O'Brien Company namufactures and sells one product.The following information pertains to each of the company's first three years of operations.
Variable cost per unit:
Manufacturing:
Direct materials $26
Direct labor $17
Variable manufacturing overhead $4
Variable selling & administrative $2
Fixed costs per year:
Fixed manufacturing overhead $540,000
Fixed sellingn & administrative expense $160,000
During its first year of operations, O'Brien produced 96,000 units and sold 78,000 units. During its second year of operations, it produced 82,000 units and sold 95,000 units. In its third year, O'Brien produced 86,000 units and sold 81,000 units. The selling price of the companys products is $77 per unit.
1. Required:
1. Assume the company uses variable costiong and FIFO inventory flow assumption (FIFO means first-in first-out. In other words, if assumes that the oldest units in inverntory are sold first):
a. Compute the unit product cost for Year 1, Year 2 and Year 3
Year 1..............................Unit Product Cost............................
Year 2..............................Unit Product Cost...........................
Year 3..............................Unit Product Cost...........................
b. Prepare a income statement for Year 1, Year 2 and Year 3
O'Brien Company
Variable Costing Income Statement
Year 1 Year 2 Year 3
Variable expenses
Total variable expenses
Fixed expenses:
Total fixed expenses
2. Assume the company uses variable costing and LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):
a. Compute the unit porduct cost for Year 1, Year 2, and Year 3
Year 1..............................Unit Product Cost.......................
Year 2..............................Unit Product Cost.......................
Year 3..............................Unit Product Cost.......................
b. Prepare an income statement for Year 1, Year 2, and Year 3
O'Brien Company
Variable Costing Income Statement
Year 1 Year 2 Year 3
Variable expenses
Total variable expenses
Fixed expenses:
Total fixed expenses
3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, Year 3. (Round your intermediate calculations and final answers to 2 decimal places)
Year 1......................................Unit Product Cost................................
Year 2......................................Unit Product Cost................................
Year 3......................................Unit Product Cost..............................
b. Prepare an income statement for Year 1, Year 2 and Year 3. (Round your intermediate calculations to 2 decimal places.)
O'Brien Company
Absorption Costing Income Statement
Year 1 Year 2 Year 3
4. Assume the company uses absorption costing and a LIFO inventory flow assumptions (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first).
a. Compute the unit product cost for Year 1, Year 2,and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.)
Year1....................................Unit Product Cost........................
Year 2..................................Unit Product Cost...........................
Year 3..................................Unit Product Cost..........................
b. Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermidiate calculations to 2 decimal places.)
O'Brien Company
Absorption Costing Income Statement
Year 1 Year 2 Year 3
In: Accounting
The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas). The necessary foundry equipment will cost a total of $3,900,000 and will be depreciated using a five-year MACRS life, The sales manager has an estimate for the sale of the classic Thunderbirds. The annual sales volume will be as follows:
year one: 230, year two: 290, year three: 340, year four: 350, year five: 310
If the sales price is $29,000 per car, variable costs are $17,000 per car, and fixed costs are $1,400,000 annually, what is the annual operating cash flow if the tax rate is 30%? The equipment is sold for salvage for $500,000 at the end of year five. Net working capital increases by $600,000 at the beginning of the project (year 0) and is reduced back to its original level in the final year. Find the internal rate of return for the project using the incremental cash flows.
|
Year |
3-Year |
5-Year |
7-Year |
10-Year |
|
|
1 |
33.33% |
20.00% |
14.29% |
10.00% |
|
|
2 |
44.45% |
32.00% |
24.49% |
18.00% |
|
|
3 |
14.81% |
19.20% |
17.49% |
14.40% |
|
|
4 |
7.41% |
11.52% |
12.49% |
11.52% |
|
|
5 |
11.52% |
8.93% |
9.22% |
||
|
6 |
5.76% |
8.93% |
7.37% |
||
|
7 |
8.93% |
6.55% |
|||
|
8 |
4.45% |
6.55% |
|||
|
9 |
6.55% |
||||
|
10 |
6.55% |
||||
|
11 |
3.28% |
a) First, what is the annual operating cash flow of the project for year one? year 2? year 3? year 4? year 5?
b) Next, what is the after tax cash flow of the equipment at disposal?
c) Then what is the incremental cash flow of the project in year 0? year 1? year 2? year 3? year 4? year 5?
d) What is the IRR of the project?
In: Finance
Required information
[The following information applies to the questions displayed below.]
O’Brien Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:
| Variable costs per unit: | ||
| Manufacturing: | ||
| Direct materials | $ | 28 |
| Direct labor | $ | 16 |
| Variable manufacturing overhead | $ | 6 |
| Variable selling and administrative | $ | 2 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 510,000 |
| Fixed selling and administrative expenses | $ | 200,000 |
During its first year of operations, O’Brien produced 91,000 units and sold 77,000 units. During its second year of operations, it produced 77,000 units and sold 86,000 units. In its third year, O’Brien produced 86,000 units and sold 81,000 units. The selling price of the company’s product is $79 per unit.
2. Assume the company uses variable costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, and Year 3.
b. Prepare an income statement for Year 1, Year 2, and Year 3.
Complete this question by entering your answers in the tabs below.
Compute the unit product cost for Year 1, Year 2, and Year 3.
|
Complete this question by entering your answers in the tabs below.
Prepare an income statement for Year 1, Year 2, and Year 3.
|
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3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, and Year 3.
b. Prepare an income statement for Year 1, Year 2, and Year 3.
Complete this question by entering your answers in the tabs below.
Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.)
|
Complete this question by entering your answers in the tabs below.
Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.)
|
|||||||||||||||||||||||||||||||||
4. Assume the company uses absorption costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):
a. Compute the unit product cost for Year 1, Year 2, and Year 3.
b. Prepare an income statement for Year 1, Year 2, and Year 3.
Complete this question by entering your answers in the tabs below.
|
Compute the unit product cost for Year 1, Year 2, and Year 3. (Round your intermediate calculations and final answers to 2 decimal places.)
Complete this question by entering your answers in the tabs below.
Prepare an income statement for Year 1, Year 2, and Year 3. (Round your intermediate calculations to 2 decimal places.)
|
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In: Accounting
Purple Corporation, an exterminating company, is a calendar year taxpayer. It contracts to provide service to homeowners once a month under a one-, two-, or three-year contract. On April 1 of the current year, the company sold a customer a one-year contract for $120. How much of the $120 is taxable in the current year if the company is an accrual basis taxpayer. If the $120 is payment on a two-year contract, how much is taxed in the year the contract is sold and in the following year? If the $120 is payment on a three-year contract, how much is taxed in the year the contract is sold and in the following year?
In: Accounting
Compute the cost of debt financing. Compute the cost of equity financing using the capital asset pricing model. Compute the weighted average cost of capital. The capital investment is to be depreciated as a 7 year asset using this table: Ownership year 1 (14.29%), year 2 (24.49%), year 3 (17.49%), year 4 (12.49%), year 5 (8.93%), year 6 (8.92%), year 7 (4.46%). Evaluate each independent project by computing net present value, internal rate of return, and payback. Then decide whether to accept or reject the project.
Debt 40%, interest rate 5%, tax rate 26%, equity 60%, risk free rate 6%, RM 13%, beta 1.10, working capital 10% next year's sales, no terminal cash flows
project 1 capital investment 1,000,000 year 1(revenue 780,000, expenses 585,000) year 2(revenue 799,500,expenses 599,625) year 3(revenue 819,488, expenses 614,616) year 4(revenue 839,975, expenses 629,981) year 5 (revenue 860,974, expenses 645,731) year 6 (revenue 882,498, expenses 661,874) year 7 (revenue 904,561, expenses 678,421) year 8 (revenue 927,175, expenses 695,381)
project 2 capital investment 750,000 year 1(revenue 800,000, expenses 600,000) year 2 (revenue 820,000, expenses 615,000) year 3 (revenue 840,500, expenses 630,375) year 4 (revenue 861,513, expenses 646,134) year 5 (revenue 883,050, expenses 662,288) year 6 (revenue 905,127, expenses 678,845) year 7 (revenue 927,755, expenses 695,816) year 8 (revenue 950,949, expenses 713,211)
project 3 capital investment 1,000,000 year 1 ( revenue 850,000, expenses 680,000) year 2 (revenue 871,250, expenses 697,000) year 3 (revenue 893,031, expenses 714,425) year 4 (revenue 915,357, expenses 732,286) year 5 ( revenue 938,241, expenses 750,593) year 6 (revenue 961,697, expenses 769,358) year 7 (revenue 985,739, expenses 788,592) year 8 (revenue 1,010,383, expenses 808,306)
In: Finance
Dividend Yield
The market price for Macro Corporation closed at $40.54 and $34.50 on December 31, current year, and previous year, respectively. The dividends per share were $0.60 for current year and $0.69 for previous year.
a. Determine the dividend yield for Macro on December 31, current year, and previous year. Round percentages to two decimal places.
| Current year | % |
| Previous year | % |
b. The dividend yield from the previous year to the current year. This is a result of a(n) in the dividend relative to stock price.
In: Accounting
Hi,
Can you please solve this correctly?
With interest at 10%, what is the benefit-cost ratio for this government project?
| Initial Cost | $205454 |
| Additional costs at the end of year 1 and year 2 | $34758/year |
| Benefits at end of year 1 and year 2 | $0/year |
| Annual benefits at end of year 3 through year 10 | $103447/year |
Enter your answer as follow: 12.34
In: Finance
Consider the 2 cash flow options below at an interest rate of 10%
| A | B | |
| Initial Cost | 100,000 | 120,000 |
| Year Cost 1 | 1000 | 1500 |
| Year Cost 2 | 1400 | 1800 |
| Year Cost 3 | 1800 | 2100 |
| Year Cost 4 | 2200 | 2400 |
| Year Cost 5 | 2600 | 2700 |
| Year Cost 6 | 3000 | 3000 |
| Year Cost 7 | 3400 | 3300 |
| Year Cost 8 | 3800 | 3600 |
| Year Cost 9 | 4200 | 3900 |
| Year Cost 10 | 4600 | 4200 |
| Year Cost 11 | 5000 | 4500 |
| Year Cost 12 | 5400 | 4800 |
| Year Cost 13 | 5800 | 5100 |
| Year Cost 14 | 6200 | 5400 |
| Year Cost 15 | 6600 | 5700 |
Option A stops at 15 years, while option B goes until year 30. The final year of option B is equal to 10200.
Yearly savings for option A is 10000 and for option B is 20000.
The salvage value for option A is 5000 and for option B is 12000.
Which option is better?
In: Economics
An investor is reviewing two proposals, assuming similar risk profiles and a 14% required return, which one should the investor buy? Why?
Lee Vista:
Purchase Price: $464,000
Cash flows from operations:
Year 1 $48,000
Year 2 $49,440
Year 3 $50,923
Year 4 $52,451
Year 5 $54,025
Cash flow from sale on year 5 $560,000
Colony Park:
Purchase Price: $500,000
Cash flows from operations:
Year 1 $56,000
Year 2 $57,400
Year 3 $58,835
Year 4 $60,306
Year 5 $61,814
Cash flow from sale on year 5 $597,000
In: Finance
Projects A and B, both of equal risk, are mutually exclusive alternatives for expanding Corporation’s capacity. The firm’s cost of capital is 13%. The cash flows for each project are shown in the following table.
Project A Project B
Year 0: ($80,000) Year 0: ($80,000)
Year 1: $15,000 Year 1: $15,000
Year 2: $20,000 Year 2: $15,000
Year 3: $25,000 Year 3: $15,000
Year 4: $30,000 Year 4: $35,000
Year 5: $30,000 Year 5: $25,000
A. What is each project’s payback period? (4 points)
B. What is each project’s net present value? (4 points)
In: Finance