Solve all questions.,,,

1.1.Lease or BuyMets nuclear research laboratory is contemplating leasing a diagnostic scanner (leasing is a common practice with expensive high-tech equipment). The scanner costs $6,300,000, and it would be depreciated straight-line to zero over four years. Because of radiation contamination, it actually will be completely worthless after four years. You can lease it for a lease payment of $1,875,000 per year for four years.

a.Lease or BuyAssume that the tax rate is 35 percent. You can borrow at 8 percent before taxes. Should the company lease or buy? (Calculate the Net Advantage to Leasing vs. Buying and see if it is positive or negative.) What is the Net Advantage to Leasing?

What is the net advantage (net disadvantage) to leasing from the Lessor's viewpoint (assume that that Lessor is in the same tax bracket (35%) as the Lessee. Showing your calculations.

tnding the Break-even Payment What would the lease payment have to be for both the lessor and lessee to be indifferent about the lease?

d.Taxes and Leasing Cash FlowsAssume that Mets does not anticipate paying taxes for the next four years. What are the cash flows from leasing in this situation? (Calculate the Net Advantage to Leasing vs. Buying)

e.Setting the lease payment.If the lessor pays taxes at 35% but the lessee does not pay taxes, over what range of lease payments will the lease be profitable to both parties?

f.MACRS Depreciation and LeasingRework part a. of problem #5 assuming that the scanner will be depreciated as three-year property under MACRS (remember the MACRS depreciation percentages are: 33%, 45%, 15%, 7%, for years 1, 2, 3, 4, respectively.) Assume Lessee's tax rate is 35%, as we assumed in part a.

2.

ART A:

A year ago, ken Inc. sold 20-year bonds at par with a coupon rate of 4.5 percent and semiannual payments. The face value of each bond is $1,000 and the yield to maturity is now 5.6 percent. What is the current value of each bond?

A. $923.09

B. $880.92

C. $872.35

D. $905.92

E. $868.66

PART B:

East &West CC bonds bear a coupon rate of 5.5 percent, payable annually. The bonds mature in 6.5 years, sell at par, and have a $1,000 face value. What is the yield to maturity?

A. 5.59%

B. 5.86%

C. 5.50%

D. 5.42%

E. 5.71%

3.Marketing / Sales Manager

You have been the marketing manager for Superior Dental Chair for over ten years. You know the company well and know that it has been struggling to remain competitive. You have been examining your sales force to determine what can be done to boost profit margins.

Retail Prices:

Supreme = $2200

Standard = $1750

Basic = $1000

Objectives:

Determine the monthly sales costs and profit margins for each product

Make sales staff determinations based on product selection strategy, staff needed, and productivity performance.

Staff earn $12 per hour plus 5% commission. Sales staff performance assumes each staff works a 40 hour work week (2080 hours per year / 12 months)

Total Volume

% Total Volume

Total Sales $

Salary

Commission

Total Sales Cost

Sales Productivity

Supreme

Standard

Basic

Total

Marketing / Sales Manager

Average Monthly Sales Data

Bob

Mary

John

Sam

Frank

Carol

Naomi

Total

Supreme

20

25

30

20

15

35

25

170

$

Standard

10

50

40

25

20

45

50

240

$

Basic

65

55

50

60

70

45

55

400

$

Hours

Monthly Salary

Commission

Total Volume

Total Sales

Total Productivity

Marketing / Sales Manager

Operations / Manufacturing Manager

You have been the operations manager for 5 years, but you have worked in the operations department for more than 10 years. You know each product line very well including which products are more efficient to produce. The new CEO has asked you for production numbers below.

Each product line is manufactured in separate facilities with separate equipment. Total monthly overhead for each building is $10,000. Each facility has the same production capacity which is dependent on the product type. Regardless of facility capacity per building is 200 per month for Supreme, 250 per month for Standard, and 400 per month for Basic.

You currently manufacture the number of chairs based on average sales from the prior month. However, you are not currently manufacturing to capacity. The capacity per unit is below but you will need to obtain the average sales volume to determine:

Productivity per unit

Total cost to produce per unit

Machine rate is $25 per hour and labor rate is $30 per hour for all products. The Supreme requires 12 machine hours and 18 labor hours each to produce. The Standard requires 5 machine hours and 10 labor hours. The Basic requires 3 machine hours and 5 labor hours. Material costs are $1100 for the Supreme, $800 for Standard and $300 for the Basic

Units Needed

Supreme

Standard

Basic

Labor Productivity

Machine Productivity

Multi-Factor Productivity

Capacity

Supreme

Standard

Basic

Labor Productivity

Machine Productivity

Multi-Factor Productivity

Supreme

Standard

Basic

Capacity

200

250

450

Needed

Material Costs

Machine Hours

Machine Rate

Total Machine

Labor Hours

Labor Rate

Total Labor

Building Overhead

Total Cost to Produce

Cost Each

16. ABC is significantly less costly to implement and maintain than thre thiemtional overhead costing systems. True False 17. When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool. True False 18. A company estimates that costs for the next year will be $500.000 for indirect labor, $50,000 for factory utilities, and $1,000,000 for the CEO's salary. The company uses machine hours as its overhead allocation base. If 25,000 machine hours are planned for this next year, then the plantwide overhead rate is $22 per machine hour. True False 15. A company estimates total overhead costs for the next year to be $1,200,000 and wishes to use direct labor hours as its overhead allocation base. This company makes two products; (1) Fancy X, which requires three direct labor hours per unit, and (2) Plain X. which requires one direct labor hour per unit. If the company plans to make 10,000 units of Fancy X and 10,000 units of Plain X, then each unit produced will be allocated the same amount of overhead. True False Malone Company sells two products Big X and Little X. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $510,000, The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $20 per hour and the company expects to manufacture 15,000 units of Big X and 18,000 units of Little X next year. Direct Material per Unit Direct Labor Dollars per Unit Big X Little X $12 20. Malone's plantwide overhead rate will be $20.98 per direct labor hour next year. True False 21. The departmental overhead rate method traces costs to each department and then determines an allocation base for each department. True False 22. True False Turtle Company produces t-shirts that go through two operations, cutting and sewing, before they are complete. Expected costs and activities for the two departments are shown below. Given this information the departmental overhead rate for the cutting department based on direct labor hours is $2.69 per direct labor hour (rounded to two decimals). Cutting Sewing Direct labor hours 250,000 DLH 75,000 DLH Machine hours 125,000 MH 150,000 MH Overhead costs $500,000 $375,000For items 12 to 13: Agusan Company is engaged in small export business. The company maintains limited record. The following balances are abstracted from the company's records for the year 2014: January 1 December 31 Account Receivable P 150,000 P 100.000 Account Payable 200,000 100,000 Account Receivable Written Off 5,000 Cash Received from costumers 2,100,000 Cash paid to trade creditors 1.400.000 Sales Discounts 15,000 Sales returns and allowances 10,000 Note receivable - Trade 50,000 100,000 Purchase discounts 20,000 Purchase returns 5.000 12. What is the amount of gross sale? A. P 2.055,000 B. P 2.080,000 C. P 2. 105,000 D. P 2,130,000 13. What is the amount of gross purchase? A. P 1,525,000 B. P 1,500,000 C. P 1,325,000 D. P 1,300,000 14. Camadillo Company reported the following changes in all the account balances for the current year, except for retained earnings: Increase (Decrease) Cash P 790,000 Accounts receivable, net 240.000 Inventory 1,270.000 Investments (470,000 Accounts payable 380,000) Bonds payable 820.000 Share capital 1,250,000 Share premium 130,000 There were no other entries in the retained earnings account except for net and dividend declaration of P 190,000 which was paid in the current year. What is the net income for the current year? A. P 1,200,000 B. P 1,190,000 C. P 200,000 D. P 10,000 15. Bart Company provided the following information for the current year: Disbursements for purchases P 5,800,000 Increase in trade accounts payable 500.000 Decrease in merchandise inventory 200.000 What is the cost of goods sold for the current year? A. P 6,500,000 B. P 6.100,000 C. P 5,500,000 D. P 5,100,000 16. During the first year, Exel Company issued 15,000 shares with P 100 par value at P 150 per share. At year-end, the entity issued 2,000 shares in payment of current obligations of P 250,000 Dividends of P 500,000 were paid during the year. Total liabilities at the end of the year amounted to P 200,000 and total assets at the end of the year equalled P 3,000,000. What is the net income for the first year of operations? A. P 1,500,000 B. P 800,000 C. P 500,000 D. P 300,000 17. Sunshine Company had total assets of P 4,000,000 and shareholders' equity of P 2,080,000 at the beginning of the year. During the year, assets increased by P 520,000 and liabilities decreased by P 820,000. What is the shareholders' equity at the end of the year? A. P 3,700,000 B. P 3,420,000 C. P 3,380,000 D. P 1,340,000 A17NC - 009 Page 3 of 4