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Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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- Saved A company is considering the following three Investment projects (Ignore income taxes.): Investment required Present value of cash inflows Project C $46,800 $ 51,948 Project D $ 53,300 $ 61,828 Project E $110,500 $ 120,445 Rank the projects according to the profitablity index, from most profitable to least profitable. Multiple Choice D. C. E C.E. D E. C. D E. D. CA company is thinking of investing in one of two potential new products for sale. The projections are as follows: Year Revenue/cost £ (Product A) Revenue/cost £ (Product B)0 (150,000) outlay (150,000) outlay 1 24,000 12,0002 24,000 25,3333 44,000 52,0004 84,000 63,333 Calculate the IRR for Product B only using 3% and 15% to 2 d.p.Coffer Company is analyzing two potential investments. Project X Cost of machine Net cash flow: Year 1 Year 2 $ 85,470 Project Y $ 65,000 33,000 33,000 3,000 30,000 Year 3 Year 4 33,000 0 • 30,000 25,000 If the company is using the payback period méthod, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice Project Y. Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project.
- please colud you explain me what how you using calculator or computation to determine NPV or IRR. A firm has the following investment alternatives: Year A B C 1 $400 $--- $-- 2 400 400 --- 3 400 800 --- 4 400 800 1,800 Each investment costs $1,400, and the firm's cost of capital is 10 percent. a. What is each investment's internal rate of return? b. Should the firm make any of these investment? c. What is each investment's net present value? d. Should the firm firm make any of these investments?Dock Company is considering a capital investment in machinery: E (Click the icon to view the data.) 8. Calculate the payback. 9. Calculate the ARR. Round the percentage to two decimal places. 10. Based on your answers to the above questions, should Dock invest in the machinery? 8. Calculate the payback. Payback years - X Data Table Initial investment $ 1,500,000 Residual value 350,000 Expected annual net cash inflows 500,000 Expected useful life 4 years Required rate of return 9% Print DoneAverage rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic AssemblerOperating Income Robotic AssemblerNet Cash Flow WarehouseOperating Income WarehouseNet Cash Flow 1 $47,500 $152,000 $100,000 $243,000 2 47,500 152,000 76,000 205,000 3 47,500 152,000 38,000 144,000 4 47,500 152,000 17,000 99,000 5 47,500 152,000 6,500 69,000 Total $237,500 $760,000 $237,500 $760,000 Each project requires an investment of $500,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 15% for purposes of the net present value analysis. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747…
- EconomicS 2. Referring to the given data in 6.7/317 at the end of Chapter 6 (Engineering Economy by Sullivan et al), select the best alternative using: (a) PW (b) AW © FW (d) IRR 6-7. Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given next. The MARR is 20% per year. At the conclusion of the useful life, the investment will be sold. A в $28,000 $55,000 $40,000 Annual expenses $15,000 $13,000 $22,000 Annual revenues $23,000 $28,000 $32,000 $6,000 $8,000 $10,000 Investment cost Market value Useful life 10 years 10 years 10 years 26.4% 24.7% 22.4% IRR A decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation using the PW method. (6.4)Dogwood Company is considering a capital investment in machinery: (Click the icon to view the data.) 8. Calculate the payback. 9. Calculate the ARR. Round the percentage to two decimal places. 10. Based on your answers to the above questions, should Dogwood invest in the machinery? 8. Calculate the payback. Amount invested Expected annual net cash inflow Payback 1,500,000 24 500,000 3 years 9. Calculate the ARR. Round the percentage to two decimal places. Average annual operating income Average amount invested ARR Data Table Initial investment $ 1,500,000 Residual value 350,000 Expected annual net cash inflows 500,000 Expected useful life 4 years Required rate of return 15%Coffer Company is analyzing two potential investments. Cost of machine Project X $ 97,090 Net cash flow: Year 1 Year 2 Year 3 Year 4 Project Y $ 72,000 36,500 3,700 36,500 33,500 36,500 33,500 0 13,000 If the company is using the payback period method, and it requires a payback period of three years or less, which project(s) should be selected? Multiple Choice ○ Project Y. ○ Project X. Both X and Y are acceptable projects. Neither X nor Y is an acceptable project. Project Y because it has a lower Initial Investment.
- Porter Company is analyzing two potential Investments. Project X $ 97,090 Initial investment Net cash flow: Year 1 Year 2 Year 3 Year 4 Multiple Choice If the company is using the payback period method, and it requires a payback of three years or less, which project(s) should be selected? O 32,500 32,500 32,500 0 Both X and Y are acceptable projects. O Project Y. Project Y $ 77,000 Project Y because it has a lower Initial Investment. Project X 5,700 34,500 34,500 25,000 Neither X nor Y is an acceptable project.Average rate of return method, net present value method, and analysis for a service company The capital investment committee of Iguana Inc. is considering two capital investments. The estimated operating income and net cash flows from each investment are as follows: Year Robotic AssemblerOperating Income Robotic AssemblerNet Cash Flow WarehouseOperating Income WarehouseNet Cash Flow 1 $34,200 $105,000 $72,000 $168,000 2 34,200 105,000 55,000 142,000 3 34,200 105,000 27,000 100,000 4 34,200 105,000 12,000 68,000 5 34,200 105,000 5,000 47,000 Total $171,000 $525,000 $171,000 $525,000 Each project requires an investment of $360,000. Straight-line depreciation will be used, and no residual value is expected. The committee has selected a rate of 10% for purposes of the net present value analysis. Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621…You were approached with the task of assessing three supposedly value-enhancing investment opportunities your company is considering. The cash flows for each are listed below. Assume that all three projects are equally risky and have a discount rate of 6.00% per year. Time Project A Project B Project C 01234 -$250 -$1,200 -$1,800 $50 $300 $750 $50 $500 $350 $50 $600 $750 $50 $1,000 $450 Infinity $50 Calculate the payback period for project "B". Note: Report your answer in years rounded to two decimal places. If it is impossible to compute the answer, report 0.00 as your response.