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23 - 1 Standard Costs and Balanced Scorecard MATCHING 239.Match the items in the two columns below by entering the appropriate code letter in the space provided.               A.Variances              F.              Materials price variance               B.Standard costs              G.              Labor quantity variance               C.Standard cost accounting system              aH.Overhead controllable variance               D.Normal standards              aI.              Overhead volume variance               E.Ideal standards             .
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23 - 1 Standard Costs and Balanced Scorecard aEx. 225 Howard, Inc. developed the following standards for 2013: Howard, Inc. Standard Cost Card Cost ElementsStandard Quantity×Standard Price=Standard Cost Direct materials5 pounds$  5$25 Direct labor1 hour$1818 Manufacturing overhead1 hour$10  10 $53 The company planned to produce 120,000 units of product and work at the 120,000 direct labor level of activity in 2013..
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D - 1 Time Value of Money 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.
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Planning for Capital Investments24-1 Exercises Ex. 166 Corn Doggy, Inc. produces and sells corn dogs. The corn dogs are dipped by hand. Austin Beagle, production manager, is considering purchasing a machine that will make the corn dogs. Austin has shopped for machines and found that the machine he wants will cost $215,000. In.
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Planning for Capital Investments24-1 111.Present Value of an Annuity of 1 Periods  8%  9% 10% 1              .926.917.909 2              1.7831.7591.736 3              2.5772.5312.487               A company has a minimum required rate of return of 8%. It is considering investing in a project that costs $91,116 and is expected to generate cash inflows of $36,000 each year for three.
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Planning for Capital Investments24-1 151.The capital budgeting technique that indicates the profitability of a capital expenditure is the a.              profitability index method. b.              net present value method. c.              internal rate of return method. d.              annual rate of return method.               152.The annual rate of return method is based on a.              accounting data. b.              the time value of money.
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Planning for Capital Investments24-1 Ex. 173 Yappy Company is considering a capital investment of $320,000 in additional equipment. The new equipment is expected to have a useful life of 8 years with no salvage value.  Depreciation is computed by the straight-line method.  During the life of the investment, annual net income and.
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Planning for Capital Investments24-1 Ex. 167 Cepeda Manufacturing Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following cash inflows. Year     AA        BB        CC    1$  7,000$  9,500$11,000 29,0009,500  10,000    3     15,000    9,500    9,000 Total$31,000$28,500$30,000 The equipment's salvage value is.
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23 - 1 Standard Costs and Balanced Scorecard aEx. 226 Presented below is a flexible manufacturing budget for Ganem Manufacturing, which manufactures fine timepieces: Activity Index: Standard direct labor hours 2,8003,2003,6004,000 Variable costs Indirect materials$  5,600$  6,400$  7,200$  8,000 Indirect labor3,2203,6804,1404,600 Utilities    7,280    8,320    9,360  10,400 Total variable16,10018,40020,70023,000 Fixed costs Supervisory salaries1,0001,0001,0001,000 Rent    3,000    3,000    3,000    3,000 Total fixed    4,000    4,000    4,000    4,000 Total costs$20,100$22,400$24,700$27,000 aEx..
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Planning for Capital Investments24-1 Ex. 178 Santana Company is considering investing in a project that will cost $151,000 and have no salvage value at the end of its 5-year life. It is estimated that the project will generate annual cash inflows of $40,000 each year. The company requires a 9% rate of.
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Planning for Capital Investments24-1 Ex. 168 Gantner Company is considering a capital investment of $300,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income.
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Planning for Capital Investments24-1 51.              When using the cash payback technique, the payback period is expressed in terms of a.              a percent. b.              dollars. c.              years. d.              months.               52.A disadvantage of the cash payback technique is that it a.              ignores obsolescence factors. b.              ignores the cost of an investment. c.              is complicated to use. d.              ignores the time value.
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23 - 1 Standard Costs and Balanced Scorecard S-A E  244(Ethics) Fulmar Manufacturing Co. is the manufacturer of miniature models, especially of automobiles with historical interest. The company is developing new standard costs. Patrick Webb suggests that the new standards for materials should not include any waste for liquid plastics that spill out.
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Planning for Capital Investments24-1 Ex. 177 KSU Corp. is considering purchasing one of two new diagnostic machines.  Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided below. Machine AMachine B Original cost$106,000$  175,000 Estimated life8 years8 years Salvage value-0--0- Estimated.
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23 - 1 Standard Costs and Balanced Scorecard COMPLETION STATEMENTS               229.A ________________ is expressed as a unit amount, whereas a _________________ is expressed as a total amount.               230.Standards which represent optimum performance under perfect operating conditions are called _______________ standards, but most companies use _________________ standards which are rigorous but attainable.               231.In.
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Planning for Capital Investments24-1 Ex. 169 Top Growth Farms, a farming cooperative, is considering purchasing a tractor for $551,500. The machine has a 10-year life and an estimated salvage value of $36,000. Delivery costs and set-up charges will be $12,100 and $400, respectively. Top Growth uses straight-line depreciation. Top Growth estimates that the.
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23 - 1 Standard Costs and Balanced Scorecard Ex. 224 Pepper Industries uses a standard cost accounting system. During March, 2013, the company reported the following manufacturing variances: Materials price variance$1,600F Materials quantity variance2,400U Labor price variance600U Labor quantity variance2,200U Overhead controllable500F Overhead volume3,000U In addition, 15,000 units of product were sold at $18 per unit. Each unit sold had.
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Planning for Capital Investments24-1 121.In using the internal rate of return method, the internal rate of return factor was 4.0 and the equal annual cash inflows were $18,000. The initial investment in the project must have been a.              $18,000. b.              $4,500. c.              $72,000. d.              $36,000.               122.The capital budgeting technique that finds the interest yield of.
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Planning for Capital Investments24-1 Ex. 174 Laramie Service Center just purchased an automobile hoist for $16,900. The hoist has a 5-year life and an estimated salvage value of $1,250. Installation costs were $3,770, and freight charges were $960. Laramie uses straight-line depreciation. The new hoist will be used to replace mufflers and tires.
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Planning for Capital Investments24-1               11.To avoid accepting projects that actually should be rejected, a company should ignore intangible benefits in calculating net present value.               12.One way of incorporating intangible benefits into the capital budgeting decision is to project conservative estimates of the value of the intangible benefits and include them.
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Planning for Capital Investments24-1 71.              The discount rate that will result in the highest net present value for a project is a.              any rate lower that the cost of capital. b.              any rate higher than the cost of capital. c.              the lowest rate used to evaluate the project. d.              the highest rate used to evaluate.
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23 - 1 Standard Costs and Balanced Scorecard aEx. 222 Jackson Manufacturing planned to produce 20,000 units of product and work at the 60,000 direct labor hours level of activity for 2013. Manufacturing overhead at this level of activity and the predetermined overhead rate are as follows: Predetermined Overhead Rate per Direct Labor Hour Variable manufacturing overhead$300,000$5 Fixed.
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23 - 1 Standard Costs and Balanced Scorecard Ex. 227 The following information was taken from the annual manufacturing overhead cost budget of Cinnamon Manufacturing: Variable manufacturing overhead costs$186,000 Fixed manufacturing overhead costs$124,000 Normal production level in direct labor hours62,000 Normal production level in units31,000 During the year, 30,000 units were produced, 64,000 hours were worked, and the.
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Planning for Capital Investments24-1 SHORT-ANSWER ESSAY QUESTIONS S-A E  194 Management uses several capital budgeting methods in evaluating projects for possible investment.  Identify those methods that are more desirable from a conceptual standpoint, and briefly explain what features these methods have that make them more desirable than other methods.  Also identify the least.
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Planning for Capital Investments24-1 141.Mussina Company had an investment which cost $250,000 and had a salvage value at the end of its useful life of zero. If Mussina's expected annual net income is $15,000, the annual rate of return is: a.                6.0%. b.              10.2%. c.              12.0%. d.              15.0%. 142.Discounted cash flow techniques include all of.
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Planning for Capital Investments24-1 41.              Brady Corp. is considering the purchase of a piece of equipment that costs $20,000. Projected net annual cash flows over the project’s life are: YearNet Annual Cash Flow               1$  3,000               28,000               315,000               49,000 The cash payback period is a.              2.29 years. b.              2.60 years. c.              2.40 years. d.              2.31 years.               42.Bradshaw Inc..
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23 - 1 Standard Costs and Balanced Scorecard SHORT-ANSWER ESSAY QUESTIONS S-A E  240 (a)  Explain the similarities and differences between standards and budgets. (b)  Contrast the accounting for standard and budgets. S-A E  241 Star Industries computes variances as a basis for evaluating the performance of managers responsible for controlling costs. For several months, the labor.
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Planning for Capital Investments24-1 COMPLETION STATEMENTS               183.For purposes of capital budgeting, estimated ____________ and outflows are preferred for inputs into the capital budgeting decision tools.               184.The technique which identifies the time period required to recover the cost of the investment is called the ________________ method.               185.The two discounted cash flow techniques.
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Planning for Capital Investments24-1 CHAPTER 24 PLANNING FOR CAPITAL INVESTMENTS TRUE-FALSE STATEMENTS               1.Capital budgeting decisions usually involve large investments and often have a significant impact on a company's future profitability.               2.The capital budgeting committee ultimately approves the capital expenditure budget for the year.               3.For purposes of capital budgeting, estimated cash inflows and.
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Planning for Capital Investments24-1 Brief Exercises BE  158 Diamond Company is considering investing in new equipment that will cost $1,400,000 with a 10-year useful life. The new equipment is expected to produce annual net income of $90,000 over its useful life. Depreciation expense, using the straight-line rate, is $140,000 per year. Instructions Compute the cash.
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Planning for Capital Investments24-1 61.              The higher the risk element in a project, the a.              more attractive the investment. b.              higher the net present value. c.              higher the cost of capital. d.              higher the discount rate.               62.If a company's required rate of return is 10% and, in using the net present value method, a project's.
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Planning for Capital Investments24-1 MATCHING 193.Match the items below by entering the appropriate code letter in the space provided.               A.Profitability index              E.              Annual rate of return method               B.Internal rate of return method              F.Cash payback technique               C.Discounted cash flow techniques              G.Cost of capital               D.Capital budgeting              H.              Net present value method ____              1.A capital budgeting.
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Planning for Capital Investments24-1 Ex. 179 Johnson Company is considering purchasing one of two new machines. The following estimates are available for each machine: Machine 1Machine 2 Initial cost$152,000$169,000 Annual cash inflows50,00060,000 Annual cash outflows15,00020,000 Estimated useful life6 years6 years The company's minimum required rate of return is 9%.           Present Value of an Annuity of 1           Period  8%  9% 10%.
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Planning for Capital Investments24-1 Ex. 172 Savanna Company is considering two capital investment proposals. Relevant data on each project are as follows: Project RedProject Blue Capital investment$440,000$640,000 Annual net income25,00060,000 Estimated useful life8 years8 years Depreciation is computed by the straight-line method with no salvage value. Savanna requires an 8% rate of return on all new investments..
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Planning for Capital Investments24-1 S-A E  196(Ethics) Sam Stanton is on the capital budgeting committee for his company, Canton Tile. Ed Rhodes is an engineer for the firm. Ed expresses his disappointment to Sam that a project that was given to him to review before submission looks extremely good on paper. "I.
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Planning for Capital Investments24-1 81.              Miles, Inc. is considering the purchase of a new machine for $600,000 that has an estimated useful life of 5 years and no salvage value. The machine will generate net annual cash flows of $105,000. It is believed that the new machine will also reduce downtime.
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Planning for Capital Investments24-1 Ex. 176 Vista Company is considering two new projects, each requiring an equipment investment of $97,000. Each project will last for three years and produce the following cash inflows: Year   Cool      Hot  1$  38,000$  42,000 243,00042,000 3    48,000    42,000 $129,000$126,000 The equipment will have no salvage value at the end of its three-year life..
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Planning for Capital Investments24-1 Ex. 181 Shilling Corp. is thinking about opening a baseball camp in Florida. In order to start the camp, the company would need to purchase land, build five baseball fields, and a dormitory-type sleeping and dining facility to house 100 players. Each year the camp would be run.
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Planning for Capital Investments24-1 101.Selma Inc. is comparing several alternative capital budgeting projects as shown below:               Projects               ABC Initial investment$80,000$120,000$160,000 Present value of net cash flows90,000110,000200,000 Using the profitability index, how many of the projects are acceptable? a.              3 b.              2 c.              1 d.              0               102.If a project has a negative net present value, its profitability index will.
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Planning for Capital Investments24-1 91.              The profitability index a.              does not take into account the discounted cash flows. b.              is calculated by dividing total cash flows by the initial investment. c.              allows comparison of the relative desirability of projects that require differing initial investments. d.              will never be greater than 1.               92.The capital budgeting method.
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Planning for Capital Investments24-1 Ex. 175 Sophie’s Pet Shop is considering the purchase of a new delivery van. Sophie Smith, owner of the shop, has compiled the following estimates in trying to determine whether the delivery van should be purchased: Cost of the van$35,000 Annual net cash flows6,000 Salvage value4,000 Estimated useful life8 years Cost of capital10% Present.
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23 - 1 Standard Costs and Balanced Scorecard aEx. 220 North Coast Manufacturing provided the following information about its standard costing system for 2013: Standard DataActual Data Labor2 hrs. @ $21 per hr.Produced9,000 units Budgeted fixed overhead$100,000Labor worked17,000 hrs. costing $340,000 Budgeted variable overhead$30 per unitActual overhead$375,000 Budgeted production10,000 units North Coast applies fixed overhead at $10 per.
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D - 1 Time Value of Money APPENDIX D TIME VALUE OF MONEY 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.
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Planning for Capital Investments24-1 MULTIPLE CHOICE QUESTIONS               26.The capital budget for the year is approved by a company's a.              board of directors. b.              capital budgeting committee. c.              officers. d.              stockholders.               27.All of the following are involved in the capital budgeting evaluation process except a company's a.              board of directors. b.              capital budgeting committee. c.              officers. d.              stockholders.               28.Most of.
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Planning for Capital Investments24-1               31.Capital budgeting is the process a.              used in sell or process further decisions. b.              of determining how much capital stock to issue. c.              of making capital expenditure decisions. d.              of eliminating unprofitable product lines.               32.Net annual cash flow can be estimated by a.              deducting credit sales from net income. b.              adding depreciation.
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Planning for Capital Investments24-1 BE  164 Mint Company is contemplating an investment costing $135,000. The investment will have a life of 8 years with no salvage value and will produce annual cash flows of $25,305. Instructions What is the approximate internal rate of return associated with this investment? BE  165 Salt Company is considering investing in.
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Planning for Capital Investments24-1 Ex. 170 Tom Bat became a baseball enthusiast at a very early age. All of his baseball experience has provided him valuable knowledge of the sport, and he is thinking about going into the batting cage business. He estimates the construction of a state-of-the-art building and the purchase.
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Planning for Capital Investments24-1 131.If the internal rate of return is less than the discount rate, then the net present value of a project is a.              positive. b.              negative. c.              zero. d.              one.               132.If a project has a negative net present value, the internal rate of return will be a.              less than the discount rate. b.              greater.
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Planning for Capital Investments24-1 Ex. 162 Carlson Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $300,000 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash flows of $52,500. Management.
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