Question #1   

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Question: Question #1    Royal Garden Tools produces and sells two products. Following is the rev…
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Royal Garden Tools
produces and sells two products. Following is the revenue and cost
information for the company’s two products.

Deluxe Grass Trimmer

Super Leaf Blower

Selling Price per Unit

$ 60.00

$ 75.00

Variable Expenses per Unit

$ 24.00

$ 55.00

Traceable Fixed Costs per year

$ 350,000

$ 210,000

Last year the company sold 15,000 Grass Trimmers and
25,000 Leaf Blowers. Royal’s Net Income for the year totaled $
350,000.

Prepare a contribution format income statement for Royal
and its two segments. Include the contribution margin and segment
margins. Calculate and include Royal’s total common fixed
costs.

Question #2

A farm owner is considering replacing his obsolete
tractor with one of two new state-of-the-tractors. This new machine
would cost $125,000 and would have a ten-year useful life.
Unfortunately, the new machine would have no salvage value but
would result in annual cost savings of $23,000 per year. The
current old tractor can be sold now for $10,000. The farm owner’s
Cost of Capital is 10%.   The farm owner uses the
straight line method of depreciation (this depreciation information
is needed only for calculating the “Simple Rate of Return” in
Question #3).

a.) Calculate the Net Present Value of replacing the
tractor .

b.) Based on this method of comparison, would you
recommend replacing the tractor? Why?

Question #3

Based on the above information for Question #2 and your
solution to that question,

calculate the following associated with replacing the
tractor:

c.) The Profitability Index

d.) The Payback Period

e.) Simple Rate of Return

Can I please have some help on questions 2 and 3
thank you!

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