If the substance is decided to be disposed than processed further, what is the total incremental cost? If the substance is decided to be processed further, what is the incremental benefit (cost)?
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A company manufactures product and substance "foop" is considered as waste. New research shows that the said substance can be further process to become a healthy juice drink. The following costs are considered
- Cost of disposal is 20 per liter
- Additional
processing cost is 6 per liter - Selling price for the healthy juice drink is 14 per liter
- Joint cost allocated to the 10,000 liters of the substance is P250,000.
If the substance is decided to be disposed than processed further, what is the total incremental cost?
If the substance is decided to be processed further, what is the incremental benefit (cost)?
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- Sell at Split-Off or Process Further Decision, Alternatives, Relevant Costs Vihaan Chemicals Company processes a number of chemical compounds used in disinfecting health club fitness equipment. One compound is decomposed into two chemicals: flexalene and soreaphine. The cost of processing one batch of compound is $71,000, and the result is 5,500 gallons of flexalene and 7,700 gallons of soreaphine. Vihaan Chemicals can sell the flexalene at split-off for $12.00 per gallon and the soreaphine for $7.20 per gallon. Alternatively, the flexalene can be processed further at a cost of $8.60 per gallon (of flexalene) into lactine. It takes 4 gallons of flexalene for every gallon of lactine. A gallon of lactine sells for $65. Required: 1. Which alternative is more cost effective and by how much? NOTE: Do NOT round interim calculations and, if required, round your answer to the nearest dollar. by $fill in the blank 2 2. What if the production of flexalene into lactine required additional…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)Help Save & Che Required information [The following information applies to the questions displayed below.] Armstrong Corporation manufactures bicycle parts. The company currently has a $19,700 inventory of parts that have become obsolete due to changes in design specifications. The parts could be sold for $7,200, or modified for $10,200 and sold for $20,700. 2-a. Calculate the benefit under each alternative for disposing of the obsolete parts. 2-b. How should the obsolete parts be disposed? Complete this question by entering your answers in the tabs below. Req 2A Req 2B Calculate the benefit under each alternative for disposing of the obsolete parts. Benefit if parts are sold without modification Net benefit if parts are sold after being modified Req 2B >