Equipment costing P1M is expected to produce 10,000 pieces of pipes during its econpmic life before being replaced. Annual production of this equipment is 2,500 pipes. The equipment's scrap value is estimated at P50,000. The cost of housing the equipment is P25,000 per year. Costs of power and maintenahce per unit are P9.00 and P7.00, respectively. Cost of labor is P35.00 per unit. Use sinking fund method of depreciation with i-12%. What is the total fixed cost per unit? O P168.98 O P137.51 O P114.76 O P121.87
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- A machine costing P 95,000 is expected to produce 10,000 units of a certain products during its entire life before being replaced. At the end of its life, it will have a scrap value of P 5,000. The cost of housing the machine is P 2,500 a year. The power consumption per unit is P 0.90 and the maintenance of the machine per unit will be P 0.70. Labor costs P 3.50 per unit. If depreciation is by declining balance method, determine the cost per unit in its 3rd year of operation if the annual production is 2500 units.A processing plant consumed 650,000 kW of electric energy annually and pays an average of P6.50 per kWh. Astudy is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost P6,500,000. Annual operation and maintenance, P1,230,000. Other expenses P305,000 per year. Life of power plant is 16 years; salvage value at the end of life is P550,000; annual taxes and insurances, 6.5% of first cost; and rate of interest is 20%. Using the sinking fund method for depreciation, determine if the power plant is justifiable.The equipment needed to manufacture a product costs $1,000,000 to purchase. This equipment has a life of 5 years and a salvage value of $100,000. Fixed costs for this equipment are $50,000 per year while variable costs are $200 per unit of finished product. Assuming that an annual interest of 6% is used to account for the time value of money: (a) Find the equivalent uniform annual cost associated with this equipment when 10,000 units of finished product are produced each year. (b) Now suppose that each unit of finished product generates $300 in revenue. How many units need to be produced each year in order to break even on this equipment?
- A company plans to manufacture a product and sell it for $3.00 per unit. Equipment to manufacture the product will cost $250,000 and will have a net salvage value of $12,000 at the end of its estimated economic life of 15 years. The equipment can manufacture up to 2,000,000 units per year. Direct labor costs are $0.25 per unit, direct material costs are $0.85 per unit, variable administrative and selling expenses are $0.25 per unit, and fixed overhead costs are $200,000, not including depreciation. If straight-line depreciation is used, what is the number of units that the company must manufacture and sell to yield a before-tax profit of 20%?The equipment needed to manufacture a product costs $1,000,000 to purchase. This equipment has a life of 5 years and a salvage value of $100,000 Fixed costs for mis equipment are $50.000 per year while variable costs are $200 per unit of finished product. Assuming that an annual interest of 9% is used to account for the time value of money (a) Find the equivalent uniform annual cost associated with this eqaipment when 10.000 units of finished product are produced each year. (b) Now suppose that each unit of finished product generates $300 in revenue How many units need to be produced each year in order to break even on this equipment?A food processing plant consumed 600,000 kwh of electric energy annually and pays an average of ₱2.00 per kwh. A study is being made to generate its own power to supply the plant the energy required, and that the power plant installed would cost ₱2,000,000. Annual operation and maintenance, ₱800,000. Other expenses, ₱100,000 per year. Life of power plant is 15 years; salvage value at the end of life is ₱200,000; annual taxes and insurance, 6% of first cost; and rate of interest is 15%. Using the sinking fund method for depreciation, determine if the power plant is justifiable? Ans: Rate of return is 7.11%, the power plant is not a good investment.
- A coal fired Power plant with 30,000 kw rated capacity costs P 15,000 per kw installed. Annual operating cost, P 12 million; annual maintenance cost, P 8 million; annual depreciation, P 15 million; interest on investment per year, 8%; cost of coal, P 800 per ton. If one pound of coal is needed to generate 1 kwh, find the total annual cost to operate the plant assuming plant capacity factor of 50%.Machine A costs $1,520,000 to buy and install and costs $48,000 per year to operate. The machine has a five-year useful life and zero salvage value. The required return is 15.5%. What is the equivalent annual cost of Machine A? (Answer: $506,819)An existing machine in a factory has an annual maintenance cost of P40,000. A new and more efficient machine will require an investment of P90,000 and is estimated to have salvage value of P30,000 at the end of 8 years. Its annual expenses for maintenance and upkeep etc. is total of P 22,000. if the company expects to earn 12% on its investment, will it be worthwhile to purchase the new machine using the present worth. Use PW Method
- An existing machine in a factory has an annual maintenance cost of P40,000. A new and more efficient machine will require an investment of P90,000 and is estimated to have salvage value of P30,000 at the end of 8 years. Its annual expenses for maintenance and upkeep etc. is total of P 22,000. if the company expects to earn 12% on its investment, will it be worthwhile to purchase the new machine using the present worth. Use PW Method Write it on paper with clear solution. ThanksA company sells Gizmos to consumers at a price of $90 per unit. The costs to produce Gizmos is $38 per unit. The company will sell 14,000 Gizmos to consumers each year. The fixed costs incurred each year will be $180,000. There is an initial investment to produce the goods of $3,800,000 which will be depreciated straight line over 11 year life of the investment to a salvage value of $0. The opportunity cost of capital is 9% and the tax rate is 31%. A. What is operating cash flow each year? B. Using an operating cash flow of 485, 210.91 each year, what is the NPV of this project? C. Given a net present value of $-498, 047.3, should the company accept or reject this project? D. Find the net present value break-even level of units sold. Round your answer to the nearest whole unitLesego Ltd is considering an investment in a new machine for the production of a new product, X. There are two possibilities, Machine A and Machine B. Both product X and the machine would have an expected life of five years.The following information is available:Product X Selling price $50Variable cost 32Increase in fixed overhead (excluding depreciation of the new machine) is $90,000 per year.YearSales units 1 10,0002 15,0003 20,0004 20,0005 5,000 Machine A Machine BInitial cost ($000) 550 480Residual value 50 30The company’s cost of capital is 10%,Required:Evaluate each machine, using the following methods:Accounting rate of return Payback;Net present value. Discuss the importance of capital budgeting in organisations.