McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 20 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost.

Manufacturing overhead for year 1 totaled $800,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following:

Required:

a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks.

a-2. Which of the two products should be dropped?

b. Regardless of your answer in requirement a, the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $650,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).)

Mattawa Manufacturing Inc. has four categories of overhead. The expected overhead costs for each of the categories for the next year are as follows:

Expected Costs Cost Driver

Activity Maintenance $510,000

Machine hours 60,000

Material handling 250,000

Material moves 20,000

Setups 60,000

Setups 3,000

Inspection 21,000

Inspections 12,000

Currently, the company applies overhead using a predetermined overhead rate based upon budgeted direct labour hours of 100,000. The company has been asked to submit a bid on a proposed job. Usually bids are based upon full manufacturing costs plus a percentage of 10 percent. Estimates for the proposed job are as follows:

Direct materials $30,000

Direct labour $24,000

Number of direct labour hours 8,000

Number of material moves 100

Number of inspections 120

Number of setups 24

Number of machine hours 4,000

Required:

1. If the company used activity-based cost drivers to assign overhead, calculate the bid price of the proposed job.

2. If the company used direct labour hours as the cost driver, calculate the bid price of the proposed job.

McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 15 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost. Manufacturing overhead for year 1 totaled $910,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following: Chairs Desks Sales revenue $ 1,112,100 $ 2,570,400 Direct materials 603,000 990,000 Direct labor 170,000 480,000 Required: a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks. a-2. Which of the two products should be dropped? Chairs Desks b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $840,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.)

suppose ABC firm is considering an investment that would extend the life of one of its facilities for 5 years. the project will require upfront cost of 8 m plus (35+2) 37 millions investment in equipment. The equipment will be obsolete in 2 years and will be depreciated via straight line over that period (assume that the equipment can’t be sold). During the next 5 years ABC expect annual sales of 55 M per year from this facility. Material cost and operating expenses are expected to total 40 M and 6.8 M respectively per year. ABC expect no networking capital requirement for the project, and it pays a tax rate of 38%. ABC has 70% of equity and the remaining is in debt. if the cost of equity and debt are 8% and 6% respectively, should they take the project? a) WACC (in percentage, thus 3.8% must be entered as 3.8); b) Incremental FCF at 0; c) Incremental FCF from year 1 to year 5; d) NPV. All dollars’ answers must be submitted in Millions, thus 4.56M must be entered as 4.56. Round to the second decimal in each case.

McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 25 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost. Manufacturing overhead for year 1 totaled $944,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following: Chairs Desks Sales revenue $ 1,156,800 $ 2,769,000 Direct materials 600,000 960,000 Direct labor 140,000 450,000 Required: a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks. a-2. Which of the two products should be dropped? Chairs Desks b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $810,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.)

McNulty, Inc., produces desks and chairs. A new CFO has just been hired and announces a new policy that if a product cannot earn a margin of at least 15 percent, it will be dropped. The margin is computed as product gross profit divided by reported product cost.

Manufacturing overhead for year 1 totaled $935,000. Overhead is allocated to products based on direct labor cost. Data for year 1 show the following:

Required:

a-1. Based on the CFO's new policy, calculate the profit margin for both chairs and desks.

a-2. Which of the two products should be dropped?

b. Regardless of your answer in requirement (a), the CFO decides at the beginning of year 2 to drop the chair product. The company cost analyst estimates that overhead without the chair line will be $720,000. The revenue and costs for desks are expected to be the same as last year. What is the estimated margin for desks in year 2? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.)

1. Your company designs and makes electronic counting and control devices for manufacturers. It employs 300 people in the Midwest and has been in business on a privately owned basis for nine years. The industry is competitive, and your company must preserve an edge in getting new products to market faster than others, maintaining a high-quality product, offering good and sustained service to its customers, and selling at a competitive price. The company offers a privately insured health care plan, among other benefits and rewards, for all employees and their dependents. It is a traditional indemnity plan design and the cost as a percentage of total employee compensation has increased from 16 percent to 25 percent over the last two years. There is no cost to the employees for their health care. Your competitors are sponsoring much less expensive plans. Your CEO has asked you for a complete review of the health care plan and to create a design that is in line with the business strategy, is cost-effective, provides employees with choice and quality, and helps recruit and retain employees.

Can you link your health care plan to a potential increase in productivity? How? How would you measure?

Question 9

One of the key early tests of Einstein's General Theory of Relativity was

the bending of the path of starlight and resulting apparent shift in the position of stars because of the Sun's mass.

sending a twin in a spaceship to the nearest star and back at a high Lorentz factor.

the Michelson-Morley experiment.

measuring the time dilation effect from gas falling into a black hole.

Question 10

According to General Relativity,

Group of answer choices

you can think of space as "flowing in" towards massive objects.

space-time has curvature.

time runs fastest far away from massive objects.

the path of light is bent when photons move through curved space.

All of these choices are correct.

None of these choices is correct.

Question 11

You are in a rocket ship deep in space and are about to pass a fellow traveler going the opposite direction at 99.9% the speed of light. You think her clock is _________ than yours and she thinks that your clock is __________ than hers.

faster; faster

faster; slower

slower; slower

slower; faster

Question 12

By observing a _____________ in 1919, astronomers were able to test the prediction that a massive object bends the path taken by light.

Group of answer choices

transit of the planet Mercury across the Sun

transit of the planet Venus across the Sun

supernova

total solar eclipse

total lunar eclipse

Question 13

The twin paradox is

a hypothetical experiment that demonstrates that special relativity is wrong

a hypothetical situation that seemingly presents a paradox but is actually resolved by a clearer understanding of the situation

a real experiment that demonstrates that special relativity is wrong

a real experiment that is consistent with the predictions made by special relativity

Question 14

Within special relativity, time dilation refers to ...

the slowing of the passage of time due to motion near the speed of light.

the speeding up of the passage of time due to motion near the speed of light.

the gradual slowing of the rotation of pulsars.

the Doppler shift of light.

Question 15

The alteration of our perception of space and time due to motion near the speed of light is described by

Group of answer choices

special relativity

general relativity

Newton's laws of motion

Galileo's law of inertia

Question 16

The curving of space by a massive object is described by which theory?

Group of answer choices

special relativity

general relativity

Newton's laws of motion

Galileo's law of inertia

Case: Cost Structures for Global Shippers Inc.

Management from Global Shippers Inc, an international shipping business, is in the process of assessing the choice between two different cost structures for the business. Option A has relatively higher variable costs per unit shipped but lower annual fixed costs, while Option B has the opposite—relatively lower variable costs in its cost structure but higher fixed costs. Assume that delivery selling prices per unit are constant. The table below contains critical information in making the decision:

Management wants you to write a professional report, answering the following questions:

Questions

Case: Cost Structures for Global Shippers Inc.

Management from Global Shippers Inc, an international shipping business, is in the process of assessing the choice between two different cost structures for the business. Option A has relatively higher variable costs per unit shipped but lower annual fixed costs, while Option B has the opposite—relatively lower variable costs in its cost structure but higher fixed costs. Assume that delivery selling prices per unit are constant. The table below contains critical information in making the decision:

Management wants you to write a professional report, answering the following questions:

Questions

1) What is the break-even point, in terms of volume (i.e., number of shipments per year), for Option A? Option B?

(2) How many shipments would have to be made under Option A to produce operating income of $30,000 for an annual period?

(3) How many shipments per year would have to be made under Option A to produce an operating margin equal to 9% of sales revenue?  

(4) How many shipments are required under Option B to produce net income of $180,000 per year, given a corporate tax rate of 40%?

(5) Assume that for the coming year total fixed costs are expected to increase by 15% for each of the two options. What is the new break-even point, in terms of number of shipments, for each option? By what percentage did the break-even point change for each case? How do these figures compare to the percentage increase in budgeted fixed costs?

(6) Assume an average income-tax rate of 20%. What volume (number of shipments) would be needed to generate net income of 5% of revenue for each option?  

(7) Which option do you think is the more profitable one for this business? Explain.

(8) Which option do you consider to be more risky to the business? Explain (calculate degree of operating leverage to help answer this question).