Question #1
Royal Garden Tools produces and sells two products.Following is the revenue and cost information for the companyâs twoproducts.
Deluxe Grass Trimmer
Super Leaf Blower
Selling Price per Unit
$ 60.00
$ 75.00
Variable Expenses per Unit
$ 24.00
$ 55.00
Traceable Fixed Costs per year
$ 350,000
$ 210,000
Last year the company sold 15,000 Grass Trimmers and25,000 Leaf Blowers. Royalâs Net Income for the year totaled $350,000.
Prepare a contribution format income statement for Royaland its two segments. Include the contribution margin and segmentmargins. Calculate and include Royalâs total common fixed costs.Show work.
Question #2
A farm owner is considering replacing his obsoletetractor with one of two new state-of-the-tractors. This new machinewould cost $125,000 and would have a ten-year useful life.Unfortunately, the new machine would have no salvage value butwould result in annual cost savings of $23,000 per year. Thecurrent old tractor can be sold now for $10,000. The farm ownerâsCost of Capital is 10%. The farm owner uses the straight linemethod of depreciation (this depreciation information is neededonly for calculating the âSimple Rate of Returnâ in Question#3).
a.) Calculate the Net Present Value of replacing thetractor .
b.) Based on this method of comparison, would yourecommend replacing the tractor? Why?
Question #3
Based on the above information for Question #2 and yoursolution to that question,
calculate the following associated with replacing thetractor:
c.) The Profitability Index
d.) The Payback Period
e.) Simple Rate of Return
All help is greatly appreciated.
Question #1
Royal Garden Tools produces and sells two products.Following is the revenue and cost information for the companyâs twoproducts.
Deluxe Grass Trimmer | Super Leaf Blower | |
Selling Price per Unit | $ 60.00 | $ 75.00 |
Variable Expenses per Unit | $ 24.00 | $ 55.00 |
Traceable Fixed Costs per year | $ 350,000 | $ 210,000 |
Last year the company sold 15,000 Grass Trimmers and25,000 Leaf Blowers. Royalâs Net Income for the year totaled $350,000.
Prepare a contribution format income statement for Royaland its two segments. Include the contribution margin and segmentmargins. Calculate and include Royalâs total common fixed costs.Show work.
Question #2
A farm owner is considering replacing his obsoletetractor with one of two new state-of-the-tractors. This new machinewould cost $125,000 and would have a ten-year useful life.Unfortunately, the new machine would have no salvage value butwould result in annual cost savings of $23,000 per year. Thecurrent old tractor can be sold now for $10,000. The farm ownerâsCost of Capital is 10%. The farm owner uses the straight linemethod of depreciation (this depreciation information is neededonly for calculating the âSimple Rate of Returnâ in Question#3).
a.) Calculate the Net Present Value of replacing thetractor .
b.) Based on this method of comparison, would yourecommend replacing the tractor? Why?
Question #3
Based on the above information for Question #2 and yoursolution to that question,
calculate the following associated with replacing thetractor:
c.) The Profitability Index
d.) The Payback Period
e.) Simple Rate of Return
All help is greatly appreciated.
