Use the Information for the Question(s)below

question 40

Multiple Choice

Use the information for the question(s) below.
The Sisyphean Corporation is considering investing in a new cane manufacturing machine that has an estimated life of three years.The cost of the machine is $30,000 and the machine will be depreciated straight line over its three-year life to a residual value of $0.
The cane manufacturing machine will result in sales of 2000 canes in year 1.Sales are estimated to grow by 10% per year each year through year three.The price per cane that Sisyphean will charge its customers is $18 each and is to remain constant.The canes have a manufacturing cost of $9 each.
Installation of the machine and the resulting increase in manufacturing capacity will require an increase in various net working capital accounts.It is estimated that the Sisyphean Corporation needs to hold 2% of its annual sales in cash,4% of its annual sales in accounts receivable,9% of its annual sales in inventory,and 5% of its annual sales in accounts payable.The firm is in the 21% tax bracket,and has a cost of capital of 10%.
-The required net working capital in the first year for the Sisyphean Corporation's project is closest to:

• A)$3600.
• B)$3960.
• C)$2880.
• D)$5400.

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Definitions:

Average Observed Time

The mean time recorded for a given task or process, based on measurements taken over a series of observations or operations.

Allowance Factors

Elements taken into account to adjust time standards or costs, accounting for various delays or inefficiencies in operations.

Normal Time

The average time in which a task or operation should be completed under normal working conditions.

Lillian Gilbreth

An American psychologist and engineer known as the "mother of modern management," instrumental in developing industrial management techniques and the study of ergonomics.