Accounting Ch 23 & 24 Homework

Skull Company makes snowboards and uses the total cost method in setting product price. Its costs for producing 10,500 units follow. The company targets a 12.5% markup on total cost.

1. (101*10500)+(26*10500)+(21*10500)+(6*10500)=1,617,000 471,000+432000=903,000 (1,617,000+903,000)/10500=$240 2. 240*0.125=$30 3. 240+30=$270

HH Electric reports the following information. Direct labor rate: $ 72per DLH Non-materials-related overhead: $ 43per DLH Materials-related overhead: 5%of direct materials cost Target profit margin (on both conversion and direct materials): 20% a. Compute the time charge per hour of direct labor. b. Compute the materials markup percentage. c. What price should the company quote for a job requiring four direct labor hours and $636 in materials?

A. Time Charge per hour of direct labor = (Direct labor rate per hr+Non-material overhead per hr)+Profit Margin =(72+43)+((72+43)*0.2) =115+23 =138 B. Materials Markup = Materials related overhead+Markup =5%+20% =25% C. (138*4)+(636*1.25) =552+795 =1347

Quary Company is considering an investment in machinery with the following information. Initial investment:$ 308,000 Materials, labor, and overhead (except depreciation): $ 69,300 Useful life: 9years Depreciation—Machinery:32,000 Salvage value:$ 20,000 Selling, general, and administrative expenses: 7,700 Expected sales per year: 15,400units Selling price per unit: $ 10 (a) Compute the investment's annual income and annual net cash flow. (b) Compute the investment's payback period.

A. see picture B. Numerator/Denominator= payback period Initial Investment/Annual Net Cash Flow= payback period 308,000/77,00= 4.0 years

20. Quary Company is considering an investment in machinery with the following information. The company's required rate of return is 14%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) a. Compute the investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 14%?

B. Higher (net present value is positive)

b. Compute the total increase in income if the departments with sales less than avoidable costs, as identified in part a, are eliminated.

M+O+P= 9400+59700+(-10700)=58,400 58,400- UNAVOIDABLE N-UNAVOIDABLE T 58400-24600-23800 =10,000 10,000-ORIGINAL NET INCOME 10000-(-1200) =11,200

Gonzalez Company is considering two new projects with the following net cash flows. The company's required rate of return on investments is 10%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Net Cash Flows Initial investment:$(60,000) Year 1: 15,000 Year 2: 26,100 Year 3:21,000 Initial investment:$(56,500) Year 1: 35,000 Year 2: 15,000 Year 3: 25,000 b. Compute net present value for each project. Based on net present value, which project is preferred?

Use PV of $1 table

17. Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $135,800. Project 2 requires an initial investment of $103,500. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.)

Use PVA of $1

Information for two alternative projects involving machinery investments follows. Project 1 requires an initial investment of $135,000. Project 2 requires an initial investment of $98,000. Assume the company requires a 10% rate of return on its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Compute the net present value of each potential investment. Use 7 years for Project 1 and 5 years for Project 2. (Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar.)

Use PVA of $1

Marin Company makes several products, including canoes. The company reports a loss from its canoe segment (see below). All its variable costs are avoidable, and $322,500 of its fixed costs are avoidable. Segment Income (Loss) Sales: $ 1,068,200 Variable costs: 763,000 Contribution margin: 305,200 Fixed costs: 367,000 Income (loss): $ (61,800) (a) Compute the income increase or decrease from eliminating this segment. (b) Should the segment be continued or eliminated?

a. see picture b. eliminate

A machine can be purchased for $210,000 and used for five years, yielding the following income. This income computation includes annual depreciation expense of $42,000. Year 1: 14,200 Year 2: 35,200 Year 3: 91,000 Year 4: 53,100 Year 5: 140,800 Compute the machine's payback period. (Round payback period answer to 2 decimal places.)

payback period 76000/133000=0.3 0.3+(years when balance was negative) 0.3+2 2.3

19. GTO Incorporated is considering an investment costing $214,170 that results in net cash flows of $30,000 annually for 11 years. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) (a) What is the internal rate of return of this investment? (b) The hurdle rate is 9.5%. Should the company invest in this project on the basis of internal rate of return?

present value of annuity factor= cash outflow/ cash inflow 214170/30000 =7.1390 a. find 7.139 on the table for 11 years, use the corresponding percent for IRR b. no. IRR should > or = hurdle rate in order to invest