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20.3-11A company sells two products with information as follows: A B Price per unit $10.00 $16.00 Variable cost per unit $8.00 $11.00 Products are made by machine.  4 units of Product A can be made with one machine hour and 2 units of Product B can be made with one machine hour.  If there are.
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21.2-10The rate of return calculations ignores the time value of money, but the payback period does include                                                         consideration of the time value of money. 21.2-11The payback method and the rate of return method are powerful, comprehensive evaluation tools, and                                                         would normally be sufficient.
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19.5-8Mist Company sells two products—A and B. Mist predicts that it will sell 2,500 units of A and 1,500 units of B during the next period. The unit contribution margins are $3.50 and $4.80, respectively. What is the weighted-average unit contribution margin?  (Please round to nearest cent.) A) $3.99 B) $4.25 C) $4.15.
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20.4-5When a company is considering the possibility of processing their product further to achieve higher sales                                           revenues, the rule is as follows:  if incremental revenues exceed incremental costs, then further processing                             will enhance operational profits. 20.4-6When a company is considering the possibility of processing their product.
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19.6-8Allston Products sells a special kind of effects pedal for musical performers.  Each unit sells for $20.00.                                            Additional data for the month of April, 2011, are as follows: Direct materials $4.00 per unit Direct labor $8.00 per unit Variable manuf. overhead $20,000 per month Fixed manuf. overhead $14,000 per month Operating expenses $21,000 per month Beginning inventory 0 units Units.
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22.3-34Hi-value Products Company is creating an operating budget for the 3rd quarter. Please review the                                                                                                   following budgets: Sales Budget Jul Aug Sep Cash sales: 75% $75,000 $90,000 $120,000 Credit sales: 25% 25,000 30,000 40,000 Total sales $100,000 $120,000 $160,000 Inventory, Purchases and COGS. Budget Jul Aug Sep Cost of goods sold $60,000 $72,000 $96,000 Desired.
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21.4-7La Grange Company is evaluating an opportunity to invest $50,000 in new manufacturing equipment.  It                                                         will have a useful life of 3 years, and will generate $10,000 cash flows at the end of Year 1; $20,000 of                                                         cash flows at the end.
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20.3-41In making product mix decisions under constraining factors, which of the following is the key to choosing                             the product type to be maximized? A)    Revenue per unit B)     Contribution margin per unit of product C)     Contribution margin per unit of the constraining factor D)    Gross profit per unit using absorption costing 20.3-42Custom Furniture.
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21.3-18If Teddy Godfried invests $10,000 today in an account compounding yearly, and he wants his money to at least double within 10 years, what interest rate is needed? Future Value of $1 4% 5% 6% 7% 8% 9% 1 1.040 1.050 1.060 1.070 1.080 1.090 2 1.082 1.103 1.124 1.145 1.166 1.188 3 1.125 1.158 1.191 1.225 1.260 1.295 4 1.170 1.216 1.262 1.311 1.360 1.412 5 1.217 1.276 1.338 1.403 1.469 1.539 6 1.265 1.340 1.419 1.501 1.587 1.677 7 1.316 1.407 1.504 1.606 1.714 1.828 8 1.369 1.477 1.594 1.718 1.851 1.993 9 1.423 1.551 1.689 1.838 1.999 2.172 10 1.480 1.629 1.791 1.967 2.159 2.367 A) 5% B) 6% C) 7% D) 8% 21.3-19$23,000 invested today in an account with 5% interest compounding yearly will grow to what amount in 6.
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21.3-28Simms Manufacturing is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $620,000 $400,000 Useful life 8 years 8 years Estimated annual net cash inflows for 8 years $130,000 $80,000 Residual value $60,000 $0 Depreciation method Straight-line Straight-line Discount rate 14% 10% What is the total present value of future cash inflows from Proposal Y? Present Value of an Annuity of $1 5% 6% 7% 8% 9% 10% 1 0.952 0.943 0.935 0.926 0.917 0.909 2 1.859 1.833 1.808 1.783 1.759 1.736 3 2.723 2.673 2.624 2.577 2.531 2.487 4 3.546 3.465 3.387 3.312 3.240 3.170 5 4.329 4.212 4.100 3.993 3.890 3.791 6 5.076 4.917 4.767 4.623 4.486 4.355 7 5.786 5.582 5.389 5.206 5.033 4.868 8 6.463 6.210 5.971 5.747 5.535 5.335 9 7.108 6.802 6.515 6.247 5.995 5.759 10 7.722 7.360 7.024 6.710 6.418 6.145 A) $266,750 B) $426,800 C) $436,800 D) $536,800 21.3-29Simms.
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21.3-8If $1,000 is invested in an account with 4% interest compounding yearly, what will the balance of the account be after 4 years?  (You may ignore small differences that result from rounding.) A)  $1,218 B)  $1,170 C)  $1,040 D)  $1,240 21.3-9If $1,000 is invested in an account with 4% interest compounding yearly, what will the balance.
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22.4-11Craig Manufacturing Company’s budgeted income statement includes the following data: Data Extracted from Budgeted Income Statement Mar Apr May Jun Sales $120,000 $90,000 $95,000 $100,000 Commission exp. - 15% of sales 18,000 13,500 14,250 15,000 Salary exp 30,000 30,000 30,000 30,000 Miscellaneous expense – 4% of sales 4,800 3,600 3,800 4,000 Rent expense 3,600 3,600 3,600 3,600 Utility expense 1,900 1,900.
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22.2-9In order to prepare a budgeted income statement, several other budgets need to be prepared first.  Which                                                                       of the following is NOT one of the budgets needed to prepare the budgeted income statement? A)  Capital expenditures B)  Sales C)  Operating expenses D)  Inventory, purchases and cost of goods sold 22.2-10The.
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22.4-58Craig Manufacturing Company’s budgeted income statement includes the following data: Data extracted from budgeted income statement Mar Apr May Jun Sales $120,000 $90,000 $95,000 $100,000 Commission expense - 15% of sales 18,000 13,500 14,250 15,000 Salary exp 30,000 30,000 30,000 30,000 Miscellaneous expense – 4% of sales 4,800 3,600 3,800 4,000 Rent expense 3,600 3,600 3,600 3,600 Utility expense 1,900 1,900.
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20.4-25A company produces 100 microwave ovens per month, each of which includes one electrical circuit.  The                                           company currently manufactures the circuit in-house but is considering outsourcing the circuits at a                                           contract price of $28 each.  Currently, the cost of producing circuits in-house includes variable.
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22.3-27Dahl Manufacturing is making its operating budget for the 4th quarter of 2012.  Sales are forecast at                                                                                     $60,000 in October, $65,000 in November, and $70,000 in December.  Cost of goods sold it 40% of sales.                                                          Expenses are budgeted as follows: Variable:Miscellaneous:5%.
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21.2-20Atlantic Company is considering investing in specialized equipment costing $360,000. The equipment                                           has a useful life of 5 years and a residual value of $45,000. Depreciation is calculated using the straight-                                          line method. The expected net cash inflows from the investment are: Year 1 $160,000 Year 2 130,000 Year 3 100,000 Year.
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22.4-59California Products Company has the following data as part of its budget for the 2nd quarter: Apr May Jun Cash collections $30,000 $32,000 $36,000 Cash payments:    Purchases of inventory 4,500 4,600 3,800    Operating expenses 7,200 7,600 8,000    Capital expenditures 0 24,500 5,200 The cash balance at April 1 is forecast to be $8,200.  Please prepare a.
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21.4-27When a company is evaluating an investment with discounted cash flows, if the investment has a higher                                                         risk, the company will use a lower discount rate, and vice versa. 21.4-28Alpha Company is considering an investment of $1,000,000 in a land development project.  It will yield                            .
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21.4-38Which of the following best describes the profitability index? A)    An index of projects in order of which has the most net income B)     The ratio of present value of cash flows to initial investment C)     The ratio of total cash flows to initial investment D)    An array of possible investment outcomes at different.
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19.5-18Argyle sells steel beams to building contractors in two sizes—regular and heavy.  Argyle sells 4 regular                                           beams for every one heavy beam.  Cost data are as follows: Regular Heavy Price per unit $20.00 $28.00 Variable cost per unit $16.00 $20.00 Argyle’s fixed costs are $2,880 per month.  How much is the breakeven.
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20.1-21Which of the following are the two most important keys to short-term business decision-making? A)  Focus on costs which do not change under two alternatives and on historic costs B)  Focus on qualitative data only and ignore future cash flows C)  Focus on sunk costs and quantitative data only D)  Focus on future expected.
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20.2-8Potlatch Company manufactures sonars for fishing boats.  Model 100 sells for $200.  Potlatch produces                                           and sells 5,000 of them per year.  Cost data are as follows: Variable manufacturing $105.00 Per unit Variable marketing $5.00 Per unit Fixed manufacturing $270,000 Per year Fixed marketing & admin $140,000 Per year A potential deal has come up for a.
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20.1-1If a business is considering buying a new vehicle, the cost of insurance on the new vehicle is information                                           that is relevant to the business decision. 20.1-2When considering whether to have a new roof installed on a building, the money spent previously on roof                             repairs to.
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22.4-21Felton Manufacturing provides the following data excerpted from its 3rd quarter budget: Jul Aug Sep Cash collections $50,000 $40,000 $48,000 Cash payments:    Purchases of inventory 31,000 22,000 18,000    Operating expenses 12,000 9,000 11,600    Capital expenditures 0 25,000 0 The cash balance at June 30 is projected to be $4,000.  Based on the above data, how much.
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22.3-32Hi-value Products Company is creating an operating budget for the 3rd quarter.  Budgeted sales are                                                                                     $100,000 in July, $120,000 in August, $160,000 in September, and $200,000 in October.  Cost of goods                                                                       sold is 60% of sales.  The desired ending.
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21.1-11Which of the following BEST describes a post-audit? A)  An audit of an operating unit of a company B)  An audit performed after financial statements have been issued C)  An analysis of an investment’s cash flows prior to committing to the initial investment D)  An analysis of an investment that is made after the.
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22.1-1Budgeting is a technique that is used to plan for future cash inflows and outflows. 22.1-2A goal of the budgeting process is to assist managers with coordinating and implementing the                                                                                                   business plan. 22.1-3Budgets provide benchmarks that help managers evaluate performance. 22.1-4A goal of the budgeting process.
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21.1-21Which of the following describes the purpose of a post-audit? A)    To screen initial investment alternatives B)     To determine whether investments are going as planned, or whether they should be abandoned C)     To determine the amount of the initial investment outlay D)    To evaluate the company’s internal controls 21.1-22Capital budgeting is: A)    planning how to invest.
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20.1-11In making a short-term decision, which of the following is MOST important? A) Separate variable costs from fixed costs B) Focus on total costs C) Use a conventional absorption costing approach D) Focus on the bottom line net income 20.1-12Which of the following describes a sunk cost? A) One that is relevant to a decision because.
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22.4-41At June 30, 2012, Alpha Company’s cash balance is $4,000.  Alpha is now preparing their cash budget for the third quarter of 2012.  The following data is provided: Cash Budget Jul Aug Sep Beginning cash balance $4,000 $8,000 $6,958 Cash collections 50,000 40,000 48,000 Cash available 54,000 48,000 54,958 Cash payments:    Purchases of inventory 31,000 22,000 18,000    Operating expenses 12,000.
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20.2-38If a company is a price-taker, which of the following is probably TRUE? A)  The company is in a highly competitive market. B)  The company’s product is unique. C)  The company has considerable flexibility in setting prices of its products. D)  The company clearly differentiates its product from the competitors. 20.2-39Grove Company makes special equipment.
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20.4-15Which of the following phrases MOST accurately describe opportunity cost? A)  The cost incurred to gain the opportunity to make a sale B)  The benefit gained by choosing a certain course of action C)  The benefit given up by not choosing an alternative course of action D)  Costs which have been incurred in the.
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20.2-18Pueblo Products is a price-taker and uses target pricing.  Pueblo has just done an analysis of their                                           revenues, costs and desired profits, and has calculated its target full cost.  Please refer to the following                                           information: Target full cost $400,000 Per year Actual fixed cost $160,000 Per year Actual variable.
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21.2-30A company is evaluating 3 possible investments.  Each uses straight-line depreciation.  See data below: Project A Project B Project C Investment $400,000 $20,000 $100,000 Salvage value $0 $2,000 $5,000 Net cash flows:    Year 1 $100,000 $10,000 $40,000    Year 2 $100,000 $8,000 $25,000    Year 3 $100,000 $5,000 $30,000    Year 4 $100,000 $3,000 $10,000    Year 5 $100,000 $0 $0.
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20.3-21Easy Cook Company manufactures two products: toaster ovens and bread machines.  The following data                                           are available: Toaster Ovens Bread Machines Sale price $60 $135 Variable costs $38 $62                           Easy Cook can manufacture five toaster ovens per machine hour and three bread machines per machine hour. Easy Cook’s production capacity is 1,500 machine hours per month. .
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22.4-1The budgeted cash collections for the current month typically take into consideration collections                                                         pertaining to credit sales of prior months. 22.4-2The cash budget can be prepared before the sales budget. 22.4-3The cash budget may be used to determine whether a company will need additional financing for the.
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21.1-1A post-audit is an analysis of an investment that is made after the investment is underway or completed. 21.1-2Capital rationing is when a company has limited resources, and it must find ways to reduce operating                                           expenses in all of its divisions and units. 21.1-3All else being equal, investments with.
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20.3-31Clay Corporation manufactures two styles of lamps—a Bedford Lamp and a Lowell Lamp.  The          following per unit data are available: Bedford Lamp Lowell Lamp Sale price $25 $35 Variable costs $17 $23 Machine hours required for 1 lamp 2 4 Total fixed costs are $30,000, and Clay can sell a maximum of 10,000 units of each style of lamp annually.  Machine.
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20.2-49 The Squash Company has 5,500 machine hours available annually to manufacture racquets.         The following information is available for the two different racquets produced by Squash: Pro  Unit sales price $200 Unit variable costs $120 Annual demand 2,000 units Machine time 2 hours per unit Mid Unit sales price $120 Unit variable costs $66 Annual demand 4,000 units Machine time 1.25 hours per unit How many units.
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22.4-31Purchases for May were $100,000, while expected purchases for June and July are $110,000 and                                                                                                   $125,000, respectively.  All purchases are paid 25% in the month of purchase and 75% the following                                                                                     month.  At what amount are June.
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21.4-48Natick Products is evaluating an investment in new production machinery.  The initial investment is                                                         $700,000 and will yield cash flows of $120,000 per year for an 8 year period.  At the end of 8 years, the                                                         machinery will be sold and has.
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21.4-17Allied Chemicals has a hurdle rate of 9% for new investments.  The production manager suggests that an                                                         equipment upgrade costing $84,460 would yield net cash flows of $40,000 in the first year, $30,000 in the                                           second year, $20,000 in the third year, and.
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21.3-38Jim wants to invest $5,000 at the end of each year for the next 10 years to prepare for his retirement.  He believes he can earn 7% on his investments.  What will the value of his investment be at the end of 10 years? Future Value of an Annuity of $1 4% 5% 6% 7% 8% 9% 1 1.000 1.000 1.000 1.000 1.000 1.000 2 2.040 2.050 2.060 2.070 2.080 2.090 3 3.122 3.153 3.184 3.215 3.246 3.278 4 4.246 4.310 4.375 4.440 4.506 4.573 5 5.416 5.526 5.637 5.751 5.867 5.985 6 6.633 6.802 6.975 7.153 7.336 7.523 7 7.898 8.142 8.394 8.654 8.923 9.200 8 9.214 9.549 9.897 10.26 10.64 11.03 9 10.58 11.03 11.49 11.98 12.49 13.02 10 12.01 12.58 13.18 13.82 14.49 15.19 A)  $61,060 B)  $69,900 C) .
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20.2-28Lowwater Sailmakers manufactures sails for sailboats. The company has the capacity to produce 25,000                                           sails per year, and is currently producing and selling 20,000 sails per year. The following information                                           relates to current production: Sale price per unit $150 Variable costs per unit:     Manufacturing 55     Marketing and administrative 25 Total.
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22.4-51Pentangle Company has prepared a preliminary cash budget for the 3rd quarter as shown below: Cash Budget Jul Aug Sep Beginning cash balance $32,000 $4,400 $6,900 Cash collections 49,400 51,000 44,600 Cash available 81,400 55,400 51,500 Cash payments:    Purchases of inventory 36,000 9,000 11,000    Operating expenses 41,000 30,500 30,900    Capital expenditures 0 9,000 7,700 Total cash payments $77,000 $48,500 $49,600.
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20.4-35When a company is considering the option of processing their product further to achieve higher sales                                           revenues, they must consider all of the following factors EXCEPT: A)  how much additional costs are necessary to process further? B)  how much incremental revenue can be earned if processed further? C)  how much.
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22.3-6Norton Company prepared the following sales budget: Month Budgeted Sales March $200,000 April $280,000 May $220,000 June $260,000 Cost of goods sold is budgeted at 60% of sales, and the inventory at the end of February was $36,000.                                                                       Desired inventory levels at the end of each month are 30% of the next month’s cost of goods.
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22.1-11Which of the following is an example of the coordination and communication function of a budget? A)  A budget demands integrated input from different business units and functions. B)  Employees are motivated to achieve the goals set by the budget. C)  Budget figures are used to evaluate the performance of managers. D)  The budget.
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22.3-16Argyle Company is preparing the operating budget for the first quarter of 2012. They forecast sales of                                                                       $50,000 in January, $60,000 in February, and $70,000 in March.  Variable and fixed expenses are as                                                                                     follows: Variable:Power cost (40% of Sales) Miscellaneous expenses.
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