2. Acme Semiconductor is expanding its facility and needs to add equipment. Your teamhave been asked to perform an economic analysis to select the most appropriate toolto acquire. Your team have gathered the following information for evaluation. Each ofthese tools has a useful life of seven years. Acme's accounting staff has establisheda company-wide MARR of 8% per year.Two recommendations were given by the top management. Based on the datapresented in Table 2, evaluate whether Tool A is better than Tool B (or vice versa) instarting up the project. As a project manager, you and your team are required topropose the solution from these two alternatives. Discuss your selection.Investment costsAnnual expensesAnnual revenueMarket valueIRRTool A$55,000$6,250$18,250$18,00015.9%Table 2Tool B$80,000$3,200$20,200$22,00014.6%

The net present value is the difference between the present value of cash flow and initial…

Answered: Acme Semiconductor is expanding its…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 4TP: Malone Industries has been in business for five years and has been very successful. In the past...

See similar textbooks

Similar questions

Acme Semiconductor is expanding its facility and needs to add equipment. There are three process tools under consideration. You have been asked to perform and economic analysis to select the most appropriate tool to acquire. You have gathered the following information for evaluation. Each of these tools has a useful life of seven years. Acme's accounting staff has established a company- wide MARR of 8% per year. Which of the process tools should be selected? Tool B P45,000,000 P8,550,000 P16,750,000 P3.750.000 Tool C P80,000,000 P3,200,000 P20,200.000 P22,000,000 14.6% Tool A P55,000,000 P6,250,000 P18.250.000 Investment Costs Annual Expenses Annual Revenues Market Value P18,000,000 15,9% IRR 7.9%
The corporate you work for has asked for a summary and report of the future projections for the next 5 years. With the help of the CFO, you have put together the following preliminary figures based on the last year's numbers for a planned production and sales level of 4,000 units per year. Building depreciation $200,000 per year Machine operator $100,000 per year Management staff. $400,000 per year Direct materials $4,000,000/year. Other expenses that seem to vary based on production levels. $3,000,000/year. Other expenses that doesn't seem vary. $1,300,000/year. Selling price per unit. $5,0000/ unit. Utilities. You have the following data to which you pay for the high-low method. .when there is no production, utility costs are $20,000/month. . When production levels reached 4,000 units, unit cost totalled $40,000 per month. 1.calculate the contribution margin per unit. 2. Calculate…
Acme Semiconductor is expanding its facility and needs to add equipment. There are three process tools under consideration. You have been asked to perform an economic analysis to select the most appropriate tool to acquire. You have gathered the following information for evaluation. Each of these tools has a useful life of seven years. Acme’s accounting staff has established a company-wide MARR of 8% per year.Which one of the process tools should be selected?
Selected data for three investment centers of Going Coastal, Inc., a manufacturer of beach chairs, are given below for the previous operating period: Sales Revenue Capital Operating Income Water Sun $60,000 $100,000 $10,000 $50,000 $1,600 $9,000 Sand $80,000 $20,000 $1,800 An investment opportunity has been identified that will yield a 17% return on investment for each center. The company's minimum acceptable rate of retum is 15%. Which of the following statements is correct? OA. If each manager is paid a bonus based solely on his ability to exceed the division's prior period ROI, the managers of all three centers will accept the opportunity. B. Sand's ROI is greater than the company's hurdle rate. C. If residual income is used to award bonuses, two of the managers will accept the investment opportunity. OD. If each manager is paid a bonus based solely on their ability to exceed the division's prior period ROI, Sun's manager would make a decision that is in the company's "best…
A company purchases a component, which is critical in the production process, from an international supplier. Recently, quality problems with this component have increased. For this reason, managers of the company are considering of producing this part in-house. The economic life of the new production system will be 8 years. The savings and expenditures related to the new production system are given below. The MARR is 15%. According to the information, answer the questions from 8 to 9. Capital expenditures (Investment costs): Building: 500,000 TL Machines and equipment: 2,200,000 TL The annual saving from material and quality control: 5,000,000 TL Annual operating cost: 1,500,000 TL Annual income tax: 800,000 TL Salvage value: 1,500,000 TL 8. What is the discounted payback period of the new production system? A.Less than 1 year B.1 year C.between 1 and 2 years D.between 2 and 3 years 9. What is the net present worth of the new production system? A.9,415,000 TL…
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division’s return on investment (ROI), which has exceeded 18% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial Investment Cost of equipment (salvage value) 170000 380000 Annual revenues and costs Sales revenue 250000 350000 Variable expenses 120000 170000 Depreciation expense 34000 76000 Fixed out-of-pocket operating costs 70000 50000 The company’s discount rate is 16%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor using tables. Required: 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4. Calculate the project…
Malone Industries has been in business for five years and has been very successful. In the past year, it expanded operations by buying Hot Metal Manufacturing for a price greater than the value of the net assets purchased. In the past year, the customer base has expanded much more than expected, and the companys owners want to increase the goodwill account. Your CPA firm has been hired to help Malone prepare year-end financial statements, and your boss has asked you to talk to Malones managers about goodwill and whether an adjustment can be made to the goodwill account. How do you respond to the owners and managers?
Javier Company has sales of 8 million and quality costs of 1,600,000. The company is embarking on a major quality improvement program. During the next three years, Javier intends to attack failure costs by increasing its appraisal and prevention costs. The right prevention activities will be selected, and appraisal costs will be reduced according to the results achieved. For the coming year, management is considering six specific activities: quality training, process control, product inspection, supplier evaluation, prototype testing, and redesign of two major products. To encourage managers to focus on reducing non-value-added quality costs and select the right activities, a bonus pool is established relating to reduction of quality costs. The bonus pool is equal to 10 percent of the total reduction in quality costs. Current quality costs and the costs of these six activities are given in the following table. Each activity is added sequentially so that its effect on the cost categories can be assessed. For example, after quality training is added, the control costs increase to 320,000, and the failure costs drop to 1,040,000. Even though the activities are presented sequentially, they are totally independent of each other. Thus, only beneficial activities need be selected. Required: 1. Identify the control activities that should be implemented, and calculate the total quality costs associated with this selection. Assume that an activity is selected only if it increases the bonus pool. 2. Given the activities selected in Requirement 1, calculate the following: a. The reduction in total quality costs b. The percentage distribution for control and failure costs c. The amount for this years bonus pool 3. Suppose that a quality engineer complained about the gainsharing incentive system. Basically, he argued that the bonus should be based only on reductions of failure and appraisal costs. In this way, investment in prevention activities would be encouraged, and eventually, failure and appraisal costs would be eliminated. After eliminating the non-value-added costs, focus could then be placed on the level of prevention costs. If this approach were adopted, what activities would be selected? Do you agree or disagree with this approach? Explain.
Forchen, Inc., provided the following information for two of its divisions for last year: Required: 1. For the Small Appliances Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 2. For the Cleaning Products Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 3. What if operating income for the Small Appliances Division was 2,000,000? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios (round to four significant digits).
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five- year period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 19% each of the ast three years. He has computed the cost and revenue estimates for each product as follows: Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs The company's discount rate is 17%. Required (Use Excel for 2-4): 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. Product A $ 190,000 $ 270,000 $ 128,000 $ $ Product B $ 400,000 $ 370,000 $ 178,000 38,000 $ 80,000 72,000 $ 52,000 3. Calculate the internal rate of return for each product. 4. Calculate the profitability index for each product. 6a. For each measure, identify whether Product A or Product B is…
QLou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five-year period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 18% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: Sales revenues Variable expenses Depreciation expense Fixed out-of-pocket operating costs The company's discount rate is 16%. Required: 1. Calculate the payback period for each product. 2. Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. Product A $170,000 Product B $380,000 $250,000 $350,000 $120,000 $170,000 $34,000 $76,000 $70,000 $50,000
Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of two new products for a five- year period. His annual pay raises are determined by his division's return on investment (ROI), which has exceeded 18% each of the last three years. He has computed the cost and revenue estimates for each product as follows: Product A Product B Initial investment: Cost of equipment (zero salvage value) Annual revenues and costs: $ 170,000 $ 380,000 Sales revenues Variable expenses $350,000 $ 250,000 $ 120,000 $ 170,000 Depreciation expense $ 34,000 $ 76,000 Fixed out-of-pocket operating costs $ 70,000 $ 50,000 The company's discount rate is 15% Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor using tables Required: 1 Calculate the payback period for each product 2 Calculate the net present value for each product. 3. Calculate the internal rate of return for each product. 4 Calculate the profitability Index for…

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Principles of Accounting Volume 1

Accounting

ISBN:

9781947172685

Author:

OpenStax

Publisher:

OpenStax College

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS