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MBA560 Financial and Managerial Accounting: Module 7 Test (2 Problems)

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Question;Saint Leo University (Graduate;Business Studies);MBA560 Financial and Managerial;Accounting;Module 7 Test;Problem 1.;Ortiz Manufacturing is considering developing and marketing one of two;new products, A and B. It has accumulated the following information about the;two products;Product A Product B;Research and development costs incurred to date $800,000 $350,000;Additional development costs to bring product to market $120,000 $45,000;Expected annual sales 100,000;units, $900,000 50,000 units, $270,000;Expected annual unit-level costs;$4 per unit, $400,000 total $2 per unit, $100,000 total;Expected annual batch-level costs;$130,000 $60,000;Allocated facility-level costs;$210,000 $63,000;Expected product life cycle;15 years 8 years;Required;1) Which of these items are relevant to Ortiz's decision about which of;these products it will launch?;Problem 2.;Mae Lee owns a small retail store in Cairo, Georgia. The following;summary information regarding expectations for the month of January is;provided: As of December 31 there is $500 in the bank and the balance in;accounts receivable is $2,500. Budgeted cash and credit sales for January are;$3,000 and $2,000, respectively. Ninety percent of credit sales are collected;in the month of sale and the remainder is collected in the following month.;Mae's suppliers do not extend credit. Cash payments for January are expected to;be $12,000. Mae has a line of credit that enables the store to borrow funds on;demand. However, funds must be borrowed on the first day of the month and;interest paid in cash on the last day of the month. Mae desires to maintain a;$500 cash balance before consideration is given to the payment of interest.;Mae's bank charges annual interest of 12% per year.;Required;1) Compute the amount of funds that needs to be borrowed.;2) Compute the amount of interest expense that will appear on the January;31 pro forma income statement.

 

Paper#37684 | Written in 18-Jul-2015

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