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Problem: A bicycle manufacturer currently produces 500,000 units a year and expects output levels to remain steady in the future. It buys chains from an outside supplier at a price of $5 a chain. The plant manager believes that it would be cheaper to make these chains rather than buy them. Direct in-house production costs are estimated to be only $3 per chain.
The necessary machinery would cost $300,000 and would be obsolete after 10 years. This investment could be depreciated to zero for tax purposes using a 10-year straight-line depreciation schedule.
The plant manager estimates that the operation would require $75,000 of inventory and other working capital upfront (year 0), but argues that this sum can be ignored since it is recoverable at the end of the 10 years.
Expected proceeds from scrapping the machinery after 10 years are $25,000.
What type of returns to scale is consistent with the above production function?
Prepare the journal entries necessary at December 31, 2008, assuming that the books have been closed and Present a schedule showing the corrected net income after reviewing the above transactions
Joe uses his BMW (a personal auto) to travel to and from his residence to his factory. However, he switches to a business vehicle if he needs to travel after he reaches the factory. What is amount of deductions?
You have a project with the following cash flow stream (assume a 10% discount rate). What is the profitability index of the project? Is it acceptable? Calculate the profitability index for this project. Is the project favorable? Why or why not?
On January 1, 2018, Twister Enterprises, a manufacturer of a variety of transportable spin rides, issues $530,000 of 7% bonds, due in 20 years, with interest payable semiannually on June 30 and December 31 each year. If the market interest rate is 6%..
What is the optimal length of a contract , L, which Weyer could make with steuben? Derive and explain your answer.
Summarize the variances that you computed in above by showing the net overall favorable or unfavorable variance for October.
The Memphis Pecan Company experienced a tornado that destroyed the company's entire inventory.
Analyze Ryan Boot Company, using ratio analysis. Compute the ratios.
In advance of a meeting with your finance director to discuss his remark, prepare an essay about the likely effect on performance if DD adopts IFRS.
The following information is from the financial statements of Abby's International Pasta Corporation.
WannaBee Corporation has $1,500,000 of Receivables on December 31, 2000. WannaBee uses the Allowance Method and historical data indicates that 7% of receivables become uncollectible. The end of year balance in the ADA is 0.
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