Finance/Cost accounting

posted by .

The XYZ Corporation is contemplating the introduction of a new machine tool which will be used solely in the manufacture of a rotor shaft. 50,000 units per year are expected to be manufactured, and the time study group anticpates a standard of 2.5 hours per piece. The labor rate for the first year is expected to be 5.60 per hour. The present method takes 3.0 hours at the same rate. The new machine tool will cost $800,000 and will be depreciated on a straight line basis over a period of 10 years with no residual value. $150,000 of special tools will be needed. It is expected that the useful life of the special tools will be 250,000 pieces. The benefit rate is 30 percent.

Basing your judgment solely on the facts listed above, should the tool be purchased?

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. accounting

    The accounting records of NuTronics, Inc., include the following information for the year ended December 31, 2011. Dec. 31 Jan. 1 Inventory of materials $ 24,000 $ 20,000 Inventory of work in process 8,000 12,000 Inventory of finished …
  2. Finance

    Yoshika Landscaping is contemplating purchasing a new ditch-digging machine that promises savings of $5,600 per year for 10 years. The machine costs $21,970, and no salvage value is expected. The company's cost of capital is 12%. You …
  3. finance

    Nucore Company is thinking of purchasing a new candy-wrapping machine at a cost of $370,000. The machine should save the company approximately $70,000 in operating costs per year over its estimated useful life of 10 years. The salvage …
  4. economics cost analysis

    The XYZ corporation is planning to purchase an extruder at a purchase price of $350,000. XYZ plans to make down payment of 25% of the first cost of the extruder and to make a 7 year,10% yearly payment loan for the rest of the first …
  5. Finance

    3. Your firm is considering buying a new machine that costs $200,000, is expected to generate $110,000 in new revenue each year and will cost $45,000 a year to operate. If your firm's marginal income tax rate is 35% what is the Net …
  6. accounting

    Jay Corp. bought a machine for $15,000. The machine is expected to produce 10,000 units. The machine has a residual value of $5,000. Assuming the machine produces 400 units during Year 1, what should the depreciation expense be?
  7. Finance

    What is the projects initial outlay? Should the project be accepted why or why not?
  8. accounting

    Meranda Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 an is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced 14,500 units. To the nearest …
  9. Accounting

    Chef Gourmet, Inc., has assembled the following data pertaining to its two most popular products. Blender Food Processor Direct material $ 21 $ 30 Direct labor 14 42 Manufacturing overhead @ $52 per machine hour 52 104 Cost if purchased …
  10. Accounting

    Chef Gourmet, Inc., has assembled the following data pertaining to its two most popular products. Blender Food Processor Direct material $ 18 $ 33 Direct labor 12 27 Manufacturing overhead @ $48 per machine hour 48 96 Cost if purchased …

More Similar Questions