The silverside company is considering investing in two alternative projects: project 1 project 2 investment $500,000 $240,000 useful life (years) 8 7 estimated annual net cash inflows for useful life $120,000 $40,000 residual value $32,000 $10,000 depreciation method straightminusline straightminusline required rate of return 11% 8% what is the accounting rate of return for project 2? (round any intermediary calculations to the nearest dollar, and round your final answer to the nearest hundredth of a percent, x.xx%.)

Instructions are listed below

Explanation:

Giving the following information:

The company assembled the information shown below for the quarter ended March 31:

Amount Sales= $ 1,092,000

Selling price per pair of skis $ 420

Variable selling expense per pair of skis $ 49

Variable administrative expense per pair of skis $ 16

Total fixed selling expense $ 135,000

Total fixed administrative expense $ 130,000

Beginning merchandise inventory $ 70,000

Ending merchandise inventory $ 115,000

Merchandise purchases $ 295,000

First, we need to calculate the cost of goods sold (COGS):

COGS= beginning merchandise inventory + purchases - ending merchandise inventory

COGS= 70000 + 295000 - 115000= $250,000

A) The general structure of an income statement proceeds as follow:

Revenue/Sales (+)

Cost of Goods Sold (COGS) (-)

=Gross Profit

Marketing, Advertising, and Promotion Expenses (-)

General and Administrative (G&A) Expenses (-)

=EBITDA

Depreciation & Amortization Expense (-)

=Operating Income or EBIT

Interest (-)

Other Expenses (-)

=EBT (Pre-Tax Income)

Income Taxes (-)

=Net Income

In this exercise:

Sales= 1092000

COGS= 250,000

Gross income= $842,000

Total selling expense= 49*420+ 135,000= 155,580

Total administrative expense= 16*420 + 130,000= 136,720

EBITDA= $549,700

B) A Contribution Margin Income Statement is a special format of the income statement that segregates the variable and fixed expenses involved in running a business.

Sales= 1,092,000

Variable costs:

Cost of good sold= 250,000

Sales commissions=49*420= $20,580

Shipping expense= 16*420= $6,720

Total variable cost= $277,300

Contribution margin= $814,700

Fixed costs:

Fixed Administrative expense= $ 130,000

IFixed selling expense= $135,000

Total fixed cost= $265,000

Net profit= $549,700

C) contribution margin per unit= $814,700/420= $1939.76