INTER. ACCOUNTING - CONNECT+ALEKS ACCESS
10th Edition
ISBN: 9781264770335
Author: SPICELAND
Publisher: MCG
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Your program office has just completed
of the latest Contract
Performance Report on its Cost Plus
Fixed Fee contract with Truman Inc. The
original estimated cost of the contract is
$300 million and the fixed fee is $15
million.
The following information is available:
"Best Case" EAC = $295 million
"Most Likely" EAC = $310 million
"Worst Case" EAC = $348 million
Which one of the following represents
the best estimate of the funding
requirements for the Truman Inc.
contract?
9. Fabulous Fabricators needs to decide how to allocate space in its production facility this year.
It is considering the following contracts:
a. What are the profitability indexes of the projects?
b. What should Fabulouo Fabricators do?
1.
a. What are the profitability indexes of the projects?
The profitability index for contract Ais
(Round to two decimal places.)
The profitability index for contract B is
(Round to two decimal places.)
The profitability index for contract C is
(Round to two decimal places.)
b. What should Fabulous Fabricators do? (Select the best choice below)
O A. Since the profitability index for C is the largest, it should choose C.
O B. Since it has the capacity to do both B and C and NPVe +NPVC is greater than
NPVA. it should do both B and C.
OC. Since the NPV of A is the largest, it should choose A
O D. It should take the two projects with the highest profitability indexes: C and A
1. Data Table
(Click on the following icon o in order to copy its contents into a…
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- Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? **round to two decimal places**arrow_forwardSuppose that a project has an immediate cost of $10 million and running costs of $1 million per year beginning at the end of a one-year construction period. At the end of this year, annual gross revenue from the project of $1.5 million per year is generated in perpetuity. (You may assume that the running costs and revenues accrue at the end of each year.) (a) Is the project profitable in a net present-value sense if the interest rate is 8%? (b) For what range of interest rates (nonnegative) is the present value of net revenues (including the immediate cost of $10 million) positive?arrow_forwardUsing the percentage-of-completion method, calculate the estimated gross profit that would be recognized during each year of the construction period. (Do not leave any answer field blank. Enter 0 for amounts.) Using the completed-contract method, calculate the estimated gross profit that would be recognized during each year of the construction period. (Do not leave any answer field blank. Enter 0 for amounts.)arrow_forward
- ABC Corp. uses the cost to cost method to account for its construction contracts. The contract price of the project is P2,000,000. ABC Corp. estimates that it will take 36 months to complete the contract. The following information for its construction contract is presented below: 20x1 20x2 20x3 Cost incurred to date 350,000 1,250,000 ? Realized gross profit for the current year 50,000 300,000 80,000 1. What is the percentage of completion rate in year 20x1? 2. What is the estimated cost to complete in year 20x1? 3. What is the percentage of completion rate in year 20x2? 4. What is the total estimated cost to complete in 20x3?arrow_forwardConsider the following after-tax cash flows: (a) Compute the project balances for Projects A and D, as a function of project year, at i = 10%.(b) Compute the future worth values for Projects A and D at i = 10% at theend of service life.(c) Suppose that Projects Band Care mutually exclusive. Assume also that the required service period is eight years and that the company is considering leasing comparable equipment that has an annual lease expense of $3,000 for the remaining years of the required service period. Which project is the better choice?arrow_forwardK Fabulous Fabricators needs to decide how to allocate space in its production facility this year is considering the following contra a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators de? What are the profitability indexes of the projects? The profitability index for contract Ais (Round to be decimal places) Round to two decimal places) The profitablity index for contract Dis The profitability index for contract CH b. What should Fabulous Fabrators do? (Select the best choice below) OA It should take the two projects with the highest profitability indexes C and A OB. Since it has the capacity to do both Band C and NPV NPV is greater than NPV, it should do to and C OC. Since the NPV of A is the largest, it should choose A OD. Since the profitability indes for the largest, it should choose C Data table (Click on the following icon in order to copy its contents into a spread) Contract Use of Facility 100% 55% 45% C $2.02 m $105 min $1.46 milion…arrow_forward
- Odin Ltd (Odin) carries out research and development. In the year ended 30 June 2018, Odinincurred total costs in relation to project X of $900,000. These were incurred at the same amounteach month up to 30 April 2018, when the project was completed. The product produced by theproject went on sale from 31 May 2018.The project had been confirmed as feasible on 1 January 2018, and the product produced by theproject was expected to have a useful life of five years.Which is carrying amount of the development expenditure asset as at 30 June 2018?A $354,000B $870,000C $360,000D $0arrow_forward· The company manager targets to reduce the current ratio in the year (2020) by 33% from the previous year (2019), this requiring to downsize the amount of the total current asset. To what level can the manager reduce the total current asset to achieve this target at (2020)? (Suppose the other things are fixed)arrow_forwardAssume, instead of $1,440,000, the latest forecast of total costs at the end of 2023 was $1,968,000. How much income would Sheridan then report for the year 2023?arrow_forward
- The initial construction cost of a project is $200000 which should be paid at the beginning of the construction period (time =0). Extra expenditures planning to be paid during operation period, which are ($5000) at the end of the first year, $3000 at the end of the second year, $1000 at the end of the third year, $1000 at the end of the fifth year and $ 1000 at the end of the sixth year. If the project life is 10 years and the interest rate is %10, draw the cash flow diagram and find a) the present worth of the project, b) the future worth at the end of the project life, c) the annual payment wortharrow_forwardInitial project set-up costs are estimated to be SEK15m (year 0-2023). Further estimated operating costs and projected revenues are as follows: Operating costs - Years 1-5 (2024-2028) All figures are in millions of SEK. Further costs are presented in the table below. No inflationary adjustments have been made Year Operational costs Maintenance costs Tech update costs Y1 6 Year Revenue (merchant fees) 4 3 Y2 6 Y1 8 4 3 Important points to note (after year 1): • Operational costs are estimated to increase by 3.5% per year • Maintenance costs are estimated to increase by 2.8% per year • Tech update costs are estimated to increase by 2% per year Revenue - revenue projections have been estimated as are follows: Y2 20 Y3 6 4 3 The discount rate used by BioMet is 4.5% per annum. Task Y3 22 in Y4 6 4 3 Y4 25 the Y5 6 4 3 Y5 30 table. 1. Prepare a cashflow forecast and use investment appraisal techniques to calculate Net Present Value (NPV), Return on Capital (ROC) and Payback Period (PB) for…arrow_forward6. Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? **round to two decimal places**arrow_forward
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