(Ignore Income Taxes in This Problem

question 36

Essay

(Ignore income taxes in this problem.) The management of an amusement park is considering purchasing a new ride for $400,000 that would have a useful life of 5 years and a salvage value of $40,000. The ride would require annual operating costs of $190,000 throughout its useful life. The company's discount rate is 12%. Management is unsure about how much additional ticket revenue the new ride would generate-particularly because customers pay a flat fee when they enter the park that entitles them to unlimited rides. Hopefully, the presence of the ride would attract new customers.
Required:
How much additional revenue would the ride have to generate per year to make it an attractive investment?

Determine the cost of ending work in process inventory and the cost of units transferred out using the weighted-average method.

Compute the costs per equivalent unit for materials and conversion costs.

Appreciate the importance of cost accounting in pricing, cost control, and decision making within a manufacturing environment.

Understand the definition and application of the FIFO method in process costing.

---

Definitions:

Management By Objectives (MBO)

A management strategy where objectives are defined so that employees understand what they need to achieve.

Type Of Uncertainty

Refers to different situations in which the probability of outcomes or future events is unknown, common in business and economics.

Management By Objectives (MBO) Procedure

A performance management approach where managers and employees collaborate to set, monitor, and achieve specific objectives.

Setting Objectives

The method of setting clear, quantifiable, attainable, pertinent, and timely objectives for a person, group, or entity.