A customer has requested that Gamba Corporation fill a special order for 2,400 units of product Q41 for $29 a unit. While the product would be modified slightly for the special order, product Q41's normal unit product cost is $23.10: $ 6.00 Direct materials Direct labor 6.00 Variable manufacturing 3.10 overhead Fixed manufacturing 8.00 overhead $23.10 Unit product cost Direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product Q41 that would increase the variable costs by $1.60 per unit and that would require an investment of $14,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operating income would increase (decrease) by: 14,200 2.200 (13,700) 15:520 Assume you have two options: Receive $12,000 five years from now or receive $13,500 seven years from now. Which would have a higher present value assuming a 5% discount rate? EXHIBIT 11B-1 Present Value of $1:17 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.025 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.587 0.543 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0:507 0.480 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.678 0.614 0,558 0.508 0.463 0.422 0.388 0.352 0.322 0.295 EXHIBIT 118-2 Present Value of an Annuity of $1 in Arrears: cabal 4% 5% Periods 6% 79 04% 10% 11% 12% 13% 0.962 1.888 2.775 3.630 4.452 0.952 0.943 1.859 1.833 2.723 2.673 3.546 3.465 4.3294212 0.935 1.808 2624 3.387 4 100 0.926 1.782 2.577 3.312 3.993 0.917 0.909 0.901 0.893 0.885 1.759 1.736 1.713 1.890 1.668 2.581 2.487 2.444 2.402 2.361 3.240 3.170 3.102 3.037 2.974 3.890 3.791 3.898 3.805 3.517 5.242 5.076 4 917 6.002 5.786 5.582 8.733 5.463 6210 7.435 7.108 6.802 8.111 7.722 7380 4.787 5.389 5.971 6.515 7.024 4.623 4.488 4.355 4 231 4.111 3.998 5.206 5.033 4.868 4.712 4.564 4.423 5.747 5535 5.335 5.148 4.968 4.799 6 247 5.995 5.759 5.537 5328 5.132 6.710 6.418 6.145 5.859 5650 5.425 10 $12.000 five years from now 513 500 seven years from now
