Best Trim, a manufacturer of lawn mowers, predicts that it will purchase 204,000 spark plugs next year. Best Trim estimates that 17,000 spark plugs will be required each month. A supplier quotes a price of $9 per spark plug. The supplier also offers a special discount option: If all 204,000 spark plugs are purchased at the start of the year, a discount of 2% off the $9 price will be given. Best Trim can invest its cash at 10% per year. It costs Best Trim $260 to place each purchase order. Q. What other factors should Best Trim consider when making its decision?

Rally Quadcopters plans to sell a standard quadcopter (toy drone) for $45 and a deluxe quadcopter for $55. Rally purchases the standard quadcopter for $25 and the deluxe quadcopter for $30. Management expects to sell two deluxe quadcopters for every three standard quadcopters. The company's monthly fixed expenses are $23,100. How many of each type of quadcopter must Rally sell monthly to breakeven? To earn $15,400? First identify the formula to compute the sales in units at various levels of operating income using the contribution margin approach. (Abbreviations used: Avg. = average, and CM = contribution margin.) ( Operating income Fixed expenses >/Weighed-avg. CM per unit Breakeven sales in units Next compute the weighted-average contribution margin per unit. First identify the formula labels, then complete the calculations step by step. Standard Deluxe Total Sale price per unit Deduct Variable expense per unit 45 35 55 30 Contribution margin per unit Sales mix in units Contribution…

In the coming year, Concord, Inc. will be introducing its first product, a wrist brace that protects serious video gamers from repetitive- motion injuries. The brace will be sold for $13.00 to retailers throughout the country. All sales will be made on account. An expected 65% of sales will be collected within the quarter of the sale, and another 30% in the quarter following the sale. The remaining 5% of credit sales are expected to be uncollectible. The sales budget for the coming year is as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Budgeted sales units 29,000 41,000 57,000 77,000 Prepare Concord, Inc's cash receipts budget for the coming year. (Enter answers in necessary fields only. Leave other fields blank. Do not enter 0. Round "Budgeted sale price" and "Cash Receipts Budgets" answers to 2 decimal places, eg. 52.75 and all other answers to 0 decimal places, e.g. 5,275.)

Jeff & Bezos is a fresh groceries delivery company. The company has access to borrowing funds at a pre-tax rate of 8 % per year. Jeff & Bezos pays income taxes using 24 % tax rate. The company would like to start using high-speed low-altitude drones to deliver grocery purchases directly to residential customers' backyards. By doing so, the company would be saving $3.2 million pre-tax every single year. Jeff & Bezos is contemplating leasing the drones for a lease term that matches the drones' economic life. It would lease them from a different company, Nets & Flicks, that currently owns the required number of the drones. Doing that would have an estimated pre-tax annual cost of $2,130,000. Nets & Flicks' requirement is that the lease payments are made by Jeff & Bezos at the beginning of each year. Instead of leasing the fleet of the drones, Jeff & Bezos is also contemplating buying them, which would cost the company $9.9 million. If the company chooses to buy them, the drones would be…

Jeff & Bezos is a fresh groceries delivery company. They have access to borrowing funds at a pre-tax rate of 6 % per year. Jeff & Bezos pays income taxes using 21% tax rate. The company would like to start using high-speed low-altitude drones to deliver grocery purchases directly to residential customers' backyards. Jeff & Bezos is contemplating leasing the drones for a lease term that matches the drones' economic life. It would lease them from a different company, Nets & Flicks, that currently own the required number of the drones. Instead of leasing the fleet of the drones, Jeff & Bezos is also contemplating buying them, which would cost the company $4,500,000. If the company chooses to buy them, the drones would be losing their economic value following the straight-line depreciation method during a three year period. The fleet of drones, due to their heavy usage, would have no salvage value in three years. Calculate the pre-tax lease payment that would make both Jeff & Bezos and…

McGilla Golf has decided to sell a new line of golf clubs and would like to know the sensitivity of NPV to changes in the price of the new clubs and the quantity of new clubs sold. The clubs will sell for $810 per set and have a variable cost of $410 per set. The company has spent $151,000 for a marketing study that determined the company will sell 55,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,600 sets of its high-priced clubs. The high-priced clubs sell at $1,110 and have variable costs of $710. The company will also increase sales of its cheap clubs by 11,100 sets. The cheap clubs sell for $450 and have variable costs of $235 per set. The fixed costs each year will be $9,110,000. The company has also spent $1,120,000 on research and development for the new clubs. The plant and equipment required will cost $28,770,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net…

Jeff & Bezos is a fresh groceries delivery company. The company has access to borrowing funds at a pre-tax rate of 8% per year. Jeff & Bezos pays income taxes using 22% tax rate. The company would like to start using high speed low-altitude drones to deliver grocery purchases directly to residential customers backyards. Doing so would bring the company pre-tax savings in the amount of $3.2 million each year. The required fleet of drones costs $8.3 million. If the company chooses to buy them, the drones would be losing their economic value following the straight-line depreciation method during a five year period. The fieet of drones, due to their heavy usage, would have no salvage value at the end. Instead of buying the fleet of the drones, Jeff & Bezos is also contemplating leasing the drones for a lease term that matches the drones" economic life. It would lease them from a different company, Nets & Flicks, that currently owns the required number of the drones. The…

Phlight Restaurant is considering a delivery service. The firm expects that sales from the new service will be $150,000 per year. Phlight currently offers a sit-down service with annual sales of $100,000. While many of the delivery sales will be to new customers, Phlight estimates that 60% of their current sit-down customers will switch and use the delivery service. The level of incremental sales associated with introducing the delivery service is closest to: Select one: a. $90,000 b. $150,000 c. $60,000 d. $120,000

TopCap Co. is evaluating the purchase of another sewing machine that will be used to manufacture sport caps. The invoice price of the machine is $123,000. In addition, delivery and installation costs will total $5,500. The machine has the capacity to produce 12,000 dozen caps per year. Sales are forecast to increase gradually, and production volumes for each of the five years of the machine's life are expected to be as follows: Use Table 6-4. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.)        2019 3,600 dozen 2020 5,600 dozen 2021 8,500 dozen 2022 11,300 dozen 2023 12,000 dozen   The caps have a contribution margin of $8.00 per dozen. Fixed costs associated with the additional production (other than depreciation expense) will be negligible. Salvage value and the investment in working capital should be ignored. TopCap Co.'s cost of capital for this capacity expansion has been set at 14%.   Required: The caps have a…

Planet Airways has been given a 5-year license to start a budget airline between Stardust and Sundown. This service requires two planes which cost $6.5 million each, payable in one year’s time. Each aircraft will make one daily return trip, allowing for 350 flyable days per year. The remaining days of the year will be used to service the planes. The capacity of each plane is 200 passengers and the price per ticket is $550 per return trip. The average passenger load is 80 percent. The carrier’s office building will cost $26 million. Half of this amount is payable now and the balance is to be paid in a year’s time. The aircrafts and the building can be depreciated, for tax purposes, at the rate of 10% per annum of the initial cost. At the end of five years, the salvage values of the planes and the building are $2.6 million per plane and $7.8 million respectively.The operational costs will be $16,000 per one way trip (per flying day) and $6,000 per non-flying day, for each plane. The tax…