EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 8220103631723
Author: Rajan
Publisher: YUZU
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Chapter 13, Problem 13.33P
Life-cycle costing. Maximum Metal Recycling and Salvage receives the opportunity to salvage scrap metal and other materials from an old industrial site. The current owners of the site will sign over the site to Maximum at no cost. Maximum intends to extract scrap metal at the site for 24 months and then will clean up the site, return the land to useable condition, and sell it to a developer. Projected costs associated with the project follow:
Ignore the time value of money.
- 1. Assuming that Maximum expects to salvage 70.000 tons of metal from the site, what is the total project life-cycle cost?
- 2. Suppose Maximum can sell the metal for $110 per ton and wants to earn a profit (before taxes) of $30 per ton. At what price must Maximum sell the land at the end of the project to achieve its target profit per ton?
- 3. Now suppose Maximum can only sell the metal for $100 per ton and the land at $110,000 less than what you calculated in requirement 2. If Maximum wanted to maintain the same markup percentage on total project life-cycle cost as in requirement 2, by how much would the company have to reduce its total project life-cycle cost?
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Life-cycle costing. Maximum Metal Recycling and Salvage receives the opportunity to salvage scrap metal and other materials from an old industrial site. The current owners of the site will sign over the site to Maximum at no cost. Maximum intends to extract scrap metal at the site for 24 months and then will clean up the site, return the land to useable condition, and sell it to a developer. Projected costs associated with the project follow:
Ignore time value of money.
Assuming that Maximum expects to salvage 70,000 tons of metal from the site, what is the total project life cycle cost?
Suppose Maximum can sell the metal for $110 per ton and wants to earn a profit (before taxes) of $30 per ton. At what price must Maximum sell the land at the end of the project to achieve its target profit per ton?
Now suppose Maximum can only sell the metal for $100 per ton and the land at $110,000 less than what you calculated in requirement 2. If Maximum wanted to maintain the same markup…
Metal Recycling and Salvage receives the opportunity to salvage scrap metal and other materials from an old industrial site. The current owners of the site will sign over the site to Enviro at no cost. Enviro intends to extract scrap metal at the site for 24 months and then will clean up the site, return the land to useable condition, and sell it to a developer. Projected costs associated with the project follow:
Read the requirements2.
Requirement 1. Assuming that Enviro expects to salvage 70,000tons of metal from the site, what is the total project life cycle cost?
Total Life-Cycle Costs
Variable costs:
Metal extraction and processing
Fixed costs:
Metal extraction and processing
Rent on temporary buildings
Administration
Clean-up
Land restoration
Selling land
Total life-cycle cost
Requirement 2. Suppose Enviro can sell the metal for $110 per ton and wants to earn a…
:You are evaluating two different silicon wafer milling machines. The Techron I costs $265,000, has a 3-year life, and has pretax operating costs of $74,000 per year. The Techron II costs $445,000, has a 5-year life, and has pretax operating costs of $47,000 per year. For both milling machines, we use straight line depreciation to zero over the project’s life and assume a salvage value of $35,000. If your tax rate is 22 percent and your discount rate is 10 percent, compute the EAC for both machines. Which machine do you prefer? Why?
Chapter 13 Solutions
EBK HORNGREN'S COST ACCOUNTING
Ch. 13 - What are the three major influences on pricing...Ch. 13 - Relevant costs for pricing decisions are full...Ch. 13 - Describe four purposes of cost allocation.Ch. 13 - How is activity-based costing useful for pricing...Ch. 13 - Describe two alternative approaches to long-run...Ch. 13 - What is a target cost per unit?Ch. 13 - Describe value engineering and its role in target...Ch. 13 - Give two examples of a value-added cost and two...Ch. 13 - It is not important for a company to distinguish...Ch. 13 - Prob. 13.10Q
Ch. 13 - Describe three alternative cost-plus pricing...Ch. 13 - Give two examples in which the difference in the...Ch. 13 - What is life-cycle budgeting?Ch. 13 - What are three benefits of using a product...Ch. 13 - Prob. 13.15QCh. 13 - Which of the following statements regarding price...Ch. 13 - Value-added, non-value-added costs. The Magill...Ch. 13 - Target operating income, value-added costs,...Ch. 13 - Target prices, target costs, activity-based...Ch. 13 - Target costs, effect of product-design changes on...Ch. 13 - Target costs, effect of process-design changes on...Ch. 13 - Cost-plus target return on investment pricing....Ch. 13 - Cost-plus, target pricing, working backward....Ch. 13 - Life-cycle budgeting and costing. Arnold...Ch. 13 - Considerations other than cost in pricing...Ch. 13 - Cost-plus, target pricing, working backward. The...Ch. 13 - Value engineering, target pricing, and target...Ch. 13 - Target service costs, value engineering,...Ch. 13 - Cost-plus, target return on investment pricing....Ch. 13 - Cost-plus, time and materials, ethics. C S...Ch. 13 - Cost-plus and market-based pricing. Georgia Temps,...Ch. 13 - Cost-plus and market-based pricing. (CMA, adapted)...Ch. 13 - Life-cycle costing. Maximum Metal Recycling and...Ch. 13 - Airline pricing, considerations other than cost in...Ch. 13 - Prob. 13.35PCh. 13 - Ethics and pricing. Instyle Interior Designs has...Ch. 13 - Value engineering, target pricing, and locked-in...
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