Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $1,700,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. The machine will produce 27,000 keyboards each year. The price of each keyboard will be $59 in the first year and will increase by 4 percent per year. The production cost per keyboard will be $26 in the first year and will increase by 5 percent per year. The project will have an annual fixed cost of $285,000 and require an immediate investment of $250,000 in net working capital. The corporate tax rate for the company is 25 percent. The appropriate discount rate is 9 percent. What is the NPV of the investment?
In: Finance
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Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $1,500,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. The machine will produce 29,000 keyboards each year. The price of each keyboard will be $52 in the first year and will increase by 4 percent per year. The production cost per keyboard will be $22 in the first year and will increase by 5 percent per year. The project will have an annual fixed cost of $265,000 and require an immediate investment of $230,000 in net working capital. The corporate tax rate for the company is 21 percent. The appropriate discount rate is 9 percent. |
| What is the NPV of the investment? |
In: Finance
|
Dickinson Brothers, Inc., is considering investing in a machine to produce computer keyboards. The price of the machine will be $1,850,000, and its economic life is five years. The machine will be fully depreciated by the straight-line method. The machine will produce 24,000 keyboards each year. The price of each keyboard will be $68 in the first year and will increase by 3 percent per year. The production cost per keyboard will be $31 in the first year and will increase by 4 percent per year. The project will have an annual fixed cost of $300,000 and require an immediate investment of $265,000 in net working capital. The corporate tax rate for the company is 23 percent. The appropriate discount rate is 8 percent. |
| What is the NPV of the investment? |
In: Finance
2. When Apple introduced its first iPhone, it had few competitors and so it set a price of $500 when its unit cost was $350. The economics consulting firm it hired to estimate the demand elasticity confirmed this was the optimal price. Since then, entry into the mobile market has occurred that make customers more price conscious. When it brought the economics consulting firm back to estimate the demand price elasticity, it found that demand had become more price elastic at -4. Also, Apple has lowered its unit cost to $300 by finding cheaper labor.
In: Economics
The demand for ice cream is given by Q D = 20 – 2P, measured in gallons of ice cream. The
supply of ice cream is given by Q S = 4P – 10. Suppose that the government legislates a $1 tax on
a gallon of ice cream, to be collected from the seller.
a) As a result of the tax, what is the price paid by buyers?
b) What is the price received by sellers?
Hint: You need to determine the consumer and producer burden of the tax. First find equilibrium price
and quantity. Then, determine the elasticity of demand and supply. Then, use the share of the tax formula
provided to you to determine the burdens. After, that you add the consumer burden to the equilibrium
price to find buyer price. Subtract the producer burden from equilibrium price to find seller price.
In: Economics
|
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system: |
| Driver and guard wages | $ | 1,080,000 |
| Vehicle operating expense | 510,000 | |
| Vehicle depreciation | 390,000 | |
| Customer representative salaries and expenses | 420,000 | |
| Office expenses | 280,000 | |
| Administrative expenses | 580,000 | |
| Total cost | $ | 3,260,000 |
| The distribution of resource consumption across the activity cost pools is as follows: |
| Travel | Pickup and Delivery |
Customer Service |
Other | Totals | ||||||
| Driver and guard wages | 50 | % | 35 | % | 10 | % | 5 | % | 100 | % |
| Vehicle operating expense | 70 | % | 5 | % | 0 | % | 25 | % | 100 | % |
| Vehicle depreciation | 60 | % | 15 | % | 0 | % | 25 | % | 100 | % |
| Customer representative salaries and expenses | 0 | % | 0 | % | 90 | % | 10 | % | 100 | % |
| Office expenses | 0 | % | 20 | % | 30 | % | 50 | % | 100 | % |
| Administrative expenses | 0 | % | 5 | % | 60 | % | 35 | % | 100 | % |
| Required: |
|
Complete the first stage allocations of costs to activity cost pools. |
In: Accounting
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:
| Driver and guard wages | $ | 980,000 |
| Vehicle operating expense | 410,000 | |
| Vehicle depreciation | 290,000 | |
| Customer representative salaries and expenses | 320,000 | |
| Office expenses | 180,000 | |
| Administrative expenses | 480,000 | |
| Total cost | $ | 2,660,000 |
The distribution of resource consumption across the activity cost pools is as follows:
| Travel |
Pickup and Delivery |
Customer Service |
Other | Totals | ||||||
| Driver and guard wages | 50 | % | 35 | % | 10 | % | 5 | % | 100 | % |
| Vehicle operating expense | 70 | % | 5 | % | 0 | % | 25 | % | 100 | % |
| Vehicle depreciation | 60 | % | 15 | % | 0 | % | 25 | % | 100 | % |
| Customer representative salaries and expenses | 0 | % | 0 | % | 90 | % | 10 | % | 100 | % |
| Office expenses | 0 | % | 20 | % | 30 | % | 50 | % | 100 | % |
| Administrative expenses | 0 | % | 5 | % | 60 | % | 35 | % | 100 | % |
Required:
Complete the first stage allocations of costs to activity cost pools.
In: Accounting
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:
| Driver and guard wages | $ | 980,000 |
| Vehicle operating expense | 410,000 | |
| Vehicle depreciation | 290,000 | |
| Customer representative salaries and expenses | 320,000 | |
| Office expenses | 180,000 | |
| Administrative expenses | 480,000 | |
| Total cost | $ | 2,660,000 |
The distribution of resource consumption across the activity cost pools is as follows:
| Travel |
Pickup and Delivery |
Customer Service |
Other | Totals | ||||||
| Driver and guard wages | 50 | % | 35 | % | 10 | % | 5 | % | 100 | % |
| Vehicle operating expense | 70 | % | 5 | % | 0 | % | 25 | % | 100 | % |
| Vehicle depreciation | 60 | % | 15 | % | 0 | % | 25 | % | 100 | % |
| Customer representative salaries and expenses | 0 | % | 0 | % | 90 | % | 10 | % | 100 | % |
| Office expenses | 0 | % | 20 | % | 30 | % | 50 | % | 100 | % |
| Administrative expenses | 0 | % | 5 | % | 60 | % | 35 | % | 100 | % |
Required:
Complete the first stage allocations of costs to activity cost pools.
In: Accounting
SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:
| Driver and guard wages | $ | 1,160,000 |
| Vehicle operating expense | 590,000 | |
| Vehicle depreciation | 470,000 | |
| Customer representative salaries and expenses | 500,000 | |
| Office expenses | 360,000 | |
| Administrative expenses | 660,000 | |
| Total cost | $ | 3,740,000 |
The distribution of resource consumption across the activity cost pools is as follows:
| Travel |
Pickup and Delivery |
Customer Service |
Other | Totals | ||||||
| Driver and guard wages | 50 | % | 35 | % | 10 | % | 5 | % | 100 | % |
| Vehicle operating expense | 70 | % | 5 | % | 0 | % | 25 | % | 100 | % |
| Vehicle depreciation | 60 | % | 15 | % | 0 | % | 25 | % | 100 | % |
| Customer representative salaries and expenses | 0 | % | 0 | % | 90 | % | 10 | % | 100 | % |
| Office expenses | 0 | % | 20 | % | 30 | % | 50 | % | 100 | % |
| Administrative expenses | 0 | % | 5 | % | 60 | % | 35 | % | 100 | % |
Required:
Complete the first stage allocations of costs to activity cost pools.
In: Accounting
Corp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The activity measures are miles for the Travel cost pool, number of pickups and deliveries for the Pickup and Delivery cost pool, and number of customers for the Customer Service cost pool. The Other cost pool has no activity measure because it is an organization-sustaining activity. The following costs will be assigned using the activity-based costing system:
| Driver and guard wages | $ | 1,040,000 |
| Vehicle operating expense | 470,000 | |
| Vehicle depreciation | 350,000 | |
| Customer representative salaries and expenses | 380,000 | |
| Office expenses | 240,000 | |
| Administrative expenses | 540,000 | |
| Total cost | $ | 3,020,000 |
The distribution of resource consumption across the activity cost pools is as follows:
| Travel | Pickup and Delivery |
Customer Service |
Other | Totals | ||||||
| Driver and guard wages | 50 | % | 35 | % | 10 | % | 5 | % | 100 | % |
| Vehicle operating expense | 70 | % | 5 | % | 0 | % | 25 | % | 100 | % |
| Vehicle depreciation | 60 | % | 15 | % | 0 | % | 25 | % | 100 | % |
| Customer representative salaries and expenses | 0 | % | 0 | % | 90 | % | 10 | % | 100 | % |
| Office expenses | 0 | % | 20 | % | 30 | % | 50 | % | 100 | % |
| Administrative expenses | 0 | % | 5 | % | 60 | % | 35 | % | 100 | % |
Required:
Complete the first stage allocations of costs to activity cost pools.
In: Accounting