Answer:
Roper Spring Water should not buy the machine, since it produces a negative net present.
Explanation:
Summary of Cash Flows on the Machine are as follows :
Year 0 = ($230,000)
Year 1 = $55,000
Year 2 = $65,000
Year 3 = $75,000
Year 4 = $75,000
Interest rate = 7%
Using the CFj Function of the Financial calculator this will be computed as :
($230,000) CF j 0
$55,000 CF j 1
$65,000 CF j 2
$75,000 CF j 3
$75,000 CF j 4
i/yr = 7%
Therefore Net Present Value is - $3,385.13
Since this is a negative Net Present Value, Roper Spring Water should not buy the machine.
Answer:
$2,800
Explanation:
The computation of the increase in consumption is shown below:
= Marginal propensity to consume × rise in income
= 0.70 × $4,000
= $2,800
Hence, the consumption would be increased by $2,800
We simply applied the above formula i.e. marginal propensity to consume is multiplied with the rise in income so that the correct answer could come
Answer:
$10,000
Explanation:
We need to find the segment margin of the deparment, which is equal to annual contribution margin minus avoidable fixed costs:
Wallen Corporation
Annual contribution margin $80,000
Annual fixed costs $160,000
Unavoidable fixed costs $90,000
Avoidable fixed costs $70,000
Segment Margin = Annual contribution margin - avoidable fixed costs
= $80,000 - $70,000
= $10,000
Therefore, if the company eliminated this department, it would have a financial advantage of $10,000, equivalent to the deparment's current segment margin.
Answer:
Dog Collar 10,000 units
Cat Collar 15,000 units
Explanation:
We have only constraint of 2,000 hours on the cutting machine.
First we will calculate the Contribution margin per hour
Contribution margin per hour = Contribution margin per unit / Numbers of hours required per unit
Dog Collar = $10 / (6/60)hours = 10 / 0.1 = $100 per hour
Cat Collar = $8 / (4/60) hours = $120 per hour
Pets Inc. will make Cat collar more than dog
Hours required for 15,000 unit of Cat Collar = 15000 x 4 / 60 = 1,000 hours
Hours for Dog Collars = 2,000 - 1000 = 1000 hour
Unit of Dog Collar = 1000 hours / (6/60) = 10,000 units
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