A manufacturing company is considering two different proposals for setting up a new production line. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A manufacturing company is considering two different proposals for setting up a new production line. The details of the two proposals are shown in the table below. Which proposal is best in terms of cost? Show your calculations to justify your answer. MARR is 17.00% per year. Cost of equipment including installation cost Annual operating costs of the equipment ($/year) Overhaul at the end of year 3 Salvage value Life Span (years) Option A $153,000 $13,425 $8,200 $9,008 19 Option B $185,000 $7,100 $0 $6,800 19 You own a company that manufactures components for the aeronautics industry. You have decided to invest in new 3D printing equipment that will allow you to produce lighter components with less waste. The purchase price of the new equipment is: $1,335,000 The annual maintenance cost is: $127,760 The expected life of the new equipment is 11 years, at which point the salvage value of the equipment will be 7.25% of the purchase price. The revenue from the new equipment is expected to be $184,600 for the first year and increasing by $35,000 per year for the life of the equipment. You do not expect to incur any other additional costs if you purchase this equipment, other than the costs listed above. What is the present worth of the project? MARR is 21.00% annually. You have been tasked with purchasing vans for the delivery business you work for. You have a choice of purchasing 4 vans at a cost of $35,108 each, or leasing 4 vans at a cost of $9,200 per van per year. The leasing option requires that an annual payment be made at the beginning of each year the van is used. What is the more cost effective option based on this info? MARR is 17.00% You will use the vans for 5 years. A manufacturing company is considering two different proposals for setting up a new production line. The details of the two proposals are shown in the table below. Which proposal is best in terms of cost? Show your calculations to justify your answer. MARR is 17.00% per year. Cost of equipment including installation cost Annual operating costs of the equipment ($/year) Overhaul at the end of year 3 Salvage value Life Span (years) Option A $153,000 $13,425 $8,200 $9,008 19 Option B $185,000 $7,100 $0 $6,800 19 You own a company that manufactures components for the aeronautics industry. You have decided to invest in new 3D printing equipment that will allow you to produce lighter components with less waste. The purchase price of the new equipment is: $1,335,000 The annual maintenance cost is: $127,760 The expected life of the new equipment is 11 years, at which point the salvage value of the equipment will be 7.25% of the purchase price. The revenue from the new equipment is expected to be $184,600 for the first year and increasing by $35,000 per year for the life of the equipment. You do not expect to incur any other additional costs if you purchase this equipment, other than the costs listed above. What is the present worth of the project? MARR is 21.00% annually. You have been tasked with purchasing vans for the delivery business you work for. You have a choice of purchasing 4 vans at a cost of $35,108 each, or leasing 4 vans at a cost of $9,200 per van per year. The leasing option requires that an annual payment be made at the beginning of each year the van is used. What is the more cost effective option based on this info? MARR is 17.00% You will use the vans for 5 years.
Expert Answer:
Answer rating: 100% (QA)
SOLUTION For the first problem To determine which proposal is best in terms of cost we need to calculate the present worth of each proposal The presen... View the full answer
Related Book For
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
Posted Date:
Students also viewed these accounting questions
-
A company is considering two different proposals for computing the bonus for its new company president. The first plan states that the bonus would be equal to 6% of profits after the bonus but before...
-
Homework-2 DECISION ANALYSIS PROBLEMS Problem-1: Kenneth Brown is the principal owner of Brown Oil, Inc. After quitting his university teaching job, Ken has been able to increase his annual salary by...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
It is stated in Section 40.3 that a finite potential well always has at least one bound level, no matter how shallow the well. Does this mean that as U 0 0, E 1 0? Does this violate the Heisenberg...
-
Are variable costs always relevant? Explain.
-
Graph each sequence in Problems 35-42 in two dimensions. \(a_{n}=\frac{1}{n}\)
-
A company is considering two alternatives, one of which must be implemented. Of the two projects, A has the higher maintenance cost, but B has the higher investment cost. The appropriate (and...
-
Division A manufactures picture tubes for TVs. The tubes can be sold either to Division B of the same company or to outside customers. Last year, the following activity was recorded in Division A:...
-
Consider the arithmetic series 7+13+19+25+31+37+43 +...and answer thequestions which follow. a) (i) T. (ii) Express Tin terms of S (2) (2) b) (i) T =........... ... S =... (2) (ii) Express T2 in...
-
Ferris Company has an old machine that is fully depreciated but has a current salvage value of $5,000. The company wants to purchase a new machine which would cost $60,000 and have a 5-year useful...
-
Sarah the Company Secretary of Beta Plc, The company is a non-listed public company. She seeks your advice on the following matters. a) The Company has 100,000 1 preference shares and 500,000 1...
-
An expensive watch is powered by a 3-volt lithium battery expected to last three years. Suppose the life of the battery has a standard deviation of 0.3 year and is normally distributed. a. Determine...
-
1) Have you ever heard something from "the grapevine" in your organization that was first denied and then turned out to be true? - Would you believe "the grapevine" from now on? - How do you think...
-
An extended paragraph of persuasion on brown sugar is healthier than white sugar are health myths. 1. revise the thesis from your outline. Correct the errors in your thesis if you have them. 2. for...
-
Your aunt wants to retire and has $300,000. She expects to live for another 25 years, and she also expects to earn 7.5% on her invested funds. How much could she withdraw at the beginning of each of...
-
Family Care Specialists Medical Group, Inc. On Saturday afternoon, January 9, 2010, Dr. Luis Samaniego. president of Family lCare Specialists Medical Group, Inc. {FEE} contemplated his proposal to...
-
QUESTION 61 The maximum work opportunity tax credit (WOTC) available to employers that hire veterans with service-related disabilities (wounded warriors) is four times the amount of the maximum...
-
Below is a sample of the data in the file NFLAttendance which contains the 32 teams in the National Football League, their conference affiliation, their division, and their average home attendance....
-
What is return on investment?
-
List some methods of gaming performance indicators.
-
How can management accounting information produce behavioral and organizational reactions?
-
Preventing a user who approves a configuration change from being the person who implements the change is an example of which of the following? A. Rotation of duties B. Least privilege C. Segregation...
-
A onedimensional heat conduction problem can be expressed by the following differential equation: where \(k\) is the thermal conductivity, \(T(x)\) is the temperature, and \(Q\) is heat generated per...
-
Consider a simply supported beam of length \(L\) subjected to a uniformly distributed transverse load \(p(x)=p_{0}\). Use the Rayleigh-Ritz method to determine the transverse deflection \(v(x)\) of...
Study smarter with the SolutionInn App