60,000 $ 122,000
What is the a ) estimated variable cost per machine hour and what is the b ) estimated TOTAL fixed cost ?
Question 5 . Question : ( TCO 7 ) North Company produces a small part that it uses in the production of its Product " H ". The company ' s unit product cost for the part , based on a production of 100,000 parts per year , is as follows : ................................................. Per part .................... Total
parts to the North Company for only $ 21.25 per part .( it appears to the President of the company that he could save $ 2.75 per unit . 100 percent of the traceable or avoidable fixed manufacturing cost is supervisor salaries and other costs that can be ELIMINATED if the parts are purchased . The decision to buy the parts from the outside supplier would have no effect on the common fixed costs of the company , and the space being used to produce the parts would otherwise be idle . Ignore the impact of income taxes in your calculation . How much would profits increase or decrease as a result of purchasing the parts from the outside supplier rather than making them inside the company ?
Question 6 . Question : ( TCO 9 ) Harry Corp buys equipment for $ 194,000 that will last for 9 years . The equipment will generate cash flows of $ 36,000 per year and will have no salvage value at the end of its life . Ignore taxes . Use 10 % required rate of return .
( a ) What is the Present Value ( PV ) of this investment ( at 10 %)?
( b ) What is the NET Present Value ( NPV ) of this investment Should you buy the equipment if you need 10 %?