Estimates for one of two process upgrades are as follows: First Cost = Php 40,000 Annual Cost = Php 5,000 Market Value = (-)Php 2,000/ year Salvage Value = Php 20,000 after 10 years. If a 4-year study period is used for AW analysis at 15% per year, what is the AW value?
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- Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $20,000, which will generate cash flows of $6,000 at the end of each of the next 6 years. Alternatively, the company can spend $12,000 for equipment that can be used for 3 years and will generate cash flows of $6,000 at the end of each year (System B). If the company’s WACC is 10% and both “projects” can be repeated indefinitely, which system should be chosen, and what is its EAA?A firm has production capacity of 500 refrigerators per month and its fixed costs are P2,750,000 a month. The variable cost per unit is P11,500 and each unit can be sold for P20,000. Economic measures are instituted to reduce the fixed costs by 10% and the variable costs by 15%. Determine the old and new profits at 100% capacity. Determine the old and new breakeven points.In manufacturing a kerosene stove, it is necessary to make two half-inch holes in No.22 gage metal. If these are drilled with the help of a jig, each hole will require one minute. The jig will cost P40.00. The drill press operator receives P1.10 per hour. The holes could be made also on a punch press at the rate of 2 holes each 10 seconds. A die would be required at a cost of P80.00. The punch operator will receive P0.90 per hour. If 1,000 stoves are to be produced and the jig or die will have no scrap value, which method will you recommend?
- The annual fixed costs for a plant are Php 5,000,000, and the variable costs are Php 7,000,000 at 70% utilization of available capacity, with net sales of Php 14,000,000. What is the breakeven point in units of production if the selling price per unit is Php 200?A company is analyzing a make-versus-purchase situation for a component used in several products, and the engineering department has developed these data: Option A: Purchase 10,000 items per year at a fixed price of Php 425 per item. The cost of placing the order is negligible according to the present cost accounting procedure. Option B: Manufacture 10,000 items per year, using available capacity in the factory. Cost estimates are direct materials = Php 250 per item and direct labor = Php 75 per item. Manufacturing overhead is allocated at 200% of direct labor (= Php 150 per item). Based on these data, should the item be purchased or manufactured?PRO Engineering is considering whether to purchase or lease a piece of earthmoving equipment.The data associated with the purchase are as followsInitial cost = $150,000Residual value = $12,000Maintenance cost = $1,800/per yearOperator cost per day = $300/dayIf the equipment is rented, the operator cost is incurred, at the rate of $300 per day and $100 for the daily rental of the equipment.Determine the minimum number of days per year the equipment must be used to justify the purchase. Use an interest rate of 7%
- Top Gun Marketing, Inc., offers overhead banner fly-by promotion services using their Cessna aircraft and banner creation facilities. The Padres Island firm specializes in restaurant promotion via fly-bys at outdoor events and other high-traffic centers, where each 10-minute increment of advertising costs $400. Over the past year, the following relation between fly-by advertising and incremental restaurant guests per month has been observed: Sales (units) = 5,200 + 55A - 0.8A2 MP= 55 -1.6 A Here A represents a 10-minute fly-by advertisement, and sales are measured in number of restaurant guests. Pete Mitchel, manager for the Padres Island firm, has been asked to recommend an appropriate level of advertising. In thinking about this problem, Mitchel noted its resemblance to the optimal resource employment problem he had studied in a managerial economics course that was part of his MBA program. The advertising-sales relation could be thought of as a production function with advertising as…The cost of making a small transistor radio is 23.00 php in labor costs and 37.00 php in material costs. The fixed cost of running the system is P 100,000.00 per month. The variable cost is P1.00 per set. The price of the radio is php75.00 each. Determine how many sets must be produced each month in order to break even.A machine used for cutting materials in a factory has the following outputs perhour at various speeds and required periodic tool regrinding at the intervals cited .Speed Output per hour Tool regrinding A 200 pieces Every 8 hours B 280 pieces Every 5 hours A set of tools costs P560 and can be ground twenty times. Each regrinding costs P54.00 and the time needed to regrind and change tools is 1 hour. The machine operator is paid P35.00 per hour including the time the tool is changed. The tool grinder who also sets the tools to the machine is paid P40.00 per hour. The hourly rate chargeable against the machine is P38.00, regardless of machine speed. Which speed is more economical? Speed B, PO.096/pc Speed B. PO.087/pc Speed A, P.054/pc Speed A, P.037/pc
- An airline is considering two types of engine systems for use in its planes. Each has the same life and the same maintenance and repair record. System A costs 5 million and uses 48,000 liters per 1,000 hours of operation at the average load encountered in passenger service. System B costs 10 million and uses 38,400 liters per 1,000 hours of operation at the same level. Both engine systems have 3-year lives before any major overhaul. Based on the initial investment, the systems have 10% salvage values. If jet fuel costs 108 a liter, and fuel consumption is expected to increase at the rate of 6% each year due to degrading engine efficiency, which engine system should the firm install? Assume 2,000 hours of operation per year, and a MARR of 10%.A civil engineer has 2 alternative designs for a house. a. Design 1 calls for a workforce consisting of 5 men each costing P400/day. This design will be finished in 4 months. b. Design 2 calls for a workforce consisting of 10 men each costing P370/day and is expected to be finished in 3 months. In addition, there will be a project engineer who will supervise the work and will be paid P800/day. Disregarding material cost, how much is the total salary expenses for Design 1 and for Design 2? Assume that there are 24 working days in a month.At the Motorola plant in Mesa, Arizona, it is desired to determine whether one-inch-thick insulation or two-inch-thick insulation should be used to reduce heat loss from a long section of steam pipe. The heat loss from this pipe without any insulation would cost Php200 per linear foot per year. The one-inch insulation will eliminate 88% of the heat loss and will cost Php60 per foot. Two-inch insulation will eliminate 92% of the heat loss and will cost Php110 per foot. The steam pipe is 1,000 feet in length and will last for10 years. MARR = 6% per year. Which insulation thickness should be recommended?