Rubber sidewalks made from ground-up tires are said to be environmentally friendly and easier on peoples’ knees. Rubbersidewalks, Inc. of Gardena, CA, manufactures the small rubberized squares that are installed where tree roots, freezing weather, and snow removal require sidewalk replacement or major repairs every three years. The District of Columbia spent $60,000 for a rubber sidewalk to replace broken concrete in a residential neighborhood lined with towering willow oaks. If a concrete sidewalk costs $28,000 and lasts only 3 years versus a 9-year life for the rubber sidewalks, what rate of return does this represent?

Rubber sidewalks made from ground-up tires are said to be environmentally friendly and easier on peoples’ knees. Rubbersidewalks, Inc. of Gardena, CA, manufactures the small rubberized squares that are installed where tree roots, freezing weather, and snow removal require sidewalk replacement or major repairs every three years. The District of Columbia spent $60,000 for a rubber sidewalk to replace broken concrete in a residential neighborhood lined with towering willow oaks. If a concrete sidewalk costs $28,000 and lasts only 3 years versus a 9-year life for the rubber sidewalks, what rate of return does this represent?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter10: Standard Costing And Variance Analysis

Section: Chapter Questions

Problem 63P: Basuras Waste Disposal Company has a long-term contract with several large cities to collect garbage...

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The Johnson Company pays $1700 a month to a trucker to haul wastepaper and cardboard to the city dump. The material could be recycled if the company were to buy a $48,000 hydraulic press baler and spend $21,000 a year for labor to operate the baler. The baler has an estimated useful life of 15 years and no salvage value. Strapping material would cost $1500 per year for the estimated 600 bales a year that would be produced. A wastepaper company will pick up the bales at the plant and pay Johnson $27 per bale for them. Use an annual cash flow analysis and an interest rate of 8% to recommend whether it is economical to install and operate the baler.
Russell Forest Products Limited needed to upgrade a burner at its sawmill in Cochrane, Ontario, to comply with the new air pollution standards. The new burner, which is used to burn the scrap wood from its sawing operations, will not only reduce the amount of pollution, but will supply heat for the plant facility, including the wood dryer. In order to encourage Russell Forest Products Limited in its compliance with the stan- dards, the Province of Ontario extended an interest-free loan of $400,000 on December 31, 2011. The only conditions in obtaining the interest-free loan are that the loan proceeds be applied directly to the construction costs and that the loan be repaid in full on December 31, 2019. RussellForest Products Limited borrowed the remaining funds from the bank for the construction of the burner and will be paying interest at the rate of 7% per year. Instructions (a) Discuss the issues related to obtaining the interest-free loan from the Province of Ontario. (b)…
The town of Arrieta has decided to have an sculptor create a statue of their town founder, Arrieta Daniels. They also plan to build a small garden around the statue in the town square. The total cost for the statue and garden construction will be $65000.Replanting flowers and other garden maintenance is budgeted at $600 per year. The statue and garden are expected to last forever but the statue will need repairs and cleaning every 4 years at an estimated cost of $2000.If Arrieta has an MARR of 7.5% per annum, what is the present worth of costs for the project?
Dakota Corporation is an owner/operator of 15 water filtration systems in the Northwestern region of the United States. During February 2022, 4 of the tanks had leaks which contaminated the water and surrounding environment. Dakota is very concerned about their obligation to the community to maintain the environment. Dakota corrected the leaks by installing new water filters and liners which cost $500,000. These corrections will extend the life of the tanks and improve future production. These improvements will also prevent any future environmental contamination. Overall, the $500,000 spent on the new water filters and liners have improved the facility. Dakota is unsure whether the $500,000 spent for this environmental issue should be capitalized or expensed. Accounting Issue: Should Dakota capitalize or expense the $500,000 spent on the new water filters and liners?
Parker County Community College (PCCC) is trying to determine whether to use no insulation or to use insulation that is either 1 inch thick or 2 inches thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $1.50 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 89% of the loss and will cost $0.40 per foot. A 2-inch thick insulated covering will eliminate 92% of the loss and will cost $0.85 per foot. PCCC Physical Plant Services estimates that there are 250,000 feet of steam pipe on campus. The PCCC Accounting Office requires a 10%/year return to justify capital expenditures. The insulation has a life expectancy of 10 years. Determine which insulation (if any) should be purchased using a ranking present worth analysis.
The Johnson Company pays $1,650 a month to a trucker to haul wastepaper and cardboard to the city dump. The material could be recycled if the company were to buy a $50,000 press baler and spend $20,000 a year for one worker to operate the baler. The baler has an estimated useful life of 14 years, with no şalvage value. Strapping material would cost $1600 per year for the estimated 650 bails a year that would be produced. A wastepaper company will pick up the bales at the plant and pay Johnson for them. In order to justify the baler, how much should Johnson charge the wastepaper company for each bale? Use an interest rate of 8% per year.________.
A large city in the midwest needs to acquire a street-cleaning machine to keep its roads looking nice year round. A used cleaning vehicle will cost $85,000 and have a $20,000 market (salvage) value at the end of its five-year life. A new system with advanced features will cost $150,000 and have a $40,000 market value at the end of its five-year life. The new system is expected to reduce labor hours compared with the used system. Current street-cleaning activity requires the used system to operate 8 hours per day for 20 days per month. Labor costs $50 per hour (including fringe benefits), andMARR is 12% per year. Solve, a. Find the breakeven percent reduction in labor hours for the new system. b. If the new system is expected to be able to reduce labor hours by 17% compared with the used system, which machine should the city purchase?
Each year in the United States nearly 5 billion pounds of discarded carpet end up in land fills. In response to this situation, a carpet manufacturer has decided to start a take-back program whereby obsolete carpet is reclaimed at the end of its useful life (about 7 years). The remanufactured carpet will then be recycled into the company’s supply chain. The out-of-pocket(variable) cost of recycling is $1.00 per square yard of carpet, and the remanufactured carpet can be sold for $3.00 per square yard. If the recycling equipment costs $1 million and has no market value at the end of its eight-year life, how much carpet must be remanufactured annually to make this a profitable undertaking? The company’s MARR is 15% per year.
A southwestern city that has 170,000 households is required to install treatment systems for the removal of arsenic from drinking water. The annual cost is projected to be $50 per household per year. Assume that one life will be saved every three years as a result of the arsenic removal system andthat the EPA values a human life at $4.8 million. Use a discount rate of 8% per year and assume the life is saved at the end of each three-year period.Utilize a conventional B/C ratio to determine if the project is economically justified.
Jenny Walters, who owns a real estate agency,bought an old house to use as her business office. Shefound that the ceiling was poorly insulated and thatthe heat loss could be cut significantly if six inchesof foam insulation were installed. She estimated thatwith the insulation, she could cut the heating billby $80 per month and the air-conditioning cost by$70 per month. Assuming that the summer seasonis three months (June, July, and August) of the yearand that the winter season is another three months(December, January, and February) of the year, howmuch can Jenny spend on insulation if she expects tokeep the property for five years? Assume that neitherheating nor air-conditioning would be required duringthe fall and spring seasons. If she decides to install theinsulation, it will be done at the beginning of May.Jenny’s interest rate is 6% compounded monthly.
Parker County Community College (PCCC) is trying to determine whether to use no insulation or to use insulation 1-inch thick or 2-inches-thick on its steam pipes. The heat loss from the pipes without insulation is expected to cost $1.50 per year per foot of pipe. A 1-inch thick insulated covering will eliminate 89% of the loss and will cost $0.40 per foot. A 2-inch thick insulated covering will eliminate 92% of the loss and will cost $0.85 per foot. PCCC Physical Plant Services estimates that there are 250,000 feet of steam pipe on campus. The PCCC Accounting Office requires a 10%/yr return to justify capital expenditures. The insulation has a life expectancy of 10 years. Determine which insulation (if any) should be purchased using an internal rate of return analysis.
A large city in the mid-West needs to acquire a street-cleaning machine to keep its roads looking nice year round. A used cleaning vehicle will cost $85,000 and have a $20,000 salvage value at the end of its five year life. A new system with advanced features will cost $150,000 and have $40,000 market value at the end of its five year life. The new system is expected to reduce labor hours compared with the used system. Current street-cleaning activity requires the used system to operate 8 hours per day for 20 days per month. Labor costs $50 per hour (including fringe benefits), and MARR is 12% per year.a. Find the breakeven percent reduction in labor hours for the new system. b. If the new system is expected to be able to reduce labor hours by 17% compared with the used system, which machine should the city purchase? c. Investigate how sensitive the decision is to 1) changes in the market value of the new system and 2) the productivity improvement of the new system. Graph your results.