1. Match the correct term to the following statement.

Cost equals :

cost minus markdown.

markdown minus markup.

net profit minus operating expenses.

selling price minus markup.

cost minus markup.

2.

Use the basic equations to determine the selling price in the following problem. Round your answer to the nearest cent.

3.

Use the basic equations to determine the markup amount in the following problem. Round your answer to the nearest cent.

4.

Complete the following problem. Round your answer to the nearest cent.

If the selling price is $32.99 and the cost is $16.00, the markup is $ =

5.

Complete the following problem. Round your answer to the nearest cent.

If the markup is $22.00 and the cost is $15.50, the selling price is $ =

6.  Match the correct term to the following statement.

________  Incurred by a business, such as rent and utilities

Select =

cost

markdown

markup

net profit

operating expenses

selling price

7.

Use the basic equations to determine the markup amount in the following problem. Round your answer to the nearest cent.

8.  

Match the correct term to the following statement.

___________ Amount manufacturer charges for merchandise.

select=

cost

markdown

markup

net profit

operating expenses

selling price

9.

Use the basic equations to determine the cost in the following problem. Round your answer to the nearest cent.

10.  Match the correct term to the following statement.

Selling Price equals =

cost plus markdown

markdown plus markup

net profit plus operating expenses

selling price plus operating expenses

cost plus markup

1. Project A cost $1,000 and Project B cost $1,000, there expected net cash inflows are shown on the timeline below and there WACC is 9.00%. What is Project B's Discounted Payback?

WACC 9.00%

                      0              1              2               3              4

                        l              l               l                l                l

ProjA      -$1,000         $675       $650

ProjB   -$1,000       $1,000   $700        $50           $50

1. Project A cost $1,050 and Project B cost $1,050, there expected net cash inflows are shown on the timeline below and there WACC is 9.00%. What is the Discounted Payback for Project A?

  WACC 9.00%

                   0              1              2               3              4

                   l                l               l                l               l        

ProjA    -$1,050       $675        $650

ProjB   -$1,050    $360        $360        $360        $360

1. Project A cost $1,000 and Project B cost $1,000, there expected net cash inflows are shown on the timeline below and there WACC is 10.00%. What is Project B's Modified Internal Rate of Return (MIRR)?

WACC 10.00%

                      0              1              2               3              4

                        l              l               l                l                l   

ProjA      -$1,000         $675       $650

ProjB   -$1,000       $1,000   $700        $50           $50

1. Project A cost $1,050 and Project B cost $1,050, there expected net cash inflows are shown on the timeline below and there WACC is 10.00%. What is Project A's Modified Internal Rate of Return (MIRR)?

WACC 10.00%

                      0              1              2               3              4

                        l              l               l                l                l   

ProjA      -$1,050         $675       $650

ProjB   -$1,050         $360   $360         $360        $360

A company manufacturing toys has a fixed cost of $60,000. Variable cost is 6 per toy.

Selling price is $10 per toy. Company target profit is $100,000.

The company found that its variable cost is going to increase by $1.5 and plans to raise its selling price by $3 and reduced the fixed costs by $20,000.

1. How many more (less) toys must be sold at the new price to reach the target profit of $100,000?

2. What is the markup (profit margin %) on sales price at this new sales volume? What is the markup (profit margin %) on total cost?

1. Cost Information and FIFO

   Gunnison Company had the following equivalent units schedule and cost information for its Sewing Department for the month of December:

   	Direct Materials		Conversion Costs
   Units started and completed	45,000		45,000
   Add: Units in beginning work in process ×
   Percentage complete:
   7,000 × 0% direct materials	—
   7,000 × 50% conversion Costs			3,500
   Add: Units in ending work in process ×
   Percentage complete:
   12,000 × 100% direct materials	12,000		—
   12,000 × 35% conversion Costs	—		4,200
   Equivalent units of output	57,000		52,700
   Costs:
   Work in process, December 1:
   Direct Material			$91,000
   Conversion Costs			21,000
   Total work in process			$112,000
   Current costs:
   Direct Material			$798,000
   Conversion Costs			263,500
   Total current costs			$1,061,500

   Required:

   1. Calculate the unit cost for December, using the FIFO method.
   $ per equivalent unit

   2. Calculate the cost of goods transferred out, calculate the cost of EWIP, and reconcile the costs assigned with the costs to account for.

   Cost of goods transferred out	$
   Cost of EWIP	$

   Cost to account for:
   BWIP	$
   Current (December)
   Total	$

   3. What if you were asked for the unit cost from the month of November? Calculate November's unit cost.
   $ per equivalent unit

Tybee Industries Inc. uses a job order cost system

A type of cost accounting system that provides for a separate record of the cost of each particular quantity of product that passes through the factory.

. The following data summarize the operations related to production for January, the first month of operations:

Question 5.

The Rubio’s Fantastic Cs is a medium-size, Los Angeles based company that has been in business for the last ten years. It specializes in manufacturing the air conditioners. Over the last two years, the Rubio’s has spent $20,000 developing a new energy efficient and eco-friendly air conditioner called EcoStar.

Suppose you are a financial consultant advising the Rubio’s on whether to build a new plant in San Diego that will manufacture the EcoStar. The current date is December 31, 2017. The plant will be built over the two years and will be ready to start production on January 1, 2020. The plant is expected to operate only for the two years and so it will cease production on December 31, 2021. The investment for the plant requires an outlay of $10 million to be paid at the end of 2017 year. The IRS rules prescribe that this expenditure is depreciated using the straight-line depreciation schedule (to 0$) over five years as soon as the plant starts producing. The plant is expected to be reselled for $5 million on December 31, 2021. The plant will be built on the land that could be rented out for $375,000 a year.

To launch the manufacture of the EcoStar, the firm would also need to acquire new equipment. The equipment will cost $1 million to be paid at the end of 2019 year and will be depreciated using the straight line depreciation over the two years the plant is manufacturing the EcoStar. After two-years of the manufacture the equipment has no salvage value.

The Fabio’s new plant will produce 100,000 air conditioners a year. The EcoStar air conditioner can be sold at $500 per unit. Raw materials costs are $220 per unit and total labor costs are $500,000 a year. These revenues and costs are expected to be the same for the two year the plant is producing.

The working capital required on December 31, 2019 to allow inventories to be financed during the first year of productions is $100,000. Working capital needs for the second year will be $200,000. When the plant ceases manufacture all the working capital will be recovered (i.e. working capital equals $0 on December 31, 2021).

The Rubio’s Fantastic Cs has a corporate tax rate of 20% and other profitable ongoing operations. The opportunity cost of capital for this kind of project is 10%.

For all questions state your solution in millions of dollars (i.e. instead of writing $1,000,000 write $1m).

Part (a) What are the depreciation tax shields associated with the purchase of new equipment?

Year     Depreciation Schedule    Depreciation Amount   Depreciation Tax Shields

Part (b)

What are the depreciation tax shields associated with the new plant?

Year     Depreciation Proportion Depreciation Amount   Depreciation Tax Shields

Part(c)

What is the book value of the equipment and plant in every year?

Part (d)

What is the capital gain tax (capital loss tax credit) that the firm incurs on December 31, 2021 when selling the plant?

Part (e)

What is the plant’s salvage value (net of taxes)?

Part (f)

What are the firm’s NOPAT in every year if the firm builds the plant and starts manufacturing the EcoStar? First, give the answers to the following questions and then fill in the table.

1. What are the firm’s revenues in the first year of production?
2. What are the firm’s costs in the first year of production (excluding depreciation)?
3. What is the firm’s EBIT (earnings before interest and tax) in the the first year of production?
4. What is the firm’s income taxes in the first year of production?
5. What is the firm’s NOPAT (net operating profit after tax) in the first year of production?

Part (g)

What is the level of NWC (net working capital) required for the EcoStar manufacture in every year?

Part (h)

What are the free cash flows of the firm in every year that the firm manufactures the EcoStar?