Preview

Variable Cost and New Conditioning Shampoo

Satisfactory Essays
Open Document
Open Document
504 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Variable Cost and New Conditioning Shampoo
1. (TCO F) Bingham Corporation uses the weighted-average method in its process costing system. Data concerning the first processing department for the most recent month are listed below.

Work in process, beginning: Units in beginning work-in-process inventory | 400 | Materials costs | $6,900 | Conversion costs | $2,500 | Percentage complete for materials | 80% | Percentage complete for conversion | 15% | Units started into production during the month | 6,000 | Units transferred to the next department during the month | 5,000 | Materials costs added during the month | $112,500 | Conversion costs added during the month | $210,300 |
Ending work in process: Units in ending work-in-process inventory | 1,200 | Percentage complete for materials | 60% | Percentage complete for conversion | 30% |

Required: Calculate the equivalent units for materials (using the weighted-average method) for the month in the first processing department. (Points : 25) |

2. (TCO G) - (Ignore income taxes in this problem.) Axillar Beauty Products Corporation is considering the production of a new conditioning shampoo that will require the purchase of new mixing machinery. The machinery will cost $375,000, is expected to have a useful life of 10 years, and is expected to have a salvage value of $50,000 at the end of 10 years. The machinery will also need a $35,000 overhaul at the end of Year 6. A $40,000 increase in working capital will be needed for this investment project. The working capital will be released at the end of the 10 years. The new shampoo is expected to generate net cash inflows of $85,000 per year for each of the 10 years. Axillar's discount rate is 16%.

Required:
(a) What is the net present value of this investment opportunity?
(b) Based on your answer to (a) above, should Axillar go ahead with the new conditioning shampoo? (Points : 35) |

(TCO C) Nic Saybin Enterprises Accounting Department collects all pertinent monthly

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Ex: if 1000 units are in Work-In-Process at the end of the period and are considered 80% complete, the…

    • 540 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    Lycoming Leather Company

    • 640 Words
    • 3 Pages

    The work in process inventory consisted of 500 partially completed units on October 1. The belts were 30 percent complete as to conversion. The costs included in the inventory on October 1, were as follows:…

    • 640 Words
    • 3 Pages
    Good Essays
  • Good Essays

    The hair industry has been been devoted to answering a need of our american people for years. A…

    • 643 Words
    • 3 Pages
    Good Essays
  • Good Essays

    project work on shampoo

    • 1082 Words
    • 5 Pages

    In the shampoo industry, during the old days the only thing the consumer used to keep in mind while purchasing was the brand name or else the person/celebrity who used to endorse it, but now things have changed. Consumers not only check the effectiveness but also the ingredients.…

    • 1082 Words
    • 5 Pages
    Good Essays
  • Good Essays

    Headgear Inc

    • 1035 Words
    • 5 Pages

    To improve profitability, John has decided to bring in a new COO with the objective of improving profitability very quickly. The new COO understands that profits must be improved within the coming 10-18 months. A bonus of 10% of profit improvement is promised the new COO if this goal is achieved. The following is the income statement for HeadGear for 2010, from the most recent annual report. Product costs for HeadGear include $25 per unit variable manufacturing costs and $1,920,000 per year fixed manufacturing overhead. Budgeted production was 120,000 units in 2010. Selling and administrative costs include a variable portion of $15 per unit and a fixed portion of $2,400,0000 per year. The same units costs and production level are also applicable for 2009.…

    • 1035 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    Acct301

    • 483 Words
    • 2 Pages

    EXERCISE 7-13 PINK MARTINI CORPORATION Cash Budget For the Quarter Ended March 31, 2012 Beginning cash balance $31,000 Add: Receipts Collections from customers 180,000 Sale of equipment 3,500 Total receipts $183,500 Total available cash $214,500 Less: Disbursements Direct materials 41,000 Direct labor 70,000 Manufacturing overhead 35,000 Selling and administrative expense 45,000 Purchase of securities 12,000 Total disbursements $203,000 Excess of available cash over disbursements 11,500 Financing Borrowings 13,500 Repayments Ending cash balance $25,000 PROBLEM 7-1A DANNER FARM SUPPLY COMPANY Sales Budget 6 Months Ending June 30, 2012 Quarter Six Months 1 2 Expected unit sales 28,000 42,000 70,000 Unit selling price 60 60 60 Total sales $1,680,000 $2,520,000 $4,200,000 DANNER FARM SUPPLY COMPANY Production Budget 6 Months Ending June 30, 2012 Quarter Six Months 1 2 Expected unit sales 28,000 42,000 Add: Desired ending finished goods 12000 18000 Total required units 40,000 60,000 Less: Beginning finished goods units 8,000 12,000 Required production units 32,000 48,000 80,000 DANNER FARM SUPPLY COMPANY Direct Materials Budget—Gumm 6 Months Ending June 30, 2012 Quarter Six Months 1 2 Units to be produced 32,000 48,000 Direct materials per unit 4 4 Total pounds needed for production 128000 192000…

    • 483 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    AC505 course project

    • 311 Words
    • 3 Pages

    ACCT505 Part B Capital Budgeting problem Clark Paints Data: Cost of new equipment $200,000 Expected life of equipment in years 5 Disposal value in 5 years $40,000 Life production - number of cans 5,500,000 Annual production or purchase needs 1,100,000 Initial training costs 0 Number of workers needed 3 Annual hours to be worked per employee 2,000 Earnings per hour for employees $12 Annual health benefits per employee $2,500 Other annual benefits per employee-% of wages 18% Cost of raw materials per can $0.25 Other variable production costs per can $0.05 Costs to purchase cans - per can $0.45 Required rate of return 12% Tax rate 35% Make Purchase Cost to produce Annual cost of direct material: Need of 1,100,000 cans per year $330,000 Annual cost of direct labor for new employees: Wages 72,000 Health benefits 7,500 Other benefits 12,960 Total wages and benefits 92,460 Other variable production costs Total annual production costs $422,460 Annual cost to purchase cans $495,000 Part 1 Cash flows over the life of the project Before Tax After Tax Item Amount Amount Annual cash savings $72,540 0.65 $47,151 Tax savings due to depreciation 32,000 0.35 $11,200 Total annual cash flow $58,351 Part 2 Payback Period 200,000/58,351 3.4 Years…

    • 311 Words
    • 3 Pages
    Satisfactory Essays
  • Satisfactory Essays

    ocean carriers

    • 501 Words
    • 6 Pages

    examines the present value of the cash flows net of the present value of the initial investment • Value of the investment • Estimates of the cash flows Initial Investment • $39M vessel • 10% due immediately • 10% due in one year • Remaining due at delivery in two years $3.9M $31.2M PV = $3.9M + + = $33.74M 2 (1 + 9%) (1 + 9%) Project Free Cash Flow Operating Revenue - Cost of Goods Sold Gross Profit - Depreciation - Other Expenses Operating Profit Before Interest and Taxes - Taxes Net Operating Profit After Taxes + Depreciation - Capital Expenditures - Increase in Working Capital - Increase in Other Assets Free Cash Flow Revenue • Contract Revenues •…

    • 501 Words
    • 6 Pages
    Satisfactory Essays
  • Good Essays

    Envelope Machine

    • 705 Words
    • 3 Pages

    FCI is deciding on whether to buy a machine that makes envelopes for their cards. The cost of envelopes is one of FCI’s largest cost components. Referring to Ms. Beaumont’s estimations the project would generate $218 000 increase in profit after taxes every year during its eight year economic life. Cost of acquiring the machine is 500,000. If we suppose that FCI is able to convince banks to loan $500,000 to invest in the envelope machine, we can first use FCI’s normal interest rate on bank credit (11%: 8,5% prime + 2,5% FCI marginal) as a discount rate to count the project’s NPV. Here we also assume that FCI will pay the loan back in two and half years.…

    • 705 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    Footnote

    • 468 Words
    • 2 Pages

    Annual Financials for Fresh Del Monte Produce Inc. BALANCESHEET Assets Fiscal year is January-December. All values USD millions. | 2008 | 2009 | Cash & Short Term Investments | 27.6M | 34.5M | Cash Only | - | - | Short-Term Investments | - | - | Total Accounts Receivable | 410M | 375M | Accounts Receivables, Net | 348M | 375M | Accounts Receivables, Gross | 377.8M | 401M | Bad Debt/Doubtful Accounts | (29.8M) | (26M) | Other Receivables | 62M | 0 | Inventories | 459.8M | 436.9M | Finished Goods | 328.3M | 316.4M | Work in Progress | - | - | Raw Materials | 131.5M | 120.5M | Progress Payments & Other | 0 | 0 | Other Current Assets | 77.2M | 54M | Miscellaneous Current Assets | 77.2M | 54M | Total Current Assets | 974.6M | 900.4M | | 2008…

    • 468 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    CHAPTER 10

    • 2716 Words
    • 54 Pages

    CHAPTER 10 - AVERAGE AND FIFO COSTING TRUE OR FALSE 1. TRUE 2. TRUE 3. TRUE 4.…

    • 2716 Words
    • 54 Pages
    Good Essays
  • Satisfactory Essays

    In this article, I could use three resources from other books or newspapers. There are “Home & Family: Shopping Around / Dry Shampoos” by Anjali Athavaley, “Body Care Chemistry” by Eagen and Rachel, “Mass Market Leadership and Shampoo Wars: The L'Oréal Strategy” by Laurent Tournois.…

    • 270 Words
    • 2 Pages
    Satisfactory Essays
  • Better Essays

    Finance Final Exam

    • 4536 Words
    • 19 Pages

    (4) Coca-Cola Amatil (CCA) has a weighted average cost of capital of 9%. CCA is considering investing in a new plant that will save the company $25 million over each of the first two years, and then $10 million each year thereafter. If the investment is $100 million, what is the netpresent value (NPV) of the project? A) $37.5 million B) $36.5 million C) $39.7 million D) $34.2 million…

    • 4536 Words
    • 19 Pages
    Better Essays
  • Good Essays

    Seatwork

    • 311 Words
    • 2 Pages

    2. Determine the equivalent units of production for materials and conversion for the Mixing Department.…

    • 311 Words
    • 2 Pages
    Good Essays
  • Satisfactory Essays

    CAE 312 Hw2 1

    • 527 Words
    • 2 Pages

    Currently, two options are available for modernization of a pumping station in a water treatment facility. Option 1 is to install a pumping system which is more durable at a cost of $20,000. With this option, the system will require to be replaced every 15 years. The maintenance cost for this system runs at $4,000 every five years. Option 2 is to install a cheaper pumping system. It costs $12,000. However, the system must be replaced every 6 years. The maintenance cost for this system is $1,600 every 2 years. Compute the present worth capitalized cost for each option and decide which one would be to our advantage. The interest rate is at 7% per year.…

    • 527 Words
    • 2 Pages
    Satisfactory Essays