The Delmar Beverage Co. produces a premium root beer that is sold throughout its chain of restaurants in the Midwest. The company is currently producing 1,900 gallons of root beer per day, which represents 80% of its manufacturing capacity. The root beer is available to restaurant customers by the mug, in bottles, or packaged in six-packs to take home. The selling price of a gallon of root beer averages $12, and cost accounting records indicate the following manufacturing costs per gallon of root beer: Raw materials Direct labor Variable overhead Fixed overhead Total absorption cost $2.06 1.67 1.61 2.03 $7.37 In addition to the manufacturing costs just described, Delmar Beverage incurs an average cost of $1.05 per gallon to distribute the root beer to its restaurants. SaveMore Inc., a chain of grocery stores, is interested in selling the premium root beer in gallon jugs throughout its stores in the St. Louis area during holiday periods and has offered to purchase root beer from Delmar Beverage at a price of $9.00 per gallon. SaveMore believes it could sell 475 gallons per day. If Delmar Beverage agrees to sell root beer to SaveMore, it estimates the average distribution cost will be $1.52 per gallon. Required: a. Identify all the relevant costs that Delmar Beverage should consider in evaluating the special sales order from SaveMore? (Round your answers to 2 decimal places.) Per Gallon Total relevant costs per gallon Required information [The following information applies to the questions displayed below.] The following capital expenditure projects have been proposed for management's consideration at Scott Inc. for the upcoming budget year: Use Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Project Year(s) $(58,000) Initial investment Amount of net cash return OHN $(54,000) 13,000 13,000 13,000 13,000 13,000 13,000 $ 4,423 1.08 26,000 26,000 26,000 13,900 $(115,000) 39,000 39,000 39,000 39,000 39,000 $(116,000) 11,600 23, 200 34,800 46,400 58,000 $(232,000) 75,000 75,000 41,000 41,000 41,000 41,000 5,491 6-10 Per year NPV (18% discount rate) Present value ratio Required: a. Calculate the net present value of projects B, C, and D, using 18% as the cost of capital for Scott Inc. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.) Project Net Present Value C Required information [The following information applies to the questions displayed below.] The following capital expenditure projects have been proposed for management's consideration at Scott Inc. for the upcoming budget year: Use Table 6-4 and Table 6-5. (Use appropriate factor(s) from the tables provided. Round the PV factors to 4 decimals.) Project Year(s) $(58,000) Initial investment Amount of net cash return $(54,000) 13,000 13,000 13,000 13,000 13,000 13,000 $ 4,423 1.88 26,000 26,000 26,000 13,900 $(115,000) 39,000 39,000 39,000 39,000 39,000 $(116,000) 11,600 23, 200 34,800 46,400 58,000 $(232,000) 75,000 75,000 41,000 41,000 41,000 41,800 $ 5,491 6-10 Per year NPV (18% discount rate) Present value ratio ? b. Calculate the present value ratio for projects B, C, D, and E. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Project Present Value Ratio
