Chapter 26 Assignment Instructions Complete The Problems Bel

Chapter 26 Assignmentinstructionscomplete The Problems Below This A

Complete the problems below. This assignment can be completed in either: Microsoft Excel, Word, or hand-written and scanned in PDF format. I prefer Microsoft Excel or Word but will not dock points for PDF format. SHOW YOUR WORK AND GET PARTIAL CREDIT FOR WRONG ANSWERS!

Paper For Above instruction

Part A: Make-or-Buy Decision Analysis

Our company is evaluating whether to produce a component in-house or purchase it from an external supplier. The costs associated with manufacturing 10,000 units are as follows: direct materials costing $75,000; direct labor costing $45,000; variable overhead amounting to $15,000; and fixed overhead totaling $10,000. Alternatively, the company can buy the parts at $14 each. If the company opts to purchase, all variable costs and half of the fixed costs will be eliminated.

1. Prepare an incremental analysis to determine whether the company should make or buy the parts.

2. Consider if producing internally would generate an additional income of $30,000. Would the decision change?

Part B: Product Line Elimination Analysis

One of the company’s product lines has a net loss of $50,000, based on sales of $800,000; variable expenses totaling $550,000; and fixed expenses of $300,000. If the product line is eliminated, $30,000 of fixed costs will still remain.

3. Prepare an analysis to determine whether the company should eliminate this product line.

Part C: Investment in a Delivery Truck

The company is contemplating purchasing a new delivery truck for $100,000, with a useful life of five years, straight-line depreciation, and zero salvage value. The new truck is expected to increase net income by $5,000 annually over five years.

4. Calculate the annual rate of return on this investment.

5. Calculate the cash payback period for this investment.

Part D: Additional Production Machine

The company is considering buying a new production machine costing $1,200,000 with a 10-year life and no salvage value. The machine is expected to increase annual cash inflows by $500,000 and increase annual cash outflows by $200,000. The company's required rate of return is 8%.

6. Calculate the net present value (NPV) of this investment project.

7. Should the project be accepted based on the NPV?

8. Calculate the internal rate of return (IRR) for this project.

9. Should the project be accepted based on the IRR?

References

  • Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice. Cengage Learning.
  • Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting. McGraw-Hill Education.
  • Horngren, C. T., Sundem, G. L., & Elliot, J. A. (2013). Introduction to Financial Accounting. Pearson.
  • Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2018). Fundamentals of Corporate Finance. McGraw-Hill Education.
  • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2019). Financial Accounting. Wiley.
  • Libby, T., Libby, R., & Short, D. G. (2015). Financial Accounting. McGraw-Hill Education.
  • Drury, C. (2018). Management and Cost Accounting. Cengage Learning.
  • Kaplan, R. S., & Cooper, R. (1998). Cost & Effect: Using Integrated Cost Systems to Drive Profitability and Competitiveness. Harvard Business School Press.
  • Needles, B., & Powers, M. (2018). Financial Accounting. Cengage Learning.
  • Anthony, R. N., & Govindarajan, V. (2014). Management Control Systems. McGraw-Hill Education.

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