Campbell Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost ofproducing 9,200 containers follows.Unit-level materialsUnit-level laborUnit-level overheadProduct-level costs*Allocated facility-level costs$ 6,9006,4004,1009,60026,600*One-third of these costs can be avoided by purchasing the containers.Russo Container Company has offered to sell comparable containers to Campbell for $2.80 each.Requireda. Calculate the total relevant cost. Should Campbell continue to make the containers?b. Campbell could lease the space it currently uses in the manufacturing process. If leasing would produce $12,800 per month,calculate the total avoidable costs. Should Campbell continue to make the containers?a. Total relevant costShould Campbell continue to make the containers?b. Total avoidable costShould Campbell continue to make the containers?

A make-or-buy choice is made while deciding whether to manufacture a product internally or to buy it…

Answered: Required a. Calculate the total…

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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A distributor of fasteners is opening a new plant and considering whether to use a mechanized process or a manual process to package the product. The manual process will have a fixed cost of $36,234 and a variable cost of $2.14 per bag. The mechanized process would have a fixed cost of $84,420 and a variable cost of $1.85 per bag. The company expects to sell each bag of fasteners for $2.75. a) What is the break-even point for the manual process (in units)? b) What is the break-even point for the mechanized process (in units)? c) A point of indifference for two processes is quantity at which each process generates the same amount of profit (review video). What is the point of indifference for the two processes? (Hint: 1) Use equations to set profit of manual process equal to mechanized process and solve for quantity; 2) (Excel) If you have a break-even for each process - have only one cell that represents quantity that be used to calculates costs/revenues for each process and use Goal…
1. Compute the annual net cost savings promised by the automated welding machine. 2a. Using the data from (1) above and other data from the problem, compute the automated welding machine’s net present value. 2b. Would you recommend purchasing the automated welding machine? 3. Assume that management can identify several intangible benefits associated with the automated welding machine, including greater flexibility in shifting from one type of product to another, improved quality of output, and faster delivery as a result of reduced throughput time. What minimum dollar value per year would management have to attach to these intangible benefits in order to make the new welding machine an acceptable investment?
Which of the following is an example of a sunk cost? Select one: a. The firm pays to replant trees following the clear cutting of 1,000 acres during a timber harvest. b. The firm spends $20 million on heart medication research and discovers a promising drug. c. The firm replaces a piece of manufacturing equipment to maintain current manufacturing capacity. d. A bank opens a new office, and the new office leads to a decline in deposits at the bank's other offices. e. All of the above are examples of sunk costs.
Sell or Process Further Port Allen Chemical Company processes raw material D into joint products E and F. Raw material D costs $6 per liter. It costs $100 to convert 100 liters of D into 60 liters of E and 40 liters of F. Product F can be sold immediately for $6 per liter or processed further into Product G at an additional cost of $4 per liter. Product G can then be sold for $14 per liter. Determine whether Product F should be sold or processed further into Product G. • Calculate the net advantage (disadvantage) of further processing • Use a negative sign with your answer to indicate a net disadvantage (if applicable). $0 per liter
Vista Company manufactures electronic equipment. It currently purchases the special switches used in each of its products from an outside supplier. The supplier charges Vista $5.50 per switch. Vista's CEO is considering purchasing either machine A or machine B so the company can manufacture its own switches. The projected data are as follows: Annual fixed costs Variable cost per switch Machine A $632,400 1.78 Required: 1. For each machine, what is the minimum number of switches that Vista must make annually for total costs to equal outside purchase cost? 2. What volume level would produce the same total costs regardless of the machine purchased? 3. What is the most profitable alternative for producing 235,000 switches per year and what is the total cost of that alternative? Required 1 Required 2 Required 3 Complete this question by entering your answers in the tabs below. Machine B $ 860,100 0.80 Minimum number of switches For each machine, what is the minimum number of switches that…
Required : i) List the alternatives facing Zee Manufacturing with respect to production of component S6 . ii) List the relevant costs for each alternative if Zee decides to purchase the component from Bryan . Predict whether the operating income will increase or decrease and better alternatives . b) Refer to the information for Zee Manufacturing above . Assume that 75 % of Zee Manufacturing's fixed overhead for component S6 would be eliminated if that component were no longer produced . Required : If Zee decides to purchase the component from Bryan , predict whether the operating income will increase or decrease and propose the better alternatives .
Waterways has discovered that a small fitting it now manufactures at a unit cost of $1.00 could be bought elsewhere for $0.81 per unit. Waterways has unit fixed manufacturing costs of $0.20 that cannot be eliminated by buying this unit. Waterways needs 465,000 of these units each year.If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now buys from another company. Waterways uses approximately 400 of these units each year. The cost of the unit is $12.33. To aid in the production of this unit, Waterways would need to purchase a new machine at a cost of $2,344, and the unit cost of producing the units would be $9.40. Without considering the possibility of making the timing unit, evaluate whether Waterways should buy or continue to make the small fitting. The company should (make or buy?) the fitting. Incremental cost / (savings) will be
A shelve manufacturer is developing a plan for the following two years. The question iswhether to lease a large workshop space with highproduction capacity or two workshop spaces with a smaller capacity. The initial cost to lease a large workshop space is equal tothe total cost of leasing two smaller ones. If the large workshop space is leased and customer demand is high, then NPV is $8,500,000 annually. If the large workshop is leased and customer demand is low, then NPV is$4,500,000. If two small workshops are leased and demand is low, the total NPV is $6,500,000 but if they experience high demand, the total NPV of two small offices will be $8,000,000.Some studies have been done on market dynamic and the market expert suggested that the likelihood of high demand is 0.7.Use the above information to determine which option returns the best NPV outcome in thetwo-year period.The rate of return is 0.1.
The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: Year Machine A 0 OLN3+ 1 2 4 $48,000 11,600 11,600 11,600 + replace Machine A Machine B These costs are expressed in real terms. a. Suppose you are Borstal's financial manager. If you had to buy one or the other machine and rent it to the production manager for that machine's economic life, what annual rental payment would you have to charge? Assume a 12% real discount rate and ignore taxes. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.) Machine B $58,000 11,200 11, 200 11,200 11,200 + replace Annual Rental Payment
Pharoah Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufacturing costs by the two methods are as follows. Direct materials Direct labor Variable overhead Fixed manufacturing costs (a) Pharoah' market research department has recommended an introductory unit sales price of $28.00. The selling expenses are estimated to be $432,000 annually plus $2.00 for each unit sold, regardless of manufacturing method. Capital-Intensive $4.00 per unit $5.00 per unit $3.00 per unit $2,284,000 Calculate the estimated break-even point in annual unit sales of the new product if Pharoah Company uses the: 1. Capital-intensive manufacturing method. Labor-intensive manufacturing method. 2. Labor-Intensive $4.50 per unit $7.00 per unit $4.00 per unit $1,437,000 Break-even point in units Capital-Intensive Labor-Intensive
Crane Company is starting business and is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $60 and Crane Company would sell it for $135. The cost to assemble the product is estimated at $20 p unit and Crane Company believes the market would support a price of $167 on the assembled unit. What is the correct decisio using the sell or process further decision rule? O Process further, the company will be better off by $32 per unit. O Sell before assembly, the company will be better off by $ per unit. O Sell before assembly, the company will be better off by $20 per unit. O Process further, the company will be better off by $12 per unit. Save for Later Attempts: 0 of 1 used Submit Answer
Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. The company has determined the following: (FV of $1, PV of $1, FVA of S1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Machine À could be purchased for $27,000. It will last 10 years with annual maintenance costs of $900 per year. After 10 years the machine can be sold for $2,835. Machine 8 could be purchased for $22,500. It also will last 10 years and will require maintenance costs of $3,600 in year three, $4,500 in year six, and $5,400 in year eight. After 10 years, the machine will have no salvage value. Required: Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations. Calculate the present value of Machine A & Machine B. Which machine Esquire…

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