20

a.A certain pcomapny- known as company A can produce a total of 1,000 units. In doing so the cost for direct materials cost is $24,000, and direct labor cost $22,500. Total (fixed and variable) factory overhead cost is $18,000. The Estimated variable factory overhead cost is going to be 40% of direct labor cost. The place can purchase the 1,000 units externally from another company called ompany B for $49 per unit plus a 10% import tariff (tax). Calculate the decrease or increase in net income if company A accepts the company B offer.

b. Coco cola . makes cokes in 6-ounce containers . A standard daily production run of 500,000 units (containers) uses direct materials (DM): Cola at $8.20 per gallon, 100,000 pounds of syrup at $2.00 per pound and packaging cans that costs $0.03 per unit. The standard DM cost per unit of the finished drink is $0.85. Calculate the standard gallons of cola used to produce 500,000 containers of coke (round to nearest gallon).

c. An investment (equipment) costs $217,000 cash in its first year of operation and it is expected to have a residual value of $20,000 at the end of its four-year useful life. The equipment produces a product that is expected to generate annual sales of 3,500 units at a price of $50 per unit. The products manufacturing cost per unit is $42.00 including $8.40 per unit for factory depreciation. Calculate this investments net annual cash flow for its first year of operation AND Calculate this investments net annual cash flow for its fourth (final) year of operation.