Please leave Column A blank as I would like to use it for marking purposes. When Mr. Ree Active, president and chief executive of Precious Products Inc., first saw the segmented income statement below, he flew into his usual rage: "When will we ever start showing a real profit? I'm starting immediate steps to eliminate those two unprofitable lines!" Product Lines v U Sales Variable expenses Contribution margin Traceable fixed expenses* Common expenses, allocated Operating income (loss) Total $250,000 119,000 131,000 98,000 32,900 $100 $100,000 37,000 63,000 31,000 18,000 $14,000 $75,000 35,000 40,000 37,000 10,500 -$7,500 W $75,000 47,000 28,000 30,000 4,400 -$6,400 *These traceable expenses could be eliminated if the product lines to which they are traced were discontinued. Required: Recommend which segments, if any, should be eliminated. Prepare a report in good form to support your answer. (5 marks) Hutchison Inc. makes three products. Information related to these products are as follows: Selling price per unit $ Direct materials per unit $ Direct labour per unit $ Variable manufacturing overheard $ Variable selling cost per unit $ Mixing minutes per unit Monthly demand in units Products X Y 67.90 $ 57.70 $ 12.10 $ 10.30$ 14.10 $ 8.00 $ 2.60 $ 2.20 $ 2.50 $ 2.20 $ 2.7 3.3 1,000 3,000 z 43.90 8.60 6.80 1.80 2.50 4.7 3,000 The mixing machines are potentially the constraint in the production facility. A total of 25,800 minutes are available per month on these machines. Direct materials and direct labour are variable costs. Required: a. How many minutes of mixing machine time is required to meet demand for all three products? (2 marks) b. How much of each product should be produced to maximize operating profits? (6 marks) C. Up to how much should Hutchison be willing to pay for one additional hour of mixing machine time if they made the best use of the existing mixing machine capacity? (2 marks) Barry Cabs is a sole proprietorship that owns and operates one taxi cab. The company purchased its cab 5 years ago for $40,000. When it purchased the cab it expected it to be useful for 8 years with a residual value of $5,000. Barry thinks he could sell the cab today for $14,000. Barry is considering replacing the old cab with a new, all-electric taxi. The all electric car would cost $60,000 and would have an expected useful life of 8 years. Over its 8 year life, the cab would reduce annual operating costs (mostly gas and maintenance) by $8,000 per year for the first 6 years, and $10,000 per year thereafter. After 8 years, it is expected the taxi would have a $2,000 residual value. Barry's cost of borrowing is 15% and assume no tax implications. Required: 1 What is the payback period for replacing the ting cab with the ne electric taxi? marks) 2 What is the net present value of replacing the existing cab with the new electric one? (4 marks) 3 What is the internal rate of return for replacing the existing cab with the new electric one? (2 marks) 4 What is the profitability index for replacing the existing cab with the new electric one? (2 marks) Please leave Column A blank as I would like to use it for marking purposes. When Mr. Ree Active, president and chief executive of Precious Products Inc., first saw the segmented income statement below, he flew into his usual rage: "When will we ever start showing a real profit? I'm starting immediate steps to eliminate those two unprofitable lines!" Product Lines v U Sales Variable expenses Contribution margin Traceable fixed expenses* Common expenses, allocated Operating income (loss) Total $250,000 119,000 131,000 98,000 32,900 $100 $100,000 37,000 63,000 31,000 18,000 $14,000 $75,000 35,000 40,000 37,000 10,500 -$7,500 W $75,000 47,000 28,000 30,000 4,400 -$6,400 *These traceable expenses could be eliminated if the product lines to which they are traced were discontinued. Required: Recommend which segments, if any, should be eliminated. Prepare a report in good form to support your answer. (5 marks) Hutchison Inc. makes three products. Information related to these products are as follows: Selling price per unit $ Direct materials per unit $ Direct labour per unit $ Variable manufacturing overheard $ Variable selling cost per unit $ Mixing minutes per unit Monthly demand in units Products X Y 67.90 $ 57.70 $ 12.10 $ 10.30$ 14.10 $ 8.00 $ 2.60 $ 2.20 $ 2.50 $ 2.20 $ 2.7 3.3 1,000 3,000 z 43.90 8.60 6.80 1.80 2.50 4.7 3,000 The mixing machines are potentially the constraint in the production facility. A total of 25,800 minutes are available per month on these machines. Direct materials and direct labour are variable costs. Required: a. How many minutes of mixing machine time is required to meet demand for all three products? (2 marks) b. How much of each product should be produced to maximize operating profits? (6 marks) C. Up to how much should Hutchison be willing to pay for one additional hour of mixing machine time if they made the best use of the existing mixing machine capacity? (2 marks) Barry Cabs is a sole proprietorship that owns and operates one taxi cab. The company purchased its cab 5 years ago for $40,000. When it purchased the cab it expected it to be useful for 8 years with a residual value of $5,000. Barry thinks he could sell the cab today for $14,000. Barry is considering replacing the old cab with a new, all-electric taxi. The all electric car would cost $60,000 and would have an expected useful life of 8 years. Over its 8 year life, the cab would reduce annual operating costs (mostly gas and maintenance) by $8,000 per year for the first 6 years, and $10,000 per year thereafter. After 8 years, it is expected the taxi would have a $2,000 residual value. Barry's cost of borrowing is 15% and assume no tax implications. Required: 1 What is the payback period for replacing the ting cab with the ne electric taxi? marks) 2 What is the net present value of replacing the existing cab with the new electric one? (4 marks) 3 What is the internal rate of return for replacing the existing cab with the new electric one? (2 marks) 4 What is the profitability index for replacing the existing cab with the new electric one? (2 marks)