Material A required 5,000 kg Available in stock. It was purchased 5 years ago at per kg. If not used for M, it can be sold as scrap @ ` 15 per kg. 35 Material B required This has to be purchased at * 25 per kg from the market. 8,000 kg Other hardware items 10,000 To be incurred Dept X - Labor oriented for 1 month @ Labor to be freshly hired. No men 7,000 per month per man spare capacity available. Dept Y - Machine oriented 3,000 machine hours @ 5 per machine hour Existing spare capacity may be used. Patten and Specification 15,000 To be incurred for M, but after the order, it can be sold for ` 2,000 Required Considering relevant costs, find out the minimum value above which the company may accept the order.

Material A required 5,000 kg Available in stock. It was purchased 5 years ago at per kg. If not used for M, it can be sold as scrap @ ` 15 per kg. 35 Material B required This has to be purchased at * 25 per kg from the market. 8,000 kg Other hardware items 10,000 To be incurred Dept X - Labor oriented for 1 month @ Labor to be freshly hired. No men 7,000 per month per man spare capacity available. Dept Y - Machine oriented 3,000 machine hours @ 5 per machine hour Existing spare capacity may be used. Patten and Specification 15,000 To be incurred for M, but after the order, it can be sold for ` 2,000 Required Considering relevant costs, find out the minimum value above which the company may accept the order.

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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Required information An electric switch manufacturing company is trying to decide between three different assembly methods. Method A has an estimated first cost of $34,000, an annual operating cost (AOC) of $5,000, and a service life of 2 years. Method B will cost $77,000 to buy and will have an AOC of $4,000 over its 4-year service life. Method C costs $145,000 initially with an AOC of $6,500 over its 8-year life. Methods A and B will have no salvage value, but Method C will have equipment worth 13% of its first cost. Perform a present worth analysis to select the method at i= 14% per year. The present worth of method A is $ The present worth of method B is $ The present worth of method C is $ Method (Click to select) v is selected.
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