Hanna, who is a 5-year-old girl, eats nothing but pasta, yogurt, and lemonade. Each month her parents buy 25 pounds of pasta, 65 packages of yogurt, and 15 bottles of lemonade. These three items make up a basket of goods and services similar to the much larger basket used by the Bureau of Labor Statistics (BLS) when computing the official Consumer Price Index (CPI). The table below lists the average price for each item in this basket for the past four years.Hanna's Meals
|
Year |
Pasta (dollars per pound) |
Yogurt (dollars per package) |
Lemonade (dollars per bottle) |
|
1 |
$1.90 |
$1.00 |
$2.10 |
|
2 |
2.10 |
1.10 |
2.20 |
|
3 |
2.25 |
1.10 |
1.95 |
|
4 |
2.20 |
1.20 |
2.00 |
Instructions: Round your answers to two decimal places.
a. For each year, calculate the CPI, using year 1 as the base year.
In year 1, the CPI was 100.00 Correct
In year 2, the CPI was 109.30 Incorrect
In year 3, the CPI was 109.30 Incorrect
In year 4, the CPI was 113.19 Correct
b. For each year, calculate the CPI, using year 3 as the base year.
In year 1, the CPI was 91.72 Correct
In year 2, the CPI was 100.00 Correct
In: Economics
Haas 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 | $ | 25 |
| Direct labor | $ | 17 |
| Variable manufacturing overhead | $ | 8 |
| Variable selling and administrative | $ | 3 |
| Fixed costs per year: | ||
| Fixed manufacturing overhead | $ | 150,000 |
| Fixed selling and administrative expenses | $ | 90,000 |
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 $57 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.
3. Assume the company uses absorption 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.
.
Zola Company manufactures and sells one product. The following information pertains to the company’s first year of operations:
| Variable cost per unit: | ||
| Direct materials | $ | 14 |
| Fixed costs per year: | ||
| Direct labor | $ | 157,250 |
| Fixed manufacturing overhead | $ | 220,000 |
| Fixed selling and administrative expenses | $ | 67,500 |
The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Zola produced 18,500 units and sold 14,800 units. The selling price of the company’s product is $51.30 per unit.
Required:
1. Assume the company uses super-variable costing:
a. Compute the unit product cost for the year.
b. Prepare an income statement for the year.
In: Accounting
Havana Inc. has identified an investment project with the following cash flows. If the discount rate is 9 percent, what is the future of these cash flows in year 6?
Year 1: $910
Year 2: $1140
Year 3: $1360
Year 4: $2100
In: Finance
s.
|
New Car Development Cost |
$12,000,000 |
|
Marketing Cost |
$250,000 |
|
New Car Variable Cost per car |
$49,600 |
|
New Car Fixed Costs per Year |
$35,000,000 |
|
New Car Sales Volume Year 1 |
5,750 |
|
New Car Sales Volume Year 2 |
6,437 |
|
New Car Sales Volume Year 3 |
4,744 |
|
New Car Sales Volume Year 4 |
3,325 |
|
New Car Sales Volume Year 5 |
2,723 |
|
New Car Unit Price |
$80,000 |
|
New Car Equipment |
450,000,000 |
|
New Car Equipment Depreciation |
7 Year MACRS Schedule |
|
Value of Equipment after 5 Years |
355,000,000 |
|
Existing Car Sales Volume if New Car is not introduced Year 1 |
12,000 |
|
Existing Car Sales Volume if New Car is not introduced Year 2 |
10,750 |
|
Existing Car Sales Volume if New Car is not introduced Year 3 |
8,700 |
|
Price of Existing Car |
$35,000 |
|
Variable Cost per Existing Car |
$19,950 |
|
Fixed Cost of Existing Cost Per Year |
$25,000,000 |
|
Sales Volume of Existing Car if New Car is introduced Year 1 |
11,000 |
|
Sales Volume of Existing Car if New Car is introduced Year 2 |
9,750 |
|
Sales Volume of Existing Car if New Car is introduced Year 3 |
7,700 |
|
Existing Car Unit Price if New Car is introduced |
$32,000 |
|
New Working Capital of the Project, changes occur in Year 1 |
20% of Sales |
|
Corporate Tax Rate |
25% |
|
Cost of Capital |
14% |
|
New Car Development Cost |
$12,000,000 |
|
Marketing Cost |
$250,000 |
|
New Car Variable Cost per car |
$49,600 |
|
New Car Fixed Costs per Year |
$35,000,000 |
|
New Car Sales Volume Year 1 |
5,750 |
|
New Car Sales Volume Year 2 |
6,437 |
|
New Car Sales Volume Year 3 |
4,744 |
|
New Car Sales Volume Year 4 |
3,325 |
|
New Car Sales Volume Year 5 |
2,723 |
|
New Car Unit Price |
$80,000 |
|
New Car Equipment |
450,000,000 |
|
New Car Equipment Depreciation |
7 Year MACRS Schedule |
|
Value of Equipment after 5 Years |
355,000,000 |
|
Existing Car Sales Volume if New Car is not introduced Year 1 |
12,000 |
|
Existing Car Sales Volume if New Car is not introduced Year 2 |
10,750 |
|
Existing Car Sales Volume if New Car is not introduced Year 3 |
8,700 |
|
Price of Existing Car |
$35,000 |
|
Variable Cost per Existing Car |
$19,950 |
|
Fixed Cost of Existing Cost Per Year |
$25,000,000 |
|
Sales Volume of Existing Car if New Car is introduced Year 1 |
11,000 |
|
Sales Volume of Existing Car if New Car is introduced Year 2 |
9,750 |
|
Sales Volume of Existing Car if New Car is introduced Year 3 |
7,700 |
|
Existing Car Unit Price if New Car is introduced |
$32,000 |
|
New Working Capital of the Project, changes occur in Year 1 |
20% of Sales |
|
Corporate Tax Rate |
25% |
|
Cost of Capital |
14% |
|
New Car Development Cost |
$12,000,000 |
|
Marketing Cost |
$250,000 |
|
New Car Variable Cost per car |
$49,600 |
|
New Car Fixed Costs per Year |
$35,000,000 |
|
New Car Sales Volume Year 1 |
5,750 |
|
New Car Sales Volume Year 2 |
6,437 |
|
New Car Sales Volume Year 3 |
4,744 |
|
New Car Sales Volume Year 4 |
3,325 |
|
New Car Sales Volume Year 5 |
2,723 |
|
New Car Unit Price |
$80,000 |
|
New Car Equipment |
450,000,000 |
|
New Car Equipment Depreciation |
7 Year MACRS Schedule |
|
Value of Equipment after 5 Years |
355,000,000 |
|
Existing Car Sales Volume if New Car is not introduced Year 1 |
12,000 |
|
Existing Car Sales Volume if New Car is not introduced Year 2 |
10,750 |
|
Existing Car Sales Volume if New Car is not introduced Year 3 |
8,700 |
|
Price of Existing Car |
$35,000 |
|
Variable Cost per Existing Car |
$19,950 |
|
Fixed Cost of Existing Cost Per Year |
$25,000,000 |
|
Sales Volume of Existing Car if New Car is introduced Year 1 |
11,000 |
|
Sales Volume of Existing Car if New Car is introduced Year 2 |
9,750 |
|
Sales Volume of Existing Car if New Car is introduced Year 3 |
7,700 |
|
Existing Car Unit Price if New Car is introduced |
$32,000 |
|
New Working Capital of the Project, changes occur in Year 1 |
20% of Sales |
|
Corporate Tax Rate |
25% |
|
Cost of Capital |
14% |
Can you and your team prepare the income statement table, the operating cash flow (OCF) table, and the total cash flow from assets (CFFA) table for this project?
In: Finance
Your company is considering an investment that would involve the following initial outlays: cost of equipment: $275467, installation: $28020, and change in NOWC: $37216. The equipment is classified to be depreciated according to the MACRS 3-year table, with the following depreciation schedule: year 1 = 33%, year 2 = 45%, year 3 = 15%, year 4 = 7%. What is the depreciation expense in year 2?
In: Finance
Joe and Jan are thinking of opening an Italian restaurant. Setting up the restaurant is very expensive and costs $400,000 today and $200,000 the first year. However, they expect to earn $150,000 their first year, $130,000 the next year, $100,000 the third year, $200,000 the fourth year, and a whopping $300,000 their fifth year.
If interest rates are currently 10%, should they open the restaurant of their dreams?
In: Finance
1
Assume that a project has a starting cost of $300,000 in year 1.
$40,000 each year in Year 2, 3, and 4. Estimated benefits of the
project are $0 in Year 1 and $ 120,000 each year in Year 2, 3, and
4. Use a discount rate of 7% and round the discount rate into two
decimal points.
Calculate the NPV for this project.
calculate the project ROI.
In: Accounting
Determine the net present value for a project that costs $58,500 and would yield after-tax cash flows of $9,000 the first year, $11,000 the second year, $14,000 the third year, $16,000 the fourth year, $20,000 the fifth year, and $26,000 the sixth year. Your firm's cost of capital is 5.00%.
Question 27 options:
|
$37,500.00 |
|
|
$16,954.36 |
|
|
$96,000.00 |
|
|
$20,377.84 |
|
|
$27,471.55 |
In: Finance
Suppose a company has proposed a new 4-year project. The project has an initial outlay of $70,000 and has expected cash flows of $20,000 in year 1, $23,000 in year 2, $29,000 in year 3, and $35,000 in year 4. The required rate of return is 12% 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)
In: Finance
Mr. D works full-time as a systems analyst for a consulting firm. In addition, he sells plants that he raises himself in a greenhouse attached to his residence. During the past 5 years, the results from raising and selling the plants have been as follows: Year Net Profit (Loss) from Scenario 1:
|
Scenario 1 |
|
|
Year 1 |
(2,000) |
|
Year 2 |
(1,200) |
|
Year 3 |
1,000 |
|
Year 4 |
2,500 |
|
Total Years 1-4 |
300 |
|
Year 5 |
(500) |
2. Please create a scenario (Scenario 2) where the cumulative profits in years 1-4 are still $300 but the taxpayer would be in a better position regarding year 5 losses.
|
Scenario 1 |
Scenario 2 |
|
|
Year 1 |
(2,000) |
|
|
Year 2 |
(1,200) |
|
|
Year 3 |
1,000 |
|
|
Year 4 |
2,500 |
|
|
Total Years 1-4 |
300 |
300 |
|
Year 5 |
(500) |
(500) |
3. Comment on your answer to 2 above. Why is Scenario 2 better for the taxpayer?
In: Accounting