29 Jun Question 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
Question
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)
1.(TCO C) Bella Lugosi Holdings, Inc. (BLH), has collected the following operating information below for its current month’s activity. Using this information, prepare a flexible budget analysis to determine how well BLH performed in terms of cost control.
Actual Costs Incurred
Static Budget
Activity level (in units)
5,250
5,178
Variable Costs:
Indirect materials
$24,182
$23,476
Utilities
$22,356
$22,674
Fixed Costs:
Administration
$63,450
$65,500
Rent
$65,317
$63,904
(Points : 30)
2
.(TCO B) Madlem, Inc., produces and sells a single product whose selling price is $240.00 per unit and whose variable expense is $86.40 per unit. The company’s fixed expense is $720,384 per month.
Required:
Determine the monthly break-even in either unit or total dollar sales. Show your work! (Points : 25)
1.(TCO F) Buckhorn Corporation bases its predetermined overhead rate on the estimated machine hours for the upcoming year. Data for the upcoming year appear below.
Estimated machine hours
85,000
Estimated variable manufacturing overhead
$5.55 per machine hour
Estimated total fixed manufacturing overhead
$95
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