Practical Business Math Procedures Chapter 7 Challenge Problems and Summary Practice Set

a. Joe has signed a contract to sell gadgets to the city. The contract provides that sales of gadgets are dependent upon a test sample of gadgets operating successfully. In December, Joe delivers $12,000 worth of gadgets to the city that will be tested in March. Joe purchased the gadgets especially for this contract and paid $8,500

1) In this exercise, you viewed the settlement of costs to finished goods and manufactured output settlement. As noted in the exercise, each should be for $42,000.

The Les Family bought two cars; One for Ema and one for Haley. Ema’s car, a 2016 Nissan Versa 1.6 S, costs $10,977 and Haley’s car, a 2011 Ford Fiesta SE 4D Sedan, costs $9,998. Haley’s car is a ruby red colored minivan that will be a great fit to the family; Ema’s car is white as a cloud, and is a four seater. The Les’s have a monthly car payment of $185.00. In addition, they pay $175.00 per month for auto insurance and $200.00 per month $1062.63 for gasoline. The Les’s chose these vehicles because the cars are safe for their children, and because they can afford them of

5. (TCO B) You sold a car and accepted a note with the following cash flow stream as your payment. What was the effective price you received for the car assuming an interest rate of 6.0%?

1. Using a similar approach as example 2.3 (textbook page 75): “Finding the Sale Price of Items in a Department Store”, provide your analysis for the following problem statement:

14. (TCO 7) Pritchard Company manufactures a product that has a variable cost of $30 per unit. Fixed costs total $2,000,000, allocated on the basis of the number of units produced. Selling price is computer by adding a 12% markup to full cost. How much should the selling price be per unit for 300,000 units?

Explanation: Purchased 90,000 minus 1800 returned = 88,200 * 2% discount = 86,436. Plus 450 Freight = 86,886

The amortization of discount in 2012 is [$450,000 –($4,695,000 X .10)] =$19,500 leaving a balance of $305,000 - $19,500 = $285,500.

1. Jensen Company purchased a new machine on September 1, 2012, at a cost of $128,000. The company

* Under cost plus system, rates are negotiated between the manufacturer and the customer, and the distributor manages those contracted rates (and adds % to the cost)

For every $1 in sales, 77.5 cents of net income is generated. This rest is 22.5 cents in expenses. I am profitable because for every $1 my company made, 77.5 cents was my income. This means that my company gets to keep 77.5 cents for every $1 made in sales. My income is high, indicating that enough revenue is being generated from the costs of running my business. An area of strength based on my revenues and expenses is that most of my revenue is being generated from GO revenue. This means that money coming into the business is my salary that I am earning. Another area of strength is that my other highest source of

Since we are not provided with the information or evidence about cash inflow needed to calculate the Net Present Value, we assumed three different scenarios to cover all possible outcomes.

Problem 1(10 points). Harley-Davidson has its engine assembly plant in Milwaukee and its motorcycle assembly plant in Pennsylvania. Engines are transported between two plants using trucks, with each trip costing $1,000. The motorcycle plant assembles and sells 438 motorcycles each day. Each engine costs $500, and Harley incurs a holding cost of 20 percent per year. How many engine should Harley load onto each truck? What is the cycle inventory of engines at Harley? (Assume that they work 250 days per year)

Themachine costs $35,000 and is expected to last for 15 years. Rainbow has determined that the cost ofcapital for such an investment is 12%.[A] Compute the payback, net present value (NPV), and internal rate of return (IRR) for this machine.Should Rainbow purchase it? Assume that all cash flows (except the initial purchase) occur at the endof the year, and do not consider taxes. Rainbow Products is considering the purchase of a paint-mixing machine to reduce labor costs.The savings are expected to result in additional cash flows to Rainbow of $5,000 per year. Themachine costs $35,000 and is expected to last for 15 years. Rainbow has determined that the cost ofcapital for such an investment is 12%.[A] Compute the payback, net present value (NPV), and internal rate of return (IRR) for this machine.Should Rainbow purchase it? Assume that all cash flows (except the initial purchase) occur at the endof the year, and do not consider taxes. Rainbow Products is considering the purchase of a paint-mixing machine to reduce labor costs.The savings are expected to result in additional cash flows to Rainbow of $5,000 per year. Themachine costs $35,000 and is expected to last for 15 years. Rainbow has determined that the cost ofcapital for such an investment is 12%.[A] Compute the payback, net present value (NPV), and internal rate of return (IRR) for this machine.Should Rainbow purchase it? Assume that all cash flows (except the initial

7. The Fly-Right Airplane Company builds small jet airplanes to sell to corporations for the use of their executives, for the custom designed airplanes a substantial start-up cost is incurred to initiate the production. They have recently received purchase requests from 3 customers with short deadlines. However, because the company’s production facility has been