Eastman Publishing Company is considering publishinga paperback textbook spreadsheet applications forbusiness. The fixed cost of manuscript preparation,textbook design, and production setup is estimated tobe $100,000. Variable production and material costs areestimated to be $5 per book. The publisher plans to sellthe text to college and university bookstores for $45each.a. What is the breakeven point?b. What profit or loss can be anticipated with a demandof 3000 copies?c. With a demand of 1800 copies, what is the minimumprice per copy that the publisher must charge to breakeven?

Break even point is the point at which total of cost and revenue is same or we can say it is no…

Answered: Eastman Publishing Company is…

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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(EOQ calculations) A downtown bookstore is trying to determine the optimal order quantity for a popular novel just printed in paperback. The store feels that the book will sell at four times its hardback figures. It would, therefore, sell approximately 2,000 copies in the next year at a price of $1.50. The store buys the book at a wholesale figure of $1. Costs for carrying the book are estimated at $0.25 a copy per year, and it costs $25 to order more books. a. Determine the EOQ. b. What would be the total costs for ordering the books 1, 4, 5, 10, and 15 times a year? c. What questionable assumptions are being made by the EOQ model? a. What is the economic order quantity (EOQ)? copies (Round to the nearest whole number.) C
The Hub Store at a university in eastern Canada is considering purchasing a self-serve checkout machine similar to those used in many grocery stores and other retail outlets. Currently the university pays part-time wages to students totalling $58,000 per year. A self-serve checkout machine would reduce part-time student wages by $38,000 per year. The machine would cost $300,000 and has a 10-year useful life. Total costs of operating the checkout machine would be $5,600 per year, including maintenance. Major maintenance would be needed on the machine in five years at a total cost of $10,600. The salvage value of the checkout machine in 10 years would be $43,000. The CCA rate is 25%. Management requires a 10% after-tax return on all equipment purchases. The company's tax rate is 30%. Required: 1. Determine the before-tax net annual cost savings that the new checkout machine will provide. Net annual cost savings Net present value $ *********** 2-a. Using the data from (1) above and other…
The Bremer Co. manufactures cordless telephones Bremer is planning to implement a JIT production system, which requires annual tooling costs of $150,000. Bremer estimates that the following annual benefits would arise from JIT production. a. Average inventory will decline by $700,000 from $900,000 to $200,00 b. Insurance, space, materials handling, and setup costs, which currently total $200,00 would decline by 30% c. The emphasis on quality inherent in JIT system would reduce rework costs by 20% Bremer currently incurs $350,000 on rework. d. Better quality would eneble Bremer to raise the prices of its products by $3 per unit. Bremer sells $30,000 unit each year. Bremer required rate of return on inventory investment is 12% per year Required: Calculate the net benefit or cost to the Bremer Corporation From implementing a JIT production system.
If the publisher believes that the price per copy could be increased to $21.95 and not affect the anticipated demand of 3800 copies, what action would you recommend? What profit or loss can be anticipated?
Seattle Radiology Group plans to invest in a new CT scanner. The group estimates $1,500 net revenue per scan. Preliminary market assessments indicate that demand will be less than 5,000 scans per year. The group is considering a scanner (Scanner B) that would result in total fixed costs of $800,000 and would yield a profit of $450,000 per year at a volume of 5,000 scans. What is the estimated breakeven volume (in number of scans) for Scanner B?
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.
The Hub Store at a university in eastern Canada is considering purchasing a self-serve checkout machine similar to those used in many grocery stores and other retail outlets. Currently the university pays part-time wages to students totalling $58,000 per year. A self-serve checkout machine would reduce part-time student wages by $38,000 per year. The machine would cost $300,000 and has a 10-year useful life. Total costs of operating the checkout machine would be $5,600 per year, including maintenance. Major maintenance would be needed on the machine in five years at a total cost of $10,600. The salvage value of the checkout machine in 10 years would be $43,000. The CCA rate is 25%. Management requires a 10% after-tax return on all equipment purchases. The company’s tax rate is 30%. Required:1. Determine the before-tax net annual cost savings that the new checkout machine will provide. 2-a. Using the data from (1) above and other data from the exercise, compute the checkout…
5. What is the maximum price that Silven should be willing to pay the outside supplier for a box of 24 tubes? 6. Instead of sales of 130,000 boxes of tubes, revised estimates show a sales volume of 161,000 boxes of tubes. At this higher sales volume, Silven would need to rent extra equipment at a cost of $51,000 per year to make the additional 31,000 boxes of tubes. Assuming that the outside supplier will not accept an order for less than 161,000 boxes of tubes, what is the financial advantage (disadvantage) in total (not per box) if Silven buys 161,000 boxes of tubes from the outside supplier? Given this new information, should Silven Industries make or buy the tubes? 7. Refer to the data in Required 6. Assume that the outside supplier will accept an order of any size for the tubes at a price of $1.95 per box. How many boxes of tubes should Silven make? How many boxes of tubes should it buy from the outside supplier?
Grove Audio is considering the introduction of a new model of wireless speakers with the following price and cost characteristics. Sales price $ 570.00 per unit Variable costs 330.00 per unit Fixed costs 960,000 per year Required: What number must Grove Audio sell annually to break even? What number must Grove Audio sell to make an operating profit of $180,000 for the year?
The Gizmo Manufacturing Company is considering making and selling a new product. The following data have been provided to management: Some managers are reluctant to launch a new product because of the uncertainty of future sales. To provide management with information that might make it easier to draw the correct conclusion, a break-even analysis will be performed for annual sales required to economically justify introducing the new product.What is the break-even value of units sold annually?
Poisson Calculators has found that it is indifferent between purchasing a high-capacity vacuum component assembly machine or a lower capacity machine as long as sales are above 1,900 units per month. The price of each calculator is $70. The high-capacity machine has cash expenses of $100,000 per month and depreciation and amortisation expenses of $30,000 per month, while the alternative has cash expenses of $30,000 per month and depreciation and amortisation expenses of $5,000 per month. Under the low-capacity alternative, variable costs per unit are $60. If the company bases its decisions on the Accounting Operating Profit Break-even, then what is the variable cost per unit under the high-capacity alternative? a. $10 b. $47 c. $60 d. $70
Gold Star Industries is contemplating a purchase of computers. The firm has narrowed its choices to the SAL 5000 and the HAL 1000. The company would need nine SALs, and each SAL costs $3,250 and requires $300 of maintenance each year. At the end of the computer’s eight-year life, each one could be sold for $195. Alternatively, the company could buy seven HALs. Each HAL costs $3,600 and requires $355 of maintenance every year. Each HAL lasts for six years and has a resale value of $140 at the end of its economic life. The company will continue to purchase the model that it chooses today into perpetuity, and the tax rate is 25 percent. Assume that the maintenance costs occur at year-end. Depreciation is straight-line to zero. What is the EAC of each model if the appropriate discount rate is 12 percent? (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

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