Cost of airconditioning plant, Cost Accounting

Assignment Help:

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.

Related Discussions:- Cost of airconditioning plant

Prepare a statement of cash flows, 2012                     2011 Cash   ...

2012                     2011 Cash                               12200                 17700 Acct receivable                  25200                  22300 Investments

Example of lifo, Example of LIFO, FIFO and Weighted Average Method Su...

Example of LIFO, FIFO and Weighted Average Method Suppose the following purchases were made in ABC Ltd as like: Date of purchase     Units purchased              Price/uni

Calculate the cost per unit for products, Chemical Recovery Company uses co...

Chemical Recovery Company uses common machinery to manufacture two products.  Each year, the company has a total of four productions runs, which is two production runs for each pro

cost classification, Explain the value attached to this common exercise un...

Explain the value attached to this common exercise undertaken by Accountants.

Evaluate the income statement for the year, DF is describing its consolidat...

DF is describing its consolidated financial declaration for the year ended 31 December 2009. DF has a numerous investments in other entities. Some of these investments are provided

Calculate the equivalent annual cost, A plant is considering the replacemen...

A plant is considering the replacement of a piece of equipment in its materials handling system with a new piece. If the company's cost of capital is 10%. Should the present asset

Calculate the inventory turnover ratio, The following information is availa...

The following information is available for the automotive division of Ford Motor Company for 2009.  The company uses the LIFO inventory method.

Determine the rate of return, A forecasted increase in metal prices has enc...

A forecasted increase in metal prices has encouraged the ABC Resource Company to consider the expansion of the capacity in one of its mine operations in Northern Ontario. For this

Calculate cost for each unit, Dropping a segment - George's Grill analyzes ...

Dropping a segment - George's Grill analyzes profitability of three operating units: restaurant, bar, and billiards room. Revenues, variable costs, and attributable fixed costs (wh

Explanation of sales revenue line, The sales revenue line demonstrates the ...

The sales revenue line demonstrates the amount of sales earned throughout the different level of activities. It can be observed that between zero and somewhere between activity B a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd