An arc welder with AI software onboard costs $3,800 today, $3750 last year, and $3,100 one year prior to that. Determine the one-year rate of inflation for each year.

The inflation rate for last year was ___%.?

The inflation rate for one year prior to last year was ___%.?

Ogilvy Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:

The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Ogilvy produced 79,000 units and sold 79,000 units. During its second year of operations, it produced 79,000 units and sold 73,400 units. In its third year, Ogilvy produced 79,000 units and sold 84,600 units. The selling price of the company’s product is $78 per unit.

Required:

1. Assume the company uses super-variable costing:

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.

2. Assume the company uses a variable costing system that assigns $28 of direct labor cost to each unit produced:

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.

3. Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3.

1b

Prepare an income statement for Year 1, Year 2, and Year 3. Assume the company uses super-variable costing.

2a

Compute the unit product cost for Year 1, Year 2, and Year 3. Assume the company uses a variable costing system that assigns $28 of direct labor cost to each unit produced.

2b

Prepare an income statement for Year 1, Year 2, and Year 3. Assume the company uses a variable costing system that assigns $28 of direct labor cost to each unit produced.

req 3

Reconcile the difference between the super-variable costing and variable costing net operating incomes in Years 1, 2, and 3.

The cash flows and Net salvage value of Project X is given the following table:

Based on the Economic Life of this project and the cost of capital is 12%, in what year should you abandoning this Project X?

• A. Year 3, since NPV in year 3 = $8,429
• B. Year 3, since NPV in year 3 = $2,629
• C. Year 4, since NPV in year 4 = $2,892
• D. Year 4, since NPV in year 4 = $2,491
• E. Year 1, since NPV in year 1 = $1,24
  

10. Suppose a company has proposed a new 4-year project. The project has an initial outlay of $60,000 and has expected cash flows of $18,000 in year 1, $23,000 in year 2, $26,000 in year 3, and $34,000 in year 4. The required rate of return is 14% for projects at this company. What is the Payback for this project? (Answer to the nearest tenth of a year, e.g. 1.2)

11. Suppose a company has proposed a new 4-year project. The project has an initial outlay of $64,000 and has expected cash flows of $20,000 in year 1, $24,000 in year 2, $28,000 in year 3, and $34,000 in year 4. The required rate of return is 14% for projects at this company. What is the discounted payback for this project? (Answer to the nearest tenth of a year, e.g. 3.2)

12.

Suppose a company has proposed a new 4-year project. The project has an initial outlay of $27,000 and has expected cash flows of $7,000 in year 1, $9,000 in year 2, $11,000 in year 3, and $14,000 in year 4. The required rate of return is 15% for projects at this company. What is the net present value for this project? (Answer to the nearest dollar.)

Problem 7-18 Variable and Absorption Costing Unit Product Costs and Income Statements [LO7-1, LO7-2]

Haas Company manufactures and sells one product. The following information pertains to each of the company’s first three years of operations:

During its first year of operations, Haas produced 60,000 units and sold 60,000 units. During its second year of operations, it produced 75,000 units and sold 50,000 units. In its third year, Haas produced 40,000 units and sold 65,000 units. The selling price of the company’s product is $72 per unit.

Required:

1. Compute the company’s break-even point in unit sales.

2. Assume the company uses variable costing:

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.

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.

Bay Properties is considering starting a commercial real estate division. It has prepared the following? four-year forecast of free cash flows for this? division:

Assume cash flows after year 4 will grow at

4%

per? year, forever. If the cost of capital for this division is

10%?,

what is the continuation value in year 4 for cash flows after year? 4? What is the value today of this? division???

What is the continuation value in year 4 for cash flows after year? 4?

Make journal entries

• for the issuance of the bond
• for interest expense for Year 1 and Year 2
• for the amortization of premium for year 1 and year 2.
  1. The straight-line method
     1. Interest expense for year ‘t’

= interest payment for year ‘t’ - amortization of premium for year ‘t’ or + amortization of discount for year ‘t’

2. Amortization of discount or premium on BP for year ‘t’

= initial balance of discount or premium / # of years in the outstanding period

$7,387/5 years = $1,478/year

Interest expense                               10,478

                           Cash                                      9,000

                           Discount on BP                       1,478

Must make the above journal entries at the end of each year for 5 years

KRJ Corporation reported (in $ millions) tax expense of $950 for the year. Taxes payable at the beginning of the year was $150 and at the end of the year it was $153. Deferred taxes at the beginning of the year was $114 and at the end of the year it was $123. The company also reported deferred tax assets at the beginning of the year of $87 and at the end of the year it was $74. How much cash (in $ millions) was paid for taxes for during the year?

15–20... If the adjusting entry for supplies used is not recorded at the end of a year, how will the following be affected at the end of the year? (Answer using one of the following: not affected, overstated, or understated.)

      15.    Assets at end of year .............................................................................................

      16.    Liabilities at end of year .........................................................................................

      17.    Stockholders’ equity at end of year .....................................................................

      18.    Revenues for year ..................................................................................................

      19.    Expenses for year ..................................................................................................

      20.    Net income for year ................................................................................................