The company manufactures a line of equipment which it sells to wholesalers. The company sold 5,000 items of this type this year, which also has a one-year guarantee if the equipment fails. Based on past experience, 10% of items sold are returned for repair. The estimated repair cost is OMR 150. What should be the value of provisions to be made? O a. OMR 75,000. O b. OMR 150. OC OMR 500. O d. OMR 750,000.
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- Marcotti Cupcakes bakes and sells a basic cupcake for $1.25. The cost of producing 600,000 cupcakes in the prior year was: At the start of the current year, Marcotti received a special order for 15,000 cupcakes to be sold for $1.10 per cupcake. To complete the order, the company must incur an additional $700 in total fixed costs to lease a special machine that will stamp the cupcakes with the customers logo. This order will not affect any of Marcottis other operations and it has excess capacity to fulfill the contract. Should the company accept the special order? (Show your work.)Cinnamon Depot bakes and sells cinnamon rolls for $1.75 each. The cost of producing 500,000 rolls in the prior year was: At the start of the current year, Cinnamon Depot received a special order for 18,000 rolls to be sold for $1.50 per roll. The company estimates it will incur an additional $1,000 in total fixed costs in order to lease a special machine that forms the rolls in the shape of a heart per the customers request. This order will not affect any of its other operations. Should the company accept the special order? (Show your work.)Markson and Sons leases a copy machine with terms that include a fixed fee each month of $500 plus a charge for each copy made. The company uses the high-low method to analyze costs. If Markson paid $360 for 5,000 copies and $280 for 3,000 copies, how much would Markson pay if it made 7,500 copies?
- Oberweis Dairy switched from delivery trucks with regular gasoline engines to ones with diesel engines. The diesel trucks cost $6,000 more than the ordinary gasoline trucks but costs $1,800 per year less to operate. Assume that Oberweis saves the operating costs at the end of each month. If Oberweis uses a discount rate of 1% per month, approximately how many months, at a minimum, must the diesel trucks remain in service for the switch to be sensible?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)Ronson recently purchased a new boat to help ship product overseas. The following information is related to that purchase: purchase price $4,500,000 cost to bring boat to production facility $15,000 yearly insurance cost $12,000 pays annual maintenance cost of $22,000 received a 10% discount on sales price Determine the acquisition cost of the boat and record the journal entry needed.
- Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years. Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the assets life, and create the journal entry for year five.On January 1, 2030, KKK consigned 300 units of gaming keyboards to SSS Each keyboard costs P400 and is sold at 50% above cost. After selling 200 keyboards, the remaining 200 units were repaired for some defects for P4,000. Because of this, SSS increased the selling price by P60. At the end of the month, SSS remitted P129,960 after deducting 15% commission, and reimbursable expenses of P1700 delivery expense and the P4,000 repair of the 100 units. How many consigned units were sold?Machine A was purchased last year for $20,000 and had an estimated MV of $2,000 at the end of its six-year life. Annual operating costs are $2,000. The machine will perform satisfactorily over the next five years. A salesperson for another company is offering a replacement, Machine B, for $14,000, with an MV of $1,400 after five years. Annual operating costs for Machine B will only be $1,400. A trade-in allowance of $10,400 has been offered for Machine A. If the before-tax MARR is 12% per year, should you buy the new machine? Solve, (a) No, continue with Machine A. (b) Yes, purchase Machine B.
- A company manager is considering purchasing a truck for transport and distribution of the company’s goods. The truck has an estimated service life of 18 years and its initial purchasing value is $ 60000. The annual earnings from the transport and the distribution of the goods are expected to change within the service life of the truck. That’s, at the end of the 1st, 7th and 14th years, each annual revenue will be $ 12000 and at the end of the other years, each annual revenue has again equal value but their values are different from $ 12000. Compute the unknown annual revenues to reach equilibrium on the cash flow series over the service life of the truck. (Assume annual interest rate of 8%).On 1-March-2010, Alpha Pharmaceuticals Ltd. purchased 10 machines for manufacturing tablets. The price of each machine is $150,000. The transportation and installation cost is 1% and 2.5% of the price respectively for each machine. The company also had to bear the cost of test runs for each machine, which were $1,500. The approximate repair and maintenance expense for each machine is $4,000 per year. The company paid 25% of price in cash and signed a 6 month, Notes Payable (N/P) for the remaining balance. The N/P bears interest expense for the company at 5% per annum. Each machine is useful for 5 years and experts estimate that each machine can be sold at the end of its useful life for 10% of its purchase price.During its useful life, the machine will produce 7,500,000 tablets. Following table shows number of tablets produced in each year. Please note that the company’s fiscal year ends on 30th June. year unit produced 1 2,500,000 2 1,700,000 3 1,400,000 4 1,200,000 5…Sandhill Co. purchases a new delivery truck for $78000. The sales taxes are $4400. The logo of the company is painted on the side of the truck for $1000. The truck’s annual license is $100. The truck undergoes safety testing for $240. What does Sandhill record as the cost of the new truck?