Loose Leaf for Cost Management: A Strategic Emphasis
Loose Leaf for Cost Management: A Strategic Emphasis
8th Edition
ISBN: 9781260165180
Author: BLOCHER, Edward; Stout, David F.; Juras, Paul; Cokins, Gary
Publisher: McGraw-Hill Education
Question
Book Icon
Chapter 12, Problem 59P

1.

To determine

Determine the total cost value of “S” paint system.

1.

Expert Solution
Check Mark

Explanation of Solution

Compute the total cost value of “S” paint system:

Particulars Present                                                           ValueYear 1Year 2Year 4Year 5Year 6Year 7Year 8Year 9Year 10Year 11
Initial investment$400,000          
After-tax paint cost (1) $228,000$228,000$228,000$228,000$228,000$228,000$228,000$228,000$228,000$0
After-tax environ. costs (3) $383,845$383,845$383,845$383,845$383,845$383,845$383,845$383,845$383,845 
Total after-tax cash costs $611,845$611,845$611,845$611,845$611,845$611,845$611,845$611,845$611,845 
Depreciation (MACRS) (2) $40,000$72,000$46,080$36,880$29,480$26,200$26,200$26,240$26,200$13,120
Tax savings on depreciation $16,000$28,800$18,432$14,752$11,792$10,480$10,480$10,496$10,480$5,248
Net after-tax cash costs$3,359,719$595,845$583,045$593,413$597,093$600,053$601,365$601,365$601,349$601,365-$5,248
Total cost$3,759,719          

Working notes:

Determine the amount of annual tax:

Annual tax}  = (Paint cost per unit×Annual coston disposal of machine×(1Tax rate)=$0.19 × 2,000,000 × (1 - 0.40)=$380,000×0.60=$228,000

Determine the amount of annual tax of “P”:

Annual tax}  = (Amortization cost per unit×Annual coston disposal of machine×(1Tax rate)=$0.20 × 2,000,000 × (1 - 0.40)=$400,000×0.60=$240,000

2.

To determine

Determine the total cost value of “P” paint system.

2.

Expert Solution
Check Mark

Explanation of Solution

Compute the total cost value of “P” paint system:

Particulars Present                                                           ValueYear 1Year 2Year 4Year 5Year 6Year 7Year 8Year 9Year 10Year 11
Powder-Paint System           
Initial investment$1,200,000          
After-tax paint cost (4) $240,000$240,000$240,000$240,000$240,000$240,000$240,000$240,000$240,000$0
Depreciation (MACRS) $120,000$216,000$138,240$110,640$88,440$78,600$78,600$78,720$78,600$39,360
Tax saving on depreciation $48,000$86,400$55,296$44,256$35,376$31,440$31,440$31,488$31,440$15,744
Net after-tax cash costs$1,064,021$192,000$153,600$184,704$195,744$204,624$208,560$208,560$208,512$208,560-$15,744
 Total cost (B)$2,264,021          

3.

To determine

Determine the amount of the firm that should be willing to pay for “P” process.

3.

Expert Solution
Check Mark

Explanation of Solution

Amount paid by firm}  = [Original estimated amount + Difference in PVs of costs ]=$1,200,000+$1,495,698=$2,695,698

Therefore, it is increased by 125% over the original price.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Covered member’s independence is impaired with respect to an attest client. What is a covered member for a CPA? What are the sources of liability for an auditor who violates the rules of professional conduct in an audit engagement?
Monty Inc., a major retailer of high-end office furniture, operates several stores and is a publicly traded company. The company is currently preparing its statement of cash flows. The comparative statement of financial position and income stetement for Monty as at May 31, 2020, are as The rollowing is additional Informacon soous transectons cunne tie year shoes may sa, coat for Monty ancy which tohows arks. Plant assets costing $69,000 were purchased by paying $47,000 in cash and issuing 5,000 common shares. In order to supplement is casn, Monty Issued ,000 edditone common snares. Cash dividends of $35,000 were declared and paid at the end of the fiscal year create cashflow direct method statement
Bonita Industries reports the following ledger account balances at June 30, 2025: Cash $1158 Accounts receivable 2838 Inventory 3384 Prepaid rent 104 Equipment 320 Accumulated depreciation-equipment 66 Accounts payable 920 Unearned rent revenue 144 Common stock 220 Retained earnings 6740 Service revenue 392 Interest revenue 80 Salaries and wages expense 200 Insurance expense 98 Assuming that all of the accounts have normal balances, what are total credits on the company's trial balance at June 30, 2025? A. $8562. B. $8586. C. $8496. D. $8482.

Chapter 12 Solutions

Loose Leaf for Cost Management: A Strategic Emphasis

Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education