Hyperion, Inc. currently sells its latest high-speed color printer, the Hyper 500, for $350. It plans to lower the price to $300 next year. Its cost of goods sold for the Hyper 500 is $200 per unit, and thi year's sales are expected to be 20,000 units.a) Suppose that if Hyperion drops the price to $300 immediatley, it can increase this year's sales by 25% to 25,000 units. What would be the incremental impact on this eyar's EBIT of such a price drop?b) Suppose that for each printer sold, Hyperion expects additional sales of $75 per year on ink cartridges for the next years, and Hyperion has a gross profit margin of 70% on ink cartridges. What is the incremntal impact on EBIT for the next three years of a priced drop this year?

Hyperion, Inc. currently sells its latest high-speed color printer, the Hyper 500, for $350. It plans to lower the price to $300 next year. Its cost of goods sold for the Hyper 500 is $200 per unit, and thi year's sales are expected to be 20,000 units.a) Suppose that if Hyperion drops the price to $300 immediatley, it can increase this year's sales by 25% to 25,000 units. What would be the incremental impact on this eyar's EBIT of such a price drop?b) Suppose that for each printer sold, Hyperion expects additional sales of $75 per year on ink cartridges for the next years, and Hyperion has a gross profit margin of 70% on ink cartridges. What is the incremntal impact on EBIT for the next three years of a priced drop this year?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 8EB: Shonda & Shonda is a company that does land surveys and engineering consulting. They have an...

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Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1.200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows: A. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer? B. What will be the impact on net operating income if Shonda & Shonda purchases the new computer? C. What would be your recommendation to Shonda & Shonda regarding this purchase?
APQ Company currently sells a piece of equipment for $150 per unit. It plans on lowering the price of the unit to $119 per unit. The cost of goods for each unit is consistent each year, at $52 per unit. The company expects to sell 100,000 units in the current year. Suppose that if APQ drops the price on the equipment immediately, it can increase sales over the next year by 30% to 130,000 units. Will this price decrease have a positive or negative impact on the company's EBIT? What will be the dollar value of the incremental impact of this price drop on the firm's EBIT? Will this have a positive or negative impact on the EBIT for the company? What will the dollar value of the incremental impact of the price drop be for the company? (Enter a negative for a loss, positive for a gain; round your answer to the nearest whole dollar.)
Warren's Hats forecasts that it will sell 25,000 baseball caps next year. The company buys its caps for $3 from the wholesaler and sells them for $15 each. If the company will incur fixed costs plus depreciation and amortization of $80,000, then what is the percentage increase in EBIT if the actual sales next year equal 27,000 caps?
Mikes Bike Co. currently sells 11 million bike tires each year at a price of $17 per tire. It is about to introduce a new tire, and it forecasts annual sales of 17 million of these improved tires at a price of $23 each. However, demand for the old tire will decrease, and sales of the old tire are expected to fall to 4 million per year (note, this says "fall TO 4 million per year," not "fall BY."). The old tire costs $6 each to manufacture, and the new ones will cost $9 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new tire? (Hint: Realized cash inflows from new tire sales minus unrealized cash inflows from old tire sales.)
Straight-Line is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below. What will be the impact on the break-even point if Straight-Line purchases the new computer? What will be the impact on net operating income if Straight-Line purchases the new computer? What would be your recommendation to Staight-Line regarding this purchase? Units sold 1400 Sales price per unit $ 225 Variable cost per unit $ 145 Fixed costs $ 52,000 Break-even in units 650 Contribution margin ratio 0.36 Break-even in dollars $ 146,250 Sales $ 315,000 Variable costs $ 203,000 Fixed costs $…
quick computing currently sells 7 million computer chips each year at a price of $12 per chip. It is about to introduce a new chip, and it forecasts annual sales of 22 million of these improved chips at a price of $15 each. However, demand for the old chip will decrease, and sales of the old chip are expected to fall to 1 million per year. The old chips cost $6 each to manufacture, and the new ones will cost $10 each. What is the proper cash flow to use to evaluate the present value of the introduction of the new chip?
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MaBak Inc. is considering buying a robotic assembly machine that will bring in an extra $28,000 per year in profit (after deducting costs for electricity, maintenance, etc.). The machine will last for 8 years; however, it will not have any resale value. MaBak Inc. has not priced robotic machines. Calculate the maximum price MaBak Inc. should pay if they want to earn an 10% return on any money invested in the company. Which table will you use for the above calculation? Number of periods? Interest Rate? Factor? What is the maximum price?
A seaI firm Trodent’s customers expects to decrease downtime by 0.3 as a result of the new seal design. If Iost production would have cost the company $110,000 per year for the next four years, how much could the company afford to spend now on the new seals, if it uses an interest rate of 0,1 2 per year?
Red-Star Co. wants to sell an electrical generator for AED 165,000 in 2024. The price of this generator in the market today is AED 94,000 (according to GE company who is the producer of this generator). If the discount rate on this generator is 9.5 percent per year. Do you think the firm will make a profit if they sell this generator? What is the rate that will make the firm breakeven? Note: Profit = Revenue -cost
Gold Star Industries is contemplating a purchase of computers. The firm has narrowed its choices to the SAL 5000 and the HAL 1000. The company would need nine SALs, and each SAL costs $3,250 and requires $300 of maintenance each year. At the end of the computer’s eight-year life, each one could be sold for $195. Alternatively, the company could buy seven HALs. Each HAL costs $3,600 and requires $355 of maintenance every year. Each HAL lasts for six years and has a resale value of $140 at the end of its economic life. The company will continue to purchase the model that it chooses today into perpetuity, and the tax rate is 25 percent. Assume that the maintenance costs occur at year-end. Depreciation is straight-line to zero. What is the EAC of each model if the appropriate discount rate is 12 percent? (Your answers should be a negative value and indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)