A company is going to buy a new equipment for manufacturing its product. Four different equipment's are available; costs, operating and other 4. expenses are as follows: Equipment A B D First Cost Php 24,000 Php 30,000 Php 49,600 Php 52,000 Power per year Php 1300 Php 1360 Php 2400 Php 2520 Labor per year Php 10,600 Php 9320 Php 4200 Php 2700 Maintenance/year Php 2800 Php 1900 Php1300 Php 700 Taxes & Insurance 2% 2% 2% 2% Life; years 5 5 5 Money is worth 10% before taxes to the company. Which equipment should be purchased ? Choose which method is applicable.

A company is going to buy a new equipment for manufacturing its product. Four different equipment's are available; costs, operating and other 4. expenses are as follows: Equipment A B D First Cost Php 24,000 Php 30,000 Php 49,600 Php 52,000 Power per year Php 1300 Php 1360 Php 2400 Php 2520 Labor per year Php 10,600 Php 9320 Php 4200 Php 2700 Maintenance/year Php 2800 Php 1900 Php1300 Php 700 Taxes & Insurance 2% 2% 2% 2% Life; years 5 5 5 Money is worth 10% before taxes to the company. Which equipment should be purchased ? Choose which method is applicable.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 31P: Jonfran Company manufactures three different models of paper shredders including the waste...

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A company is going to buy a new machine for manufacturing its product. Four different machines are available. A B D First cost Php 24,000 Php 30,000 Php 49,600 Php 52,000 Power per year Php 1,300 Php 1,360 Php 2,400 Php 2,020 Labor per year Php 11,600 Php 9,320 Php 4,200 Php 2,000 Maintenance per year Php 2,800 Php 1,900 Php 1,300 Php 700 Taxes and insurance 3% 3% 3% 3% Life, years 5 5 5 Money is worth 17% before taxes to the company. Using annual cost method, what is the total annual cost of machine C? (Answer is in Php.)
In order to carry a new investment project, company A has to purchase a machine for OMR 400,000. Company A staff have enough capacity to carry out the production, no one new will need to be hired, they are currently paid OMR 20,000. Calculate the relevant cost? a. OMR 20,000 Ob. OMR 380,000 O c. OMR 400,000 d. OMR 420,000
A company is going to buy a new machine for manufacturing its product. Four different machines are available. A B D First cost Php 24,000 Php 30,000 Php 49,600 Php 52,000 Power per year Php 1,300 Php 1,360 Php 2,400 Php 2,020 Labor per year Php 11,600 Php 9,320 Php 4,200 Php 2,000 Maintenance per year Php 2,800 Php 1,900 Php 1,300 Php 700 Taxes and insurance 3% 3% 3% 3% Life, years 5 5 Money is worth 17% before taxes to the company. Using annual cost method, what is the total annual cost of machine C?
RLC Manufacturing is planning to purchase a cutting equipment. Information are as follows: Equipment 1 Equipment 2 First Cost P 12,000 P 18,000 Salvage Value P 600 P 2,000 Annual Operation P 3,200 P 2,500 Annual Maintenance P 1,200 P 1,000 Taxes & Insurance 3% 3% Life, years 10 15 Money is worth at least 16%. Which equipment should be selected? Use: a. Rate of Return Method Rate of Return Method Annual Cost Method NOTE: Show cashflow diagram.
Choose from the two equipment which is more economical. Machine A Machine B First cost Php 8000 Php 14,000 Salvage value Php 2000 Annual operation Php 3000 Php 2400 Annual maintenance Php 1200 Php 1000 Taxes & insurance 3% 3%
RLC Manufacturing is planning to purchase a cutting equipment. Information are as follows: Equipment 1 Equipment 2 First Cost P 12,000 P 18,000 Salvage Value P 600 P 2,000 Annual Operation P 3,200 P 2,500 Annual Maintenance P 1,200 P 1,000 Taxes & Insurance 3% 3% Life, years 10 15 Money is worth at least 16%. Which equipment should be selected? Use: Annual Cost Method
A piece of production equipment is to be replaced immediately because it no longer meets quality requirements for the end product. The two best alternatives are a used piece of equipment (E1) and a new automated model (E2). The economic estimates for Alt E1 Alt E2 Capital Investment PhP 14,000 PhP 65,000 Aппual Expenses 14,000 9,000 each are shown in the accompanying table. Useful Life (years) 5 20 Market Value (at the end of useful life) 8,000 13,000 The MARR is 15% per year. Which alternative is preferred, based on the (a) coterminated assumption with a five-year study period and an imputed market value for Alternative b? Use FW. ANSWER: FW (E1) = PhP Blank 1 FW (E2) = PhP Blank 2 The best alternative is EBlank 3
A company is going to buy a new machine for manufacturing its products. Five machines are available. Data is as follows: A B C D E First Cost P 25,200 P 31,800 P 38,500 P 46,600 P 52,500 Power per year P 1,300 P 1,450 P 2,600 P 2,300 P 2,300 Labor per year P 10,500 P 9,200 P 6,200 P 3,900 P 2,350 Maintenance per year P 2,800 P 1,800 P 1,400 P 1,300 P 850 Taxes per year 3% 3% 3% 3% 3% Life, years 5 5 5 5 5 If money is worth 15% before taxes to the company, which machine should be chosen?HINT: Use Annual Cost Method
Use Service-Output Method. A Machine costs ₱80,000 and an estimated life of 10 years with a salvage value of ₱5,000. Assuming that the total service of the machine is 1,497,600 hours and the number of working days per year is 260 days. What is the book value after 4 years if the machine production time a is 24 hours? Answer: BV4 = P 78,750.00Show Solution
Jonfran Company manufactures three different models of paper shredders including the waste container, which serves as the base. While the shredder heads are different for all three models, the waste container is the same. The number of waste containers that Jonfran will need during the following years is estimated as follows: The equipment used to manufacture the waste container must be replaced because it is broken and cannot be repaired. The new equipment would have a purchase price of 945,000 with terms of 2/10, n/30; the companys policy is to take all purchase discounts. The freight on the equipment would be 11,000, and installation costs would total 22,900. The equipment would be purchased in December 20x4 and placed into service on January 1, 20x5. It would have a five-year economic life and would be treated as three-year property under MACRS. This equipment is expected to have a salvage value of 12,000 at the end of its economic life in 20x9. The new equipment would be more efficient than the old equipment, resulting in a 25 percent reduction in both direct materials and variable overhead. The savings in direct materials would result in an additional one-time decrease in working capital requirements of 2,500, resulting from a reduction in direct material inventories. This working capital reduction would be recognized at the time of equipment acquisition. The old equipment is fully depreciated and is not included in the fixed overhead. The old equipment from the plant can be sold for a salvage amount of 1,500. Rather than replace the equipment, one of Jonfrans production managers has suggested that the waste containers be purchased. One supplier has quoted a price of 27 per container. This price is 8 less than Jonfrans current manufacturing cost, which is as follows: Jonfran uses a plantwide fixed overhead rate in its operations. If the waste containers are purchased outside, the salary and benefits of one supervisor, included in fixed overhead at 45,000, would be eliminated. There would be no other changes in the other cash and noncash items included in fixed overhead except depreciation on the new equipment. Jonfran is subject to a 40 percent tax rate. Management assumes that all cash flows occur at the end of the year and uses a 12 percent after-tax discount rate. Required: 1. Prepare a schedule of cash flows for the make alternative. Calculate the NPV of the make alternative. 2. Prepare a schedule of cash flows for the buy alternative. Calculate the NPV of the buy alternative. 3. Which should Jonfran domake or buy the containers? What qualitative factors should be considered? (CMA adapted)
3. A food processing plant consumed 600,000 kWh of electric energy annually and pays an average of Php 1.00/kWh. A study is being made to generate its own power to supply the plant's energy requirement. The power plant installed would cost Php 1,500,000. Annual operation and maintenance, Php 350,000. Other expenses, Php 85,000 per year. Life of power plant is 15 years. The salvage value ate the end of life is Php 350,000. Annual taxes and insurance, 4% of the first cost. The rate of interest is 12%. Using the sinking fund method for depreciation, determine if the power plant is justifiable. Use Rate of Return (ROR) method and Annual Worth (AW) method. If the calculations predicted that the plant is a good investment, when will the payback period be?
n: A water system is to be build to serve a newly developed subdivision. This subdivision will use 300,00,000 liters of water per year. the facilities to be installed cost P1,500,000 and it is estimated that the operations and maintenance of the system will cost P70,000 annually. Operating taxes will be P24,000 per year and income taxes will be 25% of the first P100,000.00 net revenue 35% of the net revenue over P100,000.00. The life of the water system properties is 80 years ang 5% sinking fund is to be established for deprecation. at what rate per cu. meter must be the water be sold to return an annual net profit of 6% after income taxes on the original investment?