Plan to manufacture engine blocks for classic cars

Assignment Help Finance Basics

Reference no: EM13745076

The managers of PonchoParts, Inc. plan to manufacture engine blocks for classic cars from the 1960s era. They expect to sell 250 blocks annually for the next five years. The necessary foundry and machining equipment will cost a total of $800,000 and belongs in a 30% CCA class for tax purposes. The firm expects to be able to dispose of the manufacturing equipment for $150,000 at the end of the project. Labour and materials costs total $500 per engine block, fixed costs are $125,000 per year. Assume a 35% tax rate and a 12% discount rate.
What is the minimum bid price the firm should set as a sale price for the blocks if the firm were in a bidding situation?

Reference no: EM13745076

Questions Cloud

Determine the partial pressure of nitrogen in the air : You begin your expedition at the mouth of the Brisbane River at sea level (barometric pressure = 760 mmHg). The temperature is 20oC and the relative humidity is 78%. What is the partial pressure of nitrogen in the air

Costs amounts can be found in a firms accounting records : If a decision must be made to close a warehouse non-refundable prepaid rent on the warehouse is a (n) ----- cost. When the balance in ending finished goods inventory increases, net income under absorption costing is: Which of the following costs amou..

List the dollar amount of debt disney proposed to sell : List the dollar amount of debt Disney proposed to sell to the public. Indicate whether this amount has increased or decreased from 2008 to 2010. Discuss some potential causes of this increase or decrease.

What is offshoring : You will research and find an example of a firm that is going through the transformational change of offshoring much of its production activities.

Plan to manufacture engine blocks for classic cars : The managers of PonchoParts, Inc. plan to manufacture engine blocks for classic cars from the 1960s era. They expect to sell 250 blocks annually for the next five years. The necessary foundry and machining equipment will cost a total of $800,000 and ..

Fixed manufacturing costs are written off as current expense : Fixed manufacturing costs are written off as current expenses of the period in which they occurred when using -------- costing. When inventory costing system is NOT acceptable for financial reporting purposes? Which of the following would Not be rele..

A segment of a business probably should be discontinued : A segment of a business probably should be discontinued if; On an income statement prepared with direct costing approach, the excess of sales over the cost of goods sold, based on variable costs only, is referred to as the:

While non-random variation could be affecting the process : Suppose analysis of a random sample results in an "in control" determination. Which of the following statements is most appropriate

Contribution margin is calculated by deducting : Which of the following is not consideration when determining whether to continue making a part or to buy that part. Contribution margin is calculated by deducting:

User Account

All Pages