Requirements 3. Division C also produces two product lines. Because the division can sell all of the product it can produce, Dixon is expanding the plant and needs to decide which product line to emphasize. To make this decision, the division accountant assembled the following data: (Click the icon to view the Division C product data.) After expansion, the factory will have a production capacity of 4,500 machine hours per month. The plant can manufacture either 28 units of K707s or 54 units of G582s per machine hour. a. Identify the constraining factor for Division C. b. Prepare an analysis to show which product line to emphasize. 4. Division D is considering two possible expansion plans. Plan A would expand a current product line at a cost of $8,410,000. Expected annual net cash inflows are $1,500,000, with zero residual value at the end of 10 years. Under Plan B. Division D would begin producing a new product at a cost of $8,150,000. This plan is expected to generate net cash inflows of $1,090,000 per year for 10 years, the estimated useful life of the product line. Estimated residual value for Plan B is $1,000,000. Division D uses straight-line depreciation and requires an annual return of 8%. a. Compute the payback, the ARR, the NPV, and the profitability index for both plans. b. Compute the estimated IRR of Plan A c. Use Excel to verify the NPV calculations in Requirement 4(a) and the actual IRR for the two plans. How does the IRR of each plan compare with the company's required rate of return? d. Division D must rank the plans and make a recommendation to Dixon's top management team for produce, DIXOTTIS expanding the plant and needs to becue WTC Product me to emphasize. To make this decision, the division accountant assembled the following data: Click the icon to view the Division C product data.) After expansion, the factory will have a production capacity of 4,500 machine hours per month. The plant can manufacture either 28 units of K707s or 54 units of G582s per machine hour. a. Identify the constraining factor for Division C. b. Prepare an analysis to show which product line to emphasize. 4. Division D is considering two possible expansion plans. Plan A would expand a current product line at a cost of $8,410,000. Expected annual net cash inflows are $1,500,000, with zero residual value at the end of 10 years. Under Plan B, Division D would begin producing a new product at a cost of $8,150,000. This plan is expected to generate net cash inflows of $1,090,000 per year for 10 years, the estimated useful life of the product line. Estimated residual value for Plan B is $1,000,000. Division D uses straight-line depreciation and requires an annual return of 8%. a. Compute the payback, the ARR, the NPV and the profitability index for both plans. b. Compute the estimated IRR of Plan A c. Use Excel to verify the NPV calculations in Requirement 4(a) and the actual IRR for the two plans. How does the IRR of each plan compare with the company's required rate of return? d. Division D must rank the plans and make a recommendation to Dixon's top management team for the best plan. Which expansion plan should Division D choose? Why? Data Table Per Unit K707 G582 Sales price $ 40 80 $ 29 24 Variable costs $ 51 $ 16 Contribution margin Contribution margin ratio 63.8% Print Done Dan Dion, majority stockholder and president of Dion, Inc. is working with his top managers on he plans for the company As the company's managerial accountant, you ve been asked to analyze the following sitions and make recommendations to the management team Read the requirements Requirement 3. Division Calso produces two product lines Because the division can set all of the product it can produce Deon is expanding the plant and needs to decide which product in to emphasise. To make this decision the division accountant assembled the following data Click the icon to view the Division product data) Aitor expansion, the factory will have a production capacity of 8.500 machine hours per month. The plant can manufacture eithet 28 units of K707s or 5 units of CSB?s per machine how 3a. Identify the constraining factor for Division C Division C's constraining factor is machine hours 3b. Prepare an analysis to show which product line to emphasize K707 16 Contribution margin per unit Units produced each hour 51 28 54 Contribution margin per machine hour
