PELLYW7A3Problems

PELLYW7A3Problems - 3 $10,800.00 40% $4,320.00 $6,480.00 4...

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Regular Contract Sales Revenue $73.50 $41.65 Variable Costs $34.30 $34.30 Profit $39.20 $7.35 Fixed costs $12.60 $12.60 Net income $26.60 $(5.25) (5.25) x 500,000 tires = (2,625,000) 26.60 x 100,000 tires = 2,660,000 Total loss if went with contract = (5,285,000) No, the company would be at a loss since it costs more to manufacture the tire than what they are selling it for to the contract. Even with the amount of tires being sold into the contract, it is still wiser to sell to the original vendors
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Direct materials $2.05 Direct labor $3.60 Variable costs $2.70 Fixed costs $5.40 Total manufacturing costs $13.75 Markup $8.25 Minimum selling price $22.00
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Taxed at 40% Period Book value start Depreciation Expense Accumulated Depreciation Book value period end 1 $30,000.00 40% $12,000.00 $18,000.00 2 $18,000.00 40% $7,200.00 $10,800.00
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Unformatted text preview: 3 $10,800.00 40% $4,320.00 $6,480.00 4 $6,480.00 40% $2,592.00 $3,888.00 5 $3,888.00 40% $1,555.00 $2,333.00 MACRS Period Book value start Depreciation Expense Accumulated Depreciation Book value period end 1 $30,000.00 20% $6,000.00 $24,000.00 2 $24,000.00 32% $7,680.00 $16,320.00 3 $16,320.00 18% $2,938.00 $13,382.00 4 $13,382.00 15% $2,007.00 $11,375.00 5 $11,375.00 15% $1,706.00 $9,669.00 MACRS would be more beneficial because the ending book value is higher as opposed to the straight line rate Project number Added investment Expected after tax cash flow Ratio Life ROI 1 $100,000.00 $25,000.00 4 6 12% 2 $100,000.00 $30,000.00 3.3 4 8% 3 $40,000.00 $5,000.00 8 15 10% 4 $20,000.00 $10,000.00 2 2 1% 5 $50,000.00 $12,500.00 4 3 1% Rank 1 3 2 5 4...
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This note was uploaded on 02/12/2012 for the course MBA 551 taught by Professor Smith during the Spring '11 term at Indiana Wesleyan.

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PELLYW7A3Problems - 3 $10,800.00 40% $4,320.00 $6,480.00 4...

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