Managerial Accounting $4$B Test #$4($Chapters $12-14)$

Part $2.$ Problems. There are six problems. Each one is worth the score indicated next to the problem number. Show all work for complete credit. You may attach extra pages if you so desire. Please be NEAT when writing your answers. I cannot grade illegible answers. $(40$ points possible$)1.(10$ points$)$ Fothergill Company makes $40,000$ units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials$$23\mathrm{.}40$ Direct labor$22\mathrm{.}30$ Variable manufacturing overhead$1\mathrm{.}40$ Fixed manufacturing overhead $24\mathrm{.}60$ Unit product cost$$71\mathrm{.}70$ An outside supplier has offered to sell the company all of these parts it needs for $$59\mathrm{.}10$ a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $$390,000$ per year.If the part were purchased from the outside supplier, all of the direct labor, direct materials and variable manufacturing overhead costs of the part would be avoided. However, $$21\mathrm{.}90$ of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.Required:a$.$ How much of the unit product cost of $$71\mathrm{.}70$ is relevant in the decision of whether to make or buy the part?b$.$ What is the net total dollar advantage or $($disadvantage$)$ of purchasing the part rather than making it$?($remember that the facility could be used to produce a different product if we purchased the parts from the outside$).$c$.$ What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all $40,000$ units required each year? $2.(10$ points$)($Ignore income taxes in this problem.$)$ Axillar Beauty Products Corporation is considering the production of a new conditioning shampoo which will require the purchase of new mixing machinery. The machinery will cost $$310,000,$ is expected to have a useful life of $10$ years, and is expected to have a salvage value of $$35,000$ at the end of $10$ years. The machinery will also need a $$25,000$ overhaul at the end of year $6.$ A $$40,000$ increase in working capital will be needed for this investment project. The working capital will be released at the end of the $10$ years. The new shampoo is expected to generate net cash inflows of $$80,000$ per year for each of the $10$ years. Axillar's discount rate is $12\%.$Required:a$.$ What is the net present value of this investment opportunity?b$.$ Based on your answer to $($a$)$ above, should Axillar go ahead with the new conditioning shampoo? DescriptionCash FlowPV$/$PVA FactorPV of Cash FlowPurchase Machine Working Capital Overhaul yr$.6$ Annual Cash Inflows Salvage Value Release of Working Capital Net Present Value $3.(4$ points$)($Ignore income taxes in this problem.$)$ Jimmy Chitwood, Inc. is considering a project that is estimated to generate annual cash inflows of $$35,000.$ The equipment required for the project would cost $$266,210.$ The project would last $15$ years. What is the projects internal rate of return $($round to the nearest percent.$)4.(6$ points$)$ The management of Unter Corporation, an architectural design firm, is considering an investment with the following cash flows: YearInvestmentCash Inflow$1$$$13,000$$$1,0002$$$7,000$$$2,0003$ $$2,5004$ $$4,0005$ $$5,0006$ $$4,0007$ $$5,0008$ $$4,0009$ $$3,00010$ $$2,000$ Determine the Payback Period. $5.(4$ points$)$ Management of Mittel Company would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported: Inspection time$1\mathrm{.}2$daysWait time $($from order to start of production$)3\mathrm{.}4$daysProcess time$4\mathrm{.}5$daysMove time$0\mathrm{.}9$daysQueue time$3\mathrm{.}1$days Required:$1.$ Compute the throughput time. $2.$ Compute the manufacturing cycle efficiency $($MCE$)$ for the quarter. $3.$ Compute the delivery cycle time. $6.(6$ points$)$ Imperial Jewelers manufactures and sells a gold bracelet for $$209\mathrm{.}95.$ The companys accounting system says that the unit product cost for this bracelet is $$169\mathrm{.}00$ as shown below: Direct materials$$84\mathrm{.}00$Direct labor $45\mathrm{.}00$Manufacturing overhead $40\mathrm{.}00$Unit product cost$$169\mathrm{.}00$ The members of a wedding party have approached Imperial Jewelers about buying $25$ of these gold bracelets for the discounted price of $$155\mathrm{.}95$ each. The members of the wedding party would like special filigree applied to the bracelets that would increase the direct materials cost per bracelet by $$4\mathrm{.}00.$ Imperial Jewelers would also have to buy a special tool for $$300$ to apply the filigree to the bracelets. The special tool would have no other use once the special order is completed. To analyze this special order opportunity, Imperial Jewelers has determined that most of its manufacturing overhead is fixed and unaffected by variations in how much jewelry is produced in any given period. However, $$8\mathrm{.}00$ of the overhead is variable with respect to the number of bracelets produced. The company also believes that accepting this order would have no effect on its ability to produce and sell jewelry to other customers. Furthermore, the company could fulfill the wedding partys order using its existing manufacturing capacity. Required:$1.$ What is the financial advantage $($disadvantage$)$ of accepting the special order from the wedding party?