Answer: Increase by $3,500
Explanation:
The Net Working Capital of a company is calculated by subtracting Current liabilities from current assets.
Raw materials are current assets and Accounts Payable are current liabilities.
The Net working capital resulting from accepting this project is;
= 12,000 - 8,500
= $3,500
Net Working capital investment would increase by $3,500.
1. Compute its predetermined overhead rate as a percent of direct labor.
2. Compute its overhead cost as a percent of direct materials.
Answer:
(1) 22%
(2) 56%
Explanation:
Given that,
Direct labor = $536,000;
Direct materials = $211,000;
Factory overhead = $119,000
(1) Predetermined overhead rate as a percent of direct labor is simply calculated by dividing the factory overhead by its direct labor cost.
Predetermined overhead rate as a percent of direct labor:
= (Factory overhead ÷ Direct labor) × 100
= ($119,000 ÷ $536,000) × 100
= 0.22 × 100
= 22%
(2) Predetermined overhead rate as a percent of direct materials is simply calculated by dividing the factory overhead by its direct material cost.
Predetermined overhead rate as a percent of direct material:
= (Factory overhead ÷ Direct material) × 100
= ($119,000 ÷ $211,000) × 100
= 0.56 × 100
= 56%
Answer:
The Annual Operating Cash Flow is $1,029,811.43
Explanation:
Initial Investment = Cost of Machine + Modification Cost
Initial Investment = $2,575,000 + $375,000
Initial Investment = $2,950,000
Salvage Value = $0
Useful Life = 7 years
Depreciation per year = (Initial Investment - Salvage Value) / Useful Life
Depreciation per year = ($2,950,000 - $0) / 7
Depreciation per year = $421,428.57
Annual Operating Cash Flow = (Sales – Operating Costs) * (1 – Tax Rate) + Tax Rate * Depreciation
Annual Operating Cash Flow = ($1,890,000 - $454,600) * (1 - 0.40) + 0.40 * $421,428.571
Annual Operating Cash Flow = $1,435,400 * 0.60 + 0.40 * $421,428.571
Annual Operating Cash Flow = $1,029,811.4284
Annual Operating Cash Flow = $1,029,811.43
The annual operating cash flow for ABC after considering costs related to the machine investment, increased sales, and taxes, is $1,034,097.
To compute the annual operating cash flow, we first add up the total cost of the machine. This includes the purchase price of the machine which is $2,575,000, the cost of modifications which is $375,000, and the additional inventory investment of $75,000. This gives a total investment cost of $3,025,000. Given that this will be depreciated straight-line over 7 years with no salvage value, the annual depreciation expense will be $3,025,000 / 7 = $432,143.
The machine is expected to increase ABC's sales revenues by $1,890,000 per year, but will also increase operating costs excluding depreciation by $454,600. Therefore, the total annual income before tax would be the increased sales ($1,890,000) minus the increased costs ($454,600) and the depreciation ($432,143), which equals $1,003,257.
As ABC's tax rate is 40%, the annual tax payable will be: $1,003,257 * 0.4 = $401,303. The annual income after tax is then $1,003,257 - $401,303 = $601,954. Finally, we must remember to add back the depreciation (as it is a non-cash item) to get to EBIT. This gives us a final operating cash flow of $601,954 + $432,143 = $1,034,097.
#SPJ11
Answer:
The Cost of Manufactured Goods 9,998,145
Explanation:
The question is to determine Choco-rama's Cost of Goods Manufactured for the 2016 Fiscal Year.
CHOCO RAMA COST OF GOODS MANUFACTURED FOR THE 2016 FISCAL YEAR
Description Amount ($) Amount ($)
Opening Inventory of Raw materials 42,385
Add: Purchase of raw materials 387,521
Direct raw materials available 429,906
Subtract: Closing raw materials (44,299)
Raw materials in Production 385,607
Add:
Direct labour ($388,400 x $23.60) 9,166,240
Manufacturing overhead 451,850
The total manufacturing costs 10,003,697
Add: Opening Work-in-Progress 22,655
10,026,352
Subtract: Closing work-in-progress (28,207)
The Cost of Manufactured Goods 9,998,145
The question discusses inventory management at Jill's Job Shop. For Tegdiws, a reorder level is calculated based on the annual demand, lead time, and the fact that orders are placed as soon as this level is reached. Widgets are ordered every four weeks, so the ordering quantity is determined considering the holding cost and safety stock.
The question revolves around the concept of inventory management at Jill's Job Shop. Given the figures, we're looking at two factors here- reorder level for Tegdiws and fixed interval time for ordering Widgets. The primary consideration is to minimize holding costs while ensuring enough quantity is available to meet demand throughout the year.
For Tegdiws, the reorder level must be calculated to ensure that when the remaining quantity reaches this level, a new order is placed. This level is typically the amount necessary to meet demand during the lead time. Given an annual demand of 11,000 units, a lead time of 4 weeks, and a 52-week year, the reorder level for Tegdiws would be around 846 units.
On the other hand, Widgets are ordered every four weeks, so the quantity of each order should be calculated to meet the four-week demand while considering the holding cost and safety stock. With an Annual demand of 8,000 units and a 52-week year, the quantity for each order of Widgets would be approximately 615 units.
#SPJ2
Answer:
EOQ = √ 2DCo/H
D = Annual demand
Co = Ordering cost per order
H = Holding cost per item per annum
TEGDIWS
D = 11,000 units
C0 = $110
H = 10% x $15 = $1.5
EOQ = √2 x 11,000 x $110
$1.5
EOQ = 1,270 units
WIDGET
D = 8,000 units
Co = $10
H = 20% x $8 = $1.6
EOQ =√ 2 x 8,000 x $10
$1.6
EOQ = 316 units
Explanation:
EOQ is equal to the square root of 2 multiplied by annual demand and ordering cost divided by holding cost.
Year 2 Year 3
Amounts billed to customers for services rendered $ 320,000 $ 420,000
Cash collected from credit customers 230,000 370,000
Cash disbursements:
Payment of rent 77,000 0
Salaries paid to employees for services rendered during the year 137,000 157,000
Travel and entertainment 27,000 37,000
Advertising 13,500 32,000
In addition, you learn that the company incurred advertising costs of $24,000 in year 2, owed the advertising agency $4,900 at the end of year 1, and there were no liabilities at the end of year 3. Also, there were no anticipated bad debts on receivables, and the rent payment was for a two-year period, year 2 and year 3.
Required:
1. Calculate accrual net income for both years.
2. Determine the amount due the advertising agency that would be shown as a liability on RPG’s balance sheet at the end of year 2.
Answer:
RPG Company
1. Accrual Net Income for Year 2 and Year 3:
Year 2 Year 3
Amounts billed to customers for services $ 320,000 $ 420,000
Expenses:
Rent 38,500 0
Salaries paid to employees for services 137,000 157,000
Travel and entertainment 27,000 37,000
Advertising 24,000 16,600
Net Income $93,500 $170,900
2. Determination of the liability for Advertising:
Advertising Expense:
Year 1 balance = $4,900
Year 2 = $24,000
Cash paid (13,500)
Balance $15,400
Explanation:
a) Data and Calculations:
RPG Company.
Year 2 Year 3
Amounts billed to customers for services $ 320,000 $ 420,000
Cash collected from credit customers 230,000 370,000
Cash disbursements:
Payment of rent 77,000 0
Salaries paid to employees for services 137,000 157,000
Travel and entertainment 27,000 37,000
Advertising 13,500 32,000
Year 2 Year 3
Service Revenue: $ 320,000 $ 420,000
Accounts Receivable
Service revenue $320,000
Cash collected 230,000
Balance Year 2 $90,000
Service revenue 420,000
Cash collected 370,000
Balance Year 3 $50,000
Advertising Expense:
Year 1 balance = $4,900
Year 2 = $24,000
Cash paid (13,500)
Balance $15,400
Year 3 = 16,600
Cash paid 32,000
Balance 0
The accrual net income for RPG Company in Year 2 is $55,000, and in Year 3 is $194,000. The amount due to the advertising agency shown as a liability on RPG's balance sheet at the end of Year 2 is $0, as it was completely paid off in that year.
In order to calculate the accrual net income and determine the liability of the advertising agency, we first need to correctly account for all the incomes and expenses. Here's how it works:
Accrual net income is calculated as revenues (Amounts billed to customers) minus expenses. For year 2, the expenses include Payments of rent, Salaries paid, Travel and entertainment, and Advertising costs. For year 3, as there was no rent payment and no liabilities at the end of the year, we deduct only the Salaries paid, Travel and entertainment, and Advertising costs from the revenues.
Revenues
Year 2: $320,000
Year 3: $420,000
Expenses
Year 2: Rent($77,000) + Salary($137,000) + Travel & Entertainment($27,000) + Advertising($24,000) = $265,000
Year 3: Salary($157,000) + Travel & Entertainment($37,000) + Advertising($32,000) = $226,000
Accrual Net Income
Year 2: $320,000 - $265,000 = $55,000
Year 3: $420,000 - $226,000 = $194,000
The amount owed to the advertising agency that should be considered as a liability at the end of year 2 can be figured out by taking into account the advertising expenses incurred in year 2 and the previous year's outstanding. But since we learn that there were no liabilities at the end of year 3, the outstanding $4,900 at the end of year 1 must be paid in year 2 along with the incurred cost of $24,000. Therefore, the liability at the end of year 2 would be $0.
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