1 answer

Sven’s Component Sven Nys is a divisional manager of Vandelay Industries. Sven is considering introducing a...

Question:

Sven’s Component

Sven Nys is a divisional manager of Vandelay Industries. Sven is considering introducing a new component to the existing product line. Introducing the new component would require the purchase of new equipment. The equipment would cost $170,000, last for 2 years, and have zero salvage value at the end of the two years. Sven estimates that the variable overhead associated with the new component will be $95,000 a year and is allocated based on direct labor dollars. The new product will also require hiring a new employee at an annual wage of $30,000/year. This employee manufactures the new component. The new component consumes $20/unit of direct materials. The production volume, sales, and marketing costs for this new product line in each of the two years that the new component would be produced are as follows:

Year

2012

2013

Production (units)

1,800

1,700

Sales (units)

1,200

2,300

Selling Price/u

$150

$150

Marketing Cost

$10,000

$10,000

Vandelay Industries uses full absorption for both book and tax purposes. It is company policy that straight-line depreciation is used for all production machinery, and that fixed overhead is allocated on the basis of units produced. Vandelay Industries uses LIFO (last in, first out) inventory flow assumption. Vandelay Industries uses a 12% discount rate for all net present value calculations and faces a tax rate of 30% of net income. Van delay industries has positive income elsewhere in the business, so the taxes associated with any losses result in cash saved.

The company must pay for the machine in cash upon delivery. For purposes of the analysis, assume that that all other expenses associated with producing the new component will be paid in cash at the end of the year in which they occur. Also, assume that all sales of the new component will be received in cash at the end of the year in which they occur. Assume that all units produced in the year are complete and ending balance of WIP is 0.

Sven’s compensation is a base salary (regardless of wether the firm takes the project) plus a bonus of 10% of after-tax income, which is paid in cash at the end of the year. When considering the bonus scheme, the firm includes 30% of any loss as a reduction in the loss (e.g. a net income of -$100 results in an after-tax net income of -$70 and a "bonus" for SVEN of $-7). Please ignore the bonus when calculating the net income below and the net present value of the component from the firm's perspective below.

Q1. What is the cost of goods manufactured per unit in 2012?


Answers

Solution: $136.7 per unit

Computation of the cost of goods manufactured per unit in 2012:

= [Direct material + Variable OH + Depreciation + Additional Wages]

= [20 + {$95,000 + ($170,000/2) + $30,000}/1800]

= [20 + (21000 / 1800)]

= 20 + 116.67

= $136.67

.

Similar Solved Questions

1 answer
Homework: 9.2 Score: 0 of 1 pt 9.2.27-T Hw B. Since the distribution of blood alcohol...
Homework: 9.2 Score: 0 of 1 pt 9.2.27-T Hw B. Since the distribution of blood alcohol D. Since the distribution of blood aloohal concentrations is normally distributed, the sample must be lange to ensure that the sample size is greater tan b) Recendy there were approximately A. B C. OD The sample si...
1 answer
This question uses a discrete probability distribution known as the Poisson distribution. A discrete random variable...
This question uses a discrete probability distribution known as the Poisson distribution. A discrete random variable X follows a Poisson distribution with parameter λ if Pr(X = k) = Ake-A ke(0, 1,2, ) k! You are a warrior in Peter Jackson's The Hobbit: Battle of the Five Armies. Because P...
1 answer
That is sualy identidied try what type ot mmand in W to format a disk, what...
that is sualy identidied try what type ot mmand in W to format a disk, what switch can specify or more files totive 6 Which type of file suffix is used by both Windows 10 and the CentOS 7 GNOME desktop to identify file associations? a modifiers b extensions .sources d attributes Name: Class: Dabe: C...
1 answer
Problem 4-5A Preparing trial balances, closing entries, and financial statements LO C3, P2, P3 The adjusted...
Problem 4-5A Preparing trial balances, closing entries, and financial statements LO C3, P2, P3 The adjusted trial balance of Karise Repairs on December 31 follows. Credit Debit $ 93,000 1,500 2,100 50,000 KARISE REPAIRS Adjusted Trial Balance December 31 No. Account Title 101 Cash 124 Office supplie...
1 answer
Question 5: A mathematics placement test is given to all 1st year students at a small...
Question 5: A mathematics placement test is given to all 1st year students at a small college. A student who receives a grade above 35 must take an extra mathematics course. The placement test scores and the final grades for 20 students who took the regular course were recorded. a. Find the equation...
1 answer
Have you had a business presentation disturbed by a ringing cell phone? In a poll of...
Have you had a business presentation disturbed by a ringing cell phone? In a poll of 326 business men and women, 303 answered this question “yes” and only 23 answered “no” (“You Say,” Presentations: Technology and Techniques for Effective Communication, January 20...
1 answer
When you use linear regression to fit a linear model, and create a scatterplot of actual...
When you use linear regression to fit a linear model, and create a scatterplot of actual vs. predicted values, you would ideally see: a. the points lie close to the diagonal line from bottom left to upper right b. the points form a random "cloud" C. the point lie close to a horizontal line (...
1 answer
Finishing Touches has two classes of stock authorized: 8%, $10 par preferred, and $1 par value...
Finishing Touches has two classes of stock authorized: 8%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2021, its first year of operations: January 2 Issues 100,000 shares of common stock for $34 per share. February 6 Issues 2,900 shar...
1 answer
3. (a) Draw a vector model figure illustrating the orbital angular momentum L and orbital magneti...
3. (a) Draw a vector model figure illustrating the orbital angular momentum L and orbital magnetic dipole moment μ vectors for a typical atomic state, their z- components, and their Larmor precession in a uniform magnetic field B for an electron in the p-state of hydrogen. orbital magnetic dipole...
1 answer
Using the following thermochemical equation to calculate how much heat in kilojoules is evolved or absorbed...
using the following thermochemical equation to calculate how much heat in kilojoules is evolved or absorbed when 14.4g of Liquid water are converted to hydrogen gas and oxygen gas. 2H2(g) + O2(g) -----> 2H2O (l) Delat H= -571.6 kJ Review Constants Periodic Part A Use the following thermochemical...
1 answer
5. Consider the constraint set S- t(x,y) lgi(x, ) 0,-1,...4], where J1(x,y) =-x 92(x,y)--y 94(x, ...
5. Consider the constraint set S- t(x,y) lgi(x, ) 0,-1,...4], where J1(x,y) =-x 92(x,y)--y 94(x, y) = y-3 (a) Find J(0,0). Determine whether (0,0) is a regular point. (b) Find J(1,2). Determine whether (1,2) is a regular point. c) Find J(0,3). Determine whether (0,3) is a regular point. (d) Find J(3...
1 answer
Edema deu to third-spacing may result in a) dehydration b) Lymphedema c) Weak,slow pulse. d) Increased...
edema deu to third-spacing may result in a) dehydration b) Lymphedema c) Weak,slow pulse. d) Increased urine output...
1 answer
Overhead Applied to Jobs, Departmental Overhead Rates Xania Inc. uses a normal job-order costing system. Currently,...
Overhead Applied to Jobs, Departmental Overhead Rates Xania Inc. uses a normal job-order costing system. Currently, a plantwide overhead rate based on machine hours is used. Xania’s plant manager has heard that departmental overhead rates can offer significantly better cost assignments than a ...
1 answer
When to use sodium borohydride and when to use lithium aluminum hydride for reducing an aldehyde?
When to use sodium borohydride and when to use lithium aluminum hydride for reducing an aldehyde?...
1 answer
For questions I -6, either indicate the correct aimer in the blank or select the answer...
For questions I -6, either indicate the correct aimer in the blank or select the answer which most correctly answers the question. These questions do not require calculations and you do t hove to show your work. Please clearly indicate your answers !! In the equation the symbol stands for Electric F...
1 answer
What are some other strategies that parents and teachers can use to promote children?
What are some other strategies that parents and teachers can use to promote children?...
1 answer
Identify an example of a management scenario from your own experiences or current events involving adverse...
Identify an example of a management scenario from your own experiences or current events involving adverse selection or moral hazard. Describe some methods to correct the potential problems of the asymmetric information. Your journal entry must be at least 200 words in length. No references or citat...
1 answer
If someone agrees to sell a property for a said price (9 million) and takes a...
If someone agrees to sell a property for a said price (9 million) and takes a $1.00 Bill and shakes hands, can he back out on the next day?...
1 answer
Fundamental Accounting Principles, 24 Exit Assignment Progress 66% 3 4 An income statement reports a company's...
Fundamental Accounting Principles, 24 Exit Assignment Progress 66% 3 4 An income statement reports a company's Check all that apply) Service Revenue Rent Expand Ponteve Accounts Pay Wages Export WEREDERO SHKO...
1 answer
The following is Boston Teapots for the month of May 207 a record of Sky sog...
The following is Boston Teapots for the month of May 207 a record of Sky sog Company's tronsactions for May Raance 12 Purchase 28 Purchase 339 units 41 May 10 452 units 17 units @ta 45 units @ t lo10 units 341 20 Pssumira that perpetual inentoris ae rot maintained & that a pysikal cout at th...