Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 8 percent to evaluate average-risk projects, and it adds or subtracts 1 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $ 303 and will last 4 years. Project A, a riskier-than-average project, will produce annual end of year cash flows of $ 101 . Project B, of less than average risk, will produce cash flows of $ 272 at the end of Years 3 and 4 only. To the nearest .01, list the NPV of the higher NPV project. Note, if the NPV is negative, place a - sign in front of your answer. Do not use the $ symbol.
In: Finance
Virus Stopper Inc., a supplier of computer safeguard systems, uses a cost of capital of 9 percent to evaluate average-risk projects, and it adds or subtracts 3 percentage points to evaluate projects of more or less risk. Currently, two mutually exclusive projects are under consideration. Both have a cost of $ 303 and will last 4 years. Project A, a riskier-than-average project, will produce annual end of year cash flows of $ 88 . Project B, of less than average risk, will produce cash flows of $ 227 at the end of Years 3 and 4 only. To the nearest .01, list the NPV of the higher NPV project. Note, if the NPV is negative, place a - sign in front of your answer. Do not use the $ symbol.
In: Finance
Boards Inc. fabricates skateboards that the company sells for $ 37.50 each. Fixed costs for the last 12 months equaled $4,800. For the same period variable cost per unit equaled $22.50. Use the unit variable cost and sales price to calculate the unit contribution margin: 9120 Calculate the breakeven sales volume. BLANK-2 Calculate the sales volume necessary to produce a target Net Income of $3,000 per month. BLANK-3 The skateboards are manufactured in an old factory that relies heavily on worker labor. The company is considering the construction of a new automated plant that would increase fixed costs by $ 4,320 per month, but decrease the variable cost per board by $ 8.50. What would the fixed costs and unit variable costs be under the proposal. Use the unit variable cost and sales price to calculate the unit contribution margin: Fixed Cost BLANK-4 Variable cost per unit BLANK-5 Contribution Margin per unit BLANK-6 Compute the breakeven under the new proposal. BLANK-7 Prepare comparative Contribution Margin Income Statements for the current and proposed manufacturing processes assuming the sales volume is 480 units per month. Current Process Sales Revenue BLANK-8 Variable Costs BLANK-9 Contribution Margin BLANK-10 Fixed Costs BLANK-11 Net Income BLANK-12 Proposed New Process Sales Revenue BLANK-13 Variable Costs BLANK-14 Contribution Margin BLANK-15 Fixed Costs BLANK-16 Net Income BLANK-17 If the company is expected to sell 480 units a month, should they build the new factory? Yes or No BLANK-18
In: Accounting
7. Which of the following is not a type of responsibility center?
A. concentrated cost center B. Investment center C. profit center D. cost center
8. A responsibility center in which managers are held accountable for both revenues and expenses is called a _______
A. discretionary cost center B. revenue center C. cost center D. profit center
9. The amount of income a given division is expected to earn in excess of a firm's minimum return goal is called:
A. return on investment B. residual income C. allocated costs D. transfer pricing
10. The measure of the percentage of income generated by profits that were invested in capital assets is called:
A. return on investment B. residual income C. allocated costs D. transfer pricing
11. Costs that a company or manager can influence are called:
A. discretionary costs B. fixed costs C. variable costs D. controllable costs
12. A transfer pricing arrangement that uses the price that would be charged to an external customer is a:
A. market-based approach B. negotiated approach C. cost approach D. decentralized approach
In: Accounting
PA6-1 Calculating Contribution Margin, Contribution Margin Ratio, Break-Even Point [LO 6-1, 6-2]
Hermosa, Inc., produces one model of mountain bike. Partial
information for the company follows:
| Number of bikes produced and sold | 510 | 800 | 970 | |||
| Total costs | ||||||
| Variable costs | $ | 126,990 | $ | ? | $ | ? |
| Fixed costs per year | ? | ? | ? | |||
| Total costs | ? | ? | ? | |||
| Cost per unit | ||||||
| Variable cost per unit | ? | ? | ? | |||
| Fixed cost per unit | ? | ? | ? | |||
| Total cost per unit | ? | $ | 533.75 | ? | ||
Required:
1. Complete the table. (Round
your "Cost per Unit" answers to 2 decimal
places.)
2. Calculate Hermosa’s contribution margin ratio
and its total contribution margin at each sales level indicated in
the table assuming the company sells each bike for $780.
(Round your percentage answers to 2 decimal places. (i.e.
.1234 should be entered as 12.34%.))
4. Calculate Hermosa’s break-even point in units
and sales revenue. (Round your answers to the nearest whole
number.)
In: Accounting
The following information shows last year’s quality-related costs for the Madrigal Company:
|
Quality engineering |
$600,000 |
Inspection of and testing of incoming materials |
480,000 |
|
Warranty claims |
2,814,000 |
Repair costs in the field |
1,020,000 |
|
Product liability lawsuits |
5,400,000 |
Statistical process control |
300,000 |
|
Research of customer needs |
90,000 |
Product recalls |
2,400,000 |
|
Maintenance of test equipment |
420,000 |
Waste |
840,000 |
|
Returned products |
1,440,000 |
Net cost of scrap |
762,000 |
|
Rework costs |
1,440,000 |
Product quality audits |
570,000 |
|
Quality training |
150,000 |
Downtime due to defects |
150,000 |
|
Process control monitoring |
1,200,000 |
Supplier certification |
108,000 |
Total sales for the year were $120,000,000.
Prepare a cost-of-quality report grouping costs into prevention, appraisal, internal failure and external failure. Show each cost in total and as a percentage of sales.
|
Type of Cost |
Annual Cost |
Percent of Sales |
|
Prevention Costs |
||
|
Total |
||
|
Appraisal Costs |
||
|
Total |
||
|
Internal Failure Costs |
||
|
Total |
||
|
External Failure Costs |
||
|
Total |
||
|
Total Quality Costs |
In: Accounting
Presidio, Inc. produces one model of mountain bike. Partial information for the company follows:
Required:
1. Complete Presidio’s cost data table.
(Round your Cost per Unit answers to 2 decimal
places.)
| Bikes produced and sold | 410 Units | 850 Units | 1766 Units |
| Total Costs | |||
| Variable Costs | $ 118900 | ||
| Fixed Costs per year | |||
| Total Costs | $118900 | $0 | $0 |
| Cost per unit | |||
| Variable Cost per unit | |||
|
Fixed costs per unit |
|||
| Total Costs per unit | $544.00 |
2. Calculate Presidio’s contribution margin ratio
and its total contribution margin at each sales level indicated in
the cost data table assuming the company sells each bike for $640.
(Round your Margin Ratio percentage answers to 2 decimal
places (i.e. .1234 should be entered as 12.34%.))
3. Calculate net operating income (loss) at each
of the sales levels assuming a sales price of $640. (Round
your answers to the nearest whole dollar amount.)
In: Accounting
Total Cost Concept of Product Costing
Willis Products Inc. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 5,000 units of medical tablets are as follows:
| Variable costs per unit: | Fixed costs: | ||||||
| Direct materials | $120 | Factory overhead | $205,000 | ||||
| Direct labor | 44 | Selling and admin. exp. | 70,000 | ||||
| Factory overhead | 37 | ||||||
| Selling and admin. exp. | 29 | ||||||
| Total | $230 | ||||||
Willis Products desires a profit equal to a 20% rate of return on invested assets of $733,875.
a. Determine the amount of desired profit from
the production and sale of 5,000 units.
$ 146,775
b. Determine the total costs for the production of 5,000 units.
| Variable | $ 1,150,000 |
| Fixed (Need help) | |
| Total | $ (Need help) |
Determine the cost amount per unit for the production and sale
of 5,000 units.
$ per unit
c. Determine the total cost markup percentage
per unit. (rounded to one decimal place).
%
d. Determine the selling price per unit. Round
to the nearest cent.
$ per unit
In: Accounting
o The initial capital cost will be $500,000 paid at the beginning of year 1 (i.e., immediately). The impact on cottage owners will involve a loss of $50,000 at the end of each year for the first four years (because of the construction activities affecting property values) but cottage owners will benefit by $55,000 per year in perpetuity from the end of year 5 onwards. The benefits from recreational fishing will not start until the end of year 5 and will be $35,000 per year in perpetuity. Development, stocking and management costs of the recreational fishery will start at the beginning of year 3 and continue forever. These costs are $10,000 per year
The province is considering a water resource development that will enhance recreational fishing and recreational cottage values (property values).
a) Calculate the net present value using a 5% discount rate. Interpret the result. (15 points)
b) Calculate the gross benefit cost ratio using a discount rate of 5%. Interpret the result. (5 points)
c) Which value best approximates the internal rate of return: 4 %, 5%, 6%, 7%, 8%, or 9%? (Note – you are not being asked to calculate the internal rate of return!) (5 points)
In: Finance
The initial capital cost will be $500,000 paid at the beginning of year 1 (i.e., immediately). The impact on cottage owners will involve a loss of $50,000 at the end of each year for the first four years (because of the construction activities affecting property values) but cottage owners will benefit by $55,000 per year in perpetuity from the end of year 5 onwards. The benefits from recreational fishing will not start until the end of year 5 and will be $35,000 per year in perpetuity. Development, stocking and management costs of the recreational fishery will start at the beginning of year 3 and continue forever. These costs are $10,000 per year
The province is considering a water resource development that will enhance recreational fishing and recreational cottage values (property values).
a) Calculate the net present value using a 5% discount rate. Interpret the result. (15 points)
b) Calculate the gross benefit cost ratio using a discount rate of 5%. Interpret the result. (5 points)
c) Which value best approximates the internal rate of return: 4 %, 5%, 6%, 7%, 8%, or 9%? (Note – you are not being asked to calculate the internal rate of return!) (5 points)
In: Finance