Problem 1: Tom Bat became a baseball enthusiast at a very early age. All of his baseball experience has provided him valuable knowledge of the sport, and he is thinking about going into the batting cage business. He estimates that the construction of a state-of-the-art building and the purchase of necessary equipment will cost $630,000. Both the facility and the equipment will be depreciated over 12 years using the straight-line method and are expected to have zero salvage values. His required rate of return is 10%. Estimated annual net income and cash flows are $49,000 and $101,500, respectively.
For this investment, calculate the following.
Part (a): the net present value
Part (b): the internal rate of return
Part (c): the payback period
Problem 2: Roswell Company has budgeted sales revenue as follows for the next 4 months as follows.
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February
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$150,000
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March
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$120,000
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April
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$105,000
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May
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$165,000
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Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in the second month following the sale. The other 2% is uncollectible.
Prepare a schedule which shows expected cash receipts from sales for the month of May.
Problem 3: Northern Company's budgeted and actual sales for 2009 were as follows.
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Product
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Budgeted Sales
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Actual Sales
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A
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6,000 units at $8.00 per unit
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6,810 units at $7.80 per unit
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B
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5,000 units at $10.00 per unit
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4,720 units at $10.40 per unit
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Part (a): Calculate the sales volume variance.
Part (b): Calculate the sales price variance.
Part (c): Calculate the total sales variance.
Problem 4: Herbart Company gathered the following information on power costs and factory machine usage for the last 6 months.
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Power Cost
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Factory Machine Hours
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January
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$24,400
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13,900
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February
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30,300
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17,600
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March
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29,000
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16,800
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April
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22,340
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13,200
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May
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19,900
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11,600
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June
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14,900
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6,600
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Using the high-low method of analyzing costs, answer the following questions and show computations to support your answers.
Part (a): What is the estimated variable portion of power costs per factory machine hour?
Part (b): What is the estimated fixed power cost each month?
Part (c): If it is estimated that 10,000 factory machine hours will be run in July, what is the expected total power cost for July?