After our discussion we decide to accept the order of Hi-Valu Company, due to analysis and compare below. Advantages
Assume that Baldwin Company accepted the orders of Hi-Valu Company to make profits. In this condition, we should know whether Hi-Valu Company had enough short term assets to cover its short term debt.
Therefore, we should calculate Working Capital ($) of Baldwin Company: The cost of each finished product in the first year:
Materials + labors + variable cost (24.5*40%)=39.8 + 19.6 + 9.8=$69.2 Inventory
Finished products: 69.2*4,500(inventories in warehouses)=$311,400 Semi-finished products: (39.8 + 19.6)*1,000=$59,400
Materials: 39.8*25,000(sale of products per year)*2/12(two months)=$165,833.33 Total inventory=311,400+59,400+165,833.33=$536,633.33—inv.* Account Receivable /Inventory =1,359,000/2,756,000=0.49
Account Payable /Inventory =512,000/2,756,000=0.19
Account Receivable*=0.49*536,633.33(inv1)=$262,950.33—A/C* Account Payable*=0.19*536,633.33(inv1)=$101,960.33—A/P*
Current assets-Current liabilities =inv.*+(A/R*-A/P*)=536,633.333+(262,950.33-101,690.33)=$697,623.33 697,623.33*23.5%(cost rate of capital)=$163,941.48
51435069850Account Receivable, Account Payable and Inventory represented here are the numbers of Financial Statements in1982. A/C* , A/P* and inv.* represented here are the working capital we used to calculate. 020000Account Receivable, Account Payable and Inventory represented here are the numbers of Financial Statements in1982. A/C* , A/P* and inv.* represented here are the working capital we used to calculate.
Producing 25,000 products need $163,941 working capital (per year). Therefore, producing each product needs (163,941/25,000)=$6.558 working capital(per year). The profit per unit = 92.29(price of sale)-69.2(cost of first year)-6.558(cost of capital)=$16.532 Total profit=16.532*25,000=413,300 dollars
Because the trend of bicycle in America...
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