Lima has been asked to estimate the cost today of a 12 ft3 paint booth for the new plant. She has the following data: o Her company paid $3,000 for a 3 ft3 paint booth 5 years ago. o Paint booth within this range of capacity have a power-sizing exponent of 0.6. o Five years ago the paint booth cost index was 856; it is 987 today.

Lima has been asked to estimate the cost today of a 12 ft3 paint booth for the new plant. She has the following data: o Her company paid $3,000 for a 3 ft3 paint booth 5 years ago. o Paint booth within this range of capacity have a power-sizing exponent of 0.6. o Five years ago the paint booth cost index was 856; it is 987 today.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 31P: Jonfran Company manufactures three different models of paper shredders including the waste...

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Eight years ago, the Blank Block Building Company installed an automated conveyor system for $38,000. When the conveyor is replaced, the net cost of removal will be $2500. The minimum EUAC of a new conveyor is $6500. When should the conveyor be replaced if BBB’s MARR is 12%? The O&M costs for the next 5 years are $5K, $6K, $7K, $8K, and $9K.
Your first job as an engineer is to purchase a new rotary vacuum-drum filter with a capacity of 1100 ft-. Your company purchased a similar filter eight years ago with a capacity of 700 ft- for $26,000. After checking the literature, you determine the cost index was 429 eight years ago and is 548 today. If the power-sizing exponent for this type of equipment is 0.52, estimate the cost of the new filter.
Remerowski Corporation Inc. asks you to estimate the cost to purchase a new piece of production equipment. The company purchased this same type of equipment in the past for $10,000. The original equipment had a capacity of 2000 units, while the new equipment has a capacity of 1000 units. The power-sizing exponent for this type of equipment is 0.28. In addition, the cost index for this type of equipment was 126 when the original unit was purchased and is now 160. If Remerowski uses an 8% annual interest rate to evaluate equipment purchases, estimate the cost to purchase the new piece.
The cost characteristics of a CO testing machine that was purchased 5 years ago for $100,000 are shown below. The equation to determine the AW of retaining the tester one more year and then replacing it is: (a) AW = −15,000(A/P,i,1) − 54,000 + 10,000(A/F,i,1) (b) AW = −100,000(A/P,i,6) − 54,000 + 10,000(A/F,i,6) (c) AW = −60,000(A/P,i,1) − 42,000 + 40,000(A/F,i,1) (d ) AW = −100,000(A/P,i,5) − 42,000 + 15,000(A/F,i,5) Machine Age, Years from Purchase M&O Costs, $ per Year Salvage Value at End of Year, $ 1 42,000 60,000 2 47,000 40,000 3 49,000 31,000 4 50,000 24,000 5 52,000 15,000 6 54,000 10,000 7 63,000 10,000 8 67,000 10,000
Problem1: A summer camp for youngsters has the following data: Charge per camper (selling price) Fixed costs $144 $4800 Variable cost per camper Capacity 1. Write the total revenue equation. 2. Write the total cost equation. 3. Determine the breakeven point in units. 4. Calculate the breakeven point in dollars. 5. If fixed costs decrease 10%, what is the new breakeven point in units and in dollars? 6. What is the profit or loss of the session if the camp operates at 80% capacity? Problem 2: A company is considering a capital cost of $80000 to acquire new machinery. The expected annual revenue is $45000. After 6 years its salvage value will be $15000. An overhaul costing $10000 will be needed in year 3. The operation and maintenance cost (O&M) will be $5000 per year. Complete the corresponding table and cashflow diagram below. a. Cash flow table Year 0 1 2 3 4 5 6 $96 200 campers Capital Cost Annual Revenue b. Cash flow diagram O&M Overhaul Salvage Cost
Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
A manufacturing concern employed your services to give them advice whether they should replace one of their machines or have it repaired. Ten years ago the machine cost P140,000. Repairs will cost P50,000 and will extend its usefulness for 5 more years. A new machine will cost P124,000 and will last 10 years. Annual cost for fuel, lubricants and repairs will be P7,500 more for the repaired engine than for the new one. What should be the recommended alternative and how advantageous over the other?
2. Foxx Company manufactures water sealant. This sealant is used to stop leaks in basement orin concrete retainer walls. In 2019 the company sold 1.6M gallons of sealant at price of P3.00per gallon with a variable cost per gallon of P1.50. The fixed costs were P1,550,000In 2020, new automated equipment will be used in production. This will increase fixed costsfor the year to P1,785,000. The variable cost per gallon has been estimated at P1.30 per gallon.The sales volume increased by 15% percent in 2020.Required:1. For 2019 compute the BEP in gallons and pesos.2. For 2020 compute the BEP in gallons and pesos.3. How much is the EBIT for 2019 & 20204.Using the cost and revenue data for 2019 consider each of the following situationsindependently:a. What is the effect on the break even point (in gallons) for the decrease in variable cost fromP1.50 to P1.30?b. What is the effect on the break even point for the increase in fixed costs of P235,000?
A 250 square foot shell and tube heat exchanger was purchased for $15,250 in 2004 when the index value was 830. Estimate the cost of 150 square foot shell and tube heat exchanger in 2014 when the index value is 1,059 and the appropriate cost-capacity factor is 0.6.
Hey I'm having trouble with this problem, I'm not sure if 48,000 is pv or fv also I'm not sure if what to do with annual maintenance cost either. "Esquire Company needs to acquire a molding machine to be used in its manufacturing process. Two types of machines that would be appropriate are presently on the market. Machine A could be purchased for $48,000. It will last 10 years with annual maintenance costs of $1,000 per year. After 10 years the machine can be sold for $5,000.Machine B could be purchased for $40,000. It also will last 10 years and will require maintenance costs of $4,000 in year three, $5,000 in year six, and $6,000 in year eight. After 10 years, the machine will have no salvage value. Assume an interest rate of 8% properly reflects the time value of money in this situation and that maintenance costs are paid at the end of each year. Ignore income tax considerations.Calculate the present value of Machine A & Machine B. Which machine Esquire should purchase?"
White Oaks Properties builds strip shopping centers and small malls. The company plans to replace its refrigeration, cooking, and HVAC equipment with newer models in one entire center built 10 years ago. 10 years ago, the original purchase price of the equipment was $700,000 and the operating cost has averaged $220,000 per year. Determine the equivalent annual cost of the equipment if the company can now sell it for $224,000. The company's MARR is 17% per year. The equivalent annual cost of the equipment is determined to be $
Higgins Machine Tools, Inc. is currently manufacturing one of its products on a hydraulic stamping press machine. The unit cost of the product is $16, and in the past year 4,000 units were produced and sold for $24 each. It is expected that the future demand of the product and the unit price will remain steady at 4,000 units per year and $24 per unit, respectively.Defender: The machine has a remaining useful life of three years and could be sold on the open market now for $8,000. Three years from now, thethe machine is expected to have a salvage value of $1,800.Challenger: A new machine would cost $40,000, and the unit manufacturing cost on the new machine is projected to be $14. The new machine has an expected economic life of five years and an expected salvage of $8,000. The appropriate MARR is 10%. The firm does not expect a significant improvement in the machine's technology to occur, and it needs the service of either machine for an indefinite period of time.(a) Compute the cash…