporters requires the refrigerated capacity to warehouse export meats. It is considering using a contract warehouse, where it could rent space for $8 per square foot per month and estimates the variable cost of operating in this facility at $4 per square foot. Another location could be leased, using a triple-net lease for an expected fixed cost of $25,000 per month and variable operating costs of $2.50 per square foot. Finally, a warehouse could be purchased which would have an expected fixed cost of $40,000 per month and variable operating costs of $1.50 per square foot. At what volume and cost are contracting and leasing economically equal & At what volume and cost are contracting and purchasing economically equal?

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