Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Saxon Products, Inc., is investigating the purchase of a robot for use on the company's assembly line. Selected data relating to the robot are provided

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

Saxon Products, Inc., is investigating the purchase of a robot for use on the company's assembly line. Selected data relating to the robot are provided below: Cost of the robot Installation and software Annual savings in inventory carrying costs Annual increase in power and maintenance costs Salvage value in 5 years Useful life $ 1,950,000 $ 445,000 $ 230,000 $ 50,000 $ 79,000 5 years In addition to the data above, engineering studies suggest that use of the robot will result in a savings of 31,000 direct labor-hours each year. The labor rate is $18 per hour. Also, the smoother work flow made possible by the use of automation will allow the company to reduce the amount of inventory on hand by $420,000. This inventory reduction will take place at the end of the first year of operation; the released funds will be available for use elsewhere in the company. Saxon Products has a 23% required rate of return. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Determine the annual net cost savings if the robot is purchased. (Do not include the $420,000 inventory reduction or the salvage value in this computation.) 2-a. Compute the net present value of the proposed investment in the robot. 2-b. Based on these data, would you recommend that the robot be purchased? 3-a. Assume that the robot is purchased. However, due to unforeseen problems, software and installation costs were $95,000 more than estimated and direct labor could only be reduced by 22,500 hours per year, rather than the original estimate of 31,000 hours. Assuming that all other cost data is accurate, what would a postaudit suggest is the actual net present value of this investment? 3-b. Does it appear that the company made a wise investment? 4-a. Which of the following are intangible benefits associated with the new automated equipment? 4-6. Based on your analysis in Requirement 3 above, compute for the president the minimum dollar amount of annual cash inflow that would be needed from the benefits in part 4(a) for the automated equipment to yield a 23% rate of return. Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Req 2B Reg 3A Req 3B Req 4A Req 4B Determine the annual net cost savings if the robot is purchased. (Do not include the $420,000 inventory reduction or the salvage value in this computation.) Annual net cost savings Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Req 3A Req 3B Reg 4A Reg 4B Compute the net present value of the proposed investment in the robot. (Round your final answer to the nearest whole dollar amount.) Net present value Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Req 3A Req 3B Req 4A Reg 4B Based on these data, would you recommend that the robot be purchased? Yes ONO Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Reg 3A Reg 3B Req 4A Req 4B Assume that the robot is purchased. However, due to unforeseen problems, software and installation costs were $95,000 more than estimated and direct labor could only be reduced by 22,500 hours per year, rather than the original estimate of 31,000 hours. Assuming that all other cost data is accurate, what would a postaudit suggest is the actual net present value of this investment? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Show less Net present value Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Reg 3A Req 3B Req 4A Req 4B Does it appear that the company made a wise investment? Yes O No Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Req 2B Reg 34 Req 3B Req 4A Req 4B Which of the following are intangible benefits associated with the new automated equipment? (Select which of the following statements (is) are true by selecting an "X".) Reduction in inventories Greater throughput Increase in inventories Greater variety of products Higher quality Reduced cost per unit of raw material Complete this question by entering your answers in the tabs below. Reg 1 Reg 2a Req 2B Reg 3A Req 3B Req 4A Req 4B Based on your analysis in Requirement 3 above, compute for the president the minimum dollar amount of annual cash inflow that would be needed from the benefits in part 4(a) for the automated equipment to yield a 23% rate of return. (Round your final answer to the nearest whole dollar amount.) Amount of annual cash inflow

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managing IoT Systems For Institutions And Cities Internal Audit And IT Audit

Authors: Chuck Benson

1st Edition

1138590487, 978-1138590489

More Books

Students also viewed these Accounting questions

Question

1-4 How will MIS help my career?

Answered: 1 week ago