KRadovilsky Manufacturing Company, in Hayward, California, makes flashing lights for toys. The company operates its production facility 300 daysper year. It has orders for about 12,400 flashing lights per year and has the capability of producing 95 per day. Setting up the light production costs$49. The cost of each light is $0.95. The holding cost is $0.15 per light per year.a) What is the optimal size of the production run?units (round your response to the nearest whole number).

The output quantity that minimizes the overall cost of production seems to be the optimal size of…

Answered: Radovilsky Manufacturing Company, in…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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One machine has to be purchased to produce a certain product. Two options are available. Machine A, which is capable to produce 50 units per hour, can be purchased for $900,000. On the other hand, Machine B, which is capable to produce 55 units per hour, can be purchased for $1,000,000. The variable costs per hour on machines A and B are $40 and $45, respectively. The available working hours per year are 2000 and each unit produced is sold for $50. What is the profit that can be achieved in the first year of production? Assume that all units produced are sold and only one machine is used.
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Billy Bob's Crab & Oyster Shack wants to reduce the cost of labour by replacing some labour with machines. If Billy Bob's were to purchase a machine to shuck the oysters, it can save $50,000 a year for 10 years. The new machine will cost $650,000 and it will be worth $50,000 at the end of the 10 year period. The firm believes it will need $10,000 in spare parts inventory (increase in NWC), which it can sell for the $5,000 at the end of the project. The machine has a 20% CCA rate and the firm has a 15% tax rate. If they want a 20% return on their investment what is the NPV? Round your answer to the nearest dollar, no dollar sign, no commas, put negative sign if needed.
A bicycle manufacturer currently produces 247,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of < $2.20 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $1.40 per chain. The necessary machinery would cost $277,000 and would be obsolete after 10 years. This investment could be depreciated to zero for tax purposes using a 10-year straight-line depreciation schedule. The plant manager estimates that the operation would require $26,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the 10 years. Expected proceeds from scrapping the machinery after 10 years are $20,775, If the company pays tax at a rate of 28% and the opportunity cost of capital is 15%, what is the net present value of the decision to produce the…
Neptune Company has developed a small inflatable toy that it is anxious to introduce to its customers. The company's Marketing Department estimates that demand for the new toy will range between 15,000 units and 35,000 units per month. The new toy will sell for $3 per unit. Enough capacity exists in the company's plant to produce 18,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.00, and incremental fixed expenses associated with the toy would total $22,000 per month. Neptune has also identified an outside supplier who could produce the toy for a price of $1.75 per unit plus a fixed fee of $15,000 per month for any production volume up to 20,000 units. For a production volume between 20,001 and 40,000 units the fixed fee would increase to a total of $30,000 per month. Required: 1. Calculate the break-even point in unit sales assuming that Neptune does not hire the outside supplier. 2. How much profit will Neptune earn assuming: a. It…
An assembly operation at a software company now requires $250,000 per year in labor costs. A robot can be purchased and installed to automate the operation. The robot will cost $800,000, have an economic life of ten years, and have no residual value at the end of its life. Maintenance and operating expenses of $64,000 per year for the robot are estimated. MARR is 15%. Determine whether this is a viable project. Solve the problem by: (a) Present worth analysis (b) Annual cash flow analysis+- (c) Rate of return analysis
Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $120,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $915,000 per year. The fixed costs associated with this will be $235,000 per year, and variable costs will amount to 20 percent of sales. The equipment necessary for production of the Potato Pet will cost $890,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. The tax rate is 23 percent and the required return is 13 percent. Calculate the payback period, NPV, and IRR.
Pappy's Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). Pappy's paid $160,000 for a marketing survey to determine the viability of the product. It is felt that Potato Pet will generate sales of $875,000 per year. The fixed costs associated with this will be $220,000 per year, and variable costs will amount to 24 percent of sales. The equipment necessary for production of the Potato Pet will cost $930,000 and will be depreciated in a straight-line manner for the four years of the product life (as with all fads, it is felt the sales will end quickly). This is the only initial cost for the production. Pappy's has a tax rate of 23 percent and a required return of 16 percent. a. Calculate the payback period for this project. Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. Calculate the NPV for this project. Note: Do not round intermediate calculations and round your answer to 2 decimal…
Nestle Ltd. produces its premium plant food in 50 Kg bags. Demand is 100,000 Kgs. per week and the plant operates 52 weeks each year. Nestle can produce 250,000 Kgs. per week. The setup cost is OMR 200 and the annua holding cost rate is OMR 0.30 per bag. What is the optimal total cycle time including the production time in year? a. 0.146 O b. None is correct O c. 0.208 d. 0.127 e. 0.137 O f. 0.108
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Middle Industries produces a sensor for use in manufacturing. It produces the sensor in a plant with an annual practical capacity of 75,000 units. The variable cost of the sensor is $185.00 per unit, and the fixed costs of the plant are $12,375,000 annually. Current annual demand is 55,000 sensors. Middle Industries bought the plant because it was close to its other manufacturing facilities and was available for sale when they were searching for a location. Required: What cost per sensor should the cost system report to facilitate management decision making? What is the cost of excess capacity? What cost per sensor would the cost system report if the smallest manufacturing plant that could be built was able to produce 75,000 sensors? What would be the cost of excess capacity?
Mighty Safe Fire Alarm is currently buying 57,000 motherboards from MotherBoard, Inc., at a price of $63 per board. Mighty Safe is considering making its own boards. The costs to make the board are as follows: direct materials, $33 per unit; direct labor, $12 per unit; and variable factory overhead, $15 per unit. Fixed costs for the plant would increase by $90,000. Which option should be selected and why? Oa. a. buy, $90,000 increase in profits Ob. make, $80,940 increase in profits c. make, $171,000 increase in profits Od. buy, $80,940 increase in profits

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