You are hired as a consultant to decide if your client should purchase a new, highly specializedpiece of equipment. The product to be produced by this equipment is forecast to have a totalworldwide demand of 15,000 units over the entire product life. The initial investment to acquire andinstall the equipment is $256,000. The variable cost to produce each unit will be $15, and theselling price for the finished product will be $30. Which of the following best describes the situationthe firm is facing?Multiple ChoiceIt is a good investmentThe company will recover its initial investment.The company's total margin will be less than its investment.The break-even is lower than the 15,000 units that are expected to sell.All of these choices are correct.

It is the process of making decisions that involve the management of costs in order to achieve…

Answered: You are hired as a consultant to decide…

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

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 $400 per unit and sales volume to be 1,000 units in year 1; 1,500 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 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 $35,000. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 10 percent. What change in NWC occurs at the end of year 1?
Compute the operating leverage factor of both plans at the anticipated demand of 6,000 units.
Manshukh
Carl's Connection manufactures add-on products for the automobile industry. The manager at Carl's Connections has just been presented the opportunity to invest in two independent projects. The first is an air conditioner for the back seats of vans. The second opportunity is turbocharger for sedans. Withoud either investment, the company currently expects average assets for the coming year to be $28.9 million and expects operating income to be $4.335 million. Below is the expected cost for each investment and their expected operating income. It can be assumed that the outlay is the value of the asset. Air Conditioner TurboCharger Outlay $750,000.00 $600,000.00 Operating Income $90,000.00 $82,080.00 Compute the ROI for each investment by itself and round to nearest hundreth after in percent form
Middle Industries produces a sensor for use in manufacturing. It produces the sensor in a plant with an annual practical capacity of 75,000 units. The variable cost of the sensor is $185.00 per unit, and the fixed costs of the plant are $12,375,000 annually. Current annual demand is 55,000 sensors. Middle Industries bought the plant because it was close to its other manufacturing facilities and was available for sale when they were searching for a location. Required: What cost per sensor should the cost system report to facilitate management decision making? What is the cost of excess capacity? What cost per sensor would the cost system report if the smallest manufacturing plant that could be built was able to produce 75,000 sensors? What would be the cost of excess capacity?
The technique for calculating a bid price can be extended to many other types of problems. Answer the following questions using the same technique as setting a bid price; that is, set the project NPV to zero and solve for the variable in question. Martin Enterprises needs someone to supply it with 155,000 cartons of machine screws per year to support its manufacturing needs over the next five years, and you've decided to bid on the contract. It will cost $1,950,000 to install the equipment necessary to start production; you'll depreciate this cost straight-line to zero over the project's life. You estimate that, in five years, this equipment can be salvaged for $165,000. Your fixed production costs will be $280,000 per year, and your variable production costs should be $10.90 per carton. You also need an initial investment in net working capital of $145,000. The tax rate is 25 percent and you require a return of 14 percent on your investment. Assume that the price per carton is $17.50.…
Jason is interested in finding the breakeven point for a new pump it plans to produce. The price of the pump is $250 and the variable cost ratio is 50% of the price. Jason calculated that the fixed costs will be about $400,000. What is the breakeven point of operations?
Hello question is attached. Thanks
Raghubhai
Problem 1 Preparing journal entries: Abdullah Engineering completed the following transactions in the month of June. Amina Abdullah, the owner, invested $100,000 cash, office equipment with a value of $5,000, and $60,000 of drafting equipment to launch the company. The company purchased land worth $49,000 for an office by paying $6,300 cash and signing a long-term note payable for $42,700. The company purchased a portable building with $55,000 cash and moved it onto the land acquired in b. The company paid $3,000 cash for the premium on an 18-month insurance policy. The company completed and delivered a set of plans for a client and collected $6,200 cash. The company purchased $20,000 of additional drafting equipment by paying $9,500 cash and signing a long-term note payable for $10,500. The company completed $14,000 of engineering services for a client. This amount is to be received in 30 days. The company purchased $1,150 of additional office equipment on credit. The company…
Premium Corporation believes that there is a market for a portable electronic toothbrush that can be easily carried by business travelers. Premium's market research department has surveyed the features and prices of electronic brushes currently on the market. Based on this research, Premium believes that $75 would be about the right price. At this price, marketing believes that about 78,000 new portable brushes can be sold over the product's life cycle. It will cost about $1,170,000 to design and develop the portable brush. Premium has a target profit of 25% of sales. Requirement 1. Determine the total and unit target cost to manufacture, sell, distribute, and service the portable brushes. Requirement 1. Determine the total and unit target cost to manufacture, sell, distribute, and service the portable brushes. Begin by computing the total target cost to manufacture, sell, distribute, and service the portable brushes, then compute the unit target cost to manufacture, sell, distribute,…
You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $450 per unit and sales volume to be 1,000 units in year 1; 1,250 units in year 2; and 1,325 units in year 3. The project has a 3-year life. Variable costs amount to $250 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $180,000 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 $40,000. NWC requirements at the beginning of each year will be approximately 25 percent of the projected sales during the coming year. The tax rate is 21 percent and the required return on the project is 12 percent. (Use SL depreciation table) What will the cash flows for this project be? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year Total cash flow 0 1 2…

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS