Lampport Industries GHT. is dedicated to the manufacture of games for children from 2 years of age, among them
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Lampport Industries GHT. is dedicated to the manufacture of games for children from 2 years of age, among them is the traditional trampoline of 5 meters in diameter. This company wishes to determine financial aspects related to the break-even point of this game and currently handles the following costs: for the rental of the facilities ¢2,515,000.00, for basic services ¢1,485,000.00 and for employee salaries ¢4,365,000.00. In relation to the game, the direct costs are: Support legs ¢25,600.00, folding ring ¢17,325.00, metal assemblies ¢15,782.00, screws, washers and nuts ¢11,455.00, hooks and cables ¢12,860.00, plastic protectors ¢11,750.00, canvas upper ¢81,000.00, upper tubes ¢25,500.00 and protective mesh ¢22,450.00. Additionally, the company incurs the following expenses: The sale price of each trampoline is estimated at ¢266,575.00.
- a) Calculate the unit variable cost and the monthly fixed cost of the company.
- b) Calculate the Operating Break-Even Point in quantity and money of the company and interpret it.
- c) Calculate, analyze and indicate what happens to the break-even point if the Variable Cost increases by 10%
- d) Calculate, analyze and indicate
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- Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)A company in the region is planning for a new project that requires an investment in new machinery. The cost of machinery is RO 20,000. The total expenses to transport and install the machinery will be RO 5,000. Since the machinery uses the latest technology, it will result in a reduction of overall cost by RO 10,000. The company offers free maintenance for the machinery. Savings on account of the free maintenance will be RO 1,000 every year. The annual contract requires the company to pay RO 1,500 every year for vendor support. The total life of the project will be five years and it is expected that the machinery can be disposed at the end for 2,000. Straight-line depreciation is used by the company. The effective tax rate is 15%. Calculate Relevant Cash Flows for Capital Project 9050 9010 8765 9500The production department of Y Company is planning to purchase a new machine to improve product quality. The company’s management accountant is currently evaluating two options- Buy the machine OR Rent it. Following information is available:I. The company has to pay £3,200 to set up the machine. Insurance cost £450 per annum. II. If it is bought, the new machine is depreciated on reducing balance basis at the rate of 25%. After various calculations, the company has to pay £4,200 maintenance cost every year and estimated repair cost would be £300 per year. The firm will have to sell old machines, which had cost £65,000 six years ago. Apart from the above information, the £500 of delivery cost is incurred for this purchase option.III. If it is rented, £ 4,650 per year to pay as rent. There is no cost for repair and maintenance. However, the firm is required to pay the administration charge of £650 with this rent option. For rent option, the delivery cost remains at 20% of the £ 500 (the…
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