FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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- An operations manager is deciding on the level of automation for a new process. The fixed cost for automation includes the equipment purchase price, installation, and initial spare parts. The variable costs per unit for each level of automation are primarily labor related. Each unit can be sold for $81. As in many cases, you have the default alternative of doing nothing ($0 fixed cost, $0 variable costs). Hint: For these questions, also consider the “Do Nothing” option as a viable option when making your decision. Alternative Fixed Costs Variable Costs per Unit A $100,000 $54 B $272,000 $31 C $560,000 $20 Recommended: graph each alternative with units on the x-axis and $ on the y-axis. Also, include revenue on the chart. Identify the break-even points and points of indifference.arrow_forwardDiversity Ltd. produces and sells a product called Star. The company is currently selling 9,560 units of the product which represent £143,400. Total fixed costs equal £66,920 and total contribution equals £66,920. Required: Considering this information, is Diversity Ltd. selling a profitable amount of its product Star and which would be your advice for the company? Which is the price per unit at which Diversity Ltd. is selling its product? Explain your answer in detail. Consider that, after an increase in the market demand of product Star, Diversity Ltd. sells 25% more units of product Star. In this new situation, is Diversity Ltd. selling a profitable amount of its product Star? Explain your answer in detail. Draw a graph related to your previous answers in a) and b). Consider the information from the graph, which would be the financial situation of Diversity Ltd. if sales decrease in more than 25%?arrow_forwardColumbus Inc. sells a high end hair dryer in a super competitive marketplace. As a result, market research and competitive pressures influence the determination of their selling price. Their marketing department has done a comprehensive analysis and It looks like a price of $61 would be appropriate given the present business environment. The company has a goal of earning $30 on each unit. What is the target unit cost of each hair dryer? Enter your answers without dollar signs or commas. ASUS 13 f4 E3 X 19 OLF 11 (12 3. & 4. 5 7. 8. E T. Y. F G H K t6 立arrow_forward
- The Borstal Company has to choose between two machines that do the same job but have different lives. The two machines have the following costs: Year Machine A 0 OLN3+ 1 2 4 $48,000 11,600 11,600 11,600 + replace Machine A Machine B These costs are expressed in real terms. a. Suppose you are Borstal's financial manager. If you had to buy one or the other machine and rent it to the production manager for that machine's economic life, what annual rental payment would you have to charge? Assume a 12% real discount rate and ignore taxes. (Do not round intermediate calculations. Enter your answers as a positive value rounded to 2 decimal places.) Machine B $58,000 11,200 11, 200 11,200 11,200 + replace Annual Rental Paymentarrow_forwardQuestion 1: A manufacturing firm wants to choose from amongst three different machines for its plant. A hand operated machine with fixed and variable costs of Rs 2000 and Rs 4 per unit respectively. A semi-automatic machine with fixed and variable cost of Rs. 8000 and Rs. 2 per unit and an automatic machine costing Rs. 20000 and Rs. 1 per unit. If the firm wants to produce 10,000 units then which machine should be selected (also write your comments)arrow_forwardOlsen Company produces two products. Product A has a contribution margin of $30 and requires 10 machine hours. Product B has a contribution margin of $24 and requires 4 machine hours. Determine the more profitable product assuming the machine hours are the constraint. Unit contribution margin per bottleneck hour:Product A $_____Product B $_____ Product ____ is most profitable.arrow_forward
- Division X makes a part with the following characteristics: Production capacity.. 25,000 units $18 Selling price to outside customers. Variable cost per unit. $11 Fixed cost, total. $100,000 Division Y of the same company would like to purchase 10,000 units each period from Division X. Division Y now purchases the part from an outside supplier at a price of $17 each. Suppose that Division X is operating at capacity and can sell all of its output to outside customers. If Division X sells the parts to Division Y at $17 per unit, the company as a whole will be: Select one: a. better off by $10,000 each period. b. worse off by $20,000 each period. C. worse off by $10,000 each period. d. There will be no change in the status of the company as a whole.arrow_forwardFind minimum, maximum and appropriate transfer pricearrow_forward
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