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Q4- PQR company sells two products. The total fixed expenses of the company are 1,197,000. The monthly data of PQR is as follows: Products Product A Product B Total ales $1,400,000 $600,000 $2,000,00C

Q4- PQR company sells two products. The total fixed expenses of the company are 1,197,000. The monthly data of PQR is as follows: Products Product A Product B Total ales $1,400,000 $600,000 $2,000,00C

FINANCIAL ACCOUNTING
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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Total operating expenses $90,125 Net operating income $34,875 Required: 1. Compute payback period off the truck. Is the investment in new truck desirable if maximum desired payback period of the Euro Transport company is 5 years? 2. Compute the accounting rate of return promised by the truck. Would the Euro Transport company be interested in new truck if minimum required accounting rate of return is 12%? Q3- The Sunshine company is considering two projects, project A and project B. Project A requires the purchase of an equipment but no working capital investment whereas project B requires a working capital investment but no equipment. The relevant information for net present value analysis is given below: Project A Project B $600,000 Cost of equipment Working capital needed Annual cash inflows $600,000 $160,000 $120,000 $40,000 Salvage value (scrap value) of equipment Project life The working capital required for project B will be released at the end of project life. Sunshine company uses an 18% discount rate. Required: Are the two projects comparable using net present value (NPV)? If yes, Select the best investment using net present value (NPV) 8 years 8 Years method. Q4- PQR company sells two products. The total fixed expenses of the company are 1,197,000. The monthly data of PQR is as follows: Products Product A Product B Total $1,400,000 $600,000 $2,000,000 Sales
Transcribed Image Text:Total operating expenses $90,125 Net operating income $34,875 Required: 1. Compute payback period off the truck. Is the investment in new truck desirable if maximum desired payback period of the Euro Transport company is 5 years? 2. Compute the accounting rate of return promised by the truck. Would the Euro Transport company be interested in new truck if minimum required accounting rate of return is 12%? Q3- The Sunshine company is considering two projects, project A and project B. Project A requires the purchase of an equipment but no working capital investment whereas project B requires a working capital investment but no equipment. The relevant information for net present value analysis is given below: Project A Project B $600,000 Cost of equipment Working capital needed Annual cash inflows $600,000 $160,000 $120,000 $40,000 Salvage value (scrap value) of equipment Project life The working capital required for project B will be released at the end of project life. Sunshine company uses an 18% discount rate. Required: Are the two projects comparable using net present value (NPV)? If yes, Select the best investment using net present value (NPV) 8 years 8 Years method. Q4- PQR company sells two products. The total fixed expenses of the company are 1,197,000. The monthly data of PQR is as follows: Products Product A Product B Total $1,400,000 $600,000 $2,000,000 Sales
Contribution margin ratio 60% 70% Required: 1. Prepare Income statement for the company. 2. Calculate break-even point in dollars. Q5- Amber Manufacturing provided the following information for last month: Sales Variable costs Fixed costs $20,000 6,000 9,000 Operating income $5,000 If sales double next month, what is the projected operating income? Q6- Benjamin Company has the following data: Budgeted Sales $108,000 132,000 144,000 120,000 Month January February March April Cost of goods sold average 60% of sales. The inventory at December 31 was $19,440. Desired ending inventory levels are 20% of next month's sales at cost. What is the desired ending inventory value at February 28? Q7- Downstairs Company has the following sales budget for the last six months of 2010: July August September October $100,000 80,000 110,000 80,000 100,000 94,000 November December
Transcribed Image Text:Contribution margin ratio 60% 70% Required: 1. Prepare Income statement for the company. 2. Calculate break-even point in dollars. Q5- Amber Manufacturing provided the following information for last month: Sales Variable costs Fixed costs $20,000 6,000 9,000 Operating income $5,000 If sales double next month, what is the projected operating income? Q6- Benjamin Company has the following data: Budgeted Sales $108,000 132,000 144,000 120,000 Month January February March April Cost of goods sold average 60% of sales. The inventory at December 31 was $19,440. Desired ending inventory levels are 20% of next month's sales at cost. What is the desired ending inventory value at February 28? Q7- Downstairs Company has the following sales budget for the last six months of 2010: July August September October $100,000 80,000 110,000 80,000 100,000 94,000 November December
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