![]() ![]() The only difference between Boom's incremental cash flows and its incremental income is attributable to depreciation. Estimated incremental annual expense of investment (including taxes and depreciation) Memory Stick Equipment $400, 000 260, 000 Program Bank Installation $260, 000 140, 000 Memory Stick Equipment Program Bank Installation Estimated incremental annual revenue of investment. Due to rapidly changing technology, neither proposal is expected to have any salvage value or an estimated life exceeding five years. ![]() The following information pertains to these proposals. The program bank proposal requires an initial investment of $ 350, 000 \$ 350,000 $350, 000. The software would then be transferred directly to the customer's hard drive, and copies of the user's manual and registration material would be mailed the same day. Customers would gain access to Boom's mainframe, specify the program they wish to order, and provide their name, address, and credit card information. The second is to make software available through a computerized "program bank." In essence, programs would be downloaded directly from Boom using telecommunications technology. Doing so requires a $ 500, 000 \$ 500,000 $500, 000 investment in duplicating equipment. The first is to provide software on memory sticks. However, it does want to reduce its reliance on the disk medium. The company does not intend to discontinue using disks altogether. Not only are the disks cumbersome for customers to load, they are relatively expensive for Boom to purchase. Due to their complexity, some of these applications occupy as many as seven disks. Currently, all of its programs come on disks. Draw a monthly cost-volume-profit graph for sales volume up to 60 units per machine per month.īoom, Inc., sells business software. These expenses do not vary with the number of units sold.ī. Other expenses are estimated at $ 200 \$ 200 $200 per month. One person will be hired to service the machines. Owners of the buildings in which the machines are located are paid a commission of 10 cents per sandwich sold. Sandwiches sell for an average of $ 3.20 \$ 3.20 $3.20 and will cost Winslow an average of $ 1.10 \$ 1.10 $1.10 per unit to prepare. Depreciation will be computed on the straight-line basis. The machines have a service life of five years and no salvage value at the end of that period. The following information is made available to Winslow in evaluating the possible profitability of the operation.Īn investment of $ 70, 000 \$ 70,000 $70, 000 will be required, $ 10, 000 \$ 10,000 $10, 000 for merchandise and $ 60, 000 \$ 60,000 $60, 000 for the 50 machines. The machine manufacturer reports that similar sandwich machine routes have produced a sales volume ranging from 40 to 60 units per machine per month. ![]() Ed Winslow is considering investing in a sandwich machine operation involving 50 sandwich machines located in various locations throughout the city. ![]()
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