According to the company criteria

Assignment Help Managerial Accounting
Reference no: EM13962203

Blue Ridge Furniture is considering the purchase of two different items of equipment, as described below: 

Machine A. A machine has just come onto the market that compresses sawdust into various shelving products. Currently, the sawdust is disposed of as a waste product. The following information is available about the machine:

a. The machine would cost $780,000 and would have a 25% salvage value at the end of its 10-year useful life. The company uses straight-line depreciation and considers salvage value in computing depreciation deductions. 

b. The shelving products produced by the machine would generate revenues of $350,000 per year. Variable manufacturing costs would be 20% of sales. 

c. Fixed annual expenses associated with the new shelving products would be: advertising, $42,000; salaries, $86,000; utilities, $9,000; and insurance, $13,000. 

Machine B. A second machine has come onto the market that would automate a sanding process that is now done largely by hand. The following information is available about this machine:

a. The new sanding machine would cost $220,000 and would have no salvage value at the end of its 10-year useful life. The company would use straight-line depreciation. 

b. Several old pieces of sanding equipment that are fully depreciated would be disposed of at a scrap value of $7,200. 

c. The new sanding machine would provide substantial annual savings in cash operating costs. It would require an operator at an annual salary of $26,000 and $3,000 in annual maintenance costs. The current, hand-operated sanding procedure costs the company $85,000 per year. Blue Ridge Furniture requires a simple rate of return of 16% on all equipment purchases. Also, the company will not purchase equipment unless the equipment has a payback period of four years or less. 

Required: (Ignore income taxes.)

1. For machine A:
a. Prepare an income statement showing the expected net operating income each year from the new shelving products. Use the contribution format. 
b. Compute the simple rate of return. 
c. Compute the payback period. 

2. For machine B:
a. Compute the simple rate of return. 
b. Compute the payback period. 

3. According to the company's criteria, which machine, if either, should the company purchase?

Reference no: EM13962203

Questions Cloud

Visual display of internet data and information matters : Explain why the visual display of internet data and information matters? what makes the display effective? describe what you like about the design of websites and web resources. Find at least two examples of web content on the internet that you li..
Do you agree or disagree with this given statement : Evaluate the following statement: The Bill of Rights did not come from a desire to protect the liberties won in the American Revolution, but rather from a fear of the powers of the new federal government. Do you agree or disagree with this statemen..
Reverses the bytes of a file : Write a program that reverses the bytes of a file, so that the last byte is now first andthe first byte is now last. It must work with an arbitrarily long file, but try to make itreasonably efficient.
Rank these arrangements in order of magnitude of force : For arrangements F and G find the expression for the electric field at the position of the test charge due to the two fixed charges
According to the company criteria : According to the company's criteria, which machine, if either, should the company purchase?
Determine the name of person : The following bytes (shown in hex) represent a person's name as it would be stored in a computer's memory. Each byte is a padded ASCII code. Determine the name of each person.
What do you already know about the topic : What do you already know about the topic? Can you provide any background information to help your readers understand why it is important to you? (Make sure you only use what YOU already know, don't look to outside sources for background informat..
Evaluating the various health insurance plans : 1. In evaluating the various health insurance plans, what factors should the Lawrences look for in a good health insurance plan? 2. When considering disability income insurance, what are the trade-offs of purchasing this type of insurance and how d..
Discuss ethical practices utilized by law enforcement : Discuss ethical practices utilized by law enforcement that help them to maintain their objectivity throughout their investigation of this incident, Jamal and Juan''s backgrounds, and the underlying interests of social order.

Reviews

Write a Review

Managerial Accounting Questions & Answers

  Manage budgets and financial plans

Explain the budgeting process and its importance to a business, identifying the components of different budgets, forecast estimates for inclusion in the budgets.

  Prepare a retained earnings statement

Prepare a retained earnings statement for the year and Prepare a stockholders' equity section of given case.

  Prepare a master budget for the three-month period

Prepare a master budget for the three-month period.

  Construct the companys direct labor budget

Construct the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced.

  Evaluate the predetermined overhead rate

Evaluate the Predetermined Overhead Rate

  Determine the company''s bid

Determine the company's bid if activity-based costing is used and the bid is based upon full manufacturing cost plus 30 percent.

  Compute the pool rates for the different activities

Complete the schedule to compute the pool rates for the different activities.

  Prepare Company financial statements

Prepare Company financial statements

  Prepare an analysis of terracycles

This individual assignment is based on the TerraCycle Inc.

  Discuss the ethical issues

Discuss the ethical issues

  Political resources in emerging markets

Calculate the GDP in Income Approach  and Expenditure Approach

  Management accounting - ehsan electronics company

A new plant accountant suggested that the company may be able to assign support costs to products more accurately by using an activity based costing system that relies on a separate rate for each manufacturing activity that causes support costs.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd