Mount Manufacturing Company produces industrial and public-safety shirts. As is done in most apparel manufacturing, the cloth must be cut into shirt parts in accordance with patterns marked on sheets of paper, which indicate the way that the particular cloth is to be cut. At present, these patterns are marked manually, and the annual labor cost of the process is running around $103,718. Mount has the option of purchasing one of two automated marking systems. The two systems are the Lectra System 305 and the Tex Corporation Marking System. The comparative characteristics of the two systems are as follows: The firm's marginal tax rate is 40%, and the interest rate used for project evalu- ation is 12% after taxes. (a) Based on the most likely estimates, which alternative is better? (b) Suppose that the company estimates the material savings during the first year for each system on the basis of the following probability distributions: Lectra System Material Savings Probability Most Likely Estimates $150,000 0.25 Lectra System Tex Syatem $230,000 0.40 Annual labor cost $51,609 $51,609 $270,000 0.35 Annual material savings $230,000 $274,000 Теx System Material Suvings Investment cost $136,150 $195,500 Estimated life 6 уears б уеars Probubliity $200,000 0.30 Salvage value Depreciation method (MACRS) $20,000 $15,000 5 year 5 year $274,000 0.50 $312,000 0.20 Further assume that the annual material savings for both Lectra and Tex are statistically independent. Compute the mean and variance for the equivalent annual value of operating each system.

Oriole Stairs Co. designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood. Budgeted manufacturing overhead costs for the year 2025 are as follows. Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Overhead Cost Pools Inspecting Inventory control (raw materials and finished goods) Utilities Total budgeted overhead costs Purchasing Handling materials Production (cutting, milling, finishing) Setting up machines Inspecting Inventory control (raw materials and finished goods) Utilities Activity Cost Pools Direct labor For the last 4 years, Oriole Stairs Co. has been charging overhead to products on the basis of machine hours. For the year 2025, 100,000 machine hours are budgeted. Jeremy Nolan, owner-manager of Oriole Stairs Co., recently directed his accountant, Bill…

Muffin Factory (MF) bakes and sells muffins. MF buys materials from suppliers and bakes, frosts, and packages them for resale. Currently the firm offers 2 different types of muffins to gourmet bake shops in boxes, each containing a dozen muffins. The major cost is direct materials; however, a substantial amount of factory overhead is incurred in the baking, frosting, and packing process.  MF prices its muffins at full product cost, including allocated overhead, plus a markup of 40%.  Data for the current budget include factory overhead of $919,400, which has been allocated by its current costing system on the basis of each product’s direct labor cost. The budgeted direct labor cost for the current year totals $300,000. The budgeted direct costs for a one-dozen box of two of the company’s most popular muffins are as follows: Costs per one dozen             Blueberry Cinnamon   Activity Cost Driver Budgeted Activity Budgeted Cost Direct materials  $…

The Pittsburgh division of Vermont Machinery, Inc., manufactures drill bits.One of the production processes for a drill bit requires tipping, whereby carbide tips are inserted into the bit to make it stronger and more durable. This tipping process usually requires four or five operators, depending on the weekly workload. The same operators are also assigned to the stamping operation, where the size of the drill bit and the company's logo is imprinted on the bit. Vermont is considering acquiring three automatic tipping machines to replace the manual tipping and stamping operations. If the tipping process is automated, the division's engineers will have to redesign the shapes of the carbide tips to be used in the machine. The new design requires less carbide, resulting in savings on materials. The following financial data have been compiled: Project life: six years. Expected annual savings: reduced labor, $56,000; reduced material, $75,000; other benefits (reduced carpal tunnel syndrome…