1
New equipment being considered by the Johnny Pickles Brewing Company is projected to increase current sales from $13427 to $14868. Direct labor resulting from increased production will go from $3568 to $4705. Direct material will increase from $4418 to $4793. Variable overhead is expected to stay the same at $950. The fixed expenses are expected to stay the same at $997. What is the change to the Johnny Pickles Brewing Company net operating income if the brewery decides to proceed with the purchase of the new equipment? Increases in net operating income should be expressed as a positive number while decreases should be expressed as a negative number.
2.
Gofer and Goose Castle Amusement Park operates an amusement park in Central Florida. The company is trying to set the rate of admission for the upcoming busy season. Gofer and Goose is in direct competition with more popular animal themed amusement parks in Central Florida and as a result, has no control over the price it can set. The following information has been made available:
| Desired Return on Assets | 9.3% |
| Total Assets | $538121 |
| Projected Number of Guests | $7804 |
If Gofer and Goose can charge $50 per admission on average, what is the total fixed and variable costs they will be able to incur if they are to achieve the desired return on assets? Round your answer to the nearest whole dollar.
3.
Gofer and Goose Castle Amusement Park operates an amusement park in Central Florida. The company is trying to set the rate of admission for the upcoming busy season. New ownership of the park has done a tremendous job with the park and as a result, the park is now the premier park in Central Florida and has a great deal of control over the price it charges for admission.
| Desired Return on Assets | 6.7% |
| Total Assets | $6202090 |
| Projected Number of Guests | 17710 |
| Projected Fixed Expenses | $997685 |
| Projected Variable Costs Per Guest | $6 |
Based on the information above, how much should the Gofer and Goose Castle park set for the price of an admission ticket? Round your answer to the nearest whole dollar.
4.
The income statement for Bauer Online Real Estate Training is presented below. The management team at the real estate training company is not pleased with the performance of their residential real estate training line and is considering dropping it. A cost study of the residential training line has revealed that $39585 of the Selling and $33675 of the Administrative fixed expenses cannot be avoided if the residential real estate training line is dropped. If the management at Bauer Online Real Estate Training decides to drop the line, what will the new company net income be? Calculate your answer to the nearest whole dollar.
| Total | Residential | Commercial | |
| Sales Revenue | $527000 | $185000 | $342000 |
| Variable Costs | 112000 | 34000 | 78000 |
| Contribution Margin | 415000 | 151000 | 264000 |
| Fixed Costs: | |||
| Selling | 185000 | 88000 | 97000 |
| Administrative | 203000 | 94000 | 109000 |
| Total Fixed Expenses | 388000 | 182000 | 206000 |
| Operating Income (Loss) | $27000 | $(31000) | $58000 |
5.
HappyFruit Cell Phones makes consumer grade cellar devices. The Company is currently making their own chargers. The production cost information per charger is presented below.
| Direct Materials | $7.17 |
| Direct Labor | $6.17 |
| Variable Overhead | $3.86 |
| Fixed Overhead | $8.37 |
Another company has offered to sell HappyFruit the charger they supply with their devices $12 per charger.
None of the fixed overhead can be avoided. What is the cost/benefit of purchasing the charger from the outside supplier on a per unit basis. Enter a net cost as a negative number (ie. -1.50). Enter a net benefit as a positive number (ie. 1.50). Round your answer to two decimal places.
6.
The Little Buddy Bench Press Company makes family friendly fitness equipment. They recently received an offer to sell 511 customized kiddo-planks to a Planet Mall Fitness for $24 per kiddo-plank. The company has capacity to fill the order. The average costs for kiddo-plank are:
| Direct Materials | $4 |
| Direct Labor | 9 |
| Variable Manufacturing Overhead | 5 |
| Variable Selling Expenses | 3 |
| Fixed Manufacturing Overhead | 4 |
| Total Cost per Plank | $25 |
The custom order will incur no variable selling expenses. However, due to a special logo needing to be embossed on each product, the direct materials expense will increase by $8 per plank. How much will the profit of the company increase or decrease if they decide to accept the offer? Enter a net decrease as a negative number (ie. -4000). Enter a net increase as a positive number (ie. 4000). Round your answer to the whole dollar.
7.
If you invest $1297 and the investment generates $620 per year, how many years will it take to recover your original investment? Round your answer to one decimal place.
8.
If you invest $1297 and the investment generates $620 per year, how many years will it take to recover your original investment? Round your answer to one decimal place.
9.
How much would you need to invest today at 9% to have one dollar in 2 years? Enter your answer to three decimal places.
10
If you invested $1 today an interest rate of 9%, and the interest compounded annually, how much would your dollar be worth in 8 years? Round your answer to two decimal places.
11.
What is the present value of $15 if I receive it in 3 years and the discount rate is 6%? Round your answer to two decimal places.
12.
How much cash flow will an investment of $1497 need to generate annually to pay for itself in 7 years? Round your answer to the whole dollar.
- What is the net present value of $50 each year for the next 6 years if the discount rate is 2%? Round your answer to two decimal places.
- You invest $100 today expecting to make a return of 8% over 5 years. After the 5 years in up, you get a cash payout of $140. Did the investment perform to you expectations?
Yes
No
15.
You invest $100 today expecting to make a return of 10% over 5 years. After the 5 years in up, you get a cash payout of $140. What is the difference between what you invested, and the net present value of your nominal dollar return adjusted to its net present value? Round your answer to two decimal places. Your answer should be either positive or negative based on NPV-100.
16.
The Brats’n’Jerky meat packing company is considering purchasing a new piece of equipment that will cut back on waste as well as save time. Savings from reduced waste are expected to be $2499. It’s expected that the new equipment will cut the number of hours required at the plant by 1504 hours annually. The cost of one hour of labor $15. The cost of the piece of equipment being considered is $76505. What is the expected payback on the piece of equipment being considered? Round your answer to one decimal place.
17.
The Johnny Pickles Brewing Company has been successful as a small craft microbrewery with a focus on distributing its products to bars and restaurants. They are considering a bottling line that will allow them to start distributing to grocery and party stores. The equipment will cost $72176 to purchase. It’s expected that additional sales will be $29594 per year while variable expenses are expected to increase $4912 annually. The equipment is expected to last 5 years and will need a one time overhaul in year 3 that will cost $3056. The Johnny Pickles Brewing Company uses a discount rate of 10% when deciding to accept a project. What is the projected undiscounted cash flow for the bottling line in year 3? Round your answer to the whole dollar.
18.
The Johnny Pickles Brewing Company has been successful as a small craft microbrewery with a focus on distributing its products to bars and restaurants. They are considering a bottling line that will allow them to start distributing to grocery and party stores. The equipment will cost $88366 to purchase. It’s expected that additional sales will be $26666 per year while variable expenses are expected to increase $4035 annually. The equipment is expected to last 5 years and will need a one time overhaul in year 3 that will cost $8087. It will have no salvage value at the end of its useful life. The Johnny Pickles Brewing Company uses a discount rate of 10% when deciding to accept a project. What is the net present value of the project? Round your answer to the whole dollar. If the NPV is negative, enter as a negative. If it’s positive, enter as a positive.
19.
Projects with a net present value of 0 are acceptable and should be considered appropriate uses of capital.
True
False
20.
Overtime at The Office Incorporated has gotten out of control as a result of frequent mailings that are very time consuming to fold and stuff into envelopes. The Office is considering purchasing a machine that folds letters, stuffs them into envelopes, and places the appropriate postage on them. The machine should completely eliminate overtime and save The Office $4394 per year. The machine will cost $26258 and is expected to last 9 years. What is the Present Value Factor of an Annuity we would look for in the table to determine the IRR (ie. 3.724)? Round your answer to three decimal places.
21.
A project is expected to increase sales by $20,000 annually and increase expenses by $8,250 annually. The project is expected to cost $75,411 and last for 10 years. What is the IRR of the project? Round your answer to the nearest whole percentage.