Ice Cream Machine: Cost of machine $ XXXXXXXXXX,100 Cost to train employees $ XXXXXXXXXX700 Annual increase in contribution margin $ XXXXXXXXXX,600 Disposal value $ XXXXXXXXXX600 Popcorn Machine: Cost...

Ice Cream Machine:
Cost of machine $ XXXXXXXXXX,100
Cost to train employees $ XXXXXXXXXX700
Annual increase in contribution margin $ XXXXXXXXXX,600
Disposal value $ XXXXXXXXXX600
Popcorn Machine:
Cost of machine 850$
Cost to train employees 200$
Annual increase in contribution margin 350$
Disposal value 50$
Espresso Machine:
Cost of machine $ XXXXXXXXXX,900
Cost to train employees $ XXXXXXXXXX900
Annual increase in contribution margin $ XXXXXXXXXX,000
Disposal value $ XXXXXXXXXX,500
Yummy Desert Company Discount Rate: 11.00%
Yummy Dessert Company is looking into the below additional products for its menu to expand
sales. The company will have training costs when the machine(s) are installed. The company
expects all machines to have a useful life of 5 years at which time it will dispose of the machine and
purchase a new one if the product is successful. The machines, costs, and expected contribution
margin are detailed below: (32 points)
What is the net present value of the ice cream machine (round to 2 decimal places, ex. 9.99)?
What is the net present value of the popcorn machine (round to 2 decimal places, ex. 9.99)?
What is the net present value of the espresso machine (round to 2 decimal places, ex. 9.99)?
What is the profitability index of the ice cream machine (round to 4 decimal places, ex XXXXXXXXXX)?
○ Ice Cream Machine
○ Popcorn Machine
○ Espresso Machine
What is the payback period of the ice cream machine (round to 2 decimal places, ex. 9.99)?
What is the payback period of the popcorn machine (round to 2 decimal places, ex. 9.99)?
What is the payback period of the espresso machine (round to 2 decimal places, ex. 9.99)?
If the company wants to maximize its return on investment, which machine should it choose?
What is the profitability index of the popcorn machine (round to 4 decimal places, ex XXXXXXXXXX)?
What is the profitability index of the espresso machine (round to 4 decimal places, ex XXXXXXXXXX)?
What is the internal rate of return of the ice cream machine (round to 4 decimal places, ex.
0.3333)?
What is the internal rate of return of the popcorn machine (round to 4 decimal places, ex.
0.3333)?
What is the internal rate of return of the espresso machine (round to 4 decimal places, ex.
0.3333)?
○ Ice Cream Machine
○ Popcorn Machine
○ Espresso Machine
○ Ice Cream Machine
○ Popcorn Machine
○ Espresso Machine
○ Ice Cream Machine
○ Popcorn Machine
○ Espresso Machine
If the company has unlimited funds, which machine(s) should it choose?
If the company only has $10,000 to spend (on the machine and training) which machine(s) should
it choose?
If the company only has room for one machine on the counter, which machine should it choose?
Total annual units 45,000
Direct materials 0.50$
Direct labor 1.50$
Variable overhead 1.90$
Supervisor's salary 1.20$
Depreciation on special equipment 1.00$
Allocated general overhead 1.60$
Outside supplier's price per unit 5.75$
Total avoidable general overhead costs per year 4,500$
Total additions segment margin per year 17,000$
○ Make
○ Buy
Toy Corporation's best selling product is a teddy bear that wears overalls. The accounting
department reports the following costs of producing the overalls that are needed every year to
dress the toy bear. (9 points)
An outside supplier has offered to make the overalls and sell it to the company. If this offer is
accepted, the supervisor's salary and all of the variable costs, including direct labor, can be
avoided. The special equipment used to make the overalls was purchases many years ago and has
no salvage value or any other use. The allocated general overhead represents fixed costs of the
entire company. If the outside supplier's offer were accepted, some of these allocated general
overhead costs would be avoided. In addition, the space used to produce the overalls could be
used to make other toys generating additional segment margin per year for that product.
What are the annual relevant costs the company can save if they do not make the overalls?
What are the annual relevant costs (net of benefits) the company will incur if it purchases the
overalls?
Should the company continue to make the overalls or buy them from the outside supplier?
Special order units 8,000
Special order price 21.00$
Regular selling price 29.99$
Direct materials 10.75$
Direct labor 3.55$
Variable manufacturing overhead 3.27$
Fixed manufacturing overhead 2.60$
Unit product cost 20.17$
Increase to variable costs per unit 1.15$
Purchase price of new machine 20,000$
○ Yes
○ No
Willy Water Company has received a request for a special order of units for its best selling water
ottle. The normal selling price is provided below. Each of the units would need to be modified to
include the customer's logo. The normal product cost for the water bottle is computed as follows:
(12 points)
Direct labor is a variable cost. The special order would have no effect on the company's total fixed
manufacturing overhead costs. The cost to include the logo will require an increase to variable
costs and the purchase of a new machine that would have no salvage value. This special order
would have no effect on the company's other sales. The company has ample spare capacity for
producing the special order.
What is the incremental revenue of accepting the special order?
What are the incremental costs of accepting the special order?
Should the company accept the special order?
What is the lowest price the company should charge per bottle for the special order (round answer
to 2 decimal places, ex. 9.99)?
Bread Muffin Croissant
Direct materials 1.25$ XXXXXXXXXX0.60$ XXXXXXXXXX0.40$
Direct labor 2.20 XXXXXXXXXX1.00 XXXXXXXXXX1.50
Variable manufacturing overhead 0.40 XXXXXXXXXX0.25 XXXXXXXXXX0.30
Fixed manufacturing overhead 4.00 XXXXXXXXXX2.50 XXXXXXXXXX2