Accounting Expert Answers & Study Resources : Page 202

36) Juan has just received a prize which entitles him to receive annual payments of $10,000 for the next 10 years.  In order to calculate the overall value of the prize today, which of the following tables would be the best for him to use? A) Present Value of $1 B) Present.

29) A 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.

48) Potlatch 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 An offer has come in for a one time sale.

8) Mist 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).

19) A company has two different products that sell to separate markets.  Financial data are as follows: Product A Product B Total Revenue $12,000 $8,000 $20,000 Variable cost ($7,500) ($8,100) ($15,600) Fixed cost (allocated) ($3,000) ($1,000) ($4,000) Operating income $1,500 ($1,100) $400 Assume that fixed costs of $500 could be eliminated if product B was dropped; assume furthermore that dropping one product would not impact.

9) The rate of return is the only capital budgeting method that uses accrual accounting. Answer:  TRUE Diff: 1 LO:  21-2 EOC Ref:  E21-17 AACSB:  Analytic Skills AICPA Business:  Critical Thinking AICPA Functional:  Measurement 10) The rate of return calculations ignores the time value of money, but the payback period does include consideration of the time value of.

11) Which 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.

Learning Objective 21-1 1) A post-audit is an analysis of an investment that is made after the investment is underway or completed. 2) Capital rationing is when a company has limited resources, and it must find ways to reduce operating expenses in all of its divisions and units. 3) All else being.

Learning Objective 20-4 1) Dong Fang Company fabricates inexpensive automobiles for sale to 3rd world countries.  Each auto includes one wiring harness, which is currently made in-house.  Details of the harness fabrication are as follows: Volume 900 Units per month Variable cost per unit $8.00 Per unit Fixed costs $14,000 Per month A factory in Indonesia.

38) If 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. 39) Grove Company makes.

15) Carte Blanco Company is evaluating an investment of $1,000,000 which will yield cash flows of $257,000 per year for 5 years with no residual value. 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 If Carte Blanco has a hurdle rate of 10%, they should accept the investment because its internal rate of.

18) Argyle 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 point in.

9) Juan Martinez played classical guitar professionally until his motorcycle accident left him disabled.  After long months of therapy, he hired an experienced luthier (maker of stringed instruments) and opened a small shop that makes and sells Spanish guitars.  The guitars sell for $600, and the fixed monthly operating costs.

31) Archetype Fabrication makes pre-stressed concrete forms for the building industry. They use just-in-time production and accounting methodology.  At the beginning of January, selected account balances are shown in the T-accounts below. During January, the following 5 transactions take place: 1.Purchase $40,000 of materials on account. 2.Pay out $25,000 of direct labor costs. 3.Incur.

8) Potlatch 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 one time.

19) Jarvis Foods produces a gourmet condiment which sells for $10.00 per unit.  Variable costs are $7.50 per unit, and fixed costs are $18,000 per month.  Jarvis is currently selling 8,000 units per month.  If Jarvis is forced to reduce the selling price down to $9.00 per unit, and volume.

21) Reevis Company sells hand-sewn shirts for $25 per unit, and has fixed costs of $7,500.  Their contribution margin ratio is 20%. How many units do they have to sell to break even? A) 950 B) 1,750 C) 1,125 D) 1,500 22) Reevis Company sells hand-sewn shirts for $25 per unit, and has fixed costs.

41) A company produces 1,000 packs of chicken feed per month.  Sales price is $4.00 per pack.  Variable cost is $1.50 per unit, and fixed costs are $1,800 per month.  Management is considering adding a vitamin supplement to improve the value of the product.  The variable cost will go up.

Learning Objective 19-3 1) The breakeven point on a CVP graph is the point where the sales revenue line intersects the total cost line.   2) CVP graphs can help managers quickly estimate the profit or loss earned at different levels of sales volume. 3) On a CVP graph, in the area where.

21) Which 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 Answer:  B Diff: 1 LO:  21-1 EOC Ref:  S21-1 AACSB: .

25) The term net present value means the difference between: A) the total net income of the project and the initial investment. B) the initial investment and  the residual value. C) the future value of the cash flows and the present value of the cash flows. D) present value of the net inflows and.

31) Orleans Company has a normal range of production volumes between 100,000 units and 180,000 units per month.  That is considered the relevant range for production cost analysis.  If the company expands significantly beyond 180,000 units per month, which of the following would be the most likely expectation? A) The fixed.

21) Johnson Production Company uses just-in-time production and accounting methods.  On June 1, Johnson paid $6,000 for factory repair and maintenance costs in cash. Which of the following journal entries correctly records this transaction? A) Debit $6,000 to Cash, credit $6,000 to Manufacturing overhead. B) Debit $6,000 to Raw and in-process inventory,.

11) DC Electronics uses a standard part in the manufacture of several of its radios. The cost of producing 30,000 parts is $90,000, which includes fixed costs of $33,000 and variable costs of $57,000. The company can buy the part from an outside supplier for $2.50 per unit, and avoid.

6) Which of the following describes the term time value of money? A) Money can only be used at certain times and for certain purposes. B) Money loses its purchasing power over time through inflation. C) Wasted time can result in wasted money. D) When money is invested over time, it earns income and.

4) Internal failure costs occur when the company detects and corrects poor-quality goods or services before delivery to customers. 5) Costs spent to detect poor-quality goods are considered appraisal costs. 6) Costs incurred when the company corrects for poor-quality goods before they are delivered to the customer are considered internal failure costs. 7).

18) Pueblo 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 cost $1.00 Per unit Production volume 250,000 Units.

26) Amanda is ready to retire and as a retirement benefit, she can choose to take $380,000 now or $50,000 at the end of each year for a period of 10 years.  To compare the two options, she must calculate the present value of both alternatives.  She believes a discount.

19) Logan, Inc. is evaluating two possible investments in depreciable plant assets. The company uses the straight-line method of depreciation. The following information is available: Investment A Investment B Initial capital investment $60,000 $90,000 Estimated useful life 3 years 3 years Estimated residual value — 0 — — 0 — Estimated annual net cash inflow for 3 years $25,000 $40,000 Required rate of return 10% 12% How long.

39) Custom Furniture manufactures a small table and a large table. The small table sells for $800, has variable costs of $520 per table, and takes eight direct labor hours to manufacture. The large table sells for $1,200, has variable costs of $720, and takes sixteen direct labor hours to.

11) Breakeven is the point where the sales revenues are exactly equal to the total variable costs plus the total fixed costs. 12) Arturo Company's model A generator sells for $456 and model B sells for $390.  The variable cost of model A is $404 and of model B is $320. .

16) If Arthur Godfried invests $1,000 today at a rate of 7% compounding yearly, what will the value of the investment be in 4 years? 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) $1,311 B) $1,967 C) $1,316 D) $1,000 Answer:  A Explanation:  A) Calculations:  1.311 × $1,000 = $1,311 Diff: 2 LO:  21-3 EOC Ref:  S21-8 AACSB:  Analytic Skills AICPA Business:  Critical Thinking AICPA Functional: .

5) Centurion Company is considering a mineral extraction project which requires an initial investment of $2,000,000 and will yield annual cash flows of $300,000 for 8 years.  Centurion has an 8% hurdle rate.  If Centurion uses the NPV method of evaluation investments, this would be considered a good investment opportunity. Present.

28) Lowwater 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 fixed costs:     Manufacturing $640,000     Marketing and.

29) Which of the following statements describes a scenario when management should consider dropping a business division? A) The division has consistently reported an operating loss. B) The division's avoidable fixed costs are less than its contribution margin. C) The division's avoidable fixed costs are greater than its contribution margin. D) The division's unavoidable.

9) Custom Furniture manufactures a small table and a large table. The small table sells for $800, has variable costs of $520 per table, and takes eight direct labor hours to manufacture. The large table sells for $1,200, has variable costs of $720, and takes sixteen direct labor hours to.

39) A small business produces a single product and reports the following data: Price $8.00 per unit Variable cost $5.00 per unit Fixed cost $21,000 per month Volume 10,000 per month The company's variable cost goes up by $0.25 per unit.  Fixed costs are lowered from $21,000 to $18,000.   Assume other factors remain the same.  How would this change.

21) Which 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.

11) Which of the following is NOT a fixed cost? A) Property taxes B) Salary of plant manager C) Direct materials cost D) Straight-line depreciation 12) A 15% increase in production volume will result in a: A) 15% increase in the variable cost per unit. B) 15% increase in total mixed costs. C) 15% increase in total manufacturing.

Learning Objective 19-1 1) Peterson Company has both fixed and variable costs.  If the volume doubles, the total fixed costs will double. 2) Total variable costs change in response to changes in the volume of production. 3) The mixed cost per unit is constant throughout the relevant range of activity. 4) Fixed costs.

29) Arquebus Company is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen and collectors.  He is currently producing 40 flintlock muskets per month.  Cost data are as follows: Price$720 per unit Variable cost$470 per unit Fixed costs$8,000 per month How much is his margin of safety expressed.

Learning Objective 19-2 1) If a unit sells for $11.40 and has a variable cost of $3.80, its contribution margin per unit is $7.60. 2) Contribution margin is defined as the sales revenue minus the fixed costs. 3) Fixed costs divided by the contribution margin per unit equals the breakeven point in.

11) Chambers Company sells glass vases at a wholesale price of $2.50 per unit.  Variable cost is $1.75 per unit.  Chambers' fixed costs are $6,500 per month.  If Chambers wishes to make operating income of $2,500, how many units must be sold? A) 11,500 B) 11,750 C) 12,000 D) 12,500 12) Chambers Company sells glass.

Learning Objective 20-1 1) If 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. 2) When considering whether to have a new roof installed on a building, the money spent previously on roof repairs to.

31) Seven Seas Company manufactures 100 luxury yachts per month.  Included in each yacht is a compact media center.  Seven Seas manufactures the media center in-house, but is considering the possibility of outsourcing that function.  At present, the variable cost per unit is $275, and the fixed costs are $39,000.

14) The cost of inspection at various stages of production is an example of what type of cost? A) Appraisal cost B) External failure cost C) Prevention cost D) Internal failure cost 15) The cost of reengineering the production process to reduce defect rate is an example of which of the following? A) Internal failure cost B).

21) Which of the following is the term for a cost that does NOT change in total despite wide changes in volume? A) Fixed cost B) Variable cost C) Mixed cost D) Sunk cost 22) Which of the following is the term for a cost that is part variable and part fixed? A) Fixed cost B) Variable.

21) Dong Fang Company fabricates inexpensive automobiles for sale to 3rd world countries.  Each auto includes one wiring harness, which is currently made in-house.  Details of the harness fabrication are as follows: lume 900 Units per month Variable cost per unit $8.00 Per unit Fixed costs $14,000 Per month A factory in Indonesia has offered to.

21) Juan Martinez played classical guitar professionally until his motorcycle accident left him disabled.  After long months of therapy, he hired an experienced luthier (maker of stringed instruments) and opened a small shop that makes and sells Spanish guitars.  The guitars sell for $600, and the fixed monthly operating costs.

11) In 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 12) Which of the following describes a sunk cost? A) One that is relevant to a.