Cost of airconditioning plant, Cost Accounting

Devprop Leasing Co.is an industrial property development company, that typically develops warehouse and industrial complexes in new or underdeveloped areas, operates these complexes as fully fitted with equipment and office furniture for a number of years (never more than 10 years) and having created a thriving complex ultimately sells these complexes for a substantial profit.  (Details inrespect  to normal investment and operating activities are given below).  The corporation purchases its warehouse/industrial complexes from an associated (but separate) construction company at cost (including land and buildings and initial equipment etc).

Details of Discretionary Variables

The initial values of the discretionary are provided in the table on page 20.   The following details are further descriptions and parameters that are required for the investment analysis model.

Investment Project Term

Investment projects will be for a minimum of three years and for the sake of this assignment it can be assumed that no investment will exceed 10 years.  Each schedule must allow for these parameters.  In addition where an investment is for less than 10 years the schedules should be designed in a manner that does not show zero values nor show values (negative or otherwise) in years other than those for which the investment exists

The Expected Life of Investment Project:
will be determined by market demographics, economic forecasts, etc. but will always be between three and ten years.

Initial Investment

The total cost of complex is made up of the following variables

1. The cost of the Building

  • For accounting purposes all buildings are expected to have a useful life of 25 years with no scrap value. Assume straight line depreciation.
  • Repairs and Maintenance Costs will generally be related to the level of activity in the building.  It has been determined that R&M costs will be a percentage of Gross Rental Revenue.

2. The cost of Airconditioning Plant

  • The useful life of the Airconditioning Plant will vary according to the type of plant purchased and the level of maintenance.  The Plant is not expected to have a material scrap value.  The Airconditioning plant will be replaced at least once every five years  and depending on the level of maintenance may be replaced as frequently as once every three years.  Assume straight line depreciation.  Cost of replacement is expected to be the original cost of theequipment replaced plus an allowance for annual inflation (compounding annually).
  • Airconditioning Plant may have a warranty. If a warranty exists it will be between 1 & 3 years.  During the warranty period there is no repairs and maintenance costs.  Outside the warrant periods R&M costs will be the same amount (determined by a pre-arranged maintenance contract) per annum over the remaining life of the Plant.
Posted Date: 3/2/2013 12:38:27 AM | Location : United States







Related Discussions:- Cost of airconditioning plant, Assignment Help, Ask Question on Cost of airconditioning plant, Get Answer, Expert's Help, Cost of airconditioning plant Discussions

Write discussion on Cost of airconditioning plant
Your posts are moderated
Related Questions
Lapsol limited manufacture electrical appliances for the export market. The management of the company are considering investing in one of two possible capital expenditure projects.

Imperial Sandwich Plc is to be established shortly. The founders are considering their options with regard to capital structure. A total of £5 m will be required to establish the b

Zero Based Budgeting It is referred to also like priority based budgeting. It is a cost advantage approach budgeting where it is assumed that the cost allowance is Zero for a

ln an attempt to conceal a thefi of funds, Kaito Kid, controller of Shinichi Products, lnc. placed a bomb in the company s record vault. The ensuing explosion left only fragments o

What is the major value of the weighted cost of capital calculation for the firm?

What will be the cost of Well Water after considering the financing surrounding the purchase (savings on the loan), Well Water's (net) working capital situation, and the additional

This can be explained as the process of accumulating, calculating, analyzing, interpreting and reporting cost information that is both helpful and relevant to the internal and exte

During the dinner hour, the distribution of the inter-arrival time of customers at Burger Barn is predictable to be as follows: Inter-arrival Time Probabi

What type of activity could a company engage in to improve their cash flows in their Cash Flows Statement? Is this ethical? Could borrowing money make the cash from operations be

FDP Company produces a variety of home security. Gary Price, the company’s president, is concerned with the fourth quarter market demand for the company’s products. Unless someth