Collins Inc. is investigating whether to develop a new product. In evaluating whether to go ahead with the project, which of the following items should NOT be explicitly considered when cash flows are estimated?

a. The project will utilize some equipment the company currently owns but is not now using. A used equipment dealer has offered to buy the equipment.
b. The new product will cut into sales of some of the firm's other products.
c. The company has spent and expensed for tax purposes $3 million on research related to the new detergent. These funds cannot be recovered, but the research may benefit other projects that might be proposed in the future.
d. If the project is accepted, the company must invest $2 million in working capital. However, all of these funds will be recovered at the end of the project's life.
e. The company will produce the new product in a vacant building that was used to produce another product until last year. The building could be sold, leased to another company, or used in the future to produce another of the firm's products.

Wallis company manufactures only one product and uses a standard cost system. the company uses a predetermined plantwide overhead rate that relies on direct labor-hours as the allocation base. all of the company's manufacturing overhead costs are fixed—it does not incur any variable manufacturing overhead costs. the predetermined overhead rate is based on a cost formula that estimated $2,886,000 of fixed manufacturing overhead for an estimated allocation base of 288,600 direct labor-hours. wallis does not maintain any beginning or ending work in process inventory.

Almost 80% of business owners are clueless about the competition, resulting in a) lost market share and customers. b) needless lawsuits. c) uninspired products. d) lack of perseverance

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?