FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- H2. A clothing manufacturer is considering whether to add hoodies to its range of products. The hoodies would sell for $45 each and the company expects to sell 10,000 units per year. Selling hoodies, however, would cause sales of conventional jumpers to decrease by 1,000 units per year. The jumpers sell for $43 per unit. The variable costs of production are $25 per unit for hoodies and $20 per unit for jumpers. If the company adds hoodies to its range of products, fixed costs will increase by $56,000 per year and annual depreciation will increase by $21,000. What is the incremental operating cash flow from selling hoodies, if the corporate tax rate is 30%? Please show proper step by step calculationarrow_forward11) Istanbul Company currently sells cellphones for $500. It has costs of $320. A competitor is bringing a new cell phone to market that will sell for $430. Management believes it must lower the price to $430 to compete in the market for cell phones. Marketing believes that the new price will cause sales to increase by 10%, even with a new competitor in the market. Istanbul Company sales are currently 100,000 cell phones per year. What is the target cost if the company wants to maintain its same income level, and marketing is correct (rounded to the nearest cent)? A) $224.00 B) $238.18 C) $266.38 D) $290.00 E) $311.00arrow_forwardPlease help me with c. Thanks!arrow_forward
- You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $150,000 for labor, $50,000 for rent, and $30,000 for equipment. There is a one-half probability that revenues will be $210,000 and a one-half probability that revenues will be $400,000. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers. Enter a loss as a negative number. a. In the low-revenue situation, what will your accounting profit or loss be? $ What will your accounting profit or loss be in the high-revenue situation? $ b. On average, how much do you expect your revenue to be? $ Your accounting profit? $ Your economic profit? $…arrow_forwardPART 4: A large discount store has approached the owner of Yundt about buying 20,000 snow globes. The discount store is only willing to pay only $30 per unit. Based on quantitative factors alone, should Yundt accept the special order? Specifically, by what amount would the special-order increase or decrease profitability?arrow_forwardQuestion: The Savannah Shirt Company is considering adding a new product line, a cloth shopping bag with custom screen printing that will be sold to grocery stores. If the current market price of cloth shopping bags is $1.25 and the company desires a net profit of 40%, what is the target cost? The company estimates the full product cost of the cloth bags will be $0.60. Should the company manufacture the cloth bags? Why or why not?arrow_forward
- 2. Company XYZ sells CDs. The price of its new CD is $15. Fixed costs are $1,500,000 per year. Variable costs are $9. The company expects to sell 300,000 units this year. a. How many DVDS will the company need to sell to break even? b. If the forecasts are correct, how much will company XYZ make or lose this year (before taxes)?arrow_forwardSelena Corporation is currently considering relaxing its credit standards. Based on the analysis done, relaxing credit standard will potentially increase sales by 5%. Selena Corporation is currently selling 400 units with selling price of P700. Variable costs per unit based on status quo is at P400. The average total cost per unit is P425. What is the additional profit contribution from sales if credit standards are relaxed?arrow_forwardA chain of take-away pizza stores is considering introducing a new line of gluten-free pizzas. Net revenue from the new line of pizzas is expected to total $500,000 per year, but 15% of this net revenue is forecast to consist of people switching from the regular pizzas to the gluten-free pizzas. How would you describe this situation in terms of the NPV analysis upon which the situation will be based. Question 1Answer a. There is a negative externality equal to $425,000 which should be included in the NPV analysis for the gluten-free pizza project. b. There is a positive externality equal to $425,000 which should be included in the NPV analysis for the gluten-free pizza project. c. There is a positive externality equal to $75,000 which should be included in the NPV analysis for the gluten-free pizza project. d. There is a negative externality equal to $75,000 which should be included in the NPV analysis for the gluten-free pizza project.arrow_forward
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