Pool Inc is considering dropping its water toy department due to continued net operating losses. Results for the most recent year for the water toy department is shown below: Amount Description Sales (4,000 units) $64,000 Variable expenses | $44,000 Contribution margin | $20,000 Fixed expenses $30,000 Net operating loss || ($10,000) If the water toy department were discontinued, the company would still incur $12,000 per year of fixed costs. The remainder of the fixed costs are avoidable. The annual financial advantage (disadvantage) for the company from discontinuing the production and sales of the water toy department would be: $2,000 disadvantage R$2,000 advantage $8,000 disadvantage $8,000 advantage The following are Hibiscus Company's cost of making and selling an item: Description Amount per unit Direct materials $9 Direct labor $4 Variable manufacturing overhead $2 Fixed manufacturing overhead $5 Variable selling and administrative $2 Fixed selling and administrative A one-time only special order has been received for 600 units. The company has capacity to accept the oder and it would not affect regular sales. The sales price for the special order is $26 per unit. Total fixed costs would not be affected by this order. The variable selling and administrative costs would have to be incurred for this special order. The order would require an additional $3 per unit for specialized materials and a new machine that costs $2,000. What is the financial advantage or disadvantage of accepting the special order? $3,600 advantage . $1,600 advantage 0 $2,400 disadvantage 0 $2,800 advantage 0 Bronze Company currently manufactures the bike seats that are installed on its bikes. The cost to produce 300 bike seats last year were as follows: Cost per bike seat Direct materials $6 $2 Direct labor Variable manufacturing overhead Fixed manufacturing overhead $4 $10 A supplier has offered to provide Bronze Company with all of its bike seat needs for $18 per bike seat. Fixed manufacturing overhead of $6 per bike would be unavoidable even if the company decided to accept the supplier's offer. Question Answer 1. Based on this information, what is the financial advantage or disadvantage of Bronze Company buying the bike seats from the supplier instead of making internally? 2. If the buy option is selected, the company will be able to use the freed up space to generate an additional $500 of income each year to produce and sell more of another product. Based on this information, what is the financial advantage or disadvantage of Bronze Company buying the bike seats from the supplier instead of making internally? An investment project requires an initial investment of $185,000. The project is expected to generate net cash inflows of $37,500 per year for the next five years. These cash inflows occur evenly throughout the year. Assuming a 12% discount rate, the project's payback period is? (Ignore income taxes) O A. 0.20 years O B. 4.93 years C 3.61 years OD. 4.34 years At an interest rate of 14%, approximately how much would you need to invest today if you wanted to have $1,000,000 in 10 Years? Use the selections from the present value tables below: Present Value of $1 Present Value of an Annuity of $1 Period 7% 14% Period 7% 14% | 0.713 0.519 4.100 3.433 5 10 20 10 7.024 5.216 L 0.508 0.270 | 0.258 || 0.073 | 20 10.594 6.623 All answers are rounded to the nearest dollar. $270,000 O A. $150,989 O c. $73,000 OD. $191,718
