Question 2: A garment factory is facing recession. Its sunk cost are Rs. 50 lakhs per annum while the out of pocket costs are Rs. 80 per unit. The factory has a capacity to produce 24,000 units per year. Due to recession the maximum expected sales for six months are 6000 units at a selling price of Rs. 100 per unit. The recession is expected to last 6 months. Should the factory be shut down for this period? Write your comments

Question 2: A garment factory is facing recession. Its sunk cost are Rs. 50 lakhs per annum while the out of pocket costs are Rs. 80 per unit. The factory has a capacity to produce 24,000 units per year. Due to recession the maximum expected sales for six months are 6000 units at a selling price of Rs. 100 per unit. The recession is expected to last 6 months. Should the factory be shut down for this period? Write your comments

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

A maker of mechanical systems can reduce product recalls by 25% if it purchases new packaging equipment. The cost of the new equipment is expected to be $40,000 four years from now. How much could the company afford to spend now, instead of 4 years from now, if it uses a minimum attractive rate of return of 12% per year?
16) can you please help with this question?
4. Your friend wants to sell his shawarma business in mall of Dhahran. The rent of shop, machine, and all other expenses are amounting to $100000 for 10 years that you need to pay at day one. Annual operating costs for the business will be $1000. The cost of raw material per shawarma is $2. If the average number of customers per year is 275444. What should be the minimum price of shawarma to avoid any loss if the MARR is 12%/year. a) $3.876 b) $1.089 C) $2.068 d) $4.009
During a slack period, a manufacturer can sell 3000 articles per month at a price of $1.20 each. A $200,000 investment is used which is depreciated over a 20-year life. An annual fixed cost of $20,000 myst be considered well as an annual maintenance cost of $10,000. The production cost is $1.10 per item. The manufacturer's tax rate is 45%. Should the factory shut down?
2.
1. Your company has an opportunity to enhance its plastic product by adding a new feature. To make the feature, you need a new injection molding machine costing $100,000. On a per unit basis the cost of the unit increases by $3.00. You expect to be able to sell it for an additional $4.00 per unit. Sales believes that the sales will be 150,000 per year for the next five years. a. What is the ROI time? Determine the answer mathematically and show your manager a graphical representation.
6. A factory engaged in the fabrication of an automobile part with production capacity of 700,000 units per year is only operating at 62% of capacity due to unavailability of the necessary foreign currency to finance the importation of the raw materials. The annual income is P430,000. Annual fixed cost is P190,000 and variable cost is PO.348 per unit. What is the current profit or loss?
A CNC mill was purchased 4 years ago for $50,000. The current market value is $26,000, which will decline as follows over the next 5 years: $20,000, $16,250, $ 14,000, $12,000, and $8500. The O&M costs are estimated to be $6000 this year. These costs are expected to increase by $2000 per year starting year 2. MARR = 10% The marginal cost for defender in year 2 Group of answer choices $13,750 $ is 14,600 $ 13,875 $15,400 $12,400
A company is considering switching from a cash only policy to a net 30 credit policy. The price per unit is $500 and the variable cost per unit is $350. The company currently sells 1,400 units per month. Under the proposed policy the company expects to sell 1,500 units per month. The monthly compounded APR is 18%. Calculate the NPV of this switch. Assume that there are 30 days in one month. (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit any commas and the $ sign in your response. For example, an answer of $1,000.50 should be entered as 1000.50) .
Exercise E Analysis of Hair Care Company's citrus hair conditioner reveals that it is losing $5,000 annually. The company sells 5,000 units of citrus hair conditioner each year at $10 per unit. Variable costs are $6 per unit. None of the company's fixed costs would be saved if the citrus hair conditioner were eliminated. What would be the increase or decrease in company net income if citrus hair condition were eliminated?
4. Nestle Ltd. It produces its premium plant food in 50 Kg bags. Demand is 100,000 Kgs. per week and the plant operates 52 weeks each year. Nestle can produce 250,000 Kgs. per week. The setup cost is OMR 200 and the annual holding cost rate is OMR 0.40 per bag. What will the optimal duration of the downtime in years ? a.None is correct b. 0.076 c. 0.069 d. 0.721 e. 0.065 O f. 0.502
What is the reduction in Variable manufacturing cost