Reference no: EM133011693
William Products, Inc. has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system or a labor-intensive production system. The manufacturing method will not affect the quality of the product.
The estimated manufacturing costs by the two methods are as follows:
Computer Assisted Manufacturing Systems:
Direct Material = 8.20 ,
Direct Labor Hours(DLH) = .7@$15 $10.5,
Variable mfg. overhead (applied based on DLH) = .7@$10 $7.00
Fixed mfg. overhead = $2,250,000
Labor Intensive Production System:
Direct Material = 5.60 ,
Direct Labor Hours(DLH) = 1.3@$20 $26,
Variable mfg. overhead (applied based on DLH) = 1.3@$10 $13.00
Fixed mfg. overhead = $600,000
These costs are directly traceable to the new product line and they would not be incurred if the new product were not produced.
Problem a) Calculate the estimated break-even point (in annual sales volume in units) of the new product if the compnay uses the (i) Computer-Assisted Manufacturing System; (ii) Labor-Intensive Production System.
Problem b) Estimate the number of units that William Products should sell to earn an after-tax profit of $3.20 million under (i) Computer-Assisted Manufacturing System (ii) Labor-Intensive Production System. Assume an income-tax rate of 25%
Problem c) Determine the annual sales volume (in units) at which the firm would be indifferent (if profit maximization is the objective) between choosing between the two manufacturing methods. Justify your answer with appropriate calculations.
|
What is the annual operating cash flow
: The required return is 12%. The machine is expected to result in cost savings of $75,000 per year. What is the annual operating cash flow
|
|
What is the horizon value for akyol corporation
: What is the horizon value (in millions) at t =4? Akyol Corporation is undergoing a restructuring and it free cash flows are expected to be unstable.
|
|
What were the firm budgeted collections for the quarter
: If sales for April, May, and June were $80,000, $180,000, and $170,000, respectively, what were the firm's budgeted collections for the quarter?
|
|
What is today price of the stock
: After that, the dividends are expected to grow by 6% each year. If the required rate of return is 17%, what is today's price of the stock
|
|
Estimate number of units that william products should sell
: Estimate the number of units that William Products should sell to earn an after-tax profit of $3.20 million under Computer-Assisted Manufacturing System
|
|
Compute the present value of these dividends
: If the last dividend paid by the company was $2.15. Compute the present value of these dividends if the required rate of return is 14 percent
|
|
What is the present value index of the project
: The company has a project with a 5-year life, What is the present value index of the project if the required rate of return is set at 8%?
|
|
What are elements of uncertainty for internal shareholders
: What are the elements of uncertainty for internal shareholders that remain or are introduced when using CVP analysis to evaluate profits
|
|
How a company is trending over time
: How a company is trending over time. This, compared to its competition, will help identify which company is most worthy of an investment to maximize a ROI.
|