Required information

[The following information applies to the questions displayed below.]

O’Brien 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, O’Brien produced 94,000 units and sold 72,000 units. During its second year of operations, it produced 79,000 units and sold 96,000 units. In its third year, O’Brien produced 88,000 units and sold 83,000 units. The selling price of the company’s product is $76 per unit.

3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

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.

Required information

[The following information applies to the questions displayed below.]

Inner Secret T Shirt Company produces 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, O’Brien produced 97,000 units and sold 73,000 units. During its second year of operations, it produced 79,000 units and sold 98,000 units. In its third year, O’Brien produced 89,000 units and sold 84,000 units. The selling price of the company’s product is $73 per unit.

3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

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.

ABC Company is considering a 3-year project, which will add a new product to its portfolio; last year, the company hired a consultant to explore this market opportunity and paid $1 million for the research report - this amount will be depreciated over the next four years; if the company proceeds with the launch of the new product, it will need to invest $26.0 million in new equipment, which will be depreciated straight line over 4 years with no remaining salvage value.

-The project is expected to generate $12 million in sales (revenue) in the first year of the project; the sales are expected to increase by 50% in the second year, double in year 3 compare to year 2, and double again in year 4.  

-COGS is expected to be 55% of sales

-SG&A expenses will be $5.5 million each year

-The company pays income tax rate of 23.0%

-The cost of capital is 9.7%

-Working capital will start from zero and reach 20% of sales by the end of the first year and will stay at 20% of sales each year though the end of the project; working capital will be fully recovered at the end of the project;

Calculate the following:

1) Free cash flows of the project

2) NPV

3) IRR

4) Payback period

5) should the company invest in this project?

Required information

[The following information applies to the questions displayed below.]

O’Brien 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, O’Brien produced 95,000 units and sold 71,000 units. During its second year of operations, it produced 83,000 units and sold 102,000 units. In its third year, O’Brien produced 85,000 units and sold 80,000 units. The selling price of the company’s product is $71 per unit.

3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

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.

[The following information applies to the questions displayed below.]

O’Brien 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, O’Brien produced 95,000 units and sold 71,000 units. During its second year of operations, it produced 83,000 units and sold 102,000 units. In its third year, O’Brien produced 85,000 units and sold 80,000 units. The selling price of the company’s product is $71 per unit.

4. Assume the company uses absorption costing and a LIFO inventory flow assumption (LIFO means last-in first-out. In other words, it assumes that the newest units in inventory are sold first):

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.

The Carbondale Hospital is considering the purchase of a new ambulance. The decision will rest partly on the anticipated mileage to be driven next year. The miles driven during the past 5 years are as follows:

^{a)Using a 2-year moving average, the forecast for year 6 (round your response to the nearest whole number)?.
b) If a 2-year moving average is used to make the forecast, the MAD based on this (round your response to one decimal place). (Hint: You will have only 3 years of matched data.)?}

^{c)The forecast for year 6 using a weighted 2-year moving average with weights of 0.40 and 0.60 (the weight of 0.60 is for the most recent period) = miles (round your response to the nearest whole number).?
The MAD for the forecast developed using a weighted 2-year moving average with weights of 0.40 and 0.60 (round your response to one decimal place). (Hint: You will have only 3 years of matched data.)?}

^{d) Using exponential smoothing with alpha ? 0.30 and the forecast for year 1 being 3,050, the forecast for year 6 (round your response to the nearest whole number).?}

[The following information applies to the questions displayed below.] O’Brien 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 $ 29 Direct labor $ 18 Variable manufacturing overhead $ 4 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 560,000 Fixed selling and administrative expenses $ 180,000 During its first year of operations, O’Brien produced 96,000 units and sold 77,000 units. During its second year of operations, it produced 82,000 units and sold 96,000 units. In its third year, O’Brien produced 87,000 units and sold 82,000 units. The selling price of the company’s product is $74 per unit. 3. Assume the company uses absorption costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first): 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.

Required information

[The following information applies to the questions displayed below.]

Inner Secret T Shirt Company produces 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, O’Brien produced 97,000 units and sold 73,000 units. During its second year of operations, it produced 79,000 units and sold 98,000 units. In its third year, O’Brien produced 89,000 units and sold 84,000 units. The selling price of the company’s product is $73 per unit.

Required:

1. Assume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

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.

The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $1,110,000, and it would cost another $23,000 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after 3 years for $542,000. The machine would require an increase in net working capital (inventory) of $13,500. The sprayer would not change revenues, but it is expected to save the firm $389,000 per year in before-tax operating costs, mainly labor. Campbell's marginal tax rate is 40%.

What is the Year 0 net cash flow?

What are the net operating cash flows in Year 1, Year 2, and Year 3? Do not round intermediate calculations. Round your answers to the nearest dollar.

Year 1 $ =

Year 2 $ =

Year 3 $ =

What is the additional Year 3 cash flow (i.e, the after-tax salvage and the return of working capital)? Do not round intermediate calculations. Round your answer to the nearest dollar.

$ =

If the project's cost of capital is 10 %, what is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.

NPV =

Should the machine be purchased?

11.

O’Brien 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, O’Brien produced 91,000 units and sold 76,000 units. During its second year of operations, it produced 81,000 units and sold 91,000 units. In its third year, O’Brien produced 85,000 units and sold 80,000 units. The selling price of the company’s product is $75 per unit.

Case 6-29 Part-1

Required:

1. Assume the company uses variable costing and a FIFO inventory flow assumption (FIFO means first-in first-out. In other words, it assumes that the oldest units in inventory are sold first):

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.