Managerial Accounting (Math Problem Sample)

Managerial Accounting
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Managerial Accounting
Initial cost of one lift= $2, cost of installation = $1.3. Initial cost of one lift is buying price of the lift + cost of installation = 2 + 1.3 = $3.3. Maintenance cost of the lift per day is $500, maintaining the lift for the 200 days will amount to 500 * 200 =$100,000. Lift tickets per day = $55, the extra capacity is required only for 40days. The lift allows 300 additional skiers. Thus income from the lift in one year will amount to, 55 * 40* 300 = $660,000.
This is a profitable investment since the lodge will generate $ 660,000. The lodge’s cash flow will grow by a sizable amount placing at a better position to access funds. 660,000 – 100,000 = 560,000 $560,000 is the margin generated by the lift to the lodge. Before-tax rate of return for Deer is 14% which is 14/100 *3300, 000=$462,000. The amount shows the lodge’s ability to reinvest their funds or pay their loan for the purchase of the lift.
After tax rate of return is simply the amount an investor will gain after deduction of all taxes. Income tax is calculated on the operating income generated by a company or investment. $566,000 is made after deduction of the maintenance cost of the lift. Thus, income tax payable is; 40/100 * 566,000 = $226,400 net profit is 566,000 – 226,400 = $339,600. The recovery period is ten years, total revenue from the lift in ten years is, 339,600 * 10 = $3,396, 000. Though the lodge is due to recover from the investment in ten years’ time, it has is assured of that it will not incur a loss from the investment.
In making investment issues, it is wise to consider the probability of an event occurring. There are issue that the management should be conscious of before making, in making and implementing of an investment decision. These issues ar...