Answered step by step
Verified Expert Solution
Question
1 Approved Answer
i need answer for this Problems 7.26 and 7.27 Inventory at Cost Basis Problem 7.26 Apollo Data Systems is considering a promotional campaign that will
i need answer for this
Problems 7.26 and 7.27 Inventory at Cost Basis Problem 7.26 Apollo Data Systems is considering a promotional campaign that will increase annual credit sales by $484,000. The campany has a 60% cost of goods sold and will require investments in accounts receivable. inventory, and plant and equipment. The turnover for each is as follows: All $484,000 of the sales wil be collectible. However, collection costs wil be 2 percent of sales, and production and selling costs wil be 75 percent of sales. The cost to carry inventory will be 10 percent of inventory. Amortization expense on plant and equipment will be 4 percent of plant and equipment. The tax rate is 30 percent. Inventory is calculated using cost of goods sold and not sales a. Compute the investments in accounts recelvable, inventory, and plant and equipment based on the fumover ratios what is the torat value of the investment made? b. Compute the accounts receivable collection costs and production and selling costs and add the two figures together c. Compute the costs of carrying inventory. Cost of carrying inventory d. Compute the amortization expense on new plant and equipment: Amortization expense s e. Add together all the costs in parts b,c, and d Ttal cost $ f. Compute income after taxes. Income after taxes 9. If the firm has requlred return on investment of 18 percent, should it undentake the promotional campaign descrbed throughour thas problem? Yes No Problem 7.27 In the previous problem, if inventory nad anly been 2 times o. What would be the new value for inventory investment? inventofy investment toward computing income after taves. (Round the final onswer to t decimol plsce.) finte of return b. 2 . Snouid the campaign be undertakent" Problem 7.27 In the previous problem, if inventory had only been 2 times: a. What would be the new value for inventory investment? Inventory investment $ b.1 What would be the return on investment? You need to recompute the total investment and the totaf costs of the camiphign to work toward computing income after taxes. (Round the final answer to 1 decimal ploce.) Rate of return b.2 Should the campaign be undertaken Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started