In 2017, Cole & Sons, a small environmental-testing firm, performed 12,200 radon tests for $300 each and 16,000 lead tests for $230 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 12% nextyear. However, awareness of radon-related health hazards is expected to result in a 5% increase in radon-test volume each year in the near future. Jim Cole feels that if he lowers his price for lead testing to $210 per test, he will have to face only a 4% declinein lead-test sales in 2018.Read the requirementsRequirement 1. Prepare the sales budget for Cole & Sons assuming that prices are held at 2017 levels.Sales BudgetFor the Year Ended December 31, 2018RequirementsSelling priceUnits sold in 2018Total revenuesRadon tests30012810384300023032384001. Prepare a 2018 sales budget for Cole & Sons assuming that Cole holds pricesat 2017 levels.Lead tests1408070804002. Prepare a 2018 sales budget for Cole & Sons assuming that Cole lowers theprice of a lead test to $210. Should Cole lower the price of a lead test in 2018 ifthe company's goal is to maximize sales revenue?TotalPrintDone

Sales budget is very important budget which shows expected sales revenue to be earned. Estimated…

Answered: In 2017, Cole & Sons, a small…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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In 2020, Alderman & Sons, a small environmental-testing firm, performed 12,400 radon tests for $320 each and 16,600 lead tests for $220 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 15% next year. However, awareness of radon-related health hazards is expected to result in a 6% increase in radon-test volume each year in the near future. Jim Alderman feels that if he lowers his price for lead testing to $210 per test, he will have to face only a 5% decline in lead-test sales in 2021. Read the requirements LOADING... . Requirement 1. Prepare the sales budget for Alderman & Sons assuming that prices are held at 2020 levels. Sales Budget For the Year Ended December 31, 2021 Total revenues Radon tests Lead tests Total Requirement 2. Prepare the sales budget assuming that Alderman lowers the price of a…
Zoe Building Supply is considering erecting a barbed wire fence around its premises to control theft losses. The fence will cost $350,000 and have a 15-year useful life. They will also incur installation costs of $45,000. The fence is expected to reduce theft losses by $20,000 per year. The firm will no longer need the night security guard and will save $35,000 per year. Insurance premiums are expected to decrease from $65,000 per year to $50,000 per year. The fence will require annual maintenance that is estimated to cost $5,000. Zoe is in a 34% tax bracket and they have a 6% cost of capital. Should they install the fence? Use the discounted cash flow method (NPV and IRR). Show all calculations and support your recommendation with a clear explanation.
A large mudslide caused by heavy rains will cost Sabino County $1,000,000 per occurrence in lost property tax revenues. In any given year, there is one chance in 100 that a major mudslide will occur. A civil engineer has proposed constructing a culvert on a mountain where mudslides are likely. This culvert will reduce the likelihood of a mudslide to near zero. The investment cost would be $50,000, and annual maintenance expenses would be $2,000 in the first year, increasing by 5% per year thereafter. If the life of the culvert is expected to be 20 years and the cost of capital to Sabino County is 7% per year, should the culvert be built?
A grocery distribution center is considering whether to invest in RFID or bar code technology to track its inventory within the warehouse and truck loading operations. The useful life of the RFID and bar code devices is projected to be 5 years with minimal or zero salvage value. The bar code investment cost is $105,000 and can be expected to save at least $33,000 in product theft and lost items annually. The RFID system is estimated to cost $230,000 and will save $30,000 the first year, with an increase of $15,000 annually after the first year. For a 6% MARR, should the manager invest in the RFID system or the bar code system? Analyze incrementally using rate of return.
22. Glenn Medical Center has seen a growth in patient volume since its primary competitor decided to relocate to a different area of the city. To accommodate this growth, a consul- tant has advised Glenn Medical to invest in a positron-emission tomography (PET) scanner. The cost to implement the unit would be $4,000,000. The useful life of this equip- ment is typically about six years, and it will be depreciated over a six-year life to a $400,000 salvage value. Additional patient volume will yield $3,000,000 in new revenues the first year. These first-year total revenues will increase by $600,000 each year thereafter, but the unit is expensive to operate. Additional staff and variable costs, excluding depreciation expense, will come to $2,200,000 the first year, but these expenses are expected to rise by $400,000 each year thereafter. Over the life of the machine, net working capital will increase by $18,000 per year for six years. a. Assuming that Glenn Medical Center is a…
Vernon-Nelson Chemicals is planning to release a new brand of insecticide, Bee-Safe, that will kill many insect pests but not harm useful pollinators. Buying new equipment to manufacture the product will cost $30 million, and there will be an additional $2 million cost to reconfigure existing plant. The equipment is expected to have a lifetime of nine years and will be depreciated by the straight-line method over its lifetime. The firm expects that they should be able to sell 1,500,000 gallons per year at a price of $54 per gallon. It will take $40 per gallon to manufacture and support the product. If Vernon-Nelson's marginal tax rate is 40%, what are the incremental earnings in year 3 of this project? O $17.7 million O $10.6 million O $7.1 million O $21.0 million
The heat loss through the exterior walls of a certain poultry processing plant is estimated to cost the owner $3,000 next year. A salesperson from Superfiber Insulation, Inc., has told you, the plant engineer, that he can reduce the heat loss by 80% with the installation of $18,000 worth of Superfiber now. If the cost of heat loss rises by $200 per year (uniform gradient) after the next year and the owner plans to keep the present building for 15 more years, what would you recommend if the interest rate is 10% per year?
"The heat loss through the exterior walls of a certain poultry processing plant is estimated to cost the owner $4000 next year. A salesperson from Superfiber Insulation, Inc., has told you, the plant engineer, that he can reduce the heat loss by 70% with the installation of $20000 worth of Superfiber now. If the cost of heat loss rises by $30 per year (uniform gradient) after the next year and the owner plans to keep the present building for 14 more years, what is the present worth of the savings? Would you recommend installing the insulation now given that the interest rate of 7.68% year?" A 255986.64 B 316901.03 C 24457.35 D 222355.62 E 207412.21
Metropolitan Water Utility is planning to upgrade its SCADA system for controlling well pumps, booster pumps, and disinfection equipment so that everything can be controlled from one site. The first phase will reduce labor and travel costs by an estimated $31,000 per year. The second phase will reduce costs by an estimated $20,000 per year. If phase I will occur in years 1 through 3 and phase II in years 4 through 8, what is (a) the present worth of the savings, and (b) the equivalent annual worth for years 1 through 8 of the savings? Use an interest rate of 8% per year. Solve using tabulated factors and a spreadsheet.
Pollution control equipment must be purchased to remove the suspended organic material from liquid being discharged from a vegetable packing plant. Two alternative pieces of equipment are available that would accomplish the task. A Filterco unit costs $7000 and has a 5-year useful life. A Duro unit, on the other hand, costs $10,000 but will have a 10-year useful life. With inflation, equipment costs are rising at 5% per year, compounded annually, so when the Filterco unit needed to be replaced, the cost would be much more than $7000. Based on a 10year analysis period, and a 20% minimum attractive rate of return, which pollution control equipment should be purchased?
In February 2021, Culverson Company began developing a new software package to be sold to customers. The software allows people to enter health information and daily eating and exercise habits to track their health status. The project was completed in November 2021 at a cost of $800,000. Of this amount, $300,000 was spent before technological feasibility was established. Culverson expects a useful life of two years for the new product and total revenues of $1,500,000. Determine the amount that Culverson should capitalize as software development costs in 2021.
A chemical company is planning to release a new brand of insecticide that will kill many insect pests but not harm useful pollinators. Buying new equipment to manufacture the product will cost $15 million. The equipment is expected to have a lifetime of nine years and will be depreciated by the straight-line method over its lifetime. The firm expects that they should be able to sell 1,400,000 gallons per year at a price of $65 per gallon. It will take $36 per gallon to manufacture and support the product. If the company's marginal tax rate is 40%, what are the incremental earnings after tax in year 3 of this project? $23.36 million $9.58 million $12.72 million $15.30 million $14.30 million $24.36 million

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