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m_a_m_a [10]
3 years ago
14

Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $7

.9 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. The land would net $10.7 million if it were sold today. The company now wants to build its new manufacturing plant on this land; the plant will cost $21.9 million to build, and the site requires $940,000 worth of grading before it is suitable for construction.
Required:
What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?
Business
1 answer:
professor190 [17]3 years ago
7 0

Answer:

$33,540,000

Explanation:

initial investment:

  • opportunity cost of land (resale price of land) = $10,700,000
  • building cost of the facilities = $21,900,000
  • other expenses related to the site (grading) = $940,000
  • total $33,540,000

The purchase cost of the land is considered a sunk costs, since it is not relevant now. What is relevant is the price at which the land could be sold at the moment of starting the project.

You might be interested in
Metal Shelf ​Company's standard cost for raw materials is $ 4.00 per pound and it is expected that each metal shelf uses two pou
rusak2 [61]

Answer:

There are 3 possible primary answers:

  • a. The production department had to use more materials since the quality of the material was inferior.
  • The expectation that each metal shelf uses 2 lbs of materials is rounded off figure whereas in actual each metal shelf uses 2.0769 lbs of material
  • There is a process loss of 0.0769 of material per metal shelf's manufacturing(3.7% process loss)

Explanation:

Given:

Expected Material required per metal shelf = 2 lbs

Cost of raw material = 4 $/lb

Material purchased in Oct-year 2= 25,000 lbs

Cost of purchased material in Oct-year 2 = 97,000 $

Cost of material per lbs purchased in Oct-year 2 = 97000/25000 = 3.88 $/lb

Total shelves produced = 13,000 Nos

Total material used = 27,000 lbs

Actual material used per metal shelf = 27000/13000 = 2.0769 lbs/Nos

Thus it is concluded that either the expected materials' amount of 2 lbs was rounded off or there happened a process loss 0.0769 lbs per metal shelf.

Why not these?

Cost of material per lbs purchased in Oct-year 2 = 97000/25000 = 3.88 $/lb

b. The purchasing manager paid more than expected for materials

As the purchased lot was cheaper (@ 3.88 $/lb) than regular rate of 4$/lb therefore the purchase manager didn't pay more than expected.

c. Production workers were more efficient than anticipated

Actual material used per metal shelf = 27000/13000 = 2.0769 lbs/Nos

As the more material was used than expected thus this statement can't be true.

d. The overall materials variance is positive, no further analysis is necessary

Actual material used per metal shelf = 27000/13000 = 2.0769 lbs/Nos

Considering we are using more materials than expected so the overall material variance should not be positive and we should plan further analysis.

6 0
3 years ago
Read 2 more answers
On the basis of the details of the following fixed asset account, indicate the items to be reported on the statement of cash flo
iragen [17]

Answer:

Flows Added

Oct. 4: Proceeds from Sale of fixed asset $151,000

Oct. 4: Gain on sale of fixed asset <em> </em>$22,000

Flows Deducted

Mar. 12: Purchase of fixed asset $274,000

Explanation:

The Cash flow statement is prepared under the following headings :

  1. Cash flow from operating activities
  2. Cash flow from investing activities
  3. Cash flow from financing activities

Therefore form the transactions we need to establish what amount fall in which category.

Here is an extract of the Cash flow statement based on the given data

Cash flow from Operating Activities

<em>Adjustment to non-cash items </em>

Gain on sale of asset<em> </em>($151,000 - $129,000) <em>    </em>$22,000

Cash flow from Investing Activities

Purchase of Asset                                             ($274,000)

Proceeds from sale of Asset                              $151,000

Cash flow from Financing Activities

8 0
3 years ago
Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data
Alla [95]

Answer:

Blinks= $18.4

Dinks= $110.4

Explanation:

Giving the following information:

Blinks:

Units= 947

Direct labor hours per unit= 1

Dinks:

Units= 1,811

Direct labor hours per unit= 6

Fabrication Department= $109,400.

Assembly Department= $108,000.

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Total overhead= 109,400 + 108,000= $217,400

Total direct labor hours= (947*1) + (1,811*6)= 11,813

Predetermined manufacturing overhead rate= 217,400/11,813

Predetermined manufacturing overhead rate= $18.40 per direct labor hour.

Now, the unitary allocated overhead per unit:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Blinks= 1*18.4= $18.4

Dinks= 6*18.4= $110.4

7 0
3 years ago
Your Aunt Elsa has $500,000 invested at 6.5%, and she plans to retire. She wants to withdraw $40,000 at the beginning of each ye
Ksju [112]

Answer:

22.85

Explanation:

Present value (PV): $500,000

Rate: 6.5% per annual

Payment (PMT) : $40,000 per year

We can use excel to calculate the maximum number of whole payments that can be withdrawn before the account is exhausted

=NPER(rate, PMT, -PV,,1) = NPER (6.5%,40000,-500000,,1) = 22.85

Download xlsx
7 0
3 years ago
Alicia heard that as a general rule, she should spend no more than one week's pay on rent. If Alicia's pay is $35,256 per year,
Nastasia [14]
If Alicia pay per year is $35,256 and there are twelve months in a year, then her monthly salary is $35,256/12 = 2,938.
This means that Alicia earns $2, 938 each month. 
Conventionally, there are four weeks in a month, thus, Alicia earns $2,938/4 = 734.50. This means that, Alicia earns $734. 50 each week and this is the amount that Alicia is expected to spend on rent on a monthly basis.
8 0
3 years ago
Read 2 more answers
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