BH is considering the manufacture of a new product which requires the use of both a new machine and existing machine. Th

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Bh Is Considering The Manufacture Of A New Product Which Requires The Use Of Both A New Machine And Existing Machine Th 1 (72.83 KiB) Viewed 52 times

BH is considering the manufacture of a new product which requires the use of both a new machine and existing machine. The following information has been prepared: (a) New Machine $ - current purchase price 450,000 - residual value end Year 5 30,000 (b) Existing Machine $ - cost 2 years ago 240,000 - current written down value 180,000 - current disposal value 100,000 - residual value end Year 5 NIL The existing machine has sufficient spare capacity for the manufacture of the new product with no alternative use (c) New Product - life 5 years. Sales, 15,000 units per year at $ 46 per unit Cost per Unit Material 6 Direct Labour, 2 hours at $ 8 per hour 16 Variable overhead 4 Fixed overhead 10 (including depreciation of the new machine) (d) working capital required $ 45,000 immediately, it will remain at $ 45,000 during the Years 1 to 5 (e) direct labour is in short supply. It would need to be diverted from other work currently earning a $4 per hour (1) proceeds from the disposal of the machine and the liquidation of the working capital will be received at the end of Year 5 o la Required: Prepare a schedule showing the expected cash inflows, cash ouflows and net cashflows for each year of the product's life