(LG 4.5) A new packaging machine will save Greene Cheese Ltd. $3000 per year in reduced spoilage, $2500 per year in labour, and $1000 per year in pack- aging material. The new machine will have additional expenses of $700 per year in maintenance and $200 per year in energy. If it costs $20 000 to purchase, what is its payback period? Assume that the savings are earned throughout the year, not just at year-end.

(LG 4.5) A new packaging machine will save Greene Cheese Ltd. $3000 per year in reduced spoilage, $2500 per year in labour, and $1000 per year in pack- aging material. The new machine will have additional expenses of $700 per year in maintenance and $200 per year in energy. If it costs $20 000 to purchase, what is its payback period? Assume that the savings are earned throughout the year, not just at year-end.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 3E

See similar textbooks

Similar questions

A manufacturer produces three products, A, B, and C. The profits for each unit of A, B, and C sold are $1, $2, and $3, respectively. Fixed costs are $17,000 per year, and the costs of producing each unit of A, B, and C are $4, $5, and $7, respectively. Next year, a total of 12,000 units of all three products is to be produced and sold, and a total profit of $22,000 is to be realized. If total cost is to be $78,000, how many units of each of the products should be produced next year? units of product A, units of product B, and units of product C should be produced.
Your bakery can produce 3,000 unit of bagel per week for 48 weeks of operation per year. You aim to stay in this business for five years. You can either make the dough for the bagels in house or buy them from a different source. If you make the dough in house, you face with annual labour costs: $30,000, annual safety regulation costs: $5,000 and annual material costs: $20,000. But, if you choose to buy the dough from a different source, you must have a special dough-mixer machine to make adjustment for your production. Therefore, you need to pay $5,000 for the dough mixer machine, which has $1,000 salvage value at the end of 5 years. Furthermore, you face with annual maintaining costs including labour costs: $20,000 and additional overhead costs: $10,000 Using this information, find the unit cost of buy the bagel option with MARR 20%. a) Between $1.00 and $1.10 b) None of the answers are correct c) Between $1.20 and $1.30 d) Between $0.20 and $0.30 e) Between $0.50 and $0.60 f) Between…
22. An architect produces a certain construction material at a labor cost of P 16.20 per piece, material cost of P 38.50 per piece and variable cost of P 7.40 per piece. The fixed charges on the business is P 100,000.00 a month. If he sells the finished product at P 95.00 each, how many pieces must be manufactured in each month to break even?
Suppose I have computed the cost of carbon per mile for my car at 0.011 per mile. Assume that the interest rate is 5% and that I drive the car 30,000 miles per year. What is present value of the carbon expense for five years? You will need to use the PV function in Excel or a financial calculator. In Excel the present value of a stream of monetary cash flows is given by -PV(rate, number of payments, payment amount) where rate is the interest rate. We enter the payment in Excel as a positive number. You can also compute the carbon cost per year and then discount those five values back to the present.
Light emitting diode (LEDs) light bulbs have become required in recent years, but do they make financial sense? Suppose a typical 60-watt incandescent light bulb costs $.53 and lasts for 1,000 hours. A 15-watt LED, which provides the same light, costs $3.80 and lasts for 12,000 hours. A kilowatt hour of electricity costs $.129. A kilowatt-hour is 1,000 watts for 1 hour. However, electricity costs actually vary quite a bit depending on location and user type. An industrial user in West Virginia might pay $.04 per kilowatt-hour whereas a residential user in Hawaii might pay $.25. You require a return of 9 percent and use a light fixture 500 hours per year. What is the break-even cost per kilowatt-hour? (Do not round intermediate calculations and round your answer to 6 decimal places, e.g., 32.161616.) Break-even cost
9. Assume a constant marginal cost of $0.01/kwh for hydro and $0.09/kwh for natural gas given installed capacity. Assume that installed capacity can be bought at the beginning of the year and sold at the end of the year at the same price and that the discount rate or interest rate is 8.76% and that there are 8760 hours in a year. A kilowatt of natural gas capacity costs $1000 and a kilowatt of hydro capacity costs $10,000. Because you can buy and sell the capacity at the same price this means that the fixed cost of installed capacity is just the opportunity cost of capital, or the interest rate times the purchase price of the capacity.a. What is the average total cost of producing 8760 kilowatt hours in a year using one kilowatt of installed hydro capacity?b. What is the average total cost of producing 8760 kilowatt hours in a year using one kilowatt of installed natural gas capacity?
The Virginia PUC is considering a subsidy program to encourage consumers to install improved insulation in walls and ceilings of homes as a way of reducing the need for building a new CCGT plant. The insulation program would cost $1,500,000 and would save 10MWH of power. What is the negawatt cost in MWh of this power savings? Enter your answer here
Scenario 13-9Ellie has been working for an engineering firm and earning an annual salary of $80,000. She decides to open her own engineering business. Her annual expenses will include $15,000 for office rent, $3,000 for equipment rental, $1,000 for supplies, $1,200 for utilities, and a $35,000 salary for a secretary/bookkeeper. Ellie will cover her start-up expenses by cashing in a $20,000 certificate of deposit on which she was earning annual interest of $500. Refer to Scenario 13-9. According to an economist, which of the following revenue totals will yield Ellie’s business $50,000 in economic profits?
Q. On the first day of the New Year to get her business started, the owner/photographer of Exquisite Portraits Inc. paid $200 for business cards, $1000 for a listing in Yellow Pages, and $250 for an annual business license. She also leased a professional portrait camera and studio lighting equipment by signing an agreement to pay a monthly lease of $1000 each month for the next 12 months. This lease is ironclad: She must pay for all 12 months and she cannot sublease to anyone else. She rents her office and studio for $1,400 per month that must be paid at the beginning of each month. She does not have a lease on the office/studio, so she can vacate the office/studio at the end of any month should she decide to move to a new location or to go out of business. After she opens the office/studio on the first day of each month, her monthly cost of electricity for lighting the office and running her coffee machine is constant $45 per month, because she always keeps the lights on in the office…
Problem #2 (2/10): A new packaging machine will save Greene Cheese Ltd. $3000 per year in reduced spoilage, save $5000 per year in labour, and save $4000 per year in packaging material. The new machine will have additional expenses of $1500 per year in maintenance and $500 per year in energy. If it costs $68,000 to purchase, what is its payback period? Assume that the savings are earned throughout the year, not just at year end
4. You have developed an innovative new project that is estimated to produce an annual revenue stream (money in) of $15,000 per year for the next 10 years. Your current corporate cost of Money is 4%. However, in year 5, your CFO projects that rate will rise to 6% for the remaining five years of the project's lifespan. What is the NPV of this money in cashflow today? (we are ignoring any money out costs)
Your friend Sarah is planning to open a hardware store. She estimates that it would cost $50,000 each month to rent the location and buy the inventory. In addition, she would have to quit her $3,000/month job at an insurance firm. Her revenue for the store would be $60,000 each month. What is her expected accounting profit per month if she opens the hardware store? A $10,000 B $60,000 C $5,000 D $50,000 E $55,000 F $45,000