Pls explain the correct as well as in incorrect option why they are incorrect. e. from $6.00 per pair to $3.81 for aproduction facility in Latin Americathat currently has labor productivity of3,500 pairs per worker and total regularcompensation (which does not includeovertime pay) of $20,000 annually. If a company invests in productionimprovement option D that will boostlabor productivity by 50%, while its annualdepreciation costs will rise by an amountequal to 10% of the investment costsassociated with installing option D, it isaccurate to say that its labor costs perpair produced will declinea. the greatest in whichever companyproduction facility currently has thelowest total employee compensation peryear.b. by the same dollar amount in all ofthe company's production facilities thatimplement option D because the gainsin labor productivity are 50% irrespectiveof what other differences in labor-relatedconditions may exist.c. from $5.00 per pair to $3.33 for aproduction facility in the Asia-Pacificthat currently has labor productivity of3,600 pairs per worker and total regularcompensation (which does not includeovertime pay) of $18,000 annually.d. from $4.61 per pair to $3.50 for aproduction facility in the Asia-Pacificthat currently has labor productivity of3,800 pairs per worker and total regularcompensation (which does not includeovertime pay) of $17,500 annually.

The total amount of money that companies spend on employee salaries, benefits, and taxes is referred…

Answered: If a company invests in production…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter16: Financial Planning And Control

Section: Chapter Questions

Problem 20PROB

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Company A has current sales of $10,000,000 and a 45% contribution margin. Its fixed costs are $3,000,000. Company B is a service firm with current service revenue of $5,000,000 and a 20% contribution margin. Company Bs fixed costs are $500,000. Compute the degree of operating leverage for both companies. Which company will benefit most from a 25% increase in sales? Explain why.
Banyan Industries has two divisions, a tax rate of 30%, and a minimum rate of return of 20%. Division A has a weighted average cost of Capital of 9.5% and is looking at a new project that will generate a profit of $1,200,000 from a machine that costs $4,000,000. Division B has a weighted average cost of capital of 9.5% and is looking at a new project that will generate a profit of $1,350,000 from a machine that costs $5,000.000. A. Calculate the EVA for each of Banyans divisions. B. Calculate the RI for each of Banyans division. C. If Banyan uses EVA to evaluate the projects, which division has the better project and by how much? D. If Banyan uses RI, which division has the better project and by how much? E. What are some of the reasons for the similarity or difference that you found in the use of EVA versus RI?
Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?
Wellington, Inc., reports the following contribution margin income statement for the month of May. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $10 but will increase fixed costs by 20%. Prepare a projected contribution margin income statement for Wellington, Inc., assuming it purchases the new equipment. Assume sales level remains unchanged.
Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.15. The machine will increase fixed costs by $18,250 per year. The information they will use to consider these changes is shown here.
You are asked to evaluate ergonomic interventions for your company based on the following projections: Decreased annual Workers' Compensation costs: $13, 060 Increased annual production: $17,501 Initial purchase costs: $4, 561 If you have an expectation of 3.75% interest over a 6-year period, what would you calculate the multiplier for the Worker's Comp equivalence calculation to be if you're asked to evaluate the future worth over the life of the project?
Assume that a company is considering purchasing a machine for $100,000 that will have a seven-year useful life and a $16,500 salvage value. The machine will lower operating costs by $18,000 per year and increase sales volume by 1,000 units per year. The company earns a contribution margin of $3.00 per unit. The company also expects this investment to provide qualitative benefits that it is struggling to incorporate into its financial analysis. Assuming the company’s required rate of return is 17%, the minimum dollar value per year that must be provided by the machine’s qualitative benefits to justify the $100,000 investment is closest to: Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.
Mr. Sy is the general manager of the XXX Division, and his performance is measured using the residual income method. Mr. Sy is reviewing the following forecasts to his division for the next year:Category AmountsWorking Capital P 1,800,000Revenue 30,000,000Plant and Equipment 17,200,000If the imputed interest charge is 15% and Mr. Sy wants to achieve a residual income of P2,000,000 what will costs (total expenses) have to be in order to achieve the targeted residual income?
Pankey Inc. has a $700,000 investment opportunity that would involve sales of $1,050,000, a contribution margin ratio of 40% of sales, and fixed expenses of $325,500. The company's minimum required rate of return is 18%. The residual income for this year's investment opportunity is closest to: A) ($31,500) B) $0 C) $94,500 D) $126,000
If the imputed charge is 15% and Tan wants to achieve a residential income target of P2,000,000, what should be the amount of costs to achieve the target residual income? Elise Wong is the general manager of the Industrial Product Davision, and his performance is measured using the residual income method. Tan is reviewing the following forecasted information for next yr Category Amount Working Capital 1,800,000 Revenue 30,000,000 Plant and Equipment 17,200,000
A plant operating at 100% capacity (1000 kg product per year) has an annual net profit of $40,000 with a 34% tax on gross profits. If the annual fxed costs are $100,000 and variable costs are 61% of net sales, what is the break-even point (in per cent capacity or kgproduct per year)? What is the unit profit (i.e, profit per kg product) at 100% capacity?
SOWSEY Company is considering the addition of a new product to its current product lines. The expected cost and revenue data for the new product are as follows: Annual Sales 2,500 units Selling Price per unit P304 Variable Costs per unit: Production P125 Selling P49 Avoidable fixed costs per year: Production P50,000 Selling P75,000 Allocated common corporate costs per year P55,000 If the new product is added, the combined contribution margin of the other existing products lines is expected to drop P65,000 per year. Total common corporate costs would be unaffected by the decision of whether to add the new product. What is the lowest selling price per unit that could be charged for the new product line and still make an additional P2 income per unit?

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