We are evaluating a project that costs $644,000, has an eight-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Sales are projected at 70,000 units per year. Price per unit is $37, variable cost per unit is $21, and fixed costs are $725,000 per year. The tax rate is 35 percent, and we require a 15 percent return on this project.
Required:
a. Calculate the accounting break-even point.
b. Calculate the base-case cash flow and NPV. What is the sensitivity of NPV to changes in the sales figure? Explain what your answer tells you about a 500-unit decrease in projected sales.
c. What is the sensitivity of OCF to changes in the variable cost figure? Explain what your answer tells you about a $1 decrease in estimated variable costs.
Answers
Solution :
a).
Particulars Details
Selling price per unit 37
Less : variable cost per unit -21
Margin per unit 16
No. of units sold per unit 70,000
Gross margin 11,20,000
Less : fixed cost - 7,25,000
Profit before depreciation and tax 3,95,000
Less : depreciation -80,500
Profit before tax 3,14,500
Less : Tax -1,10,075
Net profit per year 2,04,425
Project Cost 6,44,000
Accounting breakeven point in years 3.15
b).
Calculating the base Cash - Cash flow and NPV
Particulars Amount
Net profit per year 2,04,425
Add : depreciation 80,500
Base Cash cashflow 2,84,925
Required rate of return 15%
Present value of base cash cash flow 12,78,550
received in 8 years.
Project cost -6,44,000
NPV 6,34,550
The present value of base cash cash flow received in 8 years is calculated as Present value of annuity received at the end of each year $ 2,84,925 at the rate of interest 15% for a period of 8 years.
The sensitivity of the NPV to 500 units decrease in projected sales :
Particulars Details
Selling price per unit 37
Less : variable cost per unit -21
Margin per unit 16
Number of units sold per year 69,500
Gross margin 11,12,000
Less : fixed cost -7,25,000
Profit before depreciation and tax 3,87,000
Less : depreciation -80,500
Profit before tax 3,06,500
Less : tax -1,07,275
Net profit per year 1,99,225
Add : depreciation 80,500
Base Cash cashflow 2,79,725
Required rate of return 15%
Present value of base cash cash flow 12,55,216
received in 8 years.
Project cost -6,44,000
NPV 6,11,216
Original NPV 6,34,550
Sensitive NPV -23,334
c).
Particulars Details
Selling price per unit 37
Less : variable cost per unit -20
Margin per unit 17
No. of units sold per year 70,000
Gross Margin 11,90,000
Less : fixed cost -7,25,000
Profit before depreciation and tax 4,65,000
Less : Depreciation -80,500
Profit before tax 3,84,500
Less : tax -1,34,575
Net profit per year 2,49925
Add : depreciation 80,500
Operating cash flow 3,30,425
Original operating cashflow 2,84,925
Sensitivity of OCF 45,500
Related Questions
QUESTION 11
Whether targeting consumers or resellers, marketers need to focus on:
O Buying center synergy.
O Corporate profit sharing
O Reducing derived demand
O Creating value for their customers
Answers
Marketers need to focus on creating value for their customers. The Option D.
Why is creating value for customers crucial for marketers?Creating value for customers is crucial for marketers as it directly impacts customer satisfaction and loyalty. When marketers prioritize creating value, they focus on understanding customer needs and preferences, developing products or services that meet those needs and delivering exceptional customer experiences.
By doing so, they differentiate themselves from competitors, build strong customer relationships and drive business growth. When customers perceive value in what a company offers, they are more likely to make repeat purchases.
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Differenciate the different Between economic and Commercial activities
Answers
Answer:
Explanation:
Commercial activities include those features of an economy that are bound to the interchange of commodities, services, and labor exercises, whereas, economic activity draws and encourages a variety of industries.
Watson Company applies overhead on the basis of machine hours. Given the following data, compute the amount of overhead applied for the period. Estimated annual overhead cost $1,500,000 Actual annual overhead cost $1,485,000 Estimated machine hours 300,000 Actual machine hours 295,000
A: $1,475,000
B: $1,500,000
C: $1,525,425
D: $1,485,000
Answers
Answer:
A: $1,475,000
Explanation:
The computation of the overhead applied is shown below:
But before that first determine the predetermined overhead rate which is
= Estimated annual overhead cost ÷ Estimated machine hours
= $1,500,000 ÷ 300,000
= $5
Now the applied overhead is
= Predetermined overhead rate × Actual machine hours
= $5 × 295,000
= $1,475,000
Place each item in the correct category
perfect competition versus not perfect competition
Answers
What are some benefits that the Shop Your Way Mastercard could provide to shoppers that ARE tied to rewards points, discounts, or saving money?
Answers
They are the competitive rewards of the benefits that the Shop way Mastercard could provide to shoppers that are tied to reward points, discounts, or saving money.
What is discounts?
The term discount refers to the provided the customer are the shopping in the bulk of the amount. The discount was to attract the customer to more shopping. The discount was the main reason are the shopkeeper are the earn more amount of the money.
According to the benefits of the shoppers are the used the master cards such as discounts, saving money and the reward points are they attract to the customer are the shopping more and more and the benefits are the competitive rewards.
As a result, the competitive rewards of the benefits that the Shop way Mastercard could provide to shoppers that are tied to reward points, discounts, or saving money.
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If a company's scope is too big what is likely to happen?
Answers
Answer:
The company will lose direction and focus.
Explanation: ;)
What if a couple files joint but only one spouse can come into the office to sign return
Answers
Main answer: The spouse who cannot come into the office can sign the return electronically using a program such as IRS e-file. If this is not possible, the spouse can sign the return in front of a notary public and send it to the other spouse to file with their signature.
Explanation: When a couple files a joint tax return, both spouses must sign the return in order for it to be considered valid. If one spouse is unable to physically come into the office to sign the return, they have a few options. One option is to use a program such as IRS e-file, which allows taxpayers to sign their returns electronically using a personal identification number (PIN). This option is only available if both spouses have access to a computer and internet connection. If this is not possible, the spouse can sign the return in front of a notary public, which is a person who is authorized to witness and certify documents. The spouse can then send the signed return to the other spouse, who can then file it with their own signature. This option is typically used when the spouse is unable to physically come into the office due to distance or other constraints.
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2.suppose 40% of the people entering X electronics store this month make a purchase. If 10 people enter the store, find the expected number making a purchase. Suppose that for the next month X electronics store forecasts 1000 customers will enter the store. (i)What is the expected number of customers who will make purchase? (ii) Find also the Standard Deviation.
Answers
i) The expected number of customers who will make a purchase in the current month is 4.
ii) The standard deviation for the number of customers making a purchase in the current month is approximately 1.55.
To find the expected number of customers making a purchase, we can multiply the total number of customers entering the store by the probability of making a purchase.
(i) For the current month:
Number of people entering the store = 10
Probability of making a purchase = 40% = 0.4
Expected number of customers making a purchase = Number of people entering the store * Probability of making a purchase
Expected number of customers making a purchase = 10 * 0.4
Expected number of customers making a purchase = 4
Therefore, the expected number of customers who will make a purchase in the current month is 4.
(ii) To find the standard deviation, we need to consider the binomial distribution since the number of customers making a purchase follows a binomial distribution with parameters n (number of trials) and p (probability of success).
For the current month:
n = Number of people entering the store = 10
p = Probability of making a purchase = 0.4
q = Probability of not making a purchase = 1 - p = 1 - 0.4 = 0.6
Standard deviation (σ) of a binomial distribution is given by the formula:
σ = √(n * p * q)
Substituting the values:
σ = √(10 * 0.4 * 0.6)
σ = √(2.4)
σ ≈ 1.55
Therefore, the standard deviation for the number of customers making a purchase in the current month is approximately 1.55.
For the next month, if the store forecasts 1000 customers to enter the store, we can use the same calculations with updated values of n and p to find the expected number of customers making a purchase and the standard deviation.
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A manufacturing company has the following budgeted overhead costs: Indirect materials: $0.50 per unit; Utilities: $0.25 per unit; Supervisory salaries: $60,000; Building rent: $80,000. If the company expects to produce 200,000 units using 100,000 hours of direct labor, the standard overhead rate will be $
Answers
Answer:
Predetermined manufacturing overhead rate= $1.45 per unit
Explanation:
First, we will calculate the variable overhead per unit:
Unitary variable overhead= Indirect materials + Utilities
Unitary variable overhead= 0.5 + 0.25
Unitary variable overhead= $0.75 per unit
Now, the total fixed overhead, and fixed overhead rate:
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Total fixed overhead= Supervisory salaries + Building rent
Total fixed overhead= 60,000 + 80,000
Total fixed overhead= $140,000
Predetermined manufacturing overhead rate= 140,000 / 200,000
Predetermined manufacturing overhead rate= $0.7 per unit
Finally, the total predetermined overhead rate:
Predetermined manufacturing overhead rate= 0.75 + 0.7
Predetermined manufacturing overhead rate= $1.45 per unit
Question 5 of 10
What are the disadvantages of a contract
for deed? Select two.
Answers
A misconception is a misunderstanding.
O True
False
Answers
The statement ''A misconception is a misunderstanding.'' is True. A misconception refers to a misunderstanding or a mistaken belief about something.
It is a cognitive error where an individual holds an incorrect understanding of a particular concept, idea, or situation. Misconceptions can arise due to various factors such as incomplete information, misinterpretation of information, cultural influences, biases, or a lack of critical thinking. Misconceptions can be found in various domains, including science, history, language, and everyday life. They can persist even in the presence of contradictory evidence or when confronted with accurate information. Correcting misconceptions is important as they can lead to flawed decision-making, misinformation spreading, and hinder personal and intellectual growth.
Addressing misconceptions requires effective communication, education, and the promotion of critical thinking skills. By challenging and correcting misconceptions, individuals can develop a more accurate understanding of the world around them, make informed judgments, and engage in meaningful discussions based on reliable information.
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If the price increases and nothing else changes, would consumers end up spending more money on the good?
a) Yes, always
b) Yes, if demand is elastic
c) Yes, if demand is inelastic
d) Yes, if demand is unit-elastic
Answers
If the price increases and nothing else changes, consumers end up spending more money on the good if the demand for the good is inelastic (third option).
What is price elasticity of demand?The price elasticity of demand measures how the quantity demanded of a good changes when the price of the good changes.
When demand is inelastic, it means that when the price of a good changes, the quantity demanded changes little. So, when price increases, consumers would spend more on the good. Goods that have an inelastic demand are usually necessities. he coefficient of elasticity is less than one
When demand is elastic, it means that when price changes, the quantity demanded changes more than the price of the good. So, when price increases, consumers would spend less than on the good. The coefficient of elasticity is greater than 1.
When demand is unit-elastic, it means that the change in price leads to an equal change in the quantity demanded. This means that a 1% change in the price leads to a 1% change in the quantity demanded. he coefficient of elasticity is equal to one.
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Drag each label to the correct location on the image.
Identify the parts of the database table.
Answers
All of the data in a database is stored in tables, which are database objects. Data is logically arranged in tables using a row-and-column layout akin to a spreadsheet. Each column denotes a record field, and each row denotes a distinct record.
A table is a group of related data stored in a database in a table format. There are rows and columns in it. A table is a collection of data components that use a model of vertical columns and horizontal rows in relational databases and flat file databases. The unit where a row and column cross is called a cell.
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Eastern University had the following transactions at the beginning of its academic year: Student tuition and fees were billed in the amount of $7,150,000. Of that amount $4,620,000 was collected in cash. Pell Grants in the amount of $2,012,000 were received by the university. The Pell Grants were applied to student accounts. Student scholarships, for which no services were required, amounted to $570,000. These were applied to student tuition bills at the beginning of each semester. Required: Prepare journal entries to record the above transactions assuming: a. Eastern University is a public university. b. Eastern University is a private university.
Answers
Answer:
100
Explanation:
hope this helps
ÇIBIL sCore is not the only credit Score in India.
Answers
In India, there are actually multiple credit scoring systems that are used to evaluate an individual's creditworthiness.
While the CIBIL score is certainly one of the most well-known and widely used credit scores in India, it is not the only credit score that lenders and financial institutions rely on. Other credit bureaus such as Experian, Equifax, and CRIF High Mark also offer credit scores that are used by lenders to assess the creditworthiness of borrowers.
Each credit bureau may use a slightly different methodology to calculate credit scores, which is why it's important for individuals to check their credit scores from all relevant bureaus to get a complete picture of their creditworthiness. Additionally, lenders may have their own internal credit scoring systems that take into account other factors beyond just credit history, such as income and employment status.
Therefore, it's important for individuals to be aware of all the credit scoring systems that are used in India and to regularly monitor their credit scores from multiple sources to ensure they have a comprehensive understanding of their financial standing.
By maintaining a good credit score across multiple credit bureaus, individuals can increase their chances of being approved for loans, credit cards, and other financial products with favorable terms and interest rates.
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Plot the production possibilities table to make a production possibilities curve. Place defense on the vertical axis and social welfare on the horizontal. The resulting curve is called a frontier.
Answers
The production possibility curve is an important economic graph because its demonstrates the maximum possible output of goods given a set amount of resources.
What is a production possibility curve?The production possibilities curve refers to a graph or economic model that shows the maximum combinations of goods and services such as any two categories of goods that can be produced from a fixed amount of resources.
In essence, the frontiers of the curve illustrates the possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture. In conclusion, it is an important economic graph because its demonstrates the maximum possible output of goods given a set amount of resources.
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Which of the following is considered the more industrial form of fishing?
A: Grouping
B: Netting
C: Gathering
Answers
Answer:
B
Explanation:
I hear netting a lot when people talk about fishing. I don't hear the other two when talking about fishing.
Managers use all of the following types of resources to achieve organizational goals except
Answers
Managers use all of the following types of resources to achieve organizational goals except: A. International.
Who is a manager?A manager can be defined as the person that help to oversee a company or an organization day to day business operation and activities by ensuring that their is smooth business operation.
Managers tend to often make use of the below resources to achieve their organizational goals and objectives:
PhysicalHumanFinancialInformationTherefore we can conclude that the correct option is A.
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The complete question is:
Managers use all of the following types of resources to achieve organizational goals EXCEPT
A. International
B. Physical
C. Human
D. Financial
E. Information
Andrew purchased a stock for $250 and sold it for $175 one year later. If he earned a dividend income of $180, the stock's yield is:
Answers
Answer:
the answer is 605$ that Math
An online streaming service sells movie rentals for $5.99 to its American shoppers. A large American chain store sells a physical copy of the same movie for $5.99. Which of the following is a possible reason that the online streaming service could expect to rent a movie for the same price that it could be purchased for somewhere else?(1 point)
a. Government intervention on maximum prices is the most common cause of abnormal market pricing. In general, the government will set a maximum on the prices of common goods. The retailer selling the movie might like to charge more but may not be able to.
b. Lack of knowledge is an important factor in determining market prices. Retailers almost always assume that shoppers don't look around for a bargain and will generally charge whatever price they want.
c. Location is an important factor in determining market prices. For the online streaming service, the buyer doesn't even have to leave his or her home, while the physical copy would need to be picked up at the store. The online retailer can charge the same price for a lesser product because the retailer is conveniently located for the consumer.
d. Government intervention on minimum prices is the most common cause of abnormal market pricing. In general, the government will set a minimum on the prices of common goods. The online retailer renting the movie might like to charge less but may not be able to.
Answers
Answer:
C
Explanation:
You can often sell less of product for more money if convenience is added to the product value.
for example, you I to gas station & pay more for a 20oz soda than our do a 2liter. you're getting way less soda for twice the amount. you are paying for the convenience of not carrying around a 2 liter
McCarthy Industries has two sales territories-East and West. Financial information for the two territories is presented below: East West Sales $980,000 $750,000 Direct costs: Variable (343,000) (225,000) Fixed (450,000) (325,000) Allocated common costs (275,000) (175,000) Net income (loss) $(88,000) $25,000 Because the company is in a start-up stage, corporate management feels that the East sales territory is creating too much of a cash drain on the company and it should be eliminated. If the East territory is discontinued, one sales manager (whose salary is $40,000 per year) will be relocated to the West territory. By how much would McCarthy's income change if the East territory is eliminated
Answers
Answer:
Decrease in income by $227,000
Explanation:
The computation of the amount of the change in the income in the case when the east territory is eliminated is shown below;
= -Sales + Direct cost + fixed cost - salary per year
= -$980,000 + $343,000 + ($450,000 - $40,000)
= -$980,000 + $343,000 + $410,000
= -$227,000
Hence, the amount of the change in the income in the case when the east territory is eliminated is -$227,000
Decrease in income by $227,000
Describe how you will use the Internet.
Answers
The Internet can be used for a variety of things, including information research, global communication, online shopping, video watching, and much more.
The Internet, also known as "the Net," is a global system of computer networks that allows users at any one computer to obtain information from any other computer with permission and, on occasion, communicate directly with users at other computers. The sharing of information and communication is streamlined when the internet is used for education. It enables them to refer to pertinent study materials in various multimedia formats and access lectures online. Allowing teachers to incorporate a variety of tools into their curriculum also helps.
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What is the role of stakeholder mapping in the procurement
Answers
Answer:
It is used primarily to gain knowledge, understanding and ideas from key individuals within the organisation. Engaging with the right internal stakeholders can ensure procurement functions gain understanding of strategic issues, cost-saving goals, value-add, compliance and organisational input moving forward.
Culture plays a key role in business. In what ways have movies influenced managerial tasks, company activities, and other ways of doing business around the world?
Can watching foreign films be an effective way of learning how to do business abroad? Justify your answer.
Answers
Answer:
In what ways have movies influenced managerial tasks, company activities, and other ways of doing business around the world?
Movies can certainly influence the behavior of managers and other businessmen, specially if they happen to be particularly fond of such movies. However, if the influenced behavior does not lead to good corporate results, it is then likely to be discarded.
Can watching foreign films be an effective way of learning how to do business abroad?
To a certain extent yes, specially if the movies are related to some kind of business activity. However, movies can also display stereotypical behaviors, or deal with subject matter that is not relevant for the business activity, so it is always important to keep in mind that they are not enough to learn how to do business abroad, and that other type of material is needed, like books, or government reports.
At the end of its annual accounting period, the company must make three adjusting entries.
a. Accrue salaries expense.
b. Adjust the Unearned Revenue account to recognize earned services revenue.
c. Record services revenue earned for which cash will be received the following period.
For each of these adjusting entries, indicate the account to be debited and the account to be credited.
a. Debit
a. Credit
b. Debit
b. Credit
c. Debit
c. Credit
Answers
There are four different sorts of accounts that require adjusting. They are deferred revenues and expenses as well as accumulated revenues and expenses. Money earned during one accounting period but not received until another is referred to as accrued revenue.
What is accounting?Accounting is the activity of keeping records of a company's financial transactions. Journal entries are how the accountants condense the transactions. In bookkeeping, these entries are utilized.
According to the rules set forth by the auditors and other governing agencies, the accountants create the books of accounts. The accountants may adhere to IFRS (International Financial Reporting Standards) or generally accepted accounting principles (GAAP)
An analyst can gain a good picture of the company's financial status by reading the book of accounts. Therefore, the book of accounts is required to determine the firm valuation for publicly traded corporations.
The financial statements of a big company provide an overview of its operations, financial situation, and cash flows during a specific time period.
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Step 2. Search to find any summary about the company that mentions funds for starting the business. Try to find any information containing employee data in this section.
Step 3. Find the section where the product or service is detailed. Look to see what kinds of products or services will be involved with the business. Compare this with what other similar business plans are offering.
Record the information you found for steps 2 and 3. Make sure you discuss how the company got money to start the business, employee data, and what products or services the company provides in comparison with what other similar business plans are offering.
Answers
We can see here that such company gotten after searching for company that mentions funds for starting the business is Go-o-gle.
Funds for starting the business: $1 million in funding from Andy Bechtolsheim.
Employee data: over 160,000 employees worldwide.
What is a company?A company is a legal and organizational entity formed by individuals or a group of individuals with the purpose of conducting business activities. It is an association of individuals who come together to engage in commercial, industrial, or professional activities in order to generate revenue and make a profit.
Their products are digital and online services.
Comparing this company, we see Microsoft.
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Wyoming Restoration Company completed the following selected transactions during July 20Y1:
July 1. Established a petty cash fund of $1,200. 12.
The cash sales for the day, according to the cash register records, totaled $8,356. The actual cash received from cash sales was $8,389. 31.
Petty cash on hand was $217. Replenished the petty cash fund for the following disbursements, each evidenced by a petty cash receipt:
July 3. Store supplies, $510.
7. Express charges on merchandise sold, $90 (Delivery Expense).
9. Office supplies, $30.
13. Office supplies, $35.
19. Postage stamps, $50 (Office Supplies).
21. Repair to office file cabinet lock, $60 (Miscellaneous Administrative Expense).
22. Postage due on special delivery letter, $28 (Miscellaneous Administrative Expense).
24. Express charges on merchandise sold, $135 (Delivery Expense).
30. Office supplies, $25.
July 31. The cash sales for the day, according to the cash register records, totaled $10,289. The actual cash received from cash sales was $10,275.
31. Decreased the petty cash fund by $100.
Journalize the transactions.
Answers
The appropriate journal entries Wyoming Restoration Company for the month of July 20Y1 are:
July 1
Debit Petty cash $1,200
Credit Cash $1,200
July 12
Debit Cash $8,389
Credit Cash short and over $33
($8,389-$8,356)
Credit Sales $8,356
July 31
Debit Store supplies $510
Debit Delivery expense $225
($90+$135)
Debit Office supplies $140
($30+$35+$50+$25)
Debit Miscellaneous Administrative Expense $88
($60+$28)
Debit Cash short and over $20
[$983-($510+$225+$140+$88)]
Credit Cash $983
($1,200-$217)
July 31
Debit Cash $10,275
Debit Cash short and over $14
($10,289-$10,275)
Credit Sales $10,289
July 31
Debit Cash $100
Credit Petty Cash $100
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16) When supply is fixed or the product is unique, then price is A) supply determined. B) demand determined. C) government determined. D) indeterminate.
Answers
Answer: B) demand determined.
Explanation:
If the supply of a good is fixed or the product is of a unique kind, the price of the good will be determined by the amount of demand for it.
Normally supply can change based on the quantity demanded which will impact prices but if the supply is definite, this means that the supply curve is inelastic and the only curve that can affect price therefore is the demand curve.
If more people demand the good, it will increase in price and if less people demand it, it will fall in price.
The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $14. The farmer's total cost at the profit-maximizing number of bushels is
Answers
Answer: $56
Explanation:
The profit-maximising quantity for a perfectly competitive firm is the point where Marginal Cost equals Marginal Revenue.
For a perfectly competitive firm, the Horizontal line is the Price, the Marginal Revenue and the Demand curve.
The point where Marginal cost equals Marginal revenue is at 4 bushels.
The Average total cost at 4 bushels is $14 so the total cost is;
= 14 * 4
= $56
Definition of marketing?
Answers
Answer:
the active business of promoting and selling products or services, including market research and advertising