Question
In: Accounting
ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of...
| ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of $100,000 each based on current demand. | ||||||||||
| The Chief Marketing Officer forecasts growth of 50 units per year through 2025. So, the demand will be 1,025 units in 2021, 1,075 units | ||||||||||
| in 2022, etc. and the $100,000 price will remain consistent for all five years of the investment life. However, ABC cannot produce more | ||||||||||
| than 1,000 units annually based on current capacity. | ||||||||||
| In order to meet demand, ABC must either update the current plant or replace it. If the plant is replaced, an initial working capital investment | ||||||||||
| of $5,000,000 is required and these funds will be released at the end of the investment life to be used elsewhere. | ||||||||||
| The following table summarizes the projected data for both options: | ||||||||||
| Update | Replace | |||||||||
| Initial investment in 2021 | $ 115,000,000 | $ 138,000,000 | ||||||||
| Terminal salvage value in 2025 | $ 10,000,000 | $ - | ||||||||
| Working capital investment required | $ - | $ 5,000,000 | ||||||||
| Useful life | 5 years | 5 years | ||||||||
| Total annual cash operating costs per unit | $ 70,000 | $ 60,000 | ||||||||
Which option is better and why?
Solutions
ekkarill92 answered 2 years agoRelated Solutions
ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of...
ABC Manufacturing expects to sell 1,025 units of
product in 2021 at an average price of $100,000 each based on
current demand.
The Chief Marketing Officer forecasts growth of 50
units per year through 2025. The $100,000 price will be constant
for 5 years.
However, ABC cannot produce more than 1,000 units
annually. They must update plant or replace it. If replaced,
initial working capital of $5 million is required. RRR is 14%.
Using excel functions, calculate NPV for both...
ABC Manufacturing expects to sell 1,025 units of product in 2021 at an average price of...
ABC Manufacturing expects to sell 1,025 units of
product in 2021 at an average price of $100,000 each based on
current demand.
The Chief Marketing Officer forecasts growth of 50
units per year through 2025. So, the demand will be 1,025 units in
2021, 1,075 units
in 2022, etc. and the $100,000 price will remain
consistent for all five years of the investment life. However, ABC
cannot produce more
than 1,000 units annually based on current
capacity.
In order to...
DGT industries expects to sell 420 units of product a and 420 units of product b...
DGT
industries expects to sell 420 units of product a and 420 units of
product b each day at an average price of $18 for product a and $28
for product b . The expected cost for product a is 42% of its
selling price and the expected cost for product b is 58% of its
selling price. DGT industries has no beginning inventory but it
wants to have a six day supply of ending inventory for each
product. Compute...
Hygeia Health expects to sell 500 units of Product A and 400 units of Product B...
Hygeia Health expects to sell 500 units of Product A and 400
units of Product B each day at an average price of $18 for Product
A and $30 for Product B. The expected cost for Product A is 41% of
its selling price and the expected cost for Product B is 61% of
its selling price. Hygeia Health has no beginning inventory, but
it wants to have a five−day supply of ending inventory for each
product. Compute the budgeted...
A new product will sell for $8. The company expects to sell around 900,000 units. (Use...
A new product will sell for $8. The company expects to sell
around 900,000 units. (Use a normal distribution with a mean of
900,000 and a standard deviation of 300,000.) Fixed costs are
normally distributed with a mean of $700,000 and a standard
deviation of $50,000. Unit variable costs are also normally
distributed with a mean of $3 and a standard deviation of $0.25.
Selling expenses are lognormally distributed with a mean of
$900,000 and a standard deviation of $50,000....
Farrow Co. expects to sell 400,000 units of its product in the next period with the...
Farrow Co. expects to sell 400,000 units of its product in the
next period with the following results.
Sales (400,000 units)
$
6,000,000
Costs and expenses
Direct materials
800,000
Direct labor
1,600,000
Overhead
400,000
Selling expenses
600,000
Administrative expenses
1,028,000
Total costs and expenses
4,428,000
Net income
$
1,572,000
The company has an opportunity to sell 40,000 additional units at
$13 per unit. The additional sales would not affect its current
expected sales. Direct materials and labor costs per unit...
In 2018, X Company expects to produce and sell 66,000 units of its only product for...
In 2018, X Company expects to produce and sell 66,000 units of
its only product for $34.73. The following are budgeted variable
costs per unit:
Direct Materials
$5.39
Direct Labor
$5.27
Variable Overhead
$4.31
Variable selling and administrative
$4.32
Total
$19.29
Budgeted fixed overhead for 2018 is $187,440, and budgeted fixed
selling and administrative expenses are $190,740.
What is X Company's budgeted contribution margin rate for
2018?
The Mason Company produces and expects to sell 10,600 units of its product. Variable selling and...
The Mason Company produces and expects to sell 10,600 units of
its product. Variable selling and administrative expense is $3.70
per unit sold and fixed selling and administrative expense is
$50,000 per month. Included in the $50,000 fixed selling and
administrative expense is a depreciation of $20,000. The budgeted
selling and administrative cash payments for November is:
$69,220.
$39,220.
$39,480.
$89,220.
Question 2 In the coming year, Power Company expects to sell 70,000 units of product X...
Question 2
In the coming year, Power Company expects to sell 70,000 units of
product X at RM13 each. Power Controller provided the following for
the coming year.
Units of production 110,000
Direct material per unit RM4.50
Direct labour per unit RM3.00
Variable overhead per unit RM1.50
Variable selling expenses per unit RM1.10
Total fixed overhead RM132,000
Total fixed selling expenses RM30,000
Total fixed administrative expenses RM15,000
Required:
a) Calculate the cost of one unit of product X under absorption...
1- Swansong plans to sell 10,000 units of a particular product during July, and expects sales...
1-
Swansong plans to sell 10,000 units of a particular product
during July, and expects sales to increase at the rate of 10% per
month during the remainder of the year. The June 30 and September
30 ending inventories are anticipated to be 950 units and 1,100
units, respectively. On the basis of this information, how many
units should Swansong purchase for the quarter ended September
30?
Select one:
a. 32,950 units
b. 33,250 units
c. 31,850 units
d. 34,750...
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