General Accounting QuestionA local landscaping company has purchased equipment costing $180,000 with an estimatedlifetime of 6 years using straight-line depreciation. Additional fixed costs per year are $85,000.Variable costs per landscaping service are $55, and the price per service averages $150. Whatwill the annual profit be if the company services 520 customers annually?

Step 1: Define ProfitNet profit is the amount the organization makes during a specific period after…

Answered: Question A local landscaping company…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 2E: Average rate of returncost savings Maui Fabricators Inc. is considering an investment in equipment...

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Average rate of returncost savings Maui Fabricators Inc. is considering an investment in equipment that will replace direct labor. The equipment has a cost of 125,000 with a 15,000 residual value and an eight-year life. The equipment will replace one employee who has an average wage of 28,000 per year. In addition, the equipment will have operating and energy costs of 5,150 per year. Determine the average rate of return on the equipment, giving effect to straight-line depreciation on the investment.
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further Instructions on internal rate of return in Excel, see Appendix C.
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A service center has installed a new computer costing 1.6 million dollars. The system is expected to serve for 8 years and straight-line depreciation is acceptable. There are additional fixed costs of $300,000 per year. The service repair charges a flat fee of $30 per customer. Variable costs are $20. What will profit be if annual volume is 75,000 units? Question 1 options: $1,000,000.00 $500,000.00 -$250,000.00 $250,000.00
General Accounting
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For a new punch press. Company A charges $250,000 to deliver and install it. Company A has estimated that the machine will have operating and maintenance (O & M) costs of $4000 a year. You estimate an annual benefit of $89,000. Company B charges $205,000 to deliver and install the device. Company B has estimated O & M of the press at $4300 a year. You estimate an annual benefit of $86,000. Both machines will last 5 years and can be sold for $15,000. Use an interest rate of 12%. Which machine should your company buy?
Crazy Burger Shop has the following investment opportunity: Burger machinery at t=0 costs $6,000. The cost of making burgers is $2,000 per year at t=1, t=2, and t=3. The burger machinery is depreciated using the straight-line method to $1,500 over 3 years. The market value of the burger machinery after three years is $2,600. Estimated annual sales are $4,500 per year at t=1, t=2, and t=3. The required return is 15%. The tax rate is 18%. Assume no working capital requirements. What is the NPV of this project? A. $259.97 B. $1,006.62 C. $876.44 D. $-702.92
Winthrop Company has an opportunity to manufacture and sell a new product for a five-year period. To pursue this opportunity, the company would need to purchase a plece of equipment for $130,000. The equipment would have a useful life of five years and a $10,000 salvage value. The CCA rate for the equipment is 30%. After careful study. Winthrop estimated the following annual costs and revenues for the new product: Sales revenues: Variable expenses Fixed expenses $250,000 $130,000 $ 70,000 The company's tax rate is 30% and its after-tax cost of capital is 10%. Required: 1. Compute the net present value of the project. (Hint Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and PV factor. Round the final answers to the nearest whole dollar. Negative value should be indicated with minus sign.) 2. Would you recommend that the project be undertaken? 1. Net present value 2 Would you recommend that the project be undertaken?
The equipment needed to manufacture a product costs $1,000,000 to purchase. This equipment has a life of 5 years and a salvage value of $100,000 Fixed costs for mis equipment are $50.000 per year while variable costs are $200 per unit of finished product. Assuming that an annual interest of 9% is used to account for the time value of money (a) Find the equivalent uniform annual cost associated with this eqaipment when 10.000 units of finished product are produced each year. (b) Now suppose that each unit of finished product generates $300 in revenue How many units need to be produced each year in order to break even on this equipment?
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Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $47,000 and a remaining useful life of five years. It can be sold now for $57,000. Variable manufacturing costs are $47,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Machine A Machine B Purchase price $ 118,000 $ 132,000 Variable manufacturing costs per year 20,000 14,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A.(b) Compute the income increase or decrease from replacing the old machine with Machine B.(c) Should Lopez keep or replace its old machine?(d) If the machine should be replaced, which new machine should Lopez purchase?

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