MANAGERIAL ACCOUNTING CONNECT ACCESS
17th Edition
ISBN: 9781265750879
Author: Garrison
Publisher: MCG
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Chapter 13.A, Problem 4E
To determine
Introduction: The total cost of a product after deducting a certain percentage of profit from the selling price is known as the target cost per unit.
The target cost per unit.
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A3 9b
You are considering a project that will supply an automobile production facility with 35,000 tonnes of machine screws annually for five years. To get the project started, you will need an initial investment of $1,500,000 in threading equipment. The project will last for five years. The accounting department estimates that annual fixed costs will be $300,000 and that variable costs should be $200 per tonne. The CCA rate for threading equipment is 20%. Accounting estimates a salvage value of $500,000 after costs of dismantling. The marketing department estimates that the auto makers will accept the contract at a selling price of $250 per tonne. The engineering department estimates you will need an initial net working capital investment of $450,000. You require a 15% return and face a marginal tax rate of 38% on this project.
b. Suppose you believe that the accounting department’s initial cost and salvage projections are accurate only to within ±15%; the marketing department’s…
A3 9a
You are considering a project that will supply an automobile production facility with 35,000 tonnes of machine screws annually for five years. To get the project started, you will need an initial investment of $1,500,000 in threading equipment. The project will last for five years. The accounting department estimates that annual fixed costs will be $300,000 and that variable costs should be $200 per tonne. The CCA rate for threading equipment is 20%. Accounting estimates a salvage value of $500,000 after costs of dismantling. The marketing department estimates that the auto makers will accept the contract at a selling price of $250 per tonne. The engineering department estimates you will need an initial net working capital investment of $450,000. You require a 15% return and face a marginal tax rate of 38% on this project.
a. What is the NPV for this project? Should you pursue this project?
QUESTION 1
Agro Tech Corporation is considering investing in a new IT system for selling to its clients. The company has
identified two new possible systems, which would be suitable for its customers. Only one of the systems can be
selected and the directors are looking for guidance on which system would be the best. The company requires a
15% rate of return on projects of this nature.
The installation cost per project will be R100 000 each, while systems can be disposed for R200 000 each after
five- years life span.
Cash flows for Agro Tech Corporation: IT System (Rands)
PERIOD
1
2
3
4
5
SYSTEM A -4 000 000
R1 800 000 R1 700 000 R1 600 000 R1 500 000 R1 400 000
SYSTEM B -3 500 000
1 500 000 1 500 000
1 500 000
1 400 000 R1 300 000
Required:
1.1 Determine the payback period in years, months and days for both systems
1.2 Based on your calculations in 1.1, which system should Agro Tech Corporation consider? Why?
1.3 Calculate the Net Present Value for both systems.
1.4 Calculate the…
Chapter 13 Solutions
MANAGERIAL ACCOUNTING CONNECT ACCESS
Ch. 13.A - EXERCISE 12A-1 Absorption Costing Approach to...Ch. 13.A - EXERCISE 12A-2 Customer Latitude and Pricing...Ch. 13.A - Prob. 3ECh. 13.A - Prob. 4ECh. 13.A - Prob. 5ECh. 13.A - EXERCISE 12A-6 Value-Based Pricing; Absorption...Ch. 13.A - Prob. 7ECh. 13.A - Prob. 8PCh. 13.A - Prob. 9PCh. 13.A - Prob. 10P
Ch. 13.A - Prob. 11PCh. 13.A -
PROBLEM 12A-12 Absorption Costing Approach to...Ch. 13.A - PROBLEM 12A-13 Value-Based Pricing LO12-10 The...Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - “Variable costs and differential costs mean the...Ch. 13 - 12-6 "All future costs are relevant in decision...Ch. 13 - Prentice Company is considering dropping one of...Ch. 13 - Prob. 8QCh. 13 - 12-9 What is the danger in allocating common fixed...Ch. 13 - 12-10 How does opportunity cost enter into a make...Ch. 13 - 12-11 Give at least four examples of possible...Ch. 13 - 12-12 How will relating product contribution...Ch. 13 - Define the following terms: joint products, joint...Ch. 13 - 12-14 From a decision-making point of view, should...Ch. 13 - What guideline should be used in determining...Ch. 13 - Prob. 16QCh. 13 - Prob. 1AECh. 13 - Prob. 2AECh. 13 - Cane Company manufactures two products called...Ch. 13 - (
Alpha Beta
$30
$...Ch. 13 - Prob. 3F15Ch. 13 - Prob. 4F15Ch. 13 - Prob. 5F15Ch. 13 - (
Alpha Beta
$30
$...Ch. 13 - Prob. 7F15Ch. 13 -
Cane Company manufactures two products called...Ch. 13 - Prob. 9F15Ch. 13 - (
Alpha Beta
$30
$...Ch. 13 - Prob. 11F15Ch. 13 - Prob. 12F15Ch. 13 - (
Alpha ...Ch. 13 - (
Alpha Beta
$30
$...Ch. 13 - (
Alpha Beta
$30
$...Ch. 13 -
EXERCISE 12-1 Identifying Relevant Costs...Ch. 13 -
EXERCISE 12-2 Dropping or Retaining a Segment...Ch. 13 -
EXERCISE 12-3 Make or Buy Decision LO12-3
Troy...Ch. 13 -
EXERCISE 12-4 Special Order Decision...Ch. 13 -
EXERCISE 12-5 Volume Trade-Off Decisions...Ch. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - (
$3.60
10.00
2.40
9.00
$25.00
)
EXERCISE 12-11...Ch. 13 - Prob. 12ECh. 13 - EXERCISE 12-13 Sell or Process Further Decision...Ch. 13 - en
r
Ch. 13 - Prob. 15ECh. 13 - (
$150
31
20
29
3
24
15
$272
$34
)
EXERCISE...Ch. 13 - Prob. 17ECh. 13 - Prob. 18PCh. 13 - PROBLEM 12-19 Dropping or Retaining a Segment...Ch. 13 -
PROBLEM 12-20 Sell or Process Further Decision...Ch. 13 - Prob. 21PCh. 13 - PROBLEM 12-22 Special Order Decisions LO12-4...Ch. 13 -
PROBLEM 12-23 Make or Buy Decision LO12-3
Silven...Ch. 13 - Prob. 24PCh. 13 - Prob. 25PCh. 13 - Prob. 26PCh. 13 - Prob. 27PCh. 13 - Prob. 28PCh. 13 - CASE 12-29 Sell or Process Further Decision LO12-7...Ch. 13 -
CASE 12-30 Ethics and the Manager; Shut Dora or...Ch. 13 - CASE 12-31 Integrative Case: Relevant Costs;...Ch. 13 -
CASE 12-32 Make or Buy Decisions; Volume...Ch. 13 - Prob. 33C
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