Unit 6 Managerial Accounting

Managerial Accounting Unit 6

Homework: Managerial Accounting. ALWAYS INCLUDE CONCLUSION AND 3 REFERENCES. ALWAYS CITE YOUR SOURCES IN TEXT. APA FORMAT.

 

1. Your Discussion should be a minimum of 250 words in length and not more than 450 words. Please include a word count. Following the APA standard, use references and in-text citations for the textbook and any other sources. 

Capital budgeting decisions are risky. For this discussion question: 

· Research the risks associated with capital budgeting and identify the three that you believe are the most significant risks.

· Describe these risks and support your assertion with specific reasons. 

Your text may be used as a source; however, it is required that at least three additional source be used.  PLEASE ALWAYS INCLUDE CONCLUSION.

 

Written Assignment

2. Submit a written paper which is 3-4 pages in length (no more than 4-pages), exclusive of the reference page.  Your paper should be double spaced in Times New Roman (or its equivalent) font which is no greater than 12 points in size. The paper should cite at least three sources in APA format.  One source can be your textbook.

Please describe the circumstances of the following case study and recommend a course of action. Explain your approach to the problem, perform relevant calculations and analysis, and formulate a recommendation. Ensure your work and recommendation are thoroughly supported.

Case Study:

A manufacturing company is evaluating two options for new equipment to introduce a new product to its suite of goods. The details for each option are provided below:

Option 1 

· $65,000 for equipment with useful life of 7 years and no salvage value. 

· Maintenance costs are expected to be $2,700 per year and increase by 3% in Year 6 and remain at that rate. 

· Materials in Year 1 are estimated to be $15,000 but remain constant at $10,000 per year for the remaining years. 

· Labor is estimated to start at $70,000 in Year 1, increasing by 3% each year after. 

Revenues are estimated to be: 

Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
-	75,000	100,000	125,000	150,000	150,000	150,000

 

Option 2 

 

· $85,000 for equipment with useful life of 7 years and a $13,000 salvage value 

· Maintenance costs are expected to be $3,500 per year and increase by 3% in Year 6 and remain at that rate. 

· Materials in Year 1 are estimated to be $20,000 but remain constant at $15,000 per year for the remaining years. 

· Labor is estimated to start at $60,000 in Year 1, increasing by 3% each year after. 

Revenues are estimated to be:

 

Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7
-	80,000	95,000	130,000	140,000	150,000	160,000

 

The company’s required rate of return is 8%.

Management has turned to its finance and accounting department to perform analyses and make a recommendation on which option to choose. They have requested that the four main capital budgeting calculations be done: NPV, IRR, Payback Period, and ARR for each option.

For this assignment, compute all required amounts and explain how the computations were performed. Evaluate the results for each option and explain what the results mean. Based on your analysis, recommend which option the company should pursue.

Superior papers will:

· Perform all calculations correctly.

· Articulate how the calculations were performed, including from where values used in the calculations were obtained.

· Evaluate the results computed and explain the meaning of the results, including why certain measurements are more accurate than others.

· Recommend which option to pursue, supported by well-thought-out rationale, and considering any other factors that could impact the recommendation.

Be sure to use APA formatting in your paper.  Purdue University’s Online Writing Lab (OWL) is a free website that provides excellent information and resources for understanding and using the APA format and style. The OWL website can be accessed here:  https://owl.purdue.edu/owl/research_and_citation/apa_style/apa_style_introduction.html

 

 

3. Please describe three qualitative factors that can affect capital budgeting decisions. Illustrate situations where those qualitative factors would cause a decision to be made that is against the quantitative analyses (i.e., calculations say to accept, but management does not and vice versa). Be specific. 

As portfolio activities are to be self-reflective, please make sure to connect the portfolio assignment to:

· Your personal experiences. Reflect on how this assignment topic is applicable to and will benefit you.

· Course readings and any external readings.

· Discussion forum posts or other course objectives.

The Portfolio Activity entry should be a minimum of 500 words and not more than 750 words. Use APA citations and references if you use ideas from the readings or other sources.