Samreen Inc.,has some material that originally cost $73,500. The material has a scrap value of $45,600 as is, but if reworked at a cost of $6,600, it could be sold for $58,100. What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as is as scrap?
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Samreen Inc.,has some material that originally cost $73,500. The material has a scrap value of $45,600 as is, but if reworked at a cost of $6,600, it could be sold for $58,100. What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as is as scrap?
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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)Sami Inc. has some material that originally cost $68,400. The material has a scrap value of $30,100 as is, but if reworked at a cost of $1,400, it could be sold for $30,800. What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as is as scrap? A. -$69,100 B. -$700 C. $29,400 D. -$39,000Cee Incorporated has some raw materials (Banana) that originally costs 35,000. This raw material remained unused and now only has a scrap value of 8,000 but if reworked at a cost of 2,000 to produce Banana Fritters it could be sold for 9,200. If the company chooses to rework the bananas, what is the incremental effect of this decision on the overall profit of the company?
- A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that cost $5.70 per unit to manufacture. The units can be a) sold as is for $3.20 each, or b) reworked for $4.70 each and then sold for the full price of $8.90 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them? (Enter costs and losses as negative values.)A company with excess capacity must decide between scrapping or reworking units that do not pass inspection. The company has 16,000 defective units that cost $6.10 per unit to manufacture. The units can be a) sold as is for $3.40 each, or b) reworked for $4.50 each and then sold for the full price of $9.50 each. What is the incremental income from selling the units as scrap and reworking and selling the units? Should the company sell the units as scrap or rework them?McPupper Steel has products that cost $10,500 to manufacture. The products can be sold as is for $13,000 or could be processed further for a cost of $2,100 and sold for $14,000. What would be the incremental profit or (loss) of processing the products further and selling them instead of selling them as is?
- the lily corporation has 8,000 obsolate units of a product that are carried in inventory at a manyfacturing cost of 160,000. if the unit are remachined for 40,000, They could be sold for $72,000. Alternatively. the unit could be sold for scrap for $28,000. which alternative is more desirable and what are the total relevant costs for that alternative?Tempo Company has 20,000 units of its product that were produced at a cost of $300,000. The units were damaged in a rainstorm. Tempo can sell the units as scrap for $40,000, or it can rework the units at a cost of $76,000 and then sell them for $100,000. If Tempo Company reworks the units, incremental income will be.Collins Company has some outdated products that originally cost $80,000 to make. The products have a current resale value of $36,000 as is, but if reworked at a cost of $20,000, they could be sold for $60,000. What is the financial advantage or disadvantage of reworking the products? a)$4,000 financial advantage b)$16,000 financial advantage c)$6,000 financial disadvantage d)$20,000 financial disadvantage
- The Lantern Corporation has 1,000 obsolete lanterns that are carried in inventory at a manufacturing cost of P20,000. If the lanterns are remachined for P5,000, they could be sold for P9,000. Alternatively, the lanterns could be sold for scrap for P1,000. Which alternative is more desirable and what are the total relevant costs for that alternative?Kim Yin Company has 15,000 units in inventory that had a production cost of $3 per unit. These units cannot be sold through normal channels due to a significant technology change. These units could be reworked at a total cost of $23,000and sold for $28,000. Another alternative is to sell the units to a junk dealer for $8,500. Should Kim Yin Company scrap or rework the units and By how much will they be better off?Kim Yin Company has 15,000 units in inventory that had a production cost of $3 per unit. These units cannot be sold through normal channels due to a significant technology change. These units could be reworked at a total cost of $23,000and sold for $28,000. Another alternative is to sell the units to a junk dealer for $8,500. Should Kim Yin Company scrap or rework the units? By how much will they be better off? Please provide the answers as well as the solutions to the questions. Thank you!