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CaHeK987 [17]
3 years ago
12

Gabuat Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price $ 164 Units in beginning inventory 0 Units produced 3,700 Units sold 3,260 Units in ending inventory 440 Variable costs per unit: Direct materials $ 51 Direct labor $ 32 Variable manufacturing overhead $ 6 Variable selling and administrative expense $ 6 Fixed costs: Fixed manufacturing overhead $88,800 Fixed selling and administrative expense $32,600 The total gross margin for the month under the absorption costing approach is:
Business
1 answer:
notsponge [240]3 years ago
5 0

Answer:

$155,700

Explanation:

Absorption costing

Sales $164 × 3,260 = $534,640

Less cost of goods sold

Opening inventory

Add variable cost of goods manufactured

[3,700 × ($51 + $32 + $6 = $89)] = $329,300

Fixed manufacturing cost

$88,800

Cost of goods available for sale

$418,100

Less ending inventory 440 × $89

$39,160

Cost of goods sold

$378,940

Gross margin

$155,700

Less variable selling and administration expenses $6 × 3,260

$19,560

Fixed selling and administrative expenses

$32,600

The total gross margin for the month under the absorption costing approach is $155,700

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3 years ago
The Campbell Company is considering adding a robotic paint sprayer to its production line. The sprayer's base price is $940,000,
Tanya [424]

Answer:

a. Year 0 Net Cash Flows = $984,000

b. We have:

Year 1 net operating cash flows = $306,159

Year 2 net operating cash flows = $332,986

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c. Additional Year 3- cash flow = $504,877

d. The machine should be purchased.

Explanation:

We start by first calculating the following:

Initial Investment = Base Price + Modification Cost = $940,000 + $25,000 = $965,000

Useful Life = 3 years

Depreciation in Year 1 = 0.3333 * $965,000 = $321,634.50

Depreciation in Year 2 = 0.4445 * $965,000 = $428,942.50

Depreciation in Year 3 = 0.1481 * $965,000 = $142,916.50

Book Value at the end of Year 3 = $965,000 - $321,634.50 - $428,942.50 - $142,916.50 = $71,506.50

After-tax Salvage Value = Salvage Value - (Salvage Value - Book Value) * Marginal tax rate = $624,000 – ($624,000 - $71,506.50) * 25% = $485,877

Initial Investment in NWC = $19,000

We can now proceed as follows:

a. What is the Year 0 net cash flow?

Year 0 Net Cash Flows = Initial Investment + Initial Investment in NWC = $965,000 + $19,000 = $984,000

b. What are the net operating cash flows in Years 1, 2, 3?

Year 1 net operating cash flows = (Pretax Cost Saving * (1 - tax)) + (tax * Depreciation in year 1) = ($301,000 * (1 – 0.25)) + (0.25 * $321,634.50) = $306,159

Year 2 net operating cash flows = (Pretax Cost Saving * (1 - tax)) + (tax * Depreciation in year 2) = ($301,000 * (1 – 0.25)) + (0.25 * $428,942.50) = $332,986

Year 3 net operating cash flows = (Pretax Cost Saving * (1 - tax)) + (tax * Depreciation in year 3) = ($301,000 * (1 – 0.25)) + (0.25 * $142,916.50) = $261,479

c. What is the additional Year 3- cash flow (i.e. after tax salvage and the return of working capital)?

Additional Year 3- cash flow = NWC recovered + After-tax Salvage Value = $19,000 + $485,877 = $504,877

d. If the project's cost of capital is 12%, should the machine be purchased?

This can be determined from the net present value (NPV) calculated as follows:

NPV = -$984,000 + ($306,159/1.12^1) + ($332,986/1.12^2) + ($261,479/1.12^3) + ($504,877/1.12^3) = $100,287.71

Since the NPV of the machine of $100,287.71 is positive, the machine should be purchased.

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Answer:

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0.8=Equity Beta/1.4266

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