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E12-27A Calculate NPV—equal annual cash infows (Learning objective 4) Use the NPV method to determine whether Olde West Products should invest in the following projects: • Project A costs $290,000 and oFers seven annual net cash in±ows of $63,000. Olde West Products requires an annual return of 14% on projects like A. • Project B costs $395,000 and oFers ten annual net cash in±ows of $71,000. Olde West Products demands an annual return of 10% on investments of this nature. Requirement What is the NPV of each project? What is the maximum acceptable price to pay for each project? E12-28A Calculate IRR—equal cash infows (Learning objective 4) Refer to Olde West Products in E12-27A. Compute the IRR of each project and use this information to identify the better investment. E3-19A Compute a predetermined overhead rate and calculate cost oF job based on direct labor costs (Learning Objectives 3 & 4) Dansville Restaurant Supply manufactures commercial stoves and ovens for restaurants and bakeries. The company uses job costing to calculate the costs of its jobs with direct labor cost as its manufacturing overhead allocation base. At the beginning of the current year, Dansville estimated that its overhead for the coming year would be $356,400. It also anticipated using 27,000 direct labor hours for the year. Dansville pays its employees an average of $24 per direct labor hour. Dansville just ²nished Job 371, which consisted of two large ovens for a regional bakery. The costs for Job 371 were as follows:
Job 371 Direct materials used $16,000 Direct labor hours used 125 Requirements 1. What is Dansville’s predetermined manufacturing overhead rate based on direct labor cost? 2. Calculate the manufacturing overhead to be allocated based on direct labor cost to Job 371. 3. What is the total cost of Job 371? S6-8 Use the high-low method (Learning objective 4) Three Brothers Catering uses the high-low method to predict its total overhead costs. Past records show that total overhead cost was $25,600 when 810 hours were worked and $27,700 when 910 hours were worked. If Three Brothers Catering has 835 hours scheduled for next month, what is the expected total overhead cost for next month? E7-40B Find breakeven and target proft volume (Learning Objectives 1 & 2) Hang Ten produces sports socks. The company has Fxed expenses of $80,000 and variable expenses of $0.80 per package. Each package sells for $1.60. Requirements 1. Compute the contribution margin per package and the contribution margin ratio. 2. ±ind the breakeven point in units and in dollars.
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