Cost of airconditioning plant, Cost Accounting

Devprop Leasing 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
Q. Issues to consider when making decisions? At activity level A it can be seen from diagram that sales revenue line intersects the total cost line specifying that this is the

Q. Explain Break-even analysis? Cost-volume-profit (CVP) analysistracks that how profit changes when there are changes insales price, variable costs, fixed c

Under a contract with the provincial government, ChemLabs Inc. analyzes the chemical and bacterial composition of well water in various municipalities in the interior of British Co

Making Variance Analysis More Meaningful To compose variance analysis as useful aid to management is the main objective of variance calculations.  However this can only be don

for financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?

Cash Budget - Budgetary Planning and Control This can records the cash outflows and inflows that are expected to take place in respect of every functional budget. This may be

Role of Cost Accounting in Business Management The system is a set of interdependent parts that together form a unitary whole such performs some functions. A number of sub sys

Important Aspect Regarding to Service Cost Centres The basis selected should be one that is judged to be the mainly equitable way of sharing the service costs of department

annual usage rs 160000@ 40 per unit, cost of placing and receiving one order rs 200:annual carrying cost ; 25% of inventory value

What is callable preferred stock? Why do corporations issue such stock? Given the different features that are associated with stock (callable, cumulative, preferred, etc.), what ty