Construction Accounting And Financial Management (4th Edition)
4th Edition
ISBN: 9780135232873
Author: Steven J. Peterson MBA PE
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 10, Problem 21P
To determine
Ascertain the profit and
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Show Attempt History
Current Attempt in Progress
The Bramble Company manufactures 3,800 units of a part that could be purchased from an outside supplier for $14 each. Bramble's
costs to manufacture each part are as follows:
Direct materials
$3
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
9.
Total
$19
All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no
alternative uses.
(a-b)
Gress margin-ISalos Cost/Sales
>>
F1O
F9
FB
F7
F6
F5
吕口
F4
F3
(c) If Sarasota could lease the manufacturing facilities to another company for $25,200 per year, what would be the net total cost
to outsource production of the part?
Net cost to buy $
Trent Incorporated needs an additional worker on a multiyear project. It could hire an employee for a $65,000 annual salary. Alternatively, it could engage an independent contractor for a $72,000 annual fee. Trent's income tax rate is 21 percent.
Compute the annual after-tax cost of each option and indicate which minimizes the after-tax cost of obtaining the worker. (Round all your intermediate calculations to the nearest whole dollar amount.)
This was a homework question that I missed. Could you please help me figure out what I did wrong?
My answer: After-tax cost of employee: $51,350
After-tax cost of independent contractor: $56,880
Chapter 10 Solutions
Construction Accounting And Financial Management (4th Edition)
Ch. 10 - What are some of the ways a company can increase...Ch. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - A construction company has total revenues of...Ch. 10 - A construction company has total revenues of...Ch. 10 - A construction company has total revenues of...Ch. 10 - A construction company has total revenues of...Ch. 10 - Determine the break-even volume of work for a...Ch. 10 - Determine the break-even volume of work for a...
Ch. 10 - Determine the break-even volume of work for a...Ch. 10 - Determine the break-even volume of work for a...Ch. 10 - A construction company has a fixed overhead of...Ch. 10 - A construction company has a fixed overhead of...Ch. 10 - Determine the break-even contribution margin ratio...Ch. 10 - Determine the break-even contribution margin ratio...Ch. 10 - Determine the break-even contribution margin ratio...Ch. 10 - Determine the break-even contribution margin ratio...Ch. 10 - Determine the profit and overhead markup for a...Ch. 10 - Determine the profit and overhead markup for a...Ch. 10 - Prob. 21PCh. 10 - Prob. 22P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Suppose the company plans to use a building that it owns to house the project. The building could be sold for $5 million after taxes and real estate commissions. How would that fact affect your answer? The potential sale of the building represents an opportunity cost of conducting the project in that building. Therefore, the possible after-tax sale price must be charged against the project as a cost. The potential sale of the building represents an opportunity cost of conducting the project in that building. Therefore, the possible before-tax sale price must be charged against the project as a cost. The potential sale of the building represents an externality and therefore should not be charged against the project. The potential sale of the building represents a real option and therefore should be charged against the project. The potential sale of the building represents a real option and therefore should not be charged against the project. -Select-IIIIIIIVVarrow_forwardDevon Corporation is trying to decide whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $156,500 over its estimated life, while the total cost to buy the equipment will be $122.600 over its estimated life. At Devon's required rate of return, the net present value of the cost of leasing the equipment is $110,600 and the net present value of the cost of buying the equipment is $125.500. Based on financial factors. Devon should: Multiple Choice lease the equipment, saving $33.900 over buying buy the equipment, saving $33,900 over leasing ease the equipment, saving $14,900 over buying buy the equipment, saving $14,900 ever leasingarrow_forwardFabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? a. What are the profitability indexes of the projects? The profitability index for contract A is (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) NPV Use of Facility Contract A $1.99 million 100% $0.96 million 50% $1.52 million 50% B с Print ACCES Done - Xarrow_forward
- O Δ You work for a construction company that is considering a bid on a project to modernize the power grid in a country that is recovering from an earthquake. The cost to prepare the documentation that is necessary to submit the bid is $50,000. If a bid is submitted, you estimate that the project will be awarded with probability 0.5. The company's profit depends on the political situation prevalent in the country at the time of the project. Based on your experience, you conclude that with probability 0.2, the country would present favorable conditions and that the company would earn $240,000; with probability 0.7, the country would present stable conditions and the company would earn $140,000; and that with probability 0.1, the country would present unstable conditions and the company would lose 560,000. a. Would you recommend that the company bid on the project? b. Before your company bids on the project, what is the maximum amount you would pay for a forecast of the political…arrow_forwardDante Development Corporation is considering bidding on a contract for a new office building complex. The following figure shows the decision tree prepared by one of Dante’s analysts. At node 1, the company must decide whether to bid on the contract. The cost of preparing the bid is $200,000. The upper branch from node 2 shows that the company has a 0.8 probability of winning the contract if it submits a bid. If the company wins the bid, it will have to pay $2 million to become a partner in the project. Node 3 shows that the company will then consider doing a market research study to forecast demand for the office units prior to beginning construction. The cost of this study is $150,000. Node 4 is a chance node showing the possible outcomes of the market research study.Nodes 5, 6, and 7 are similar in that they are the decision nodes for Dante to either build the office complex or sell the rights in the project to another developer. The decision to build the complex will result in an…arrow_forwardAcefacto Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on using in a construction project. The project will be depreciated straight line to a value of$670,000at the end of the project's and assets ten year life. Ace's marginal tax rate is32%. The firm will have to pay$8,047,675to buy the asset. You have estimated that they could sell the asset for$787,309to a Brazilian firm at the end of the project. Answer in dollars and cents.arrow_forward
- Your company decided to offer product delivery service and would need a truck for the delivery. You are evaluating the following two options. Option 1: Your company can lease a truck at a pretax cost of $27,000 per year. Option 2: Your company can buy a truck at a cost of $84,000, with annual pretax maintenance expenses of $14,000. The truck will depreciate to zero on a straight-line basis. The truck has a 4 years life and will have a salvage value of $18,000 at the end of its life. If the tax rate is 35% and the discount rate is 10%, which option would you prefer? (Hint: compute the equivalent annual cost (EAC).)arrow_forwardAcefacto Inc., has asked for you to calculate the after-tax salvage value of an asset it plans on using in a construction project. The project will be depreciated straight line to a value of $670,000 at the end of the project's and assets ten year life. Ace's marginal tax rate is 31%. The firm will have to pay $8,802,175 to buy the asset. You have estimated that they could sell the asset for $595,641 to a Brazilian firm at the end of the project. Answer in dollars and cents.arrow_forwardYour company has just signed a three-year nonrenewable contract with the city of New Orleans for earthmoving work. You are investigating the purchase of heavy construction equipment for this job. The equipment costs $200,000 and qualifies for five-year MACRS depreciation. At the end of the three-year contract, you expect to be able to sell the equipment for $70,000. If the projected operating expense for the equipment is $65,000 per year, what is the after-tax equivalent uniform annual cost (EUAC) of owning and operating this equipment? The effective income tax rate is 40%, and the after-tax MARR is 12% per year.arrow_forward
- Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? **round to two decimal places**arrow_forwardYour company is preparing for a bid to supply garden tools to Garden Pro, Inc. The contract calls for 1,500,000garden tools per year over the next five years.The installation of equipment necessary for the production will cost you $7,000,000.You will depreciate this cost straight-line to zero over the project’s life. You estimate that you can sell this equipment at the end of the project for $1,400,000 (pre-tax).The fixed production costs will be $6,000,000 per year, and the variable production costs should be $10 per unit. The project also requires $800,000 in initial investment in net working capital, which is fully recoverable at the end of the project.The tax rate is 25 percent. The project’s required rate of return is 20 percent. Find the price that makes the net present value (NPV) of the project equal to zero.arrow_forwardPhoenix Products Inc. requires a new machine to produce a part for a solar air conditioner. Two companies have submitted bids, and you have been assigned the task of choosing one of the machines. Cash flow analysis indicates the following: Year Machine A Machine B 0 −$1,000 −$1,000 1 0 417 2 0 417 3 0 417 4 1,938 417 If the required rate of return for Phoenix Products is 5 percent, which of the following is the most valid statement? Group of answer choices The IRRA < IRRB, therefore accept Machine B. The NPVA < NPVB, therefore accept Machine B. The IRRA > IRRB, therefore accept Machine A. The NPVA > NPVB, therefore accept Machine A. None of these.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education