Jerston Company has an annual plant capacity of 4,200 units. Data concerning thi
ID: 2455278 • Letter: J
Question
Jerston Company has an annual plant capacity of 4,200 units. Data concerning this product are given below: Annual sales at regular selling prices 3,800 units Manufacturing costs: Variable $ 42 per unit Fixed (annual) $ 73,500 Selling and administrative expenses: Variable (sales commissions) $ 9 per unit Fixed (annual) $ 17,200 The company has received a special order for 400 units at a selling price of $100 each. Regular sales would not be affected, and sales commissions on the 400 units would be reduced by one-third. This special order would have no impact on total fixed costs. Required: a. Determine the net advantage (disadvantage) for the special order. (Input the amount as a positive value.) (Click to select)Net disadvantageNet advantage $ b. The company should accept the special order. Yes No (Ignore income taxes in this problem.) The management of Dewitz Corporation is considering a project that would require an initial investment of $69,000. No other cash outflows would be required. The present value of the cash inflows would be $80,040. The profitability index of the project is closest to: 0.16 1.16 0.86 0.14
(Ignore income taxes in this problem.) The Jackson Company has invested in a machine that cost $100,000, that has a useful life of ten years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of seven years. Given these data, the simple rate of return on the machine is closest to (Round your intermediate calculations to the nearest dollar amount): 2.86% 4.76% 4.29% 24.29%
(Ignore income taxes in this problem.) The management of Orebaugh Corporation is investigating automating a process by replacing old equipment by a new machine. The old equipment would be sold for scrap now for $17,000. The new machine would cost $476,500, would have a 5 year useful life, and would have no salvage value. By automating the process, the company would save $174,500 per year in cash operating costs. Required: Determine the simple rate of return on the investment. (Round your answer to 2 decimal places.) Simple rate of return % (Ignore income taxes in this problem.) Oriental Company has gathered the following data on a proposed investment project: Investment in depreciable equipment $450,000 Annual net cash flows $50,000 Life of the equipment 14 years Salvage value $0 Discount rate 12.50% The company uses straight-line depreciation on all equipment. The payback period for the investment would be: 4.24 years 0.11 years 14 years 9.00 years
(Ignore income taxes in this problem.) Blaine Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $196,000 and would have a ten-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $15,000 per year to operate and maintain, but would save $56,000 per year in labor and other costs. The old machine can be sold now for scrap for $20,000. What is the simple rate of return on the new machine? (Round off your answer to the nearest one-hundredth of a percent.) 10.92% 28.16% 23.52% 12.16%
Explanation / Answer
Annual capacity 4,200 sales in units 3,800 Maufacturing cost Variable 42 Fixed cost 73,500 variable selling expense 9 Fixed selling expense 17,200 units amount special order 400 40,000 Variable cost 42 16,800 Sales commission $6 2,400 Net advanatage of special order 20,800 b) the company should accept the special order b) Initial investment 69,000 Present value of cash inflows 80,040 profitability index 1.16 (80040/69000) PI= PV of inflow/investment c) Cost of Machine 100,000 useful life 10 years No salvage value Depreciation 10,000 payback period 7 years 100,000 Depreciation for 7 years 70,000 balance depreciation 30,000 rate of return 23.08% (30000/130000) d) old machine scrap 17,000 new machine 476,500 net investment required 459,500 savings in operating cost 174,500 rate of return 37.98% (174500/459500) e) Investment in depreciable equipment 450,000 annual cashflow 50,000 payback period 9.0 years f) new machine 196,000 sale of old machine 20,000 net investment required 176,000 useful life 10 years savings in labor cost 56,000 operating cost 15,000 net savings 41,000 rate of return 23.30%
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