Homework2: A construction company had a number of projects and needed to a construction equipment to be used for five years. The company had two choices: the first one included buying the equipment with a price of $50,000; the operation and repair cost is $2,000 a year, and the salvage value is $10,000 at the end of the fifth year. The second option comprised renting the required equipment with amount of $8,000 a year, which is usually paid at the begging of each year and needs $3,000 a year for operation and repair. Specify which option is better for the company? The interest rate is 6%.
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- Q5) A firm is planning to manufacture a new product. The sales department estimates that the quantity that can be sold depends on the selling price. As the selling price is increased, the quantity that can be sold decreases. Numerically they estimate: P = $35.00 - 0.02Q where P =selling price per unit Q = quantity sold per year On the other hand, the management estimates that the average cost of manufacturing and selling the product will decrease as the quantity sold increases. They estimate C = $4.00Q + $8000 where C = cost to produce and sell Q per year The firm's management wishes to produce and sell the product at the rate that will maximize profit, that is, where income minus cost will be a maximum. What quantity should the decision makers plan to produce and sell each year?Night Shades. Incorporated, manufactures biotech sunglasses. The variable materials cost is $12.14 per unit, and the variable labor cost is $6.89 per unit. a. What is the variable cost per unit? b. Suppose the company incurs fixed costs of $845,000 during a year in which total production is 210,000 units. What are the total costs for the year? c. If the selling price is $49.99 per unit, does the company break even on a cash basis? If depreciation is $450.000 per year, what is the accounting break-even point? Pls don't copy answerChanveida finds a home listed for $48k. Similar homes in good condition sell for $60k (market value). She pays $35k. Closing costs are $2k, estimated fix-up is $7k, and holding costs are $3k. She ‘flips’ the property after 3 months for $58k. Her closing costs upon sale are 7% of the sell price. Her overall tax rate is 30%. Assume no financing is used and there is no depreciation taken. Determine the Adjusted Cost Basis. (Do not show a decimal or cents in your answer)
- SINGLE-PRODUCT BREAK-EVEN ANALYSIS Stephens, Inc., wants to determine the minimum dollar volume and unit volume needed at its new facilityto break even.APPROACH c The firm first determines that it has fixed costs of $10,000 this period. Direct labor is$1.50 per unit, and material is $.75 per unit. The selling price is $4.00 per unit.Some commonly known costs associated with manufacturing operations arelisted below:(a) Paint shop superintendent's salary(b) Labor costs in assembling a product(c) Rent on a factory building(d) Radio-frequency identification (RFID) units embedded in the final productduring shipping ( e) Depreciation on machinery(f) Lubricants used for machines(g) CPU chips used in notebook production(h) Paint used in automobile production(i) Janitorial and custodial salaries(j) Coffee beans used in packaging roasted coffee(k) Sugar used in icecream production(I) Electricity for operation of machines(m) Electricity for heating and cooling the factory building(n) Glue used in electronic board productionClassify each cost as being either variable or fixed with respect to volume or level of activity.Sam and Bridget are self-employed. Each year, they contribute money to Self- Managed Superannuation Fund (SMSF), the SB Superannuation fund, which was set up by their accountant. This year, they have been expanding their business and do not have enough cash to contribute to the super fund. They own the premises on which the business is conducted outright (ie, there is no mortgage). Bridget owns 8,000 Commonwealth Bank shares. They also own a residential investment property. Required: Can you advise any alternative methods by which Sam and Bridget can contribute to the SB SMSF in the event they do not have the cash flow to contribute? Which assets could they transfer to the SB SMSF, and which are precluded? Explain.
- Some commonly known costs associated with manufacturing operations arelisted below:(a) Paint shop superintendent's salary(b) Labor costs in assembling a product(c) Rent on a factory building(d) Radio-frequency identification (RFID) units embedded in the final productduring shipping ( e) Depreciation on machinery(f) Lubricants used for machines(g) CPU chips used in notebook production(h) The paint used in automobile production(i) Janitorial and custodial salaries(j) Coffee beans used in packaging roasted coffee(k) Sugar used in ice cream production(I) Electricity for the operation of machines(m) Electricity for heating and cooling the factory building(n) The glue used in electronic board productionClassify each cost as being either variable or fixed with respect to volume or level of activity.The CFO of Axis Manufacturing is evaluating the introduction of a new product. The costs of a recently completed marketing study for the new product and the possible increase in the sales of a related product made by Axis are best described (respectively) as follows: a. Opportunity cost b. Depreciation cost c. Sunk costPeabody Corporation has the following base-case estimates for its new smallengine assembly project:• Price per un it= $500• Variable costs = $120 per unit• Fixed costs = $2.5 million• Demand = 20,000 units per year• Capital investment = $8 million a1 year 0• Product life = 8 years• Salvage value = $500,000• Depreciation method =seven-year MACRS• Tax rate= 35%• MARR = l2%Suppose the company believes that all of its estimates (except the product life, depreciation method, tax rale, and MARR) are accurate only 10 within ±20%.(a) What is the NPW of the project based on its base-case scenario?(b) What is the NPW of the project based on its best-case scenario?(c) What is the worst-case scenario?(d) What conclusion would you make about the project after seeing the scenario analyses?
- Tanaka Industrial Systems Company is trying to decide between two different conveyor belt systems. System A costs $275,000, has a 4-year life, and requires $81,000 in pretax annual operating costs. System B costs $355,000, has a 6-year life, and requires $75,000 in pretax annual operating costs. Both systems are to be depreciated straight-line to zero over their lives and will have zero salvage value. Suppose the company always needs a conveyor belt system; when one wears out, it must be replaced. Assume the tax rate is 22 percent and the discount rate is 9 percent. Calculate the EAC for both conveyor belt systems.Consider a project to supply Detroit with 27,000 tons of machine screws annually for automobile production. You will need an initial $4,600,000 investment in threading equipment to get the project started; the project will last for 5 years. The accounting department estimates that annual fixed costs will be $1,100,000 and that variable costs should be $205 per ton; accounting will depreciate the initial fixed asset investment straight-line to zero over the 5-year project life. It also estimates a salvage value of $475,000 after dismantling costs. The marketing department estimates that the automakers will let the contract at a selling price of $308 per ton. The engineering department estimates you will need an initial net working capital investment of $440,000. You require a return of 12 percent and face a tax rate of 23 percent on this project. a. Suppose you’re confident about your own projections, but you’re a little unsure about Detroit’s actual machine screw…ABCD Inc. is a shoe company, they have decided to build a new manufacturing facility because they have developed modern technology to help in the production of their sneakers. The new facility will be able to process up to 10,000 pairs of sneakers per year, but this year is only expected to produce 7,000 pairs. ABCD Inc.'s first facility uses the same technology and has processed 12,000 shoes per year with a full production capacity of 12,000. Draw the long run and short-run average cost curve for ABCD’s new facility and first facility and indicate where the MES is most likely to occur.