Question

The Brisbane Manufacturing Company produces a single model of a CD player. Each player is sold for $191 with a resulting contribution margin of $74.

Brisbane's management is considering a change in its quality control system. Currently, Brisbane spends $42,000 a year to inspect the CD players. An average of 1,900 units turn out to be defective - 1,520 of them are detected in the inspection process and are repaired for $85. If a defective CD player is not identified in the inspection process, the customer who receives it is given a full refund of the purchase price.

The proposed quality control system involves the purchase of an x-ray machine for $190,000. The machine would last for five years and would have salvage value at that time of $20,000. Brisbane would also spend $580,000 immediately to train workers to better detect and repair defective units. Annual inspection costs would increase by $21,000. This new control system would reduce the number of defective units to 400 per year. 345 of these defective units would be detected and repaired at a cost of $44 per unit. Customers who still received defective players would be given a refund equal to 150% of the purchase price.

Questions 1 & 2 [0 points; unlimited tries]
1. What is the Year 3 cash flow if Brisbane keeps using its current system?  

错误.

Tries 4/99

以前的尝试

2. What is the Year 3 cash flow if Brisbane replaces its current system?  

Tries 0/99

Questions 3 & 4 [5 points each; 5 tries each]
[NOTE: When computing present values, use the present value factors from the tables on page 118 in the Coursepack]
3. Assuming a discount rate of 8%, what is the net present value if Brisbane keeps using its current system?  

Tries 0/5

4. Assuming a discount rate of 8%, what is the net present value if Brisbane replaces its current system?

Answer 1

Selling Price	191
Less: Variable cost	117
Contribution margin	74

Details	Qty	Current System	Qty	New System
Inspection cost		42000		63000
Repair cost	1520	129200	345	15180
Refund	380	72580	55	15758
Training cost				116000
Total Cost		243780		209938

Sales qty details not provided in the question if it is assumed that sales under current system is 5000 per annum and new system is 5500

Details	Qty	Current System	Qty	New System
Total Cost		243780		209938
Sales	5000	370000	5500	407000
Net Cash inflow per annum		126220		197063
Discount rate(8%)		3.9927		3.9927
Cost of Machine				-190000
NPV		503959		596811