1. Should SS upgrade its production line or replace it? Show your calculations 2. Suppose the one-time equipment cost to replace the production equipment is negotiable. All other data are as given previously. What is the maximum one-time equipment cost that SS would be willing to pay to replace the old equipment rather than upgrade it?
Q: P Company is try whother to acau bether
A: Goodwill is recorded ad an asset when there is the purchase of another business. Often the purchase…
Q: Variable Costing, Value of Ending Inventory, Operating Income Pattison Products, Inc., began…
A: Calculation of variable cost of production : Particulars Amount Direct materials per unit…
Q: All of Pocast Corporation's sales are on account. Sixty percent of the credit sales are collected in…
A: Solution:- Given, All of Pocast Corporation's sales are on account. Credit sales are collected in…
Q: Controls that enhance the accuracy and reliability of the accounting records are automated…
A: Accounting control is the manner in which process are configured to. Manage risk within an…
Q: _____ 1. If Moonton Company instructed Northern Vale Division to supply Iron Hooks to Mooniyan…
A: When we take decision by using marginal costing , we…
Q: from Towards a X Mail-Edjouline X Bb Content - ACG2 X CengageNOWv2 X (58) YouTube werPoint…
A:
Q: Kingbird Inc. has recorded all necessary adjusting entries, except for income tax expense, at its…
A: No. Account Titles and Explanation Debit Credit 1 Sales Revenue $ 661,500 Income…
Q: in the production process. The company applies ove to products using machir predetermined OH rate…
A: Overhead application (OA) refers to the assignment of the cost of factory overhead to the produced…
Q: Question Toy Plc. makes special toy cars which it sells to retailers for K25, 000 per toy car.…
A: The breakeven point is indeed the sales volume at which a company loses money. At this time, a…
Q: Triple-F Health Club (Family, Fitness, and Fun) is a not-for-profit, family-oriented health club.…
A: Cash budget is the one which includes the quantitative estimates for the payments and receipts of…
Q: units Number o
A: Depreciation can be charged by various methods like straight line method, declining balance method…
Q: Question 23 Based on the following information provided by Max Trading Company on December 31, 2000,…
A: Solution.. Net sales = Sales - sales return and allowances - sales discount = P780,000 -…
Q: Variable Costing, Absorption Costing During its first year of operations, Snobegon, Inc. (located in…
A: The cost per unit under absorption costing consists of variable and fixed manufacturing costs. The…
Q: On August 1, 2022, The STUVWXYZ Corporation paid P4,200,000 to Atras-Zhinigang Manufacturing Co. for…
A: Prepaid expenses are the one which are paid in advance for the following period. They are recorded…
Q: Required: 1. What is the annual payment (round to the nearest $)? %$4 2. What are the total interest…
A: Amortisation of Loan concept Annual Equal Annual Payment
Q: X owns a business in Manila. BIR imposed income tax on X’s net income while the City of Manila thru…
A: Double taxation Double taxation refers to the income taxes paid twice for the same source of income.…
Q: 5) Budgeted costs are: A) the costs incurred this year C) predicted or forecasted costs B)…
A: The cost which is incurred this year is called current cost. The cost which is incurred last year is…
Q: How much is the liquidation value per share of Jevan Company?
A: Liquidation is the process in which the company’s assets has been liquidated means cashed those…
Q: If national income Y = 10,500, disposable income Yd = 8,500 , consumption is C = 8,000, transfer…
A: The answer is stated below:
Q: ed into a contract agreement with the government to construct and edifice for a total contract…
A: Given: Total contract price= P25,000,000 government paid= P10,000,000 withheld 5% vat
Q: Force Corporation has one temporary difference at the end of 2020 that will reverse and cause…
A: A journal entry is the first step—and an essential function—of the accounting process. Journal…
Q: How can we determine the interest rate of a company from the annual report ? provide examples
A: Interest Expenses It is important for the business entity to calculate the interest cost which are…
Q: Determine if this shall result in recognition of liabilities 15.Violation of the terms of agreement…
A: As per IAS 37, of IFRS Provisions, contingent liabilities and contingent assets If likelihood of…
Q: 4. Hasya Enterprise sells notebooks and the annual demand for the notebooks is 1800. The cost of the…
A: Calculation of total cost in case the offer is accepted Ordering cost = RM 44 Unit Cost = 1200 -…
Q: The treatment of repairs and additions to property, plant and equipment can be best described as:…
A: Property, plant, and equipment repairs are a type of expenditure incurred after purchasing a…
Q: Which of the following audit phases would generally be conducted last in relation to the others? *
A:
Q: Based on the following reconciling items between the bank balance and the book balance on November…
A: A bank reconciliation statement is a statement prepared on a particular date to reconcile the…
Q: ancing for an acquisition structu either an asset or stock acquisit
A: To explain the correct option as,
Q: what are the two tax rates whih are used to calculate AMT, ignoring the special treatment of…
A: A dividend seems to be the distribution of a part of a company's earnings to a selected group of…
Q: When a firm gets riskier what will happen to its bonds Multiple Choice the market interest rate…
A: The primary risk associated with bonds are interest rate risk and market risk some corporation bonds…
Q: What can government (if anything) do to adapt to the changes before the end of fiscal year if their…
A: budget is prepared by the government in order to record the all expenditure and all the revenue that…
Q: Statement of financial position as at 30 June 2021 Provision for depreciation Costs (RM) Net Book…
A: Realisation A/c Dr. Cr. Particulars Amount Particulars Amount Freehold Land…
Q: 20. SPPE Corp is planning to expand, and new projects is expecting to earn an average of Php375,000…
A: Introduction:- Economic value added means as follows under:- It is calculate correct economic…
Q: Blue Corporation holds 70 percent of Black Company's voting common stock. On January 1, 2003, Black…
A: In case of Consolidation, when there is a transfer of asset between the parent and the subsidiary…
Q: The Bomb Pop Corporation sold ice cream equipment for $18,500. The equipment was originally…
A: Formula: Gain or loss = Sale value - Net book value of Asset
Q: When from among the choices available only one is possible, the obligation in effect ceases to be…
A: Answer:- True Explanation:- When from the choices available only one of the choice is possible, the…
Q: Based on the following adjusted trial balance of Lyndon Company on December 31, 200C, the end of the…
A: Liability is the present obligation which arises as a result of past event and required to be paid…
Q: Which of the following would not be a correct form for an adjusting entry? a. A debit to a revenue…
A: Adjusting entries are prepared by management to ensure the accrual basis accounting system. It is…
Q: Give 2 takeaways in the importance of Non-Legal Law in Business Law and Give 1 Takeaway in the…
A: Business law refers to the law body which dealt with the commerce as well as business and it is…
Q: Flaherty, Inc., has just completed its first year of operations. The unit costs on a normal costing…
A: The absorption costing includes both variable and fixed cost whereas variable costing includes only…
Q: Donr bad aress receints from ber for ns 109C
A: Form 1099 as per provisions of IRS is for the persons doing small business or…
Q: As the desire decreases for a given materiality amount, the sample size necessary to test an…
A: Auditing and Assurance
Q: Determine if this shall result in recognition of liabilities 5. signing of employment contract by a…
A: Recognition of liabilities: Liability is recognized in the balance sheet when it is probable that an…
Q: If the value implied by the purchase price of an acquired company exceeds the fair values of…
A: Business combination between companies may result in profit or loss which are generally referred…
Q: QUESTION THREE The following transactions were extracted from the books Egyakoo Ltd for the month of…
A: Accounting equation is as below: Asset= liability + Equity Every transaction has two impact.
Q: Percent of Sales Method At the end of the current year, Accounts Receivable has a balance of…
A: Accounts receivables is the amount to be received from the customers on account. Bad debt expense…
Q: Calculate the annual depreciation
A: Purchase cost of machine = $850,000 Productive life = 7 years Salvage value = $150,000 Depreciable…
Q: the investment turnover increased by 30% and ROS decreased by 20%, the Residual Income would a.…
A: Residual income will overcome some problems that were present in Return on investment.
Q: Assets Liabilities Capital 1. 8.000 5,000
A: Formula: Accounting equation: Assets = Liabilities + Capital
Q: Determine if this shall result in recognition of liabilities 6. Declaration of cash dividends on…
A: Cumulative preference shares are those preference shares whose dividend gets accumulate if any year…
1. Should SS upgrade its production line or replace it? Show your calculations
2. Suppose the one-time equipment cost to replace the production equipment is negotiable.
All other data are as given previously. What is the maximum one-time equipment cost that SS
would be willing to pay to replace the old equipment rather than upgrade it?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)Thaler Company bought 26,000 of raw materials a year ago in anticipation of producing 5,000 units of a deluxe version of its product to be priced at 75 each. Now the price of the deluxe version has dropped to 35 each, and Thaler is now deciding whether to produce 1,500 units of the deluxe version at a cost of 48,000 or to scrap the project. What is the opportunity cost of this decision? a. 175,000 b. 375,000 c. 48,000 d. 26,000Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting machine. Two new models are available: Machine 190-3, which has a cost of $190,000, a 3-year expected life, and after-tax cash flows (labor savings and depreciation) of $87,000 per year; and Machine 360-6, which has a cost of $360,000, a 6-year life, and after-tax cash flows of $98,300 per year. Knitting machine prices are not expected to rise because inflation will be offset by cheaper components (microprocessors) used in the machines. Assume that Filkins’ cost of capital is 14%. Should the firm replace its old knitting machine? If so, which new machine should it use? By how much would the value of the company increase if it accepted the better machine? What is the equivalent annual annuity for each machine?
- Newmarge Products Inc. is evaluating a new design for one of its manufacturing processes. The new design will eliminate the production of a toxic solid residue. The initial cost of the system is estimated at 860,000 and includes computerized equipment, software, and installation. There is no expected salvage value. The new system has a useful life of 8 years and is projected to produce cash operating savings of 225,000 per year over the old system (reducing labor costs and costs of processing and disposing of toxic waste). The cost of capital is 16%. Required: 1. Compute the NPV of the new system. 2. One year after implementation, the internal audit staff noted the following about the new system: (1) the cost of acquiring the system was 60,000 more than expected due to higher installation costs, and (2) the annual cost savings were 20,000 less than expected because more labor cost was needed than anticipated. Using the changes in expected costs and benefits, compute the NPV as if this information had been available one year ago. Did the company make the right decision? 3. CONCEPTUAL CONNECTION Upon reporting the results mentioned in the postaudit, the marketing manager responded in a memo to the internal audit department indicating that cash inflows also had increased by a net of 60,000 per year because of increased purchases by environmentally sensitive customers. Describe the effect that this has on the analysis in Requirement 2. 4. CONCEPTUAL CONNECTION Why is a postaudit beneficial to a firm?Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last for ten years, Alfredo knows the technology will become old quickly, and so they plan to replace this printer in three years. At that point, Alfredo believes it will be able to sell the printer for $15,000. Calculate yearly depreciation using the double-declining-balance method.Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
- NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Based solely on financial factors, explain why NoFat should accept or reject PUs special sales offer.NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Assume for this question that NoFat rejected PUs special sales offer because the 2.20 price suggested by PU was too low. In response to the rejection, PU asked NoFat to determine the price at which it would be willing to accept the special sales offer. For its regular sales, NoFat sets prices by marking up variable costs by 10%. If Allyson decides to use NoFats 10% markup pricing method to set the price for PUs special sales offer, a. Calculate the price that NoFat would charge PU for each pound of olestra. b. Calculate the relevant profit that NoFat would earn if it set the special sales price by using its markup pricing method. (Hint: Use the estimate of relevant costs that you calculated in response to Requirement 1b.) c. Explain why NoFat should accept or reject the special sales offer if it uses its markup pricing method to set the special sales price.NoFat manufactures one product, olestra, and sells it to large potato chip manufacturers as the key ingredient in nonfat snack foods, including Ruffles, Lays, Doritos, and Tostitos brand products. For each of the past 3 years, sales of olestra have been far less than the expected annual volume of 125,000 pounds. Therefore, the company has ended each year with significant unused capacity. Due to a short shelf life, NoFat must sell every pound of olestra that it produces each year. As a result, NoFats controller, Allyson Ashley, has decided to seek out potential special sales offers from other companies. One company, Patterson Union (PU)a toxic waste cleanup companyoffered to buy 10,000 pounds of olestra from NoFat during December for a price of 2.20 per pound. PU discovered through its research that olestra has proven to be very effective in cleaning up toxic waste locations designated as Superfund Sites by the U.S. Environmental Protection Agency. Allyson was excited, noting that This is another way to use our expensive olestra plant! The annual costs incurred by NoFat to produce and sell 100,000 pounds of olestra are as follows: In addition, Allyson met with several of NoFats key production managers and discovered the following information: The special order could be produced without incurring any additional marketing or customer service costs. NoFat owns the aging plant facility that it uses to manufacture olestra. NoFat incurs costs to set up and clean its machines for each production run, or batch, of olestra that it produces. The total setup costs shown in the previous table represent the production of 20 batches during the year. NoFat leases its plant machinery. The lease agreement is negotiated and signed on the first day of each year. NoFat currently leases enough machinery to produce 125,000 pounds of olestra. PU requires that an independent quality team inspects any facility from which it makes purchases. The terms of the special sales offer would require NoFat to bear the 1,000 cost of the inspection team. Assume for this question that Allysons relevant analysis reveals that NoFat would earn a positive relevant profit of 10,000 from the special sale (i.e., the special sales alternative). However, after conducting this traditional, short-term relevant analysis, Allyson wonders whether it might be more profitable over the long term to downsize the company by reducing its manufacturing capacity (i.e., its plant machinery and plant facility). She is aware that downsizing requires a multiyear time horizon because companies usually cannot increase or decrease fixed plant assets every year. Therefore, Allyson has decided to use a 5-year time horizon in her long-term decision analysis. She has identified the following information regarding capacity downsizing (i.e., the downsizing alternative): The plant facility consists of several buildings. If it chooses to downsize its capacity, NoFat can immediately sell one of the buildings to an adjacent business for 30,000. If it chooses to downsize its capacity, NoFats annual lease cost for plant machinery will decrease to 9,000. Therefore, Allyson must choose between these two alternatives: Accept the special sales offer each year and earn a 10,000 relevant profit for each of the next 5 years or reject the special sales offer and downsize as described above. Assume that NoFat pays for all costs with cash. Also, assume a 10% discount rate, a 5-year time horizon, and all cash flows occur at the end of the year. Using an NPV approach to discount future cash flows to present value, a. Calculate the NPV of accepting the special sale with the assumed positive relevant profit of 10,000 per year (i.e., the special sales alternative). b. Calculate the NPV of downsizing capacity as previously described (i.e., the downsizing alternative). c. Based on the NPV of Requirements 5a and 5b, identify and explain which of these two alternatives is best for NoFat to pursue in the long term.
- Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6 years, and an estimated salvage value of 800. The replacement machine is eligible for 100% bonus depreciation at the time of purchase- The replacement machine would permit an output expansion, so sales would rise by 1,000 per year; even so, the new machines much greater efficiency would cause operating expenses to decline by 1,500 per year The new machine would require that inventories be increased by 2,000, but accounts payable would simultaneously increase by 500. Dautens marginal federal-plus-state tax rate is 25%, and its WACC is 11%. Should it replace the old machine?Mallette Manufacturing, Inc., produces washing machines, dryers, and dishwashers. Because of increasing competition, Mallette is considering investing in an automated manufacturing system. Since competition is most keen for dishwashers, the production process for this line has been selected for initial evaluation. The automated system for the dishwasher line would replace an existing system (purchased one year ago for 6 million). Although the existing system will be fully depreciated in nine years, it is expected to last another 10 years. The automated system would also have a useful life of 10 years. The existing system is capable of producing 100,000 dishwashers per year. Sales and production data using the existing system are provided by the Accounting Department: All cash expenses with the exception of depreciation, which is 6 per unit. The existing equipment is being depreciated using straight-line with no salvage value considered. The automated system will cost 34 million to purchase, plus an estimated 20 million in software and implementation. (Assume that all investment outlays occur at the beginning of the first year.) If the automated equipment is purchased, the old equipment can be sold for 3 million. The automated system will require fewer parts for production and will produce with less waste. Because of this, the direct material cost per unit will be reduced by 25 percent. Automation will also require fewer support activities, and as a consequence, volume-related overhead will be reduced by 4 per unit and direct fixed overhead (other than depreciation) by 17 per unit. Direct labor is reduced by 60 percent. Assume, for simplicity, that the new investment will be depreciated on a pure straight-line basis for tax purposes with no salvage value. Ignore the half-life convention. The firms cost of capital is 12 percent, but management chooses to use 20 percent as the required rate of return for evaluation of investments. The combined federal and state tax rate is 40 percent. Required: 1. Compute the net present value for the old system and the automated system. Which system would the company choose? 2. Repeat the net present value analysis of Requirement 1, using 12 percent as the discount rate. 3. Upon seeing the projected sales for the old system, the marketing manager commented: Sales of 100,000 units per year cannot be maintained in the current competitive environment for more than one year unless we buy the automated system. The automated system will allow us to compete on the basis of quality and lead time. If we keep the old system, our sales will drop by 10,000 units per year. Repeat the net present value analysis, using this new information and a 12 percent discount rate. 4. An industrial engineer for Mallette noticed that salvage value for the automated equipment had not been included in the analysis. He estimated that the equipment could be sold for 4 million at the end of 10 years. He also estimated that the equipment of the old system would have no salvage value at the end of 10 years. Repeat the net present value analysis using this information, the information in Requirement 3, and a 12 percent discount rate. 5. Given the outcomes of the previous four requirements, comment on the importance of providing accurate inputs for assessing investments in automated manufacturing systems.