h-capacity machine has cash expenses of $10,000 per month, while the alternative has cash expenses of $5,000 per month and depreciation and amortisation expenses of $2,000 per month. under high capacity, the variable costs per unit are $10; and they are $40 for the other alternative. if the company bases its decisions on the accounting operating profit break-even, then what are the de
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- A bicycle manufacturer currently produces 360,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $2.10 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.50 per chain. The necessary machinery would cost $268,000 and would be obsolete after ten years. This investment could be depreciated to zero for tax purposes using a ten-year straight-line depreciation schedule. The plant manager estimates that the operation would require $56,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the ten years. Expected proceeds from scrapping the machinery after ten years are $20,100.If the company pays tax at a rate of 20% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the…"We ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. "At a price of $20 per drum, we would be paying $5.45 less than it costs us to manufacture the drums in our own plant. Because we use 80,000 drums a year, that equals an annual cost savings of $436,000." Antilles Refining's current cost to manufacture one drum is given below (based on 80,000 drums per year): Direct materials Direct labor Variable overhead Fixed overhead ($2.90 general company overhead, $1.80 depreciation, and $0.75 supervision) Total cost per drum A decision about whether to make or buy the drums is especially important at this time because the equipment used to make the drums is completely worn out and must be replaced. The choices facing the company are: $ 12.00 6.50 1.50 Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $180,000 per year. Alternative 2: Purchase…"In my opinion, we ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N.V., of Aruba. “At a price of $19 per drum, we would be paying $5.35 less than it costs us to manufacture the drums in our own plant. Since we use 60,000 drums a year, that would be an annual cost savings of $321,000." Antilles Refining's current cost to manufacture one drum is given below (based on 60,000 drums per year): Direct materials $ 10.45 Direct labor 7.00 Variable overhead 1.50 Fixed overhead ($3.00 general company overhead, $1.70 depreciation, and $0.70 supervision) 5.40 Total cost per drum $ 24.35 A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are: Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $168,000…
- Answer the following questions. 1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Douglas accept Peach's offer? Explain. 1. Douglas Computers makes 5,900 units of a circuit board, CB76 at a cost of $220 each. Variable cost per unit is $170 and fixed cost per unit is $50. Peach Electronics offers to supply 5,900 units of CB76 for $200. If Douglas buys from Peach it will be able to save $20 per unit in fixed costs but continue to incur the remaining $30 per unit. Should Douglas accept Peach's offer? Explain. Begin by calculating the relevant cost per unit. (If a box is not used in the table, leave the box empty; do not enter a zero.) Make Buy Relevant costs: Unit relevant cost Douglas…Big Seats has the capacity to produce 100,000 sofas per year but only produces 80,000 sofas per year. The sale price is $1,000 each. Direct materials equals $100 per sofa, direct labor equals $200 per sofa, and allocated overhead equals $100,000 per year. Buy & Large offers to buy an additional 2,000 sofas but is only willing to pay $800 per sofa. What is the additional operating income (loss) of accepting the offer? ENTER NEGATIVE NUMBERS WITH A "_" SIGN. DO NOT USE PARENTHESES. EXAMPLE: -1000Novak Fashions needs to replace a beltloop attacher that currently costs the company $58,000 in annual cash operating costs. This machine is of no use to another company, but it could be sold as scrap for $3,128. Managers have identified a potential replacement machine, Euromat's Model HD-435. The HD-435 is priced at $93,000 and would cost Novak Fashions $38,000 in annual cash operating costs. The machine has a useful life of 8 years, and it is not expected to have any salvage value at the end of that time. Click here to view the factor table.
- Grear Tire Company has produced a new tire with an estimated mean lifetime mileage of 33,500 miles. Management also belleves that the standard deviation is 3,500 miles and that tire mileage is normally distributed. To promote the new tire, Grear has offered to refund some money if the tire fails to reach 30,000 miles before the tire needs to be replaced. Specifically, for tires with a lifetime below 30,000 miles, Grear will refund a customer $1 per 100 miles short of 30,000. (a) For each tire sold, what is the average cost of the promotion (in $)? (Use at least 1,000 trials. Round your answer to two decimal places.) $ 47.57 (b) What is the probability that Grear will refund more than $25 for a tire? (Use at least 1,000 trials. Round your answer to three decimal places.) 0.043A distributor of fasteners is opening a new plant and considering whether to use a mechanized process or a manual process to package the product. The manual process will have a fixed cost of $36,234 and a variable cost of $2.14 per bag. The mechanized process would have a fixed cost of $84,420 and a variable cost of $1.85 per bag. The company expects to sell each bag of fasteners for $2.75. a) What is the break-even point for the manual process (in units)? b) What is the break-even point for the mechanized process (in units)? c) A point of indifference for two processes is quantity at which each process generates the same amount of profit (review video). What is the point of indifference for the two processes? (Hint: 1) Use equations to set profit of manual process equal to mechanized process and solve for quantity; 2) (Excel) If you have a break-even for each process - have only one cell that represents quantity that be used to calculates costs/revenues for each process and use Goal…Novak Inc. makes unfinished bookcases that it sells for $60. Production costs are $38 variable and $10 fixed. Because it has unused capacity, Novak is considering finishing the bookcases and selling them for $72. Variable finishing costs are expected to be $9 per unit with no increase in fixed costs. Prepare an analysis on a per-unit basis that shows whether Novak should sell unfinished or finished bookcases. (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Net Income Sell Process Further Increase (Decrease) $ $ $ Sales per unit Variable cost per unit Fixed cost per unit Total per unit cost $ Net income per unit The bookcases processed further. $ $
- 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?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?Peru Company, which manufactures sneakers, has enough capacity available to accept a special order of 20,000 pairs of sneakers at Ph 6.00 a pair. The normal selling price is Ph 10.00 a pair. Variable manufacturing costs are Ph 4.50 a pair, and fixed manufacturing costs are Ph 1.50 a pair. Peru will not incur any selling expenses as a result of the special order. What could be the effect on operating income if the special order could be accepted without affecting normal sales? O Ph 0 Ph 30,000 increase Ph 90,000 increase O Ph 120,000 increase