A piece of laborsaving equipment has just come onto the market that Mitsui Electronics, Ltd., could useto reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow (currency is inthousands of yen, denoted by ¥):Purchase cost of the equipment ............. ¥432,000Annual cost savings that will beprovided by the equipment .................. ¥90,000Life of the equipment .............................. 12 yearsRequired:(Ignore income taxes.)1. Compute the payback period for the equipment. If the company requires a payback period of fouryears or less, would the equipment be purchased?2. Compute the simple rate of return on the equipment. Use straight-line depreciation based on theequipment’s useful life. Would the equipment be purchased if the company’s required rate of returnis 14%?

A piece of laborsaving equipment has just come onto the market that Mitsui Electronics, Ltd., could useto reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow (currency is inthousands of yen, denoted by ¥):Purchase cost of the equipment ............. ¥432,000Annual cost savings that will beprovided by the equipment .................. ¥90,000Life of the equipment .............................. 12 yearsRequired:(Ignore income taxes.)1. Compute the payback period for the equipment. If the company requires a payback period of fouryears or less, would the equipment be purchased?2. Compute the simple rate of return on the equipment. Use straight-line depreciation based on theequipment’s useful life. Would the equipment be purchased if the company’s required rate of returnis 14%?

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 11P: Emerald Island Company is considering building a manufacturing plant in County Kerry. Predicting...

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A piece of labor-saving equipment has just come onto the market that Mitsui Electronics, Ltd., could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow: Purchase cost of the equipment $ 560,500 Annual cost savings that will beprovided by the equipment $ 95,000 Life of the equipment 10 years Required: 1a. Compute the payback period for the equipment. 1b. If the company requires a payback period of four years or less, would the equipment be purchased? 2a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment’s useful life. 2b. Would the equipment be purchased if the company’s required rate of return is 16%?
A piece of labour-saving equipment has just come onto the market, which Kaisen Electronics Ltd. could use to reduce costs in one of its plants in Japan. Relevant data relating to the equipment follow (currency is in thousands of yen, denoted by ¥): Purchase cost of the equipment ¥ 283,500 Annual cost savings that will be provided by the equipment ¥ 63,000 Life of the equipment 10 years Required: 1-a. Compute the payback period for the equipment. (Round your answer to 1 decimal place.) 1-b. If the company requires a payback period of five years or less, would the equipment be purchased? multiple choice 1 No Yes 2-a. Compute the simple rate of return on the equipment. Use straight-line depreciation based on the equipment’s useful life. (Round your answer to 1 decimal place. (i.e., 0.123 should be considered as 12.3%).) 2-b. Will the equipment be purchased if the company requires a rate of return of at least 17%?
Davao has a potential foreign customer that has offered to buy 1,500 tons atP450 per ton. Assume that all of Davao’s costs would be at the same levels and rates as last year. What net income after taxes would Davao make if it took this order and rejected some business from regular customers so as not to exceed capacity?
A British-made component costs 118 U.K. pounds. A company in the United States needs to buy these components and the current indirect quote indicates that one dollar will buy 0.92 pounds. Ignoring transactions costs, how much will one component cost in U.S. dollars? Instruction: Type your answer in dollars, and round to two decimal places
One of your Taiwanese suppliers has bid on a new line of molded plastic parts that iscurrently being assembled at your plant. The supplier has bid $0.10 per part, given a forecastyou provided of 200,000 parts in year 1; 300,000 in year 2; and 500,000 in year 3.Shipping and handling of parts from the supplier’s factory is estimated at $0.01 per unit.Additional inventory handling charges should amount to $0.005 per unit. Finally, administrativecosts are estimated at $20 per month.Although your plant is able to continue producing the part, the plant would need toinvest in another molding machine, which would cost $10,000. Direct materials can bepurchased for $0.05 per unit. Direct labor is estimated at $0.03 per unit plus a 50 percentsurcharge for benei ts; indirect labor is estimated at $0.011 per unit plus 50 percent benei ts. Up-front engineering and design costs will amount to $30,000. Finally, management has insisted that overhead be allocated if the parts are made in-house at a rate…
The RV company, engaged in the fabrication of automobile engine part withproduction capacity of 700,000 units per year, is only operating at 65% capacity due to unavailability of the necessary foreign currency to finance the importation of their raw materials. The current annual income is P450,000; annual fixed costs are P190,000 and variable cost are P0.35 per unit. A) What is the current profit/loss? B) What is the breakeven point in units and in pesos? C) Draw the breakeven chart.
One of your Taiwanese suppliers has bid on a new line of molded plastic parts that is currently being assembled at your plant. The supplier has bid $0.10 per part, given a forecast you provided of 200,000 parts in year 1; 300,000 in year 2; and 500,000 in year 3. Shipping and handling of parts from the supplier’s factory is estimated at $0.01 per unit. Additional inventory handling charges should amount to $0.005 per unit. Finally,administrative costs are estimated at $20 per month. Although your plant is able to continue producing the part, the plant would need to invest in another molding machine, which would cost $10,000. Direct materials can be purchased for $0.05 per unit. Direct labor is estimated at $0.03 per unit plus a 50 percent surcharge for benefits; indirect labor is estimated at $0.011 per unit plus 50 percent benefits. Up-front engineering and design costs will amount to $30,000. Finally, management has insisted that overhead be allocated if the parts are made in-house…
Davao has a potential foreign customer that has offered to buy 1,500 tons at P450 per ton. Assume that all of Davao’s costs would be at the same levels and rates as last year. What net income after taxes would Davao make if it took this order and rejected some business from regular customers so as not to exceed capacity? Answer: 221,500 Without prejudice to your answers to previous questions, and assume that Davao plans to market its product in a new territory. Davao estimates that an advertising and promotion program costing P61,500 annually would need to be undertaken for the next two or three years. In addition, a P25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Davao’s current after-tax income of P94,500? Answer: 307.5
Davao has a potential foreign customer that has offered to buy 1,500 tons at P450 per ton. Assume that all of Davao’s costs would be at the same levels and rates as last year. What net income after taxes would Davao make if it took this order and rejected some business from regular customers so as not to exceed capacity? Without prejudice to your answers to previous questions, and assume that Davao plans to market its product in a new territory. Davao estimates that an advertising and promotion program costing P61,500 annually would need to be undertaken for the next two or three years. In addition, a P25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Davao’s current after-tax income of P94,500? If the sales volume is estimated to be 2,100 tons in the next year, and if the prices and costs stay at the same levels and amounts next year, the…
Use this information for Stryker Industries to answer the question that follow.Stryker Industries received an offer from an exporter for 15,000 units of product at $17.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price $20 Unit manufacturing costs: Variable 11 Fixed 1 What is the amount of income or loss from the acceptance of the offer?
a. Davao had a potential foreign customer that has offered to buy 1,500 tons at 450 per ton. Assume that all of Davao's costs would bet at the same levels and rates as last year. What net incomr after taxes would Davao make if it took this order and rejected some business from regular customers so as not to exceed capacity? b. Without prejudice to your answers to peevious questions, and assume that Davao plans to market its product in a new territory. Davao estimated that an advertising and promotion program costing 61,500 annually would need to be undertaken for the next two or three years. In addition l, a 25 per ton sales commission over and above the current commission to the sales force in the new territory would be required. How many tons would have to be sold in the new territory to maintain Davao's current after-tax income of 94,500.
Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 93,000 kilometers during a year, the average operating cost is 9.2 cents per kilometer. If a truck is driven only 62,000 kilometers during a year, the average operating cost increases to 9.9 cents per kilometer. Using the high-low method, estimate the variable operating cost per kilometer and the annual fixed operating cost associated with the fleet of trucks. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places.) Express the variable and fixed costs in the form Y = a + bX. (Do not round your intermediate calculations. Round the Variable cost per kilometer to 3 decimal places.) If a truck were driven 77,500 kilometers during a year, what total operating cost would you expect to be incurred? (Do not round intermediate calculations.)