In the last 6 months, demand for one of Appleby Company’s products has dropped off considerably, due mainly to it becoming obsolescent as a result of technological change.  Knowing that the equipment used in the manufacture of this product may not be easy to sell, Appleby spent $50,000 on consultants to determine whether it could use the equipment to produce a new product under license by another company.  The consultant has determined that this product would have variable production costs of $65 per unit and should sell at a price of $90/unit.  The licensing royalty is 5% of gross product revenue.  Estimated annual demand is 20,000 units per year.  Additional annual operating costs related to this product are $30,000/year (excluding depreciation).  Depreciation on the equipment is $15,000/year.Relevant costs include all of the following except:Question 13Answera.Variable production costs of $65/unitb.Additional annual operating costs or $30,000/yearc.Licensing royalties of 5% of gross product revenuesd.Consultant fees of $50,000

In a manufacturing company, Product X is a popular item known for its quality and durability. During the last production cycle, the company produced 3,000 units of Product X. The opening inventory at the beginning of the cycle was 200 units, and the closing inventory at the end of the cycle was 400 units. The company also incurred administrative expenses amounting to $15,000 during the period, and the sales team received commissions totalling 5% of total sales revenue.The financial details for Product X are as follows:Selling price per unit: $70Direct materials per unit: $20Direct labor per unit: $12Variable production overhead per unit: $8Fixed production overhead: $30,000Calculate the gross profit for Product X using marginal costing.

A Western Canadian producer is considering purchasing a five-year product licence from Sunkist Growers Inc. The product licence will cost $1,000,000$1,000,000 , and the required equipment will cost $0.5$0.5 million. Equipment upgrades will be $100,000$100,000 at the beginning of the third and fifth years. Expected profits are $500,000$500,000 million in each of the first three years and $400,000$400,000 in the last two years. The producer will purchase product licences only if the IRRIRR is greater than 15%15% . Should the product licence be purchased?Find the internal rate of return (IRR)(IRR) .The producer will purchase product licences only if the IRRIRR is greater than 15%15% . Should the product licence be purchased? No, the product licence should not be purchased since IRR<15%IRR<15% . Yes, the product licence should be purchased since IRR>15%IRR>15% .

APPLE LTD STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20.11 Notes ASSETS Non-current assets ............................................................................................... R 2 780 000 Property, plant and equipment ............................................................................. 1 Financial assets (25 000 + 20 000) ........................................................................ 2 735 000 45 000 Current assets ....................................................................................................... 1 033 300 Inventories ............................................................................................................... Trade and other receivables ................................................................................... Financial assets ...................................................................................................... 380 500 627 200 21 000 Deferred expenses .................................................................................................. 4 600 Total assets ........................................................................................................... 3 813 300 APPLE LTD NOTES FOR THE YEAR ENDED 31 DECEMBER 20.11 1. Property, plant and equipment Land Buildings Motor vehicles Crane Equipment Total Carrying amount 1/1/20.11 R 380 000 R - R 420 000 R 360 000 R 240 000 R 1 400 000 Cost Accumulated depreciation 380 000 - - - 700 000 (280 000) 480 000 (120 000) 360 000 (120 000) 1 920 000 (520 000) Depreciation Additions to cost Disposals at carrying amount Depreciation capitalised Revaluation - - - - 420 000* - 960 000 - 40 000 - (143 000) 90 000 (24 000) - - (56 000) - - (40 000) - (62 000) 150 000 - - - (261 000) 1 200 000 (24 000) - 420 000 Carrying amount 31/12/20.11 800 000 1000 000 343 000 264 000 328 000 2 735 000 Cost/Valuation Accumulated depreciation 800 000 - 1000 000 - 730 000 (387 000) 480 000 (216 000) 510 000 (182 000) 3 520 000 (785 000) *Balancing figure The company employed an accredited independent sworn appraiser, Mr. S Coetzee to determine the fair value of land. The date of the revaluation was 31 December 20.11.

A firm is considering renewing its equipment tomeet increased demand for its product. The cost of equipment modifications is$1.9 million plus $100,000 in installation costs. The firm will depreciate the equipment modifications under MACRS, using a 5-year recovery period. (See Table 4.2on page 117 for the applicable depreciation percentages.) Additional sales revenuefrom the renewal should amount to $1.2 million per year, and additional operatingLG 5expenses and other costs (excluding depreciation and interest) will amount to 40%of the additional sales. The firm is subject to a tax rate of 40%. (Note: Answer thefollowing questions for each of the next 6 years.)a. What incremental earnings before depreciation, interest, and taxes will resultfrom the renewal?b. What incremental net operating profits after taxes will result from the renewal?c. What incremental operating cash inflows will result from the renewal?

Apple products are ............. other companies’ products. a) much more expensive, then b) much expensive, as c) more expensive, than d) so much more expensive, as