2. A company produces deluxe widgets. It has a capacity of 280,000 units per year. The fixed annual cost of the process is $4,000,000. The widgets sell for $50 each. Each widget requires parts and labor to make. a. What is the maximum the company can pay (parts and labor) per unit for manufacture? (don't consider time value of money) b. If the estimated costs were $25 per unit, and the MARR were 15% for a potential purchaser (of the company), what is the maximum sales price to buy the company considering a life of 20 years? c. If the cost to produce the units increases at 5% per year, but sales price remains $ 50, how long could the company operate at a profit? (After how many years with the production cost increasing would it take for the net income to equal the fixed costs?

2. A company produces deluxe widgets. It has a capacity of 280,000 units per year. The fixed annual cost of the process is $4,000,000. The widgets sell for $50 each. Each widget requires parts and labor to make. a. What is the maximum the company can pay (parts and labor) per unit for manufacture? (don't consider time value of money) b. If the estimated costs were $25 per unit, and the MARR were 15% for a potential purchaser (of the company), what is the maximum sales price to buy the company considering a life of 20 years? c. If the cost to produce the units increases at 5% per year, but sales price remains $ 50, how long could the company operate at a profit? (After how many years with the production cost increasing would it take for the net income to equal the fixed costs?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter5: Activity-based Costing And Management

Section: Chapter Questions

Problem 16MCQ: Suppose that a company is spending 60,000 per year for inspecting, 30,000 for purchasing, and 40,000...

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