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Vlad [161]
4 years ago
10

Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.20 per unit. Bluebird currently produces and s

ells 75,000 units at $7.20 each. This level represents 80% of its capacity. These bird feeders would be marketed under the wholesaler’s name and would not affect Bluebird’s sales through its normal channels. Production costs for these units are $3.80 per unit, which includes $2.35 variable cost and $1.45 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:
Business
1 answer:
kap26 [50]4 years ago
4 0

Answer:

Effect on income= $12,750 increase

Explanation:

Giving the following information:

Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.20 per unit. Production costs for these units are $3.80 per unit, which includes $2.35 variable cost and $1.45 fixed cost.

<u>Because it is a special offer and there is unused capacity, we will not take into account the fixed costs:</u>

Effect on income= 15,000*(3.2 - 2.35)= $12,750 increase

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Lena is a sole proprietor. In April of this year, she sold equipment purchased four years ago for $26,000 with an adjusted basis
viva [34]

Answer:

  1. Lena has a ORDINARY GAIN of $1,500 from the sale of the first equipment.
  2. Lena has a ORDINARY LOSS of $2,700 from the sale of the second equipment.

Explanation:

Lena sold the first equipment for $17,000, and that resulted in an ordinary gain = $17,000 - $15,500 = $1,500. This gain was due to a §1245 depreciation recapture.

Lena sold the second equipment for $5,500, and that resulted in an ordinary loss (§1231 loss) = $5,500 - $8,200 = $2,700.

7 0
3 years ago
Evans Ltd. is now considering the possibility of offering a lifetime membership option to its subscribers. Under this proposal,
Ahat [919]

Answer: $329.75

Explanation:

The one year subscription is $40 per year. It is estimated that the average age of current subscribers is 38 and they will leave on average to 78. This means that they will leave for,

= 78 - 38

= 40 years

Evans Ltd  average interest rate on long-term debt is 12% so this means that we can use that 12% as a discount rate for the cash-flow expected.

I have attached a Present Value Interest Factor of an Annuity table to this question. It helps calculate annuities faster.

The above can be treated as an annuity because the $40 is constant every year.

The present value of the $40 over 40 years can be calculated by,

= $40 * present value Interest Factor of an Annuity for 40 years at 12% (look at the table for where 40 years on the y axis intersects with 12% on the x axis)

= $40 * 8.2438 (this is the figure when it is not rounded off to 3 dp)

= $329.752

= $329.75

This shows that the lifetime flat fee of $480 is more profitable for Evans Ltd as opposed to the yearly subscription. They should therefore try to sell more of the lifetime contract with the flat fee.

3 0
3 years ago
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