The direct materials cost per pound for both years was $0.09 per pound. In 2022, Rolling Mills, a producer of organic oat flour, had thecapacity to produce 12,000,000 pounds of product at a conversioncost per pound of $0.18. The conversion cost per pound was $0.14in 2021 (the previous year). The direct material cost per pound forboth years was $0.09 per pound. In 2022, Rolling Mills produced10,500,000 pounds, while actual production for the previous yearwas 9,200,000 pounds.What was the cost of unused capacity in 2022?

Given:2022 Capacity: 12,000,000 pounds2022 Actual Production: 10,500,000 pounds2022 Conversion Cost…

Answered: In 2022, Rolling Mills, a producer of…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EB: Caduceus Company is considering the purchase of a new piece of factory equipment that will cost...

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ABC Manufacturing expects to sell 1,025 units of product in 2023 at an average price of $100,000 per unit based on current demand. The Chief Marketing Officer forecasts growth of 50 units per year through 2027. So, the demand will be 1,025 units in 2023, 1,075 units in 2024, etc. and the $100,000 price will remain consistent for all five years of the investment life. However, ABC cannot produce more than 1,000 units annually based on current capacity. In order to meet demand, ABC must either update the current plant or replace it. The old equipment is fully depreciated and can be sold for $4,000,000 if the plant is replaced. If the plant is updated, the costs to update it would be capitalized and depreciated over the useful life of the updated plant. If the plant is updated, then the old equipment would be retained. The following table summarizes the…
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ABC Manufacturing expects to sell 1,025 units of product in 2022 at an average price of $100,000 each based on current demand. The Chief Marketing Officer forecasts growth of 50 units per year through 2026. So, the demand will be 1,025 units in 2022, 1,075 units in 2023, etc. and the $100,000 price will remain consistent for all five years of the investment life. However, ABC cannot produce more than 1,000 units annually based on current capacity. In order to meet demand, ABC must either update the current plant or replace it. If the plant is replaced, an initial working capital investment of $6,000,000 is required and these funds will be released at the end of the investment life to be used elsewhere. The following table summarizes the projected data for both options: Update Replace Initial investment in 2022 $ 125,000,000 $ 130,000,000 Terminal salvage value in 2026 $ 8,000,000 $…
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A company is considering the purchase of a new machine for $68,000. Management predicts that the machine can produce sales of $19,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $7,000 per year including depreciation of $6,000 per year. Income tax expense is $4,800 per year based on a tax rate of 40%. What is the payback period for the new machine? Multiple Choice 22.67 years. 8.50 years. 3.58 years. 5.15 years. 11.33 years.
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