After spending a year and $48,000, you finally have the design of your new product ready. In orderto start production, you will need $27,000 in raw materials and you will also need to use someexisting equipment that you've fully depreciated, but which has a market value of $101,000. Yourcolleague notes that the new product could represent 10% of the company's overall sales and that10% of overhead is $60,000. Your tax rate is 40%. As you start your analysis of the product, whatshould be your initial incremental free cash flow?The initial incremental free cash flow is $sign if the answer is negative.).(Round to the nearest dollar. Be sure to use a negative

Cash flow refers to the flow of the payments that are received or paid by the entity, it is the…

Answered: After spending a year and $48,000, you…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 16PB: At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The...

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Keleher Industries manufactures pet doors and sells them directly to the consumer via their web site. The marketing manager believes that if the company invests in new software, they will increase their sales by 10%. The new software will increase fixed costs by $400 per month. Prepare a forecasted contribution margin income statement for Keleher Industries reflecting the new software cost and associated increase in sales. The previous annual statement is as follows:
Suppose that a company is spending 60,000 per year for inspecting, 30,000 for purchasing, and 40,000 for reworking products. A good estimate of nonvalue-added costs would be a. 70,000. b. 130,000. c. 40,000. d. 90,000. e. 100,000.
After spending a year and $80,000, you finally have the design of your new product ready. In order to start production, you will need $22,000 in raw materials and you will also need to use some existing equipment that you've fully depreciated, but which has a market value of $100,000. Your colleague notes that the new product could represent 10% of the company's overall sales and that 10% of overhead is $40,000. Your tax rate is 20%. As you start your analysis of the product, what should be your initial incremental free cash flow?
1. After spending a year and $50,000, you finally have the design of your new product ready. In order to start production, you will need $30,000 in raw materials and you will also need to use some existing equipment that you've fully depreciated, but which has a market value of $100,000. Your colleague notes that the new product could represent 10% of the company's overall sales and that 10% of overhead is $60,000. Your tax rate is 25%. As you start your analysis of the product, what should be your initial incremental free cash flow? The initial incremental free cash flow is $____ (Round to the nearest dollar. Be sure to use a negative sign if the answer is negative.)
Marketing has come up with a new product line for the company. They expect average annual revenue of 25 million USD for the first three years while there will be an increase of 10% in annual revenue from years four to six. Manufacturing cost is expected to be 60% of the annual revenue. A new production line will be needed to be set up, which includes the warehouse to store the raw materials and finished goods. The cost to build the warehouse should be no more than 5% of the total investment cost to set up the new production line. Total investment is projected to be at 100 million USD, inclusive of the warehouse build cost. Assume MARR = 12%. a. Should the company proceed with producing the new product line? You have the option to rent though and are looking at a warehouse in Sta. Rosa, Laguna. The broker is giving it to you for 1 million USD every year with an increase in rent of 7% every year. b. Assuming that the answer to letter (a) is that the project is profitable, which option…
ETS manufactures a component for its computer products. The annual demand for thiscomponent is 2500 units. The annual cost of maintaining inventory is10% per unit and the cost of preparing an order and setting up productionfor the order is $ 50.The machine used to make this part has a production rate of 10,000units per year and the cost is $ 22 per unit.a. Find the EPQ(Economic Production Quantity)A. How long does it take to produce the batch?B. How many batches will be produced per year?C. What is the maximum inventory level?D. What is the total cost per year?E. A supplier offers to sell a similar component for $ 25 per unit with a charge$ 5 per service per order. Should the company accept the offer?F. Find the average inventory level for each situation
A car manufacturer is considering the purchase of an industrial robot for assembling cars. An employee who does the same tasks as the robot would do costs the company $60,000 in wages and benefits this year. Those costs are expected to increase by 5% annually over the next 10 years. A robot would cost $150,000, which includes initial purchase, installation, and training costs. The robot would cost $25,000 to operate in its first year, and costs are expected to increase by $2,000 each year. The company expects to be able to sell the robot at the end of 10 years for a salvage value of $10,000. If the company can earn 5% on its funds, then should the company purchase the robot? Of course, use calculations to justify your answer.
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $175,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $890,000 per year. The fixed costs associated with this will be $226,000 per year, and variable costs will amount to 22 percent of sales. The equipment necessary for production of the Potato Pet will cost $960,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy's has a tax rate of 21 percent and a required return of 15 percent. Calculate the payback period for this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Calculate the NPV for this project. Note: Do not round intermediate calculations and round your answer to 2 decimal…
Sonora, Inc. is launching a new product that it estimates will sell for $95 per unit. Annual demand is estimated to be 98,000 units. Sonora estimates that using its current manufacturing technology, it can manufacture the units for $37 per unit, but if it purchases a new machine, the units can be manufactured for $36 per unit. Sonora has a target profit of 20% return on sales. Under target costing, what is the target cost for the new product?
A consulting engineering company is proposing a project that it estimates will require 210hours of technical work. Their company-wide labor rate is $70.00 per hour. Based on workthe company has performed in recent years, their Labor Utilization Rate is 62.5% and theirBreak Even Multiplier is 2.1. The company wants to target a Profit of 30% for this project. I need to solve for direct labor cost, total labor cost, indirect cost, total cost, how much the company should charge, effective labor multiplier and non-labor indirect costs
Pappy’s Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy’s paid $180,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $895,000 per year. The fixed costs associated with this will be $228,000 per year, and variable costs will amount to 24 percent of sales. The equipment necessary for production of the Potato Pet will cost $970,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy's has a tax rate of 22 percent and a required return of 16 percent. Calculate the Time 0 cash flow for this project. Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32. Calculate the annual OCF for this project. Note: Do not round…
You are hired as a consultant to decide if your client should purchase a new, highly specialized piece of equipment. The product to be produced by this equipment is forecast to have a total worldwide demand of 15,000 units over the entire product life. The initial investment to acquire and install the equipment is $256,000. The variable cost to produce each unit will be $15, and the selling price for the finished product will be $30. Which of the following best describes the situation the firm is facing? Multiple Choice It is a good investment The company will recover its initial investment. The company's total margin will be less than its investment. The break-even is lower than the 15,000 units that are expected to sell. All of these choices are correct.

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