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Study Resources (Accounting)

Ex. 198 Cannon Hospital is considering purchasing an ultrasound machine for $2,270,000. The machine has a 10-year life and an estimated salvage value of $80,000. Installation costs and freight charges will be $48,400 and $1,600, respectively. The hospital uses straight-line depreciation. Cannon estimates that the machine will be used five times a.
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MULTIPLE CHOICE QUESTIONS Note: Students will need time value of money tables for some questions.               21.Compound interest is the return on principal a.only. b.for one or more periods. c.for two or more periods. d.for one period.               22.The difference between the amount borrowed (or invested) and the amount repaid (or collected) is commonly known as a.simple interest. b.an.
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Ex. 183 Grant Enterprises manufactured 6,000 units of a component part that is used in its product and incurred the following costs: Direct materials$70,000 Direct labor30,000 Variable manufacturing overhead20,000 Fixed manufacturing overhead  40,000 $160,000 Another company has offered to sell the same component part to the company for $24 per unit. The fixed manufacturing overhead consists mainly.
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Ex. 191 Milwaukee, Inc. has three divisions: Bud, Wise, and Er. The results of May, 2012 are presented below.    Bud    Wise     Er    Total  Units sold3,0005,0002,00010,000 Revenue$70,000$50,000$40,000$160,000 Less variable costs32,00026,00016,00074,000 Less direct fixed costs14,00019,00012,00045,000 Less allocated fixed costs    6,000  10,000    4,000    20,000 Net income$18,000$ (5,000)$  8,000$  21,000 All of the allocated costs will continue even if a division is.
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Ex. 185 Kuhn Bicycle Company has been manufacturing its own seats for its bicycles. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 60% of direct labor cost. The direct materials and direct labor cost per unit to make the.
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              11.A higher discount rate produces a higher present value.               12.The formula for the present value of a single amount is FV / (1 + i)N.               13.In computing the present value of an annuity, it is necessary to know only the discount rate and the amount of the periodic receipts.
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SHORT-ANSWER ESSAY QUESTIONS S-A E  222 Management is often faced with the alternative of continuing to make a product or component internally, or going to an external source and purchasing the product or component. In gathering relevant information for these two alternatives, briefly identify the quantitative factors that should be considered. Are.
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              68.Each of the following is a disadvantage of buying rather than making a component of a company's product except that a.quality control specifications may not be met. b.the outside supplier could increase prices significantly in the future. c.profitable product lines may be dropped. d.the supplier may not deliver on time.               69.Carter, Inc. can.
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Ex. 199 Benford Industries just purchased an automobile hoist for $13,000. The hoist has a 5-year life and an estimated salvage value of $960. Installation costs were $2,900, and freight charges were $740. Benford uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Benford estimates.
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Ex. 192 Union Corp. operates two divisions, the West Division and the East Division. The West Division manufactures and sells logs to paper manufacturers. The East Division operates retail lumber mills which sell a variety of products in the do-it-yourself homeowner market. The company is considering disposing of the East Division.
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              58.If a company must expand capacity to accept a special order, it is likely that there will be a.an increase in unit variable costs. b.no increase in fixed costs. c.an increase in variable and fixed costs per unit. d.an increase in fixed costs.               59.Which of the following is true if a company can.
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Ex. 186 Fleet Co. produces an oil-based chemical product which it sells to paint manufacturers. In 2012, the company incurred $688,000 of costs to produce 40,000 gallons of the chemical. The selling price of the chemical is $22.00 per gallon. The costs per unit to manufacture a gallon of the chemical.
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Ex. 201 Hawk, Inc. is considering a capital investment of $200,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and cash inflows are.
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              48.Which of the following is not a true statement? a.Incremental analysis might also be referred to as differential analysis. b.Incremental analysis is the same as CVP analysis. c.Incremental analysis is useful in making decisions. d.Incremental analysis focuses on decisions that involve a choice among alternative courses of action.               49.Incremental analysis would not be.
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              41.Present value is based on a.the dollar amount to be received. b.the length of time until the amount is received. c.the interest rate. d.all of these.               42.Which of the following accounting problems does not involve a present value calculation? a.The determination of the market price of a bond. b.The determination of the declining-balance depreciation expense. c.The.
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148.Use the following table,  Present value of an Annuity of 1  Period   8%    9%  10%  1.926.917.909 21.7831.7591.736 32.5772.5312.487 A company has a minimum required rate of return of 9%. It is considering investing in a project which costs $840,000 and is expected to generate cash inflows of $336,000 at the end of each year for three.
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Ex. 203 Coyote Co. is considering two new projects, each requiring an equipment investment of $72,000. Each project will last for three years and produce the following annual net income. Year      TIP       TOP  1$  6,000$  9,000 29,0009,000 3  14,000    9,000 $29,000$27,000 The equipment will have no salvage value at the end of its three-year life..
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Ex. 200 Visor Enterprises is considering three new projects, each requiring an equipment investment of $20,000. Each project will last for 3 years and produce the following cash inflows. Year     AA        BB        CC    1$  7,000$  9,500$11,000 29,0009,500  10,000    3     15,000    9,500    9,000 Total$31,000$28,500$30,000 The equipment's salvage value is zero. Visor uses straight-line.
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              98.Begley, Inc. is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old MachineNew Machine Price$250,000$500,000 Accumulated Depreciation75,000-0- Remaining useful life10 years-0- Useful life-0-10 years Annual operating costs$200,000$150,500 If the old machine is replaced, it can be sold for $20,000. The net advantage (disadvantage) of replacing the old machine.
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Ex. 193 Daryl, Inc. has three product lines in its retail stores: electronics, soft goods, and food. Results of the fourth quarter are presented below:   Electronics     Food  Soft Goods   Total              Units sold2,0004,0004,00010,000 Revenue$44,000$80,000$46,000$170,000 Variable departmental costs34,00044,00024,000102,000 Direct fixed costs2,0006,0004,00012,000 Allocated fixed costs    14,000    14,000    14,000  42,000 Net income (loss)$ (6,000)$  16,000$  4,000$  14,000 The allocated fixed costs.
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Ex. 196 Sue Ray, Inc. manufactures and sells two products. Relevant per unit data concerning each product are given below:       Product       StandardDeluxe Selling price$28$32 Variable costs$10$12 Machine hours45 Ex. 196(Cont.) Instructions (a)Compute the contribution margin per unit of the limited resource for each product. (b)If 1,000 additional machine hours are available, which product should be manufactured? (c)Prepare an analysis showing the.
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              31.All of the following are necessary to compute the future value of a single amount except the a.interest rate. b.number of periods. c.principal. d.maturity value.               32.If $20,000 is put in a savings account paying interest of 4% compounded annually, what amount will be in the account at the end of 5 years? a.$16,439. b.$24,000. c.$24,310. d.$24,333.               33.Farmington.
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TRUE-FALSE STATEMENTS               1.An important step in management's decision-making process is to determine and evaluate possible courses of action.               2.In making decisions, management ordinarily considers both financial and nonfinancial information.               3.In incremental analysis, total variable costs will always change under alternative courses of action, and total fixed costs will always remain.
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MULTIPLE CHOICE QUESTIONS               38.A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to a.assign responsibility for the decision. b.provide relevant revenue and cost data about each course of action. c.determine the amount of money that should be spent on a project. d.decide which actions that management should.
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158.If an unprofitable segment is eliminated a.it is impossible for net income to decrease. b.fixed expenses allocated to the eliminated segment will be eliminated. c.variable expenses of the eliminated segment will be eliminated. d.it is impossible for net income to increase. 159.All of the following are relevant in deciding whether to eliminate an unprofitable segment.
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COMPLETION STATEMENTS               206.An important purpose of management accounting is to provide _____________________ for decision making.               207.The process used to identify the financial data that change under alternative courses of action is called __________________ analysis.               208.In a decision on whether an order should be accepted at a special price when there.
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Ex. 195 Shin Enterprises has 8,000 machine hours available to use to produce either Product A or Product B. The cost accounting department developed the following unit information for each of the products: Product AProduct B Sales price$57$71 Direct materials1921 Direct labor1514 Variable manufacturing overhead812 Fixed manufacturing overhead36 Machine hours required.61.2 Management desires to make a decision regarding which.
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Exercises Ex. 178 Lark Corp. produced and sold 50,000 units of product and is operating at 70% of plant capacity. Unit information about its product is as follows: Sales Price$140 Variable manufacturing cost$90 Fixed manufacturing cost ($1,000,000 ÷ 50,000)  20  110 Profit per unit$30 The company received a proposal from a foreign company to buy 15,000 units.
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              21.If a company has only a certain number of machine hours available for production, it is generally more profitable to produce and sell the product with the highest unit contribution margin.               22.Capital budgeting decisions usually involve large investments and can have a significant impact on a company's future profitability.              .
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              88.The focus of a sell or process further decision is a.incremental revenue. b.incremental cost. c.both incremental revenue and incremental cost. d.neither incremental revenue nor incremental cost.               89.Walk Manufacturing gathered the following data about the three products that it produces: PresentEstimated AdditionalEstimated Sales ProductSales Value Processing Costsif Processed Further A$24,000$16,000$42,000 B28,00010,00036,000 C22,0006,00032,000 Which of the products should not be processed.
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              51.The present value of $10,000 to be received in 5 years will be smaller if the discount rate is a.increased. b.decreased. c.not changed. d.equal to the stated rate of interest.               52.Rogers Company is considering purchasing equipment. The equipment will produce the following cash flows: Year 1              $20,000 Year 2              $30,000 Dexter requires a minimum rate of.
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128.Green Co. is considering buying equipment for $480,000 with a useful life of five years and an estimated salvage value of $24,000. If annual expected income is $42,000, the denominator in computing the annual rate of return is a.$480,000. b.$240,000. c.$252,000. d.$504,000.               129.A capital budgeting technique which takes into consideration the time value of.
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              78.Corny produces corn chips. The cost of one batch is below: Direct materials$36.00 Direct labor26.00 Variable overhead22.00 Fixed overhead28.00 An outside supplier has offered to produce the corn chips for $50 per batch. How much will Corny save if it accepts the offer? a.$4.00 per batch b.$34.00 per batch c.$62.00 per batch d.$12.00 per batch               79.Mink Manufacturing is.
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S-A E  226(Ethics) Brett Gavin is on the capital budgeting committee for his company, Oak Corporation. Ed Boyd is an engineer for the firm. Ed expresses his disappointment to Brett that a project that was given to him to review before submission looks extremely good on paper. "I really hoped that.
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118.A company is considering purchasing factory equipment which costs $960,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $450,000 and annual operating expenses exclusive of depreciation expense are expected to be.
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Ex. 181 Larkin Company produces golf discs which it normally sells to retailers for $6 each. The cost of manufacturing 25,000 golf discs is: Materials$  10,000 Labor30,000 Variable overhead20,000 Fixed overhead    40,000 Total$100,000 Innova also incurs 5% sales commission ($0.30) on each disc sold. Rudd Corporation offers Innova $4.25 per disc for 5,000 discs. Rudd would sell the.
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              61.Barnard Company is considering investing in an annuity contract that will return $40,000 annually at the end of each year for 12 years. Barnard has obtained the following values related to the time value of money to help in its planning process and compounded interest decisions. Present value of 1.
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TRUE-FALSE STATEMENTS               1.Interest is the difference between the amount borrowed and the principal.               2.Compound interest is computed on the principal and any interest earned that has not been withdrawn.               3.The amount of interest involved in any financing transaction is based on two elements, principal and interest rate.               4.Compound interest uses.
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BRIEF Exercises BE 166 Opera Industries is considering Plan A which is estimated to have sales of $80,000 and costs of $30,000.  The company currently has sales of $76,000 and costs of $28,000. Instructions Compare plans using incremental analysis. BE 167 Hyde Enterprises produces giant stuffed bears. Each bear consists of $24 of variable costs and.
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Ex. 180 Captain Enterprises supplies schools with floor mattresses to use in physical education classes. Captain has received a special order from a large school district to buy 600 mats at $90 each. Acceptance of the special order will not affect fixed costs but will result in $2,400 of shipping costs. For.
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              11.An opportunity cost is the potential benefit obtained by using resources in an alternative course of action.               12.If an incremental make or buy analysis indicates that it is cheaper to buy rather than make an item, management should always make the decision to choose the lowest cost alternative.               13.In.
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Ex. 189 Kay Dart Enterprises uses a machine that removes the bark from cut timber. The machine is unreliable and results in a significant amount of downtime and excessive labor costs. The management is considering replacing the machine with a more efficient one which will minimize downtime and excessive labor costs..
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138.Use the following table, Present Value of an Annuity of 1 Period  8%  9% 10% 1.926.917.909 21.7831.7591.736 32.5772.5312.487 A company has a minimum required rate of return of 9% and is considering investing in a project that costs $350,000 and is expected to generate cash inflows of $140,000 at the end of each year for three.
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Ex. 197 Skein Manufacturing estimates the following cash flows and depreciation on a project that will cost $200,000 and will last 10 years with no salvage value: Revenues Sales$70,000 Operating expenses Salary expense$32,000 Depreciation expense20,000 Miscellaneous expenses    8,000  60,000 Net Income$10,000 Ex. 197(Cont.) Instructions (a)Calculate the expected annual rate of return on this project showing calculations to support your answer. (b)Calculate the.
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108.A company can produce and sell only one of the following two products: MachineContribution Hours RequiredMargin Per Unit Product 13$60 Product 22$50 If the company has machine capacity of 2,000 hours, what is the total contribution margin of the product it should produce to maximize net income? a.$40,000 b.$48,000 c.$50,000 d.$32,000 109.Parker Company’s contribution margin is $8 per unit for.
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              31.Accounting contributes to management's decision-making process through internal reports that review the actual impact of the decision.               32.The process used to identify the financial data that change under alternative courses of action is called allocation of limited resources.               33.If a company is operating at full capacity, the incremental costs.
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MATCHING 221.Match the items below by entering the appropriate code letter in the space provided.               A.Incremental analysis              F.              Cash payback technique               B.Opportunity cost              G.              Hurdle or cutoff rate               C.Discounted cash flow technique              H.Net present value method               D.Capital budgeting              I.              Sunk cost               E.Annual rate of return technique              J.Internal rate of return method ____             .
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