2. Calculating costs Susan is working for a consulting firm making $60,000 per year but considers starting her own consulting company. Susan has determined that to launch the business, she needs to invest $100,000 of her own funds. The annual cost of running the business will include $75,000 for the rent of the office space, $190,000 for employee wages, and $6,000 for materials and utilities. Susan plans to manage the business, which means that she will have to quit her current job. Suppose that the interest rate (or rate of return) on investments in the economy is 6%. Susan's total explicit cost per year is Susan's total cost per year is
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- Jamie is considering leaving her current job, which pays $75,000 per year, to start a new company that develops applications for smart phones. Based on market research, she can sell about 50,000 units during the first year at a price of $4 per unit. With annual overhead costs and operating expenses amounting to $145,000, Jamie expects a profit margin of 20 percent. During the first year, Jamie is using her savings to cover total costs. Current annual rate of return on saving is 2.1%. This margin is 5 percent larger than that of her largest competitor, Apps, Inc.Jim Bingham is considering starting a small catering business. He would need to purchase a delivery van and various equipment costing $150,000 to equip the business and another $60,000 for inventories and other working capital needs. Rent for the building used by the business will be $30,000 per year. Jim's marketing studies indicate that the annual cash inflow from the business will amount to $125,000. In addition to the building rent, annual cash outflow for operating costs will amount to $50,000. Jim wants to operate the catering business for only five years. He estimates that the equipment could be sold at that time for 10% of its original cost. The working capital will be fully released for other purposes at the end of the six years. Jim uses a 14% discount rate. needed; Would you advise Jim to make this investment?Ashley is a fresh graduate and is now planning to start a new business. She would run an online shop to sell snacks imported from Japan. She expects the annual purchase cost would be $380,000 and the annual sales would be $790,000. Four sets of computers are needed, which cost $7,000 each and could be sold at half price in the second-hand market after one year. She has to rent a small office, which costs her $19,000 per month. (i) Calculate the annual accounting profit of Ashely's snack business. (ii) Ashley will be involved in the daily operations of this snack business and has to give up the opportunity to get a full-time job. În consideration of annual economic profit, in what condition should Ashley start this business? Explain with relevant figures.
- esc You plan on starting a lawn mowing business by investing $700 of your own money and purchasing $500 of equipment. You plan to work 80 hours in your first month and 370 hours in your second month of business. You charge your customers $24 per hour. Your anticipated costs include: Advertising Gas Depreciation Assistant's Wages Miscellaneous Expenses You plan on collecting 90% of your sales in the month you mow the lawn and the remainder in the following month. Calculate the accounts receivable balance at the end of your second month of business. Click Save and Submit to save and submit. Click Save All Answers to save all answers. 1 Q A 2 W $8 per month $1.40 per hour $25 per month $8.00 per hour $40 per month S # 3 E D $ 4 R 67 dº % 5 LL MacBook Pro T < 6 G & Y 7 H * 00 8 U J o3. Bill Braddock is considering opening a Fast 'n Clean Car Service Center, He estimates that the following costs will be incurred during his first year of operations: Rent $9,200, Depreciation on equipment $7,000, Wages $16,400, Motor oil $2.00 per quart. He estimates that each oil change will require 5 quarts of oil. Oil filters will cost $3.00 each. He must also pay The Fast 'n Clean Corporation a franchise fee of $1.10 per oil change, since he will operate the business as a franchise. In addition, utility costs are expected to behave in relation to the number of oil changes as follows: Number of Oil Changes 4,000 6,000 9,000 Utility Costs $ 6,000 $7,300 $ 9,600 12,000 $12,600 $15,000 14,000 Bill Braddock anticipates that he can provide the oil change service with a filter at $25 each. Instructions: (a) Using the high-low method, determine variable costs per unit and total fixed costs. (b) Determine the break-even point in number of oil changes and sales dollars. (c) Without regard…Murad is considering starting a small catering business. He would need to purchase a delivery van and various equipment costing $62,500 to equip the business and another $30,000 for working capital needs. Rent for the building used by the business will be $17,500 per year. In addition to the building rent, annual cash outflow for operating costs will amount to $20,000. Murads marketing studies indicate that the annual cash inflow from the business will amount to $60,000. All of working capital would be released at the end of 7 years. Murad wants to operate the catering business for only seven years. He estimates that the equipment could be sold at that time for 5% of its original cost. Murad uses a 13% discount rate. Use the following present value tables, to determine the appropriate discount factor(s) Present Value of $1; 1 (1 +r) Periods S% 9% 10% 11% 16% 17% 0.572 0.5520.534 0.497 0.476 0.456 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 | 0.410 0.390 12% 13% 14% 15% 0.735 0.708…
- Mr. Jones also considers improving the production efficiency of his company. He realizes if he rents a new equipment, the production costs will be reduced. He then gathers the following information:The new equipment can be rented at a cost of $60,000 a year. To operate the new equipment, the company also needs to hire a supervisor whose annual salary is $40,000. The equipment will reduce the direct materials cost and direct labor cost by 50%. Currently, direct materials, director labor, and variable manufacturing overhead cost $2, $2, and $1, respectively. Mr. Jones further finds that the use of new equipment has no impact on the company’s fixed manufacturing overhead. Q:Mr. Jones is not sure whether it is worthwhile to rent the new equipment. Mr. Kaye shows his prediction of the next three years’ sales. In Year 4, Year 5, and Year 6, the predicted sales units are 40,000, 50,000, and 60,000, respectively. Please make your recommendations to Mr. Jones, in which year should the company…(Management Accounting) Mary is considering leaving her current position to open an ice cream shop. Mary's current annual salary is $77,000. Annual ice cream shop revenue and costs are estimated at $260,000 and $210,000, respectively. What is Mary's annual opportunity cost of starting the ice cream shop? A) $50,000 B) $77,000 C) $210,000 D) $260,000Adela plans to set up a sewing workshop. She estimates that renting a well-located shop would cost her $ 1,000,000 per month. In addition, she needs to buy an industrial sewing machine for $ 800,000, an overlock machine for $ 500,000, and a cutting machine for $ 600,000. He also needs to buy an ironing machine worth $650,000 and cutting tables and other furniture for an estimated total of $1,500,000.The corporate tax rate is 25% and the fixed assets are depreciated on a straight-line basis over 4 years.The residual value of the fixed assets is equal to 10% of their acquisition value.Adela estimates that in the first year she would generate $25 million in sales revenue, which is estimated to increase by $5 million per year to $40 million per year in the fourth year. Of this amount, the cost of sales is 20% of sales and in addition it must cancel administrative and salary expenses of $ 10 million annually.IT IS REQUESTED: Considering the above, make the 4-year evaluation to conclude…
- Jamie is considering leaving her current job, which pays $75,000 per year, to start a newcompany that develops applications for smartphones. Based on market research, she can sellabout 50,000 units during the first year at a price of $4 per unit. With annual overhead costsand operating expenses amounting to $145,000. Jamie expects a profit margin of 20 percent.This margin is 5 percent larger than that of her largest competitor, Apps, Inc.● If Jamie decides to embark on her new venture, what will her accounting costs be duringthe first year of operation?○ Her company’s implicit costs?○ Her company’s opportunity costs?● Suppose that Jamie’s estimated selling price is lower than originally projected during thefirst year. How much revenue would she need in order to earn:o Positive accounting profits?o Positive economic profitsary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment $ 175,000 Working capital needed $ 185,000 Annual cash inflow from sales $ 190,000 Annual cash outflow for operating costs $ 145,000 Salvage value of equipment $ 20,000 Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the present value factor you will use for the net annual cash flows?Mary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment $ 175,000 Working capital needed $ 185,000 Annual cash inflow from sales $ 190,000 Annual cash outflow for operating costs $ 145,000 Salvage value of equipment $ 20,000 Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the present value factor you will use for the net annual cash flows? Enter your answer to three decimals.