MANAGERIAL ACCOUNTING F/MGRS.
6th Edition
ISBN: 9781264100590
Author: Noreen
Publisher: RENT MCG
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Chapter IE, Problem 5E
Capital Budgeting,
Simmons Company is a merchandiser with multiple store locations. One of its store managers is considering a shift in her store’s product mix in anticipation of a strengthening economy. Her store would invest $800,000 in more expensive merchandise (an increase in its
Required:
- Assuming the company’s discount rate is 16%, calculate the
net present value of the store manager’s investment opportunity. - Calculate the annual margin, turnover, and return on investment (ROI) provided by the store manager’s investment opportunity.
- Assuming that the company’s minimum required
rate of return is 16%, calculate the residual income earned by the store manager’s investment opportunity for each of rears 1 through 3. - Do you think the store manager would choose to pursue this investment opportunity? Do you think the company would want the store manager to pursue it? Why?
- Using a discount rate of 16%, calculate the present value of your residual incomes for years 1 through 3. Is your answer greater than, less than, or equal to the net present value that you computed in (1) above? Why? Support your explanation with computations.
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PROBLEM 2. Outlast Company's projected profit for the
coming year follows:
Per Unit
Total
P200,000
(120,000)
80,000
(64,000)
P 16,000
Sales
Less: Variable costs
P20
(12)
P 8
Contribution margin
Less Fixed expenses
Income
4. Suppose Outlast would like to earn operating income equ
to 20 percent of sales revenue. How many units must be
sold for this goal to be realized?
5. For the projected level of sales, compute the margin of
safety.
1. Multiplicationtable: (No need the explanation just the answer pls)A manufacturer has invested P750,000 in a new product and wants to set a price to earn a 15 percent ROI. The cost per unit is P18 and the company expects to sell 50,000 units in the first year. The company's target-return price for this product is P ______.
a. 18.23 b.20.25 c.20.70 d.18.10 e.25.202. A ballpen manufacturer have the following costs and expected sales: Variable cost P 10.00 Fixed cost P300,000.00Expected unit sales 50,000 Break-even volume will be P______.
a. 30,000 b. 35,000 c. 20,000 d. 25,000
3. If the cost of manufacturing a product is P30 and the item sells for P50, the markup percentage is _____ %. a. 67.7 b. 67.6 c. 66.7 d. 66.8
Top management is unhappy with the investment center's return on investment (ROD) It asks the manager of the South Division to
submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of
action
1
2
3
(a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%)
Increase sales by $300,000 with no change in the contribution margin percentage.
Reduce variable costs by $160,000
Reduce average operating assets by 3%
Return on Investment
Action 1
(b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, eg.
1.57%)
Action 21
Action 31
Save for Later
%
Return on investment
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Chapter IE Solutions
MANAGERIAL ACCOUNTING F/MGRS.
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