Dexter Co. is considering a capital investment of $275,000 i…
Dexter Co. is considering a capital investment of $275,000 in new equipment. The equipment is expected to have a 5-year useful life with no salvage value. During the life of the investment, net annual cash flows are expected to be $80,000. Dexter’s minimum required rate of return is 10%. a) Using the present value tables below, what is the net present value of the investment? b) Should the investment be accepted or rejected?
Read DetailsLuxury Goods sells boxes of fine stemware for $150 each, wit…
Luxury Goods sells boxes of fine stemware for $150 each, with a variable cost percentage of 35%. The company’s fixed costs are $54,600 per year. At what level of sales (in dollars) will the company earn $100,000 in target net income?
Read DetailsMicrosoft Company has a machine that affixes labels to bottl…
Microsoft Company has a machine that affixes labels to bottles. The machine has a book value of $80,000 and a remaining useful life of 3 years. If the company continues to use the current machine, it would require $10,000 in additional repair costs. A new, more efficient machine is available at a cost of $300,000 that will have a 3-year useful life with no salvage value. Additionally, the new machine will lower annual variable production costs from $520,000 to $410,000. If the current machine is sold, the company would receive a trade-in value of $6,000. What is the increase or (decrease) in net income that would result from purchasing the new machine?
Read DetailsMilton Manufacturing currently makes 10,000 units of a subco…
Milton Manufacturing currently makes 10,000 units of a subcomponent part and incurs the following costs: Variable Costs $32,250 Fixed Costs $16,200 The company is considering outsourcing production to an outside supplier that has offered to sell 10,000 parts to Milton for $2.85 a unit. None of Milton Manufacturing’s fixed overhead costs would be avoided if they outsource production. If Milton outsources production of the subcomponent, it could use the released production capacity to produce another product that would generate additional income of $3,600. What is the increase or (decrease) in Net Income that would result from Milton’s decision to buy rather than make the subcomponent parts?
Read DetailsStonewell, Inc. uses flexible budgets. At normal capacity of…
Stonewell, Inc. uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. Stonewell had actual overhead costs of $250,000 for 18,000 units produced. Using a flexible budget, what is the difference between actual and budgeted costs?
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