# Time value of money & CVP Analysis

Anonymous
timer Asked: Jun 7th, 2015

Question description

 1)  A jeans maker is designing a new line of jeans called the Slims. The jeans will sell for \$295 per pair and cost \$188.80 per pair in variable costs to make. (Round your answers to 2 decimal places.) Compute the contribution margin per pair   Contribution margin Compute contribution margin ratio: Choose numerator/ choose denominator =  contribution margin ratio   /  =  contribution margin ratio   0 2)Blanchard Company manufactures a single product that sells for \$110 per unit and whose total variable costs are \$88 per unit. The company’s annual fixed costs are \$308,000.

(1)

Prepare a contribution margin income statement for Blanchard Company at the break-even point.

Blanchard  company

 Contribution Margin Income Statement (at Break-Even) % of sales Sales Contribution margin

 (2) Assume the company’s fixed costs increase by \$125,000. What amount of sales (in dollars) is needed to break even?

Break-even points in dollars

 Choose Numerator: / Choose Denominator: = Break-even point in dollars / = Break-even point in dollars

3)Blanchard Company manufactures a single product that sells for \$168 per unit and whose total variable costs are \$126 per unit. The company targets an annual after-tax income of \$840,000. The company is subject to a 20% income tax rate. Assume that fixed costs remain at \$630,000.

Pretax income =

1)compute the unit sales to earn the target after  tax net income

Choose numerator/  choose denominator= units to achieve target

2)Compute the dollar sales  to earn  the target after tax net income

Choose numerator / choose denominator = units  to achieve target

4)

 Blanchard Company manufactures a single product that sells for \$160 per unit and whose total variable costs are \$128 per unit. The company’s annual fixed costs are \$625,000. The sales manager predicts that annual sales of the company’s product will soon reach 39,500 units and its price will increase to \$194 per unit. According to the production manager, the variable costs are expected to increase to \$135 per unit but fixed costs will remain \$625,000. The income tax rate is 20%. What amounts of pretax and after-tax income can the company expect to earn from these predicted changes?

Blanchard company

Forecasted contribution margin income statement

Units  \$per unit

Contribution margin

5) Bill Thompson expects to invest \$18,000 at 10% and, at the end of a certain period, receive \$75,190. How many years will it be before Thompson receives the payment? (Use table B.2.) (PV of \$1, FV of \$1, PVA of \$1, and FVA of \$1) (Use appropriate factor(s) from the tables provided.)

Future value  /  present value  /  =  f (FV of  a single amount)

/

=

Table values are based on

n =

i=

6) Ed Summers expects to invest \$24,000 for 11 years, after which he wants to receive \$36,948.00. What rate of interest must Summers earn? (Use table B.2.) (PV of \$1, FV of \$1, PVA of \$1, and FVA of \$1) (Use appropriate factor(s) from the tables provided.)

Future value  /  present value  /  =  f (FV of  a single amount)

/

=

Table values are based on

n =

i=

7) Sam Weber finances a new automobile by paying \$6,900 cash and agreeing to make 20 monthly payments of \$480 each, the first payment to be made one month after the purchase. The loan bears interest at an annual rate of 12%. What is the cost of the automobile? (PV of \$1, FV of \$1, PVA of \$1, and FVA of \$1) (Use appropriate factor(s) from the tables provided. Round your final answers to 2 decimal places.)

Monthly payment x p (PVof an ordinary annunity)= present value of loan

X  =

Table values are based on :

n=  20

i= 1.0%

present value of loan + cash down payment = cost of the automobile

+  =

8)

 Spiller Corp. plans to issue 6%, 6-year, \$480,000 par value bonds payable that pay interest semiannually on June 30 and December 31. The bonds are dated December 31, 2013, and are issued on that date. (PV of \$1, FV of \$1, PVA of \$1, and FVA of \$1) (Use appropriate factor(s) from the tables provided. Round your answers to nearest whole dollar.)
 If the market rate of interest for the bonds is 4% on the date of issue, what will be the total cash proceeds from the bond issue?

Table  values are based on

n=

i=

cash flow  table value  amount  present value

present (maturity ) value

Interest (annuity)

Total cash proceeds

9) McAdams Company expects to earn 8% per year on an investment that will pay \$607,773 six years from now. (PV of \$1, FV of \$1, PVA of \$1, and FVA of \$1) (Use appropriate factor(s) from the tables provided. Round your answers to nearest whole dollar.)

Compute the present value of the investment

Future value x p(PV of a single amount)= present value

X  =

Table value are based on

n=

i=

10) On January 1, 2013, a company agrees to pay \$28,000 in six years. If the annual interest rate is 3%, determine how much cash the company can borrow with this agreement. (PV of \$1, FV of \$1, PVA of \$1, and FVA of \$1) (Use appropriate factor(s) from the tables provided. Round your answers to nearest whole dollar.)

Future value x p(PV of a single amount  ) = amount borrowed

Table  values are based on :

n=  6

i=  3.0%

11) [The following information applies to the questions displayed below.]

 Xcite Equipment Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year’s plans call for a \$310 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be \$421,600, up to a maximum capacity of 550,000 yards of rope. Forecasted variable costs are \$186 per 100 yards of XT rope.

Estimate Product XT’s break-even point in terms of sales units. (1 unit = 100 yards.) (Do not round intermediate calculations.)

Contribution margin  per 100yds

Contribution margin =

Contribution margin ratio

Choose numerator/ choose denominator = contribution margin ratio

/ = contribution margin ratio

1(a) estimate product XT’s break-even ratio point in terms of sales units. (1 unit= 100yards )(Round to nearest whole unit).

Choose numerator/ choose denominator= break-even units

/  = break-even units

1(B) estimate product XT’s break-even point in terms of sales dollars

Choose numerator/ choose denominator = break –even  dollars

/  = Break-even dollars

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