i. | Per component | 18500 components |
Variable costs: | ||
Cost of material | 1.5 | 27750 |
Cost of Labour: | ||
Tool setter(Per component--$ 18/60 min.*3 min.) | 0.9 | 16650 |
Machine operator(Per component--$ 6/60 min. *3 min.) | 0.3 | 5550 |
1.Total variable costs | 2.7 | 49950 |
Fixed costs: | ||
Tooling costs(2000/1000*925) | 0.1 | 1850 |
General Overheads($ 15/hr.*925 hrs.) | 0.75 | 13875 |
Depreciation-automatic lathe(180000/10yrs./2000 hrs.*925 hrs.) | 0.45 | 8325 |
2.Total fixed costs | 1.3 | 24050 |
Total costs for 18500 components(1+2) | 4 | 74000 |
Offer price | 3.5 | 64750 |
Loss | 0.5 | 9250 |
NOTE: Share of full costs are considered as it is a Job order. Tool costs are indirect costs & hence treated as fixed costs. | ||
ii.Breakeven quantity for the job: | ||
Fixed costs/Contribution per component | ||
ie.Fixed costs/(Offer price-Variable cost)per component | ||
24050/(3.5-2.7)= | ||
30063 components | ||
iii. | |
Offer price/component | 3.2 |
Less:Variable cost/component | 2.7 |
Contribution /component | 0.5 |
Total fixed costs (as in 1. above) | 24050 |
Breakeven point=24050/(3.2-2.7)= | |
48100 components |
b. | |
NPV (Project A): | |
-150000+(30000*5.747)= ( P/A 8%,8 yrs.) | |
22410 | |
NPV (Project B): | |
(-35000*4.993)+(340000*0.540)= (P/A due, 8%,6 yrs.)&P/F 8%,Yr.8) | |
8845 | |
Project A represents better financial investment. | |
(a) A company can manufacture a certain component from bar stock using an automatic lathe. The...
(a) A company can manufacture a certain component from bar stock using an automatic lathe. The breakdown of costs is as follows: Cost of automatic lathe Tooling cost for component Setting up time Tool setter's rate Machine operator's rate Time to produce one component Cost of material per component Genera overheads (excluding $15.00 per hour $180,000.00 $1,800.00 10 hours $12.00 per hour $6.00 per hour 6 minutes $1.20 depreciation) Assume straight-line depreciation of the lathe over a period of 10...
A company is evaluating the feasibility of investing in machinery to manufacture an automotive component. It would need to make an investment of $530,000 today, after which, it would have to spend $6,500 every year starting one year from now, for eight years. At the end of the period, the machine would have a salvage value of $8,000. The company confirmed that it can produce and sell 8,700 components every year for eight years and the net return would be...
A company is evaluating the feasibility of investing in machinery to manufacture an automotive component. It would need to make an investment of $570,000 today, after which, it would have to spend $9,000 every year starting one year from now, for eight years. At the end of the period, the machine would have a salvage value of $13,000. The company confirmed that it can produce and sell 7,750 components every year for eight years and the net return would be...
Question 4 of 4 A company is evaluating the feasibility of investing in machinery to manufacture an automotive component. It would need to make an investment of $580,000 today, after which, it would have to spend $8,000 every year starting one year from now, for twelve years. At the end of the period, the machine would have a salvage value of $9,000. The company confirmed that it can produce and sell 7,200 components every year for twelve years and the...
19. Monty Company is considering buying a machine for $340000 with an estimated life of 10 years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6000 each year. The cash payback period on this investment is 28.33 years. 5.67 years. 8.50 years. 10.00 years. 20. Use the following table, Present Value of an Annuity of 1 Period 8% 9% 10% 1 0.926 0.917 0.909 2 1.783 1.759...
The Goodparts Company produces a component that is subsequently used in the aerospace industry. The component consists of three parts (A, B, and C) that are purchased from outside and cost 40, 35, and 15 cents per piece, respectively. Parts A and B are assembled first on assembly line 1, which produces 155 components per hour. Part C undergoes a drilling operation before being finally assembled with the output from assembly line 1. There are in total six drilling machines,...
A new mechanical component manufacturing company is preparing its business plan to generate money. The company is to start in 2019 gaining the gross revenue from selling mechanical products. In 2018, a research shows that the market size is equal to $500 million and grows at the rate of 10% yearly. In addition, the company states that the production demand is 200 units per hour with 50 working hours per week and 50 weeks follows: Question 7 (20 marks: per...
3. The Bar The Banana Company is considering a project of buying a machine at $4,300. The machine, with an economic life of three-year, can generate a year end cash flow of $1,200 in year one and two respectively, as well as $3,000 in year three. Assume that the required rate of return is 12% per year. Determine the Discounted Payback (in fractional year) and Profitability Index of the project. Should the project be taken assuming the preset cut-off discounted...
Step by step solution needed for all parts of the question and each part with answers thanks ☺ A mining company considers opening a new excavation site. The project requires an investment of £25 million at the outset, followed by £17 million in 15 months' time. It is expected that the new site will provide income over a 30 year period starting from the end of the second year. Net income from the project will be received continuously at a...
Quillen Company is performing a post-audit of a project completed one year ago. The initial estimates were that the project would cost $244,230, would have a useful life of 9 years, zero salvage value, and would result in net annual cash flows of $46,700 per year. Now that the investment has been in operation for 1 year, revised figures indicate that it actually cost $228,895, will have a total useful life of 11 years, and will produce net annual cash...