The proposed quality control system involves the purchase

Assignment Help Accounting Basics

Reference no: EM13566569

The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $204 with a resulting contribution margin of $71.

Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $40,500 a year to inspect the CD players. An average of 1,900 units turn out to be defective - 1,330 of them are detected in the inspection process and are repaired for $80. If a defective CD player is not identified in the inspection process, the customer who receives it is given a full refund of the purchase price. Competitors are expected to improve their quality control systems in the future, so if Brisbane does not improve its system, sales volume is expected to fall by 490 CD players a year for the next five years. In other words, it will fall by 490 units in the first year, 980 units in the second year, etc..

The proposed quality control system involves the purchase of an x-ray machine for $310,000. The machine would last for five years and would have salvage value at that time of $18,000. Brisbane would also spend $820,000 immediately to train workers to better detect and repair defective units. Annual inspection costs would increase by $23,000. This new control system would reduce the number of defective units to 380 per year. 315 of these defective units would be detected and repaired at a cost of $42 per unit. Customers who still received defective players would be given a refund equal to one-and-a-fourth times the purchase price.

Questions 1 & 2 [no credit; unlimited tries]
1. What is the Year 3 cash flow if Brisbane keeps using its current system?

Tries 0/99

2. What is the Year 3 cash flow if Brisbane replaces its current system?

Tries 0/99

Questions 3 & 4 [5 points each; 5 tries each]
3. Assuming a discount rate of 6%, what is the net present value if Brisbane keeps using its current system?

Tries 0/5

4. Assuming a discount rate of 6%, what is the net present value if Brisbane replaces its current system?

Reference no: EM13566569

Questions Cloud

The corporate charter approved on that date authorized the : peeler company was incorporated as a new business on january 1 2012. the corporate charter approved on that date

Causwell company began 2013 with 18000 units of inventory : causwell company began 2013 with 18000 units of inventory on hand. the cost of each unit was 5. during 2013 an

The average of a gallon unleaded regular gas was reported : the average of a gallon unleaded regular gas was reported to be 2.34 in northern kentucky. use this price as the

One client had indicated that they were interested in : one client had indicated that they were interested in purchasing 42500 worth of products so the bookkeeper recorded the

The proposed quality control system involves the purchase : the brisbane manufacturing company produces a single model of a cd player. each player is sold for 204 with a resulting

A population of 1000 students spends an average of 1050 a : a population of 1000 students spends an average of 10.50 a day on dinner. the standard deviation of the expenditure is

In a recent period 13000 units were produced and there was : in a recent period 13000 units were produced and there was a favorable labor efficiency variance of 23000. if 40000

Eric and denise are partners in ed partnership eric owns a : eric and denise are partners in ed partnership. eric owns a 60 capital profits and loss interest. denise owns the

Lounsberry inc regularly uses material o55p and currently : lounsberry inc. regularly uses material o55p and currently has in stock 360 liters of the material for which it paid

User Account

All Pages