A part is to be used in the assembly of a product. Alternative 1 is to manufacture it in-hol and alternative 2 is to purchase from outside. Determine the break-even quantity per y between the two alternatives using the data gven in the table and i-10%. [Note: You may use TC=FC,+vQ and TC1 TC2 per year] Alternative 1: Manufacture the Part A machine will be needed for production: Initial cost of the machine will be P-$72,000 and salvage value will be F=$8000 dollars after 6 years of life. The variable production cost will be V=$1.6 per unit. Alternative 2: Purchase the part from Outside The part will be purchased at a cost of v2 $6 per unit.

A part is to be used in the assembly of a product. Alternative 1 is to manufacture it in-hol and alternative 2 is to purchase from outside. Determine the break-even quantity per y between the two alternatives using the data gven in the table and i-10%. [Note: You may use TC=FC,+vQ and TC1 TC2 per year] Alternative 1: Manufacture the Part A machine will be needed for production: Initial cost of the machine will be P-$72,000 and salvage value will be F=$8000 dollars after 6 years of life. The variable production cost will be V=$1.6 per unit. Alternative 2: Purchase the part from Outside The part will be purchased at a cost of v2 $6 per unit.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 7EA: Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per...

See similar textbooks

Similar questions

The Fence Company is setting up a new production line to produce top rails. The relevant data for two alternatives are shown below. Solve, a. Based on MARR of 8%, determine the annual rate of production for which the alternatives are equally economical. b. If it is estimated that production will be 300 top rails per year, which alternative is preferred and what will be the total annual cost?
7- A part is to be used in the assembly of a product. Alternative 1 is to manufacture it in-house and alternative 2 is to purchase from outside. Determine the break-even quantity per year between the two alternatives using the data gven in the table and =10%. [Note: You may use TC=FC+vQ and TC1=TC2 per year] Alternative 1: A machine will be needed for production: Initial cost of the Manufacture the Part machine will be P=$72,000 and salvage value will be F=s8000 dollars after 6 years of life. The variable production cost will be V=$1.6 per unit. Alternative 2: Purchase the part from Outside The part will be purchased at a cost of v2=$6 per unit. a) 12000 Units b) O 1500 Units c)O 4568 Units d) 3522 Units e) 1364 Units O Leave blank
Acme Products, Inc. is interested in producing and selling an improved widget. Market research indicates that customers would be willing to pay $90 for such a widget and that 50,000 units could be sold each year at this price. If Acme Products requires a 75% return on sales to undertake production, what is the target cost for the new widget? Select one: O a. $31.50. O b. $67.50. OC. $58.50. Od. $22.50.
A car component can be produced by either of two manufacturing methods, method A or method B. For method A the fixed costs are £70000 per year and the variable costs are £21 per component. For method B the fixed costs are £82000 per year and the variable costs are £18 per component. Calculate the break-even quantity per year, for which the cost of manufacture is the same whichever method is used. Give your answer as an exact value.
An industrial firm uses economic analysis to determine which of two different machines to purchase. Each machine is capable. Each machine is capable of performing the same task in a given amount of time. Assume the MARR=8%. Use the following data for analysis:What is the approximate equivalent uniform annual cost of Machine X?
possible annual sales may not exceed $50 lakhs and if there is competition it may fall considerably. of a new 48. A company has a project to install a new machine exclusively for the manufacture product which is expected to have good demand and reasonably high margin. Maximum e company has obtained quotations and short listed two offers for the new machine. Details in respect of the two models are given below : Machine Models M, $ 50 lakhs 5 lakhs 15 lakhs $ 50 lakhs Maximum possible sales per year Fixed Costs per year Estimated profit for maximum sales 8 lakhs 17 lakhs You are required to calculate : (i) Break even sales of each machine; (ii) Sales at which both models will give the same profit;
1) A distribution company is considering three different alternatives to satisfy their customer's demands. Their options are to rent a ready distribution center (D01), Rent and mobilize a center (D02), or outsourcing (OS). The estimate for each method is shown. The lifetime for D01, D02, and OS are 2, 6, and 3 respectively. MARR is 0.08 per year. D01 D02 OS FIRST COST, $ 138,000 962,000 АОС, $ SV, $ 113,000 70,000 138,000 36,000 352,000 a) Draw the cash flow for all of alternatives. b) Which alternative will be selected on the basis of PW calculation? Why? c) If OS increases 20% each year, which alternative will be more economical (PW method)? d) Which alternative will be selected if AW method is used?
Break-even analysis Show all your solutions. 1. The Fixed Cost is P4,000. The material and labor costs are P4.00 per unit. The supplier’s selling price is P5.00 per unit. The break-even point is 2. Production has indicated that they can produce widgets at a cost of P4.00 each if they lease new equipment at a cost of P10,000. Marketing has estimated the number of units they can sell at a number of prices (Php4000) Which price/volume option will allow the firm to avoid losing money on this project? 3. A food repacking company estimates sales figures of Php15.5M for their most popular item. Assuming that the item sells at Php375 each, fixed costs are Php4M, and variable cost are Php215 per unit repacked. a. What is the break-even sales volume? b. Find the corresponding profit figures if the actual sales will be as estimated. 4. A manufacturer can sell a certain health supplement for P1,100 per unit. Its total cost consists of a fixed overhead of Php75,000 plus production costs of…
An industrial firm uses economic analysis to determine which of two different machines to purchase. Each machine is capable. Each machine is capable of performing the same task in a given amount of time. Assume the MARR=8%. Use the following data for analysis:Which, if either of the two machines should the firm choose?
Two alternative machines will produce the same product, but one is capable of higher quality work, which can be expected to return greater revenue. The following are relevant data. Determine which is the better alternative, assuming repeatability and using SL. depreciation, an income-tax rate of 26%, and an after-tax MARR of 11%. Capital investment Life Calculate the AW value for the Machine A AWA(11%) 5 (Round to the nearest dollar) Terminal BV (and MV) Annual receipts Annual expenses Machine A $18,000 11 years $4,000 $157,000 $129,000 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 11% per year. Machine $29,000 6 years 50 $178,000 $164,000
Suppose that a manufacturer can produce a part for $11.00 with a fixed cost of $7,000. Alternately, the manufacturer could contract with a supplier in Asia to purchase the part at a cost of $13.00, which includes transportation. a. If the anticipated production volume is 1,300 units, compute the total cost of manufacturing and the total cost of outsourcing. b. What is the best decision? a. The total cost of manufacturing is $.
A company has a choice between two machines with identical production capacity but different costs. Use incremental rate of return analysis to determine which machine should be selected if the MARR is 8% per year. (Show you calculation process and make sure to indicate which machine should be selected). A B Initial cost $100 Annual benefit $20 Useful life (years) 10 $50 $12 10