Determine the investment cost for replacing the 700 fixtures. $ b. Determine the annual utility cost savings from employing the new energy solution. $ Evaluate the proposal using net present value, assuming a 15-year life and 8% minimum rate of return. (Click here to view Present Value of Ordinary Annuity.)
Q: Minden Co. has sales of $500,000, operating profit of $50,000, interest expense of $10,000, tax…
A: Debt to equity ratio, is a financial metric that compares a company's total debt to its total…
Q: The accountant for Gizmo Traders provides you with the following information for the financial years…
A: Gross profit percentage is the percentage of gross profit earned by the entity on sales. It is…
Q: Parent Inc. purchased all the outstanding shares of Sub Ltd. on January 1, Year 1, for $254,000.…
A: Parent company is the one which has a stake or ownership in the subsidiary company. Subsidiary…
Q: FirstClass Gaming Inc. manufactures components for computer games within a relevant range of 134,400…
A: Variable cost is the one that varies with the variation in the number of units produced. Fixed cost…
Q: When your accountant is working with the Accountant's Copy of your data file, you cannot Select one:…
A: An Accountant's copy, also known as an Accountant's copy file, is a feature in accounting software…
Q: Littlefield Partners produce a part sold to agricultural equipment suppliers. For the last year…
A: Breakeven is the point at which an entity is in situation of no profit and no loss. At this point,…
Q: Make-or-Buy Decision for a Service Company The Theater Arts Guild of Dallas (TAG-D) employs five…
A: A make-or-buy choice is made by the business entities while deciding whether to manufacture a…
Q: Choose the stakeholder that is MOST likely to ask the following question. Will the business be able…
A: Business is defined as any unit that is engaged in executing activities. They may be involved in…
Q: machine that cost $24,000 with a book value of $18 a. Gain of $12,000 b. Loss of $12,000 c. Debit to…
A: Given that the machine cost $24,000 and had a book value of $18,000, the accumulated depreciation…
Q: Barnacle Industries incurred and applied the following manufacturing costs: Direct material Direct…
A: Cost of Production = Direct Material + Direct Labor + Manufacturing Overhead + beginning balance of…
Q: The following information was available for Marigold company at December 31, 2020: beginning…
A: Average inventory :— It is calculated by dividing sum of beginning inventory and ending inventory by…
Q: What would you pay for a $10,000, 5 year, 8% bond if you desired to yield 10%? Need help knowing how…
A: Bond price is computed as present value of periodic interest and maturity amount discounted at…
Q: rations issue bonds, there are two distinct obligations. What are those obligations? What do the…
A: When corporations issue bonds, they take on two distinct obligations: the obligation to pay interest…
Q: Magpie Corporation uses the total cost method of product pricing. Below is cost information for the…
A: The contribution margin is computed as the selling price per unit, minus the variable cost per unit.…
Q: This is the trial balance of Wildhorse Company on September 30. Cash Accounts Receivable Supplies…
A: First journal entries are prepared in books of account and then with the help of it, T - accounts…
Q: Mr. and Mrs. Daku had the following income items: Mr. Daku's salary 43,000 Mrs. Daku's Schedule C…
A: A taxpayer who practices a profession must file a schedule C with the form 1040. Schedule C is…
Q: During the months of January and February, Hancock Corporation sold goods to three customers. The…
A: DISCOUNT TERM The 2/10 net 30 calculation is a way of providing cash discounts on purchases. It…
Q: the following information was available for Marigold company at December 31, 2020: beginning…
A: Given: Beginning Inventory = $104,000 Ending Inventory = $76,000 Cost of Goods Sold = $900,000
Q: uired information the following information for the Quick Study below. (Algo) (11-14) following…
A: The unit cost is calculated as estimated overhead cost divided by estimated base activity. The cost…
Q: Determine which of the operating segments are reportable based on the: a. Revenue test. Reportable…
A: Revenue test is based on segment revenue. If revenue from sales to external customers and from…
Q: Question 9 Mary Am lives in Detroit, Michigan, USA. She commutes daily to Windsor, Ontario, Canada,…
A: The correct option is (D) A non-residentSince Mary Am works only from 9 am to 5 pm Monday through…
Q: Problem 21-9 (Algo) Part 2 Required: 2. Prepare the cash flows from operating activities section of…
A: CASH FLOW STATEMENTCash flow statement is additional information to user of financial statement.…
Q: The following summary transactions occurred in the period of January/February for Beauty Treatments…
A: The Value Added Tax (VAT) may be computed using the prospective method or retrospective method. The…
Q: Ovit, Inc. has preferred stock with a price of $18.25 and a dividend of $1.74 per year. What is its…
A: The dividend yield is used to assess the return on investment (ROI) produced by a stock that pays…
Q: Ruby's Department Store has budgeted cost of goods sold of $36,000 for its men's shorts in March.…
A: Cost of goods sold :— It is the value of units sold during the period. It is calculated by deducting…
Q: ounded to the nearest dollar) using the following data is Line Item Description Amount Variable…
A: Markup % = (Fixed cost + Desired profit) / Total Variable cost Markup % = ($90,000 + $150,000) /…
Q: Discuss the concept of earnings management and its ethical implications in financial reporting. What…
A: Earnings management refers to the deliberate manipulation of financial results by companies to…
Q: The following list of accounts was drawn for Tile, Etc., Inc. on December 31, Year 1, after the…
A: The Statement of Cash Flow under the direct method records the cash payment and receipt from each…
Q: During the current month, Sheridan Company incurs the following manufacturing costs. (a) (b) (c)…
A: Manufacturing overhead = Factory utilities + Factory property tax + Factory depreciation
Q: On January 1, 2021, QuickStream Communications leased telephone equipment from Digium, Inc. Digium's…
A: For the purpose of maintaining track of commercial transactions, the business entities record them…
Q: Tambin Inc. produces a gasoline additive that, when added to the gas tank of the average automobile,…
A: Process Costing - It is the method of costing which is used wherein the product is completed through…
Q: The ledger of Wildhorse Company contains the following balances: Owner's Capital $30,500, Owner's…
A: The closing entries are prepared to close the temporary accounts of the business. The temporary…
Q: The June 30 cash balance in the general ledger is $785. The June 30 balance shown on the bank…
A: Ideally cash balance as per cashbook and bank balance as per bank statement must reconcile with each…
Q: On July 31, 2014, the following data were accumulated to assist the accountant in prepar- ing the…
A: Adjusting entries are those which are reported in the books at the end of the period so as to adjust…
Q: The payroll of Stellar Company for September 2024 is as follows: Total payroll was $950,000, of…
A: The process of recording and keeping track of any financial or non-financial action is known as…
Q: Waterway Industries provided the following information from its accounting records for 2019:…
A: Given that Estimated production 50000 labor hour Actual production 46000 labor hours Actual…
Q: The following information is for 2023: Income before income tax Correction of prior period error:…
A: Retained earnings play a vital role in a company's financial health and stability. They serve as a…
Q: a. What are the tax liability the marginal tax rate, and the average tax rate for a married couple…
A: Tax Liability is calculated by multiplying the taxable income with applicable income tax rates.…
Q: Trey's Trucks uses a standard part in the manufacture of several of its trucks. The cost of…
A: Relevant cost :— It is the cost that are different in different alternatives. This cost is used for…
Q: Prepare a production report for the Mixing Department for the current year. If an amount is zero,…
A: The production report provides a detailed summary of the production cost reports in the department…
Q: ABC Corporation issued $1,000,000 of 10-year bonds with a stated interest rate of 8%. The bonds pay…
A: Given, Face value of bonds = $1,000,000 Stated interest rate = 8 % Number of years = 10
Q: The Cheyenne Hotel in Big Sky, Montana, has accumulated records of the total electrical costs of the…
A: Semi-variable cost = Fixed cost + variable cost. Where variable cost per unit = change in…
Q: OBJ. 2 PR 3-1A Adjusting entries On July 31, 2014, the following data were accumulated to assist the…
A: Lets understand the basics. Adjusting journal entry is required to make to record correct amount of…
Q: Describe the accounting treatment for intangible assets such as patents, copyrights, and trademarks.…
A: Intangible assets are non-physical assets that lack a physical presence but hold value for an…
Q: For many years, Thomson Company manufactured a single product called LEC 40. Then three years ago,…
A: The overhead is applied to the production on the basis of a pre-determined overhead rate. The…
Q: Accounting XYZ Company acquired a building for $500,000. The company paid $100,000 in cash and…
A: A journal entry is a record of a business transaction in an accounting system. It is used to capture…
Q: Question 10 of 10 < Prepare a trial balance from the ledger accounts of Black Diamond Express as of…
A: A Statement that shows the ending balance of all the ledger accounts of a firm at the end of the…
Q: A Construction Company undertook a contract for the construction of a building. The contract price…
A: According to the question given, we are required to prepare the contract account.Contract…
Q: How much cost, in total, would be allocated in the first-stage allocation to the Fabricating…
A: Fabricating activity means assembly activity Given information Costs are allocated to first stage…
Q: The owner's claim on a company's as
A: The owner's claim on a company's assets is referred to as an asset, representing the portion of the…
Den-Tex Company is evaluating a proposal to replace its HID (high intensity discharge) lighting with LED (light emitting diode) lighting throughout its warehouse. LED lighting consumes less power and lasts longer than HID lighting for similar performance. The following information was developed:
| HID watt hour consumption per fixture | 500 | watts per hr. |
| LED watt hour consumption per fixture | 300 | watts per hr. |
| Number of fixtures | 700 | |
| Lifetime investment cost (in present value terms) to replace each HID fixture with LED |
$500 | |
| Operating hours per day | 10 | |
| Operating days per year | 300 | |
| Metered utility rate per kilowatt-hour (kwh)* | $0.11 |
*Note: A kilowatt-hour is equal to 1,000 watts per hour.
a. Determine the investment cost for replacing the 700 fixtures.
$
b. Determine the annual utility cost savings from employing the new energy solution.
$
Evaluate the proposal using
$
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
- Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that the system will have a 10-year life and a required return of 10% with a net present value of negative $500,000. Nevertheless, he acknowledges that he did not quantify the potential sales increases that might result from this improvement on the issue of on-time delivery, because it was too difficult to quantify. If there is a general agreement that qualitative factors may offer an additional net cash flow of $150,000 per year, how should Boxer proceed with this Investment?Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A recent marketing study indicated that consumers would react favorably to a radio with the Salem brand name. Owner Kenneth Booth was interested in the possibility. Before any commitment was made, however, Kenneth wanted to know what the incremental fixed costs would be and how many radios must be sold to cover these costs. In response, Betty Johnson, the marketing manager, gathered data for the current products to help in projecting overhead costs for the new product. The overhead costs based on 30,000 direct labor hours follow. (The high-low method using direct labor hours as the independent variable was used to determine the fixed and variable costs.) All depreciation. The following activity data were also gathered: Betty was told that a plantwide overhead rate was used to assign overhead costs based on direct labor hours. She was also informed by engineering that if 20,000 radios were produced and sold (her projection based on her marketing study), they would have the same activity data as the recorders (use the same direct labor hours, machine hours, setups, and so on). Engineering also provided the following additional estimates for the proposed product line: Upon receiving these estimates, Betty did some quick calculations and became quite excited. With a selling price of 26 and just 18,000 of additional fixed costs, only 4,500 units had to be sold to break even. Since Betty was confident that 20,000 units could be sold, she was prepared to strongly recommend the new product line. Required: 1. Reproduce Bettys break-even calculation using conventional cost assignments. How much additional profit would be expected under this scenario, assuming that 20,000 radios are sold? 2. Use an activity-based costing approach, and calculate the break-even point and the incremental profit that would be earned on sales of 20,000 units. 3. Explain why the CVP analysis done in Requirement 2 is more accurate than the analysis done in Requirement 1. What recommendation would you make?
- Nico Parts, Inc., produces electronic products with short life cycles (of less than two years). Development has to be rapid, and the profitability of the products is tied strongly to the ability to find designs that will keep production and logistics costs low. Recently, management has also decided that post-purchase costs are important in design decisions. Last month, a proposal for a new product was presented to management. The total market was projected at 200,000 units (for the two-year period). The proposed selling price was 130 per unit. At this price, market share was expected to be 25 percent. The manufacturing and logistics costs were estimated to be 120 per unit. Upon reviewing the projected figures, Brian Metcalf, president of Nico, called in his chief design engineer, Mark Williams, and his marketing manager, Cathy McCourt. The following conversation was recorded: BRIAN: Mark, as you know, we agreed that a profit of 15 per unit is needed for this new product. Also, as I look at the projected market share, 25 percent isnt acceptable. Total profits need to be increased. Cathy, what suggestions do you have? CATHY: Simple. Decrease the selling price to 125 and we expand our market share to 35 percent. To increase total profits, however, we need some cost reductions as well. BRIAN: Youre right. However, keep in mind that I do not want to earn a profit that is less than 15 per unit. MARK: Does that 15 per unit factor in preproduction costs? You know we have already spent 100,000 on developing this product. To lower costs will require more expenditure on development. BRIAN: Good point. No, the projected cost of 120 does not include the 100,000 we have already spent. I do want a design that will provide a 15-per-unit profit, including consideration of preproduction costs. CATHY: I might mention that post-purchase costs are important as well. The current design will impose about 10 per unit for using, maintaining, and disposing our product. Thats about the same as our competitors. If we can reduce that cost to about 5 per unit by designing a better product, we could probably capture about 50 percent of the market. I have just completed a marketing survey at Marks request and have found out that the current design has two features not valued by potential customers. These two features have a projected cost of 6 per unit. However, the price consumers are willing to pay for the product is the same with or without the features. Required: 1. Calculate the target cost associated with the initial 25 percent market share. Does the initial design meet this target? Now calculate the total life-cycle profit that the current (initial) design offers (including preproduction costs). 2. Assume that the two features that are apparently not valued by consumers will be eliminated. Also assume that the selling price is lowered to 125. a. Calculate the target cost for the 125 price and 35 percent market share. b. How much more cost reduction is needed? c. What are the total life-cycle profits now projected for the new product? d. Describe the three general approaches that Nico can take to reduce the projected cost to this new target. Of the three approaches, which is likely to produce the most reduction? 3. Suppose that the Engineering Department has two new designs: Design A and Design B. Both designs eliminate the two nonvalued features. Both designs also reduce production and logistics costs by an additional 8 per unit. Design A, however, leaves post-purchase costs at 10 per unit, while Design B reduces post-purchase costs to 4 per unit. Developing and testing Design A costs an additional 150,000, while Design B costs an additional 300,000. Assuming a price of 125, calculate the total life-cycle profits under each design. Which would you choose? Explain. What if the design you chose cost an additional 500,000 instead of 150,000 or 300,000? Would this have changed your decision? 4. Refer to Requirement 3. For every extra dollar spent on preproduction activities, how much benefit was generated? What does this say about the importance of knowing the linkages between preproduction activities and later activities?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.Keith Golding has decided to purchase a personal computer. He has narrowed his choices to two: Brand A and Brand B. Both brands have the same processing speed, hard disk capacity, RAM, graphics card memory, and basic software support package. Both come from companies with good reputations. The selling price for each is identical. After some review, Keith discovers that the cost of operating and maintaining Brand A over a three-year period is estimated to be 200. For Brand B, the operating and maintenance cost is 600. The sales agent for Brand A emphasized the lower operating and maintenance cost. She claimed that it was lower than any other PC brand. The sales agent for Brand B, however, emphasized the service reputation of the product. She provided Keith with a copy of an article appearing in a PC magazine that rated service performance of various PC brands. Brand B was rated number one. Based on all the information, Keith decided to buy Brand B. Required: 1. What is the total product purchased by Keith? 2. Is the Brand A company pursuing a cost leadership or differentiation strategy? The Brand B company? Explain. 3. When asked why he purchased Brand B, Keith replied, I think Brand B offered more value than Brand A. What are the possible sources of this greater value? If Keiths reaction represents the majority opinion, what suggestions could you offer to help improve the strategic position of Brand A?
- Southland Corporation’s decision to produce a new line of recreational products resulted in the need to construct either a small plant or a large plant. The best selection of plant size depends on how the marketplace reacts to the new product line. To conduct an analysis, marketing management has decided to view the possible long-run demand as low, medium, or high. The following payoff table shows the projected profit in millions of dollars: What is the decision to be made, and what is the chance event for Southland’s problem? Construct a decision tree. Recommend a decision based on the use of the optimistic, conservative, and minimax regret approaches.Stahman, Inc., estimates its hidden external failure costs using the Taguchi loss function. Stahlman produces plastic sheets that vary in thickness and grade. For one of its large-volume products, it was determined that k = 30,000 and T = 0.28 inches in diameter. A sample of four units produced the following values: Required: 1. Calculate the average loss per unit. 2. Assuming that 100,000 units were produced, what is the total hidden cost? 3. Assume that the multiplier for Stahmans hidden external failure costs is six. What are the measured external costs? Explain the difference between measured costs and hidden costs.Syntech makes digital cameras for drones. Their basic digital camera uses $80 in variable costs and requires $1,500 per month in fixed costs. Syntech sells 100 cameras per month. If they process the camera further to enhance its functionality, it will require an additional $45 per unit of variable costs, plus an increase in fixed costs of $1,000 per month. The current price of the camera is $160. The marketing manager is positive that they can sell more and charge a higher price for the improved version. At what price level would the upgraded camera begin to improve operational earnings?
- Shelby Industries has a capacity to produce 45.000 oak shelves per year and is currently selling 40,000 shelves for $32 each. Martin Hardwoods has approached Shelby about buying 1,200 shelves for a new project and is willing to pay $26 each. The shelves can be packaged in bulk; this saves Shelby $1.50 per shelf compared to the normal packaging cost. Shelves have a unit variable cost of $27 with fixed costs of $350,000. Because the shelves dont require packaging, the unit variable costs for the special order will drop from $27 per shelf to $25.50 per shelf. Shelby has enough idle capacity to accept the contract. What is the minimum price per shelf that Shelby should accept for this special order?The Bremer Co. manufactures cordless telephones Bremer is planning to implement a JIT production system, which requires annual tooling costs of $150,000. Bremer estimates that the following annual benefits would arise from JIT production. a. Average inventory will decline by $700,000 from $900,000 to $200,00 b. Insurance, space, materials handling, and setup costs, which currently total $200,00 would decline by 30% c. The emphasis on quality inherent in JIT system would reduce rework costs by 20% Bremer currently incurs $350,000 on rework. d. Better quality would eneble Bremer to raise the prices of its products by $3 per unit. Bremer sells $30,000 unit each year. Bremer required rate of return on inventory investment is 12% per year Required: Calculate the net benefit or cost to the Bremer Corporation From implementing a JIT production system.Liquid Sleeve, Inc. is a company that makes a sealing solution for machine shaft surfaces that have been compromised by abrasion, high pressures,or inadequate lubrication. The manager is considering adding a metal-based nanoparticle (Type Al or Fe) to its solution to increase the product’s performance at high temperatures. The costs associated with each type are estimated. If the company’sMARRis 20% per year, which nanoparticle type should the company select? Utilize a rate of return analysis.
