Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts:a. What are the profitability indexes of the projects?b. What should Fabulous Fabricators do?a. What are the profitability indexes of the projects?The profitability index for contract A is(Round to two decimal places.)Data table(Click on the following icon in order to copy its contents into a spreadsheet.)NPVUse of FacilityContractA$1.99 million100%$0.96 million50%$1.52 million50%BсPrintACCESDone- X

Profitability Index:The profitability index measures the amount of profit created per unit of…

Answered: Fabulous Fabricators needs to decide…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: (a) Invest in A (b) Invest in C (c) Invest in C and B (d) Invest in B
Three construction jobs are being considered by Clam City Construction (see the accompanying table). Each is characterized by an initial deposit paid by the client to Clam City Construction (CCC), a yearly cost incurred by CCC at the end of each of three years, and a final payment to CCC by the client at the end of three years. CCC has the capacity to do only one of these contracts. Use an appropriate rate of return method to determine which it should choose. The company's MARR is 10 percent. Job 1 2 3 Deposit $100,000 $130,000 $145,000 Cost per Year $75,000 $100,000 $150,000 Final Payment $195,000 $240,000 $350,000 with an Considering the jobs in order of lowest first cost, the best option is incremental rate of return of percent. (Round to one decimal place as needed. Use an approximate ERR if the IRR cannot be used.)
Nance Network Consultants, Incorporated uses the percentage-of-completion method to account for its long-term contracts. It uses the cost-to-cost approach to measure progress. During the current year, Nance signed a contract to develop a computer network for an international accounting firm. Information related to the contract follows. DELIVERABLES Compute the percentage-of-completion for each year. Compute the gross profit and revenue to be recognized each year of the contract. Prepare the journal entries required for each year of the contract. Prepare the t-accounts for construction in progress, billings on construction in progress, and accounts receivable. Determine the net asset (liability) for each year of the contract on December 31. Contract Price 800,000
Nance Network Consultants, Incorporated uses the percentage-of-completion method to account for its long-term contracts. It uses the cost-to-cost approach to measure progress. During the current year, Nance signed a contract to develop a computer network for an international accounting firm. Information related to the contract follows. Prepare the t-accounts for construction in progress, billings on construction in progress, and accounts receivable. Determine the net asset (liability) for each year of the contract on December 31.
Consider the following:purchase of an office building worth P1M from unrestricted funding. Currently, the office building is on a 2 year lease, with rentals of BWP 22000 per month. Provide for recommendations to the finance manager. What what would be the possible effect on the financial health of the organization, if these transactions are approved?
Help me with: 4. Prepare all journal entries related to this project for Jorg for all 3 years. 5. How will this project be carried on the balance sheet for 2019, 2020, and 2021? Jorg is building an office building for Wilmington Company for $20,000,000. The contract has the following characteristics: • The office building is built to the customer’s specifications and the customer can make changes to these specifications over the contract term. • Progress payments are made by the customer throughout construction. • The customer can cancel the contract at any time (with a termination penalty); any work in process is the property of the customer. Jorg provides you with the following details: December 31 2019 2020 2021 Costs incurred to date $8,000,000 $16,000,000 $18,000,000 Estimated costs to complete 6,000,000 3,000,000 — Billings to date 8,000,000 16,000,000 20,000,000 Collections to date 6,000,000 12,000,000 18,000,000
A company is accounting for a long-term construction contract where revenue is recognized over time. The project is built to the customer's specifications, and the customer can make changes as construction is ongoing. It is a 3-year, fixed-fee contract that is presently in its first year. The latest reasonable estimates of total contract costs indicate that the contract will be completed at a profit. The company will submit progress billings to the customer and has reasonable assurance that collections on these billings will be received in each year of the contract. The contract can be canceled at any time by the customer who will retain control of any work done to date. Discuss the following: a. When should revenue from contracts be accounted for overtime versus at a point in time? b. How would the income recognized in each year of this long-term construction contract be determined using the cost-to-cost basis of determining progress toward satisfaction of the performance…
Before you begin this assignment, review the Tying It All Together feature in the chapter Granite Construction Incorporated is a major construction firm whose projects include roads, highways, bridges, dams, tunnels, mass transit facilities, and airports. Suppose Granite Construction wants to bid on a project to construct a bridge in Nevada Estimators have projected the expected direct materials costs to be $55 million and the direct labor costs (including design and construction) to be $30 million. The company uses a predetermined overhead allocation rate of 50% of direct labor costs and a markup of 20% of total costs. Requirements What items would most likely be included in direct materials? Calculate the estimated direct costs, the indirect costs, and the total costs for the project. What amount should Granite Construction bid for the project? Why does Granite Construction include both direct and indirect costs when calculating the markup?
Penny is compiling a list of costs incurred so far on a project. She must categorize these costs so that she can present the amount of direct cost incurred. Which of the following should Penny include in this list?This type of question contains radio buttons and checkboxes for selection of options. Use Tab for navigation and Enter or space to select the option. option A Expense incurred in meeting the regulatory standards for the company option B Benefits for employees in the organization option C Travel expenses to the customer’s office option D Costs incurred for maintaining coffee stations around the office.
Listed below are five items that may—or may not—require disclosure in the notes that accompanyfinancial statements.a. Mandella Construction Co. uses the percentage-of-completion method to recognize revenueon long-term construction contracts. This is one of two acceptable methods of accounting forsuch projects. Over the life of the project, both methods produce the same overall results, butthe annual results may differ substantially.b. One of the most popular artists at Spectacular Comics is leaving the company and going towork for a competitor.c. Shortly after the balance sheet date, but before the financial statements are issued, one ofCoast Foods’s two processing plants was damaged by a tornado. The plant will be out of servicefor at least three months.d. The management of Soft Systems believes that the company has developed systems softwarethat will make Windows ® virtually obsolete. If they are correct, the company’s profits couldincrease by 10-fold or more.e. College Property…
Listed below are five items that may—or may not—require disclosure in the notes that accompanyfinancial statements.a. Mandella Construction Co. uses the percentage-of-completion method to recognize revenueon long-term construction contracts. This is one of two acceptable methods of accounting forsuch projects. Over the life of the project, both methods produce the same overall results, butthe annual results may differ substantially.b. One of the most popular artists at Spectacular Comics is leaving the company and going towork for a competitor.c. Shortly after the balance sheet date, but before the financial statements are issued, one of Coast Foods’s two processing plants was damaged by a tornado. The plant will be out of ser-vice for at least three months. d. The management of Soft Systems believes that the company has developed systems softwarethat will make Windows ® virtually obsolete. If they are correct, the company’s profits couldincrease by 10-fold or more.e. College Property…
Zenith Investment Company is considering the purchase of an office property. It has done an extensive market analysis and has estimated that based on current market supply or demand relationships, rents, and its estimate of operating expenses, annual NOI will be as follows: Year NOI 1 $ 1,030,000 2 1,030,000 3 1,030,000 4 1,210,000 5 1,260,000 6 1,310,000 7 1,349,000 8 1,389,170 A market that is currently oversupplied is expected to result in cash flows remaining flat for the next three years at $1,030,000. During years 4, 5, and 6, market rents are expected to be higher. It is further expected that beginning in year 7 and every year thereafter, NOI will tend to reflect a stable, balanced market and should grow at 3 percent per year indefinitely. Zenith believes that investors should earn a 12 percent return (r) on an investment of this kind.Required: a. Assuming that the investment is expected to produce NOI in years 1 to 8 and is expected to be owned for…

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