q-1 RBC Corporation is considering purchasing a new piece of equipment. The machine would cost $350,000 and has an estimated useful life of 6 years. Management estimates that the new machine will provide the following annual cash flows of $220,000 from customers, $80,000 from maintenance expenses and $20,000 other costs. The company is expecting a salvage value of $18,500 at the end of the machines useful life, and a maintenance expense of $185,000 at the end of year 3. Assume a discount rate of 10%

Required: (10 Marks)

A) Calculate the payback period

B) Calculate the NPV

C) Calculate the profitability index

D) Should the company move forward with this investment and why or why not? What other factors should they consider other than just financial factors?

Q2Top of Form

Which answer best describes variable costs?

Select one:

a. Costs that vary disproportionately in total at every activity level, and remain the same per unit.

b. Costs that decrease per unit at every activity level, and vary proportionately in total.

c. Costs that remain the same per unit at every activity level but vary proportionately in total.

d. Costs that remain the same in total but very per unit at every activity level.

q-3PTI Group manufactures electric vehicles, and as part of the process produce energy saving light bulbs to be used within the vehicles. The company needs to produce 24,000 light bulbs with the costs below:

Direct Materials: $227,000

Direct Labour: $330,000

Variable Overhead: $195,000

Fixed Costs: $175,000

Instead of paying $38.63 to produce each light bulb, the company could pay $35/light bulb and buy them already made from another manufacturing company. If this were the case their fixed costs would be reduced by 20%.

Required: (8 Marks)

A) Prepare an incremental analysis

B) State which option the company should select and why C) In an independent scenario, if the company chooses to buy the light bulbs it would free up some capacity so that they could rent out some space in their warehouse for an additional $60,000 revenue. Show how this would impact the incremental analysis above and state whether this changes the companies decision.

Question 4

Question text

The break-even point is where

Question 5

Adcor, Inc. sells air conditioners for $500 each. Variable costs are $200 per unit, and fixed costs total $300,000. What sales are needed by Adcor to break even?

a. $300,000.

b. $750,000.

c. $1,000.

d. $500,000.

a. total sales equal total variable costs.

b. total sales equal total fixed costs.

c. total variable costs equal total fixed costs.

d. contribution margin equals total fixed costs.

Question 6

A company budgeted unit sales of 204,000 units for January, 2017 and 240,000 units for February 2017. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 61,200 units of inventory on hand on December 31, 2016, how many units should be produced in January, 2017 in order for the company to meet its goals?

a. 204,000 units

b. 276,000 units

c. 193,200 units

d. 214,800 units

Question 7

Oxley Corp reported the following information for the current year: Sales (50,000 units) $400,000, direct materials and direct labor $150,000, other variable costs $25,000, and fixed costs $180,000. What is Oxley's break-even point in units?

a. 40,000.

b. 50,000.

c. 36,000.

d. 48,000.