Survey Of Accounting
5th Edition
ISBN: 9781259631122
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Question
Chapter 13, Problem 16E
To determine
The amount of avoidable cost associated with the segment
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Exercise 6-11A (Static) Establishing price for an outsourcing decision LO 6-3
Levesque Company makes and sells lawn mowers for which it currently makes the engines. It has an opportunity to purchase the
engines from a reliable manufacturer. The annual costs of making the engines are shown here.
Cost of materials (20,000 units × $26)
Labor (20,000 units × $20)
Depreciation on manufacturing equipment*
Salary of supervisor of engine production
Rental cost of equipment used to make engines
Allocated portion of corporate-level facility-sustaining costs
Total cost to make 20,000 engines
*The equipment has a book value of $90,000 but its market value is zero.
Required
a. Determine the maximum price per unit that Levesque would be willing to pay for the engines.
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Problem 3 A metal plating company on government contract is considering four different
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Annual Income,
Salvage
Method
First Cost, $
Value, $
$/Year
A
30,000
1,000
4,000
B
36,000
2,000
5,000
C
41,000
500
8,000
Ꭰ
53,000
-2,000
10,500
Problem 5:
Platypus Corporation's managers have presented the company's management with two proposals
for expanding its production capacity. Based on the following two different alternatives, which
proposal should they adopt?
Cost of the Equipment Required
Project 1
$250,000
Working Capital Investment Required
0
Annual Cash Inflows
$65,000
Maintenance cost in year 4
$15,000
Maintenance cost in year 6
0
Salvage Value of Equipment in 8 Years
$12,000
Project 2
$100,000
$150,000
$50,000
0
$15,000
0
Both projects have a life of 8 years. In 8 years Project 2's working capital will be released and be
available to invest in other projects. The company has a discount rate of 16%
Required:
1) Calculate the net present value for each project.
2) Based solely on the net present value of the project, which alternative would you
recommend the company invest in? Why?
Chapter 13 Solutions
Survey Of Accounting
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - Prob. 3QCh. 13 - Prob. 4QCh. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Prob. 7QCh. 13 - Prob. 8QCh. 13 - Prob. 9QCh. 13 - Prob. 10Q
Ch. 13 - Prob. 11QCh. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - Prob. 17QCh. 13 - Prob. 18QCh. 13 - Prob. 19QCh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Exercise 6-5AOpportunity costs Norman Dowd owns...Ch. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Exercise 6-11AEstablishing price for an...Ch. 13 - Exercise 6-12AOutsourcing decision with...Ch. 13 - Exercise 6-13AOutsourcing decision affected by...Ch. 13 - Prob. 14ECh. 13 - Exercise 6-15ASegment elimination decision Dudley...Ch. 13 - Prob. 16ECh. 13 - Exercise 6-17AAsset replacementopportunity cost...Ch. 13 - Prob. 18ECh. 13 - Exercise 6-19A Asset replacement decision Mead...Ch. 13 - Exercise 6-20A Asset replacement decision Kahn...Ch. 13 - Exercise 6-21A Annual versus cumulative data for...Ch. 13 - Problem 6-23A Context-sensitive relevance Required...Ch. 13 - Problem 6-24A Context-sensitive relevance...Ch. 13 - Problem 6-25A Effect of order quantity on special...Ch. 13 - Problem 6-26A Effects of the level of production...Ch. 13 - Problem 6-28A Eliminating a segment Western Boot...Ch. 13 - Effect of activity level and opportunity cost on...Ch. 13 - Problem 6-30A Comprehensive problem including...Ch. 13 - Prob. 29PCh. 13 - ATC 6-1 Business Application Case Analyzing...Ch. 13 - ATC 6-2 Group Assignment Relevance and cost...Ch. 13 - Prob. 3ATCCh. 13 - Prob. 4ATCCh. 13 - Prob. 5ATC
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