The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Initial Operating Rate of Operating Cost Increase Asset First Cost Cost MARR $125,000 $125,000 A $35,000 $35,000 11.5%/year 11.5%/year 5% В 25% a. Determine the economic lives for assets A and B.
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- 3. The annual worth method An office supply company has purchased a light duty delivery truck for $15,000. It is anticipated that the purchase of the truck will increase the company’s revenue by $10,000 annually, whereas the associated operating expenses are expected to be $3,000 per year. The truck’s market value is expected to decrease by $2,500 each year it is in service. If the company plans to keep the truck for only 2 years, what is the annual worth of this investment? The MARR = 18% per yearA Company manufactures and sells one product. The product has the following cost and revenue data: Selling price Per Unit (AED) 70 Variable cost Per Unit (AED) 30 Total fixed expenses per month are as follows: Expenses types AED Advertising 400,702 Rent 100,000 Heating 100,000 The company produced and sold 10,000 units during the month and had no beginning or ending inventories. a. What is the break-even value in Dirhams?A Company manufactures and sells one product. The product has the following cost and revenue data: Selling price Per Unit (AED) Variable cost Per Unit (AED) Rent 70 Total fixed expenses per month are as follows: Expenses types AED Advertising Heating 30 457,816 100,000 100,000 The company produced and sold 10,000 units during the month and had no beginning or ending inventories. a. What is the break-even value in Dirhams?
- Please solve in 30 min i will give you a upvote PROBLEM 2 Karim Inc. calculated the annual cost of owning an asset as follows. EUAC Annual EUAC Replacement Capital Repair Repair Year Costs Costs Costs $1,400 $1,100 1 2 $450 $200 3 $900 $600 $350 4 $800 $800 $400 $700 $1,000 $600 $1,300 $500 $1,600 $450 $600 7 $750 a. When should the company replace the equipment? b. If Karim Inc currently replaces its equipment every year to avoid increasing annual repair costs, how much can the company save annually?Jumbo Company uses 1,100 units of an particular item each year. Carrying the item in inventory costs $200 per unit per year. It costs $150 for each order of the chemical. The firm uses the item at a constant rate each year. Calculate the Economic Order Quantity AND Use the data from problem above and assume that Jumbo Company operates 250 days per year. Also assume that its total usage is 1,100 units per year. There is a lead time of 2 days and Jumbo desires to keep a safety stock of 4 units. Calculate the reorder pointA university is trying to determine how much it should charge for tickets to basketball games to help offset the expenses of the new arena. The cost to build the arena including labor, materials. e tc. was $92 million. Each year the maintenance cost is expected to increase by 5% as the building gets older. 1l1e maintenance cost for the first year is $150.000. Utilities arc expected to average about $200.000 per year and labor costs $300,000. The average attendance at basketball games over the year is expected to be J00.000 people (or 100.000 tickets sold to events). Assuming the arena has no other source of income besides regular ticket sales (not including student tickets) for basketball games, what should the university charge so that it can recover at least a 6% cost of borrowing on its investment? ll1c university expects the arena to be used for 40 years and 10 have no appreciable salvage value.
- . Over the past year, a company has sold the following 10 items. The following tableshows the annual sales in units and the cost of each item.a. Calculate the annual dollar usage of each item.b. List the items according to their total annual dollar usage.c. Calculate the cumulative annual dollar usage and the cumulative percentage ofitems.d. Group the items into A, B, and C groups based on percentage of annual dollarusageRerform an EAC analysis and evaluate what decision to make regarding 2 challengers and 1 defender. Elaborate:a) Graphsb) EAC analysisc) Conclude the exercise and make a decision regarding the results Machine N1 (#1 challenger) useful life = 8 years Initial Cost $15,000 MARR 18% Year Operating costs Market value EAC 1 $ 355.00 $ 8,000.00 2 $ 500.00 $ 7,000.00 3 $ 788.00 $ 6,000.00 4 $ 1,000.00 $ 5,000.00 5 $ 1,355.00 $ 4,000.00 6 $ 1,688.00 $ 3,000.00 7 $ 2,012.00 $ 1,000.00 8 $ 2,345.00 $ 0.002-36. A gear manufacturer produces gears for a ma- chine. Two processes, casting and forging, are possible for manufacturing, and the parameters of each process are as follows Casting Forging Production rate 80 gears per hour 10 hours per day 40 gears per hour 16 hour per day Daily production time Percent of parts rejected based on visual inspection (20% 10% Assume that the daily demand for gears allows all defect-free gears to be sold. Additionally tested or rejected gears cannot be sold. Find the process that maximizes profit per day if each part is made from $5 worth of material and can be sold for $70) Both processes are fully automated, and variable overhead cost is charged at the rate of $90 per hour.
- You are considering purchasing a dump truck.The truck will cost $75,000 and have operating andmaintenance costs that start at $18,000 the first yearand increases by $2,000 per year. Assume that thesalvage value at the end of five years is $22,000 andinterest rate is 12%. What is the equivalent annualcost of owning and operating the truck?The projected profit of a hi-tech recording disks retailer is Birr 200,000 for the current year based on sale volume of 200,000 units. The company has been selling the disks for $16 each; variable costs consist of the Birr 10 purchase price and Birr 2 handling cost. The retailer’s annual costs are Birr 600,000. Required: a. Calculate the breakeven point for the current year in units. b. What will be the company’s profit for the current year if there is a 10% increase in projected unit sales volume? c. Management is planning for the coming year when it expects that the unit purchase price of the disks will increase by 30%. What volume of dollar sales must the retailer achieve in the coming year to maintain the current year’s profit if the selling price remains constant at Birr 16Available Oct 1 at 10:30am - Oct 4 at 9:30pm 3 days The consolidated oil company must install antipollution equipment in a new refinery to meet federal air legislation. Two types of equipment are being considered, which will have investment and annual operating costs as follows; Equipment A C Investment P600,000 P760,000 P1,240,000 P1,600,000 Power 68,000 68,000 120,000 126,000 Labor 40,000 45,000 65,000 50,000 Maintenance 660,000 600,000 420,000 370,000 Taxes and Insurance 12,000 15,000 25,000 28,000 Assuming an economic life of 10 years for each type, no salvage value, and that the company wants a before-tax return of 20 % on its capital, determine which alternative should be purchased using the following economic methods; a) Rate of return method. b) Annual cost method c) Present worth method d) Equivalent uniform annual cost method