Mickey's Boats will produce a new line of speed boats. It has a choice of larger production facility with a less laborers orsmaller production facility with more laborers. Each boat will be sold for $80,000. If the large production facility ischosen, the cost to produce each boat will be $50,000, while the cost per boat will be $64, 000 at the smaller productionfacility. The large production facility would have fixed costs of $10 million and a depreciation expense of $1,600,000,while those expenses would be $4 million and $600,000 for the smaller production facility. Calculate the number ofspeed boats for which the accounting operating profit is the same regardless of the production facility choice? a. 500boats b. 1,000 boats c. 429 boats d. 215 boats

Operating profit is the profit earned through core business operations. While calculating operating…

Answered: Mickey's Boats will produce a new line…

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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You are evaluating a project for The Farstroke golf club, guaranteed to correct that nasty slice. You estimate the sales price of The Farstroke to be $490 per unit and sales volume to be 1,200 units in year 1; 1,125 units in year 2; and 1,000 units In year 3. The project has a 3-year life. Variable costs amount to $270 per unit and fixed costs are $100,000 per year. The project requires an initial Investment of $138,000 in assets, which can be depreciated using bonus depreciation. The actual market value of these assets at the end of year 3 is expected to be $26,000. NWC requirements at the beginning of each year will be approximately 30 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 11 percent. What change in NWC occurs at the end of year 1? (Enter a decrease as a negative amount using a minus sign.) Decrease of
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