Finch Appliances makes and sells kitchen equipment for offices and hotel rooms.The management believes that a new model of refrigerator made out of a syntheticmaterial would sell well at a price of P430 per unit. Labor costs are estimated at P49per unit and overhead costs would be P58 per unit.The major uncertainty is the price of the synthetic material. The company is innegotiations with several suppliers for the material. Because of the risk associated withthe new product, it will only proceed if the estimated return is at least 20 percent of theselling priceRequired: What is the most Finch can pay for the synthetic material per unit(refrigerator) and meet its profitability goal? (Do not round intermediate calculations.)Highest material price per unit

Selling price of new model refrigerator=P430 per unit Desired return on selling price=20%

Answered: Finch Appliances makes and sells…

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

Vaughn Manufacturing is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $65 and Vaughn Manufacturing would sell it for $145. The cost to assemble the product is estimated at $28 per unit and Vaughn Manufacturing believes the market would support a price of $178 on the assembled unit. What is the correct decision using the sell or process further decision rule and why? Process further because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $33 per unit. Sell before assembly because profits will be greater by $28 per unit. O Process further because profits will be greater by $5 per unit. eTextbook and Media Save for Later Attempts: 2 of 3 used Submit Answer
Liquid Sleeve, Inc. is a company that makes a sealing solution for machine shaft surfaces that have been compromised by abrasion, high pressures,or inadequate lubrication. The manager is considering adding a metal-based nanoparticle (Type Al or Fe) to its solution to increase the product’s performance at high temperatures. The costs associated with each type are estimated. If the company’sMARRis 20% per year, which nanoparticle type should the company select? Utilize a rate of return analysis.
Two currently owned machines are being considered for the production of a part. The capital investment associated with the machines is about the same. The important differences between the machines are their production capacities (production rate × available production hours) and their reject rates (percentage of parts produced that cannot be sold). The material cost is P300.00 per part, and all defect-free parts produced can be sold for P600 each. (Rejected parts have negligible scrap value.) For either machine, the operator cost is P750.00 per hour and the variable overhead rate for traceable costs is P250.00 per hour. Considering the table below: MACHINE A: Production rate: 100 parts/hr Hours available for production: 7hrs/day Percent parts rejected: 10% MACHINE B: Production rate: 130 parts/hr Hours available for production: 6hrs/day Percent parts rejected: 15% What is the profit per day of Machine A? What is the profit per day of Machine B?
Tania Company manufactures watches. A national sporting goods chain recentlysubmitted a special order for 4,000 sport watches. Tania was not operating at capacityand could use the extra business. Unfortunately, the order’s offering price of RM17 perwatch was below the cost to produce the watches. The controller did not agree to take aloss on the deal. However, the personnel manager argued in favor of accepting theorder even though a loss would be incurred: it would avoid the problems of layoff andwould help maintain the community image of the company. The following informationis the full cost to produce a sport watch:Table 6: Production CostsDetails Unit CostRMDirect materials 6.50Direct labor 5.00Variable overhead 3.25Fixed overhead 2.50Total 17.25 List the relevant costs of the two alternatives of the special order. (ii) Propose whether operating income increase or decrease if the order is accepted
Bermuda Co. must choose between gas-powered and an electric-powered forklift truck for moving materials in its factory. Because both forklifts perform the same function, the firm will choose only one. (They are mutually exclusive investments.) The electric-powered truck will cost more, but it will be less expensive to operate; it will cost $110,000, whereas the gas powered truck will cost $40,000. The required rate of return that applies to both investments is 14 percent. The life for both types of truck is estimated be 12 years, during which time the net cash flows for the electric-powered truck will be $23,500 per year and those for gas-powered truck will be $10,000 per year. Calculate the NPV and IRR for each type of truck, and decide which to recommend.
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
The Lamar Company manufactures wiring tools. The company is currently producing well below its full capacity. The Boston Company has approached Lamar with an offer to buy 15,000 tools at $1.80 each. Lamar sells its tools wholesale for $1.90 each; the average cost per unit is $1.88, of which $0.32 is fixed costs. If Lamar were to accept Boston's offer, what would be the increase in Lamar's operating profits? Multiple Choice O O $1,500. $5,100. $1,200. $3,600.
The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting, grinding, and packing plant. The two alternatives are (1) a conveyor system with a high initial cost but low annual operating costs and (2) several forklift trucks, which cost less but have considerably higher operating costs. The decision to construct the plant has already been made, and the choice here will have no effect on the overall revenues of the project. The cost of capital for the plant is 12%, and the projects' expected net costs are listed in the following table: a. What is the IRR of each alternative? The IRR of alternative 1 is -Select- Year 0 1 2 3 4 5 -Select- Expected Net Cost Forklift -$200,000 -160,000 -160,000 -160,000 -160,000 -160,000 Conveyor -$500,000 -120,000 -120,000 -120,000 -120,000 -20,000 The IRR of alternative 2 is-Select- b. What is the present value of costs of each alternative? Do not round Intermediate calculations. Round your answers to the nearest…
Under pressure from its board of directors, management at Roadside is planning to enter the conventional battery-powered flashlight market. Roadside expects to sell this boring product to wholesalers for $18.12 per unit. Relevant fixed costs will total $334,573, and variable costs to make this product will be $14.57 per unit. Background research estimates the size of the market for conventional flashlights at 1.8 million units per year. If sales of this unit reach breakeven, what market share will Roadside have? Report your answer as a percent. Report 27.5%, for example, as "27.5". Rounding: tenth of a percent.
Lynch Castings is planning to replace a continuous casting machine with a newer and more efficient model. The existing model was purchased 5 years ago and cost £20000. It had an expected life of 10 years and salvage value of £4000. However, reliability has become a problem and replacement parts are costing the company £2000 a year. The market for continuous casting machines is currently somewhat flat. The distributors of the best known model currently available are keen to boost turnover and have offered to sell the company a new machine at a large discount to the list price. The price quoted by the distributors is £18000 for cash. The distributors are prepared to buy the old machine from the company for £6000 and claim that the new machine will require no maintenance, will last without problem for five years and they guarantee to buy it back at that time for £2000. The new machine will result in cost savings of £7000 per year but will require additional working capital of £5000 which…
Two alternative locations are under consideration for a new plant: Jackson, Mississippi, and Dayton, Ohio. The Jackson location is superior in terms of costs. However, management believes that sales volume would decline if this location were chosen because it is farther from the market, and the firm's customers prefer local suppliers. The selling price of the product is $375 per unit in either case. Use the following information to determine which location yields the higher total profit per year: Location Jackson Dayton Annual Fixed Cost $2,100,000 $3,000,000 Variable Cost per Unit $45 $80 Forecasted Demand per Year 40,000 units 39,000 units The annual profit from Jackson is $8575000. (Enter your response as an integer.)
Crane Company is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Crane Company would sell it for $135. The cost to assemble the product is estimated at $20 p unit and Crane Company believes the market would support a price of $167 on the assembled unit. What is the correct decisio using the sell or process further decision rule? O Process further, the company will be better off by $32 per unit. O Sell before assembly, the company will be better off by $ per unit. O Sell before assembly, the company will be better off by $20 per unit. O Process further, the company will be better off by $12 per unit. Save for Later Attempts: 0 of 1 used Submit Answer

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS