ACCT exam 3

A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to future decisions, is called a(n):

sunk cost

After-tax net income divided by the average amount invested in a project, is the:

accounting rate of return

The calculation of the payback period for an investment when net cash flow is even (equal) is:

cost of investment / annual net cash flow

The process of restating future cash flows in todays dollars is known as

discounting

A budget based on several different levels of activity, often including both a best-case and worst-case scenario, is called a:

flexible budget

Capital budgeting is the process of analyzing

long term investments

A cost that requires a future outlay of cash, and is relevant for current and future decision making, is a(n):

out of pocket cost

A company paid $200,000 ten years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $200,000 original cost of the machine is an example of a(n):

sunk cost

Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3 per unit. Bluebird currently produces and sells 75,000 units at $7.00 each. This level represents 80% of its capacity. Production costs for these units are $3.50 per unit, which includes $2.25 variable cost and $1.25 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:

$11,250 increase.

Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:

$150,000 fixed and $102,500 variable.

Hassock Corp. produces woven wall hangings. It takes 2 hours of direct labor to produce a single wall hanging. Hassock's standard labor cost is $12 per hour. During August, Hassock produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376. What is Bartels labor rate for August?

$2,104 favorable

Summerlin Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. What is the direct materials quantity variance?

$2,500 unfavorable

A company's flexible budget for 12,000 units of production showed per unit contribution margin of $3.00 and fixed costs, $20,000. The operating income expected if the company produces and sells 18,000 units is

$34,000

A company has established 5 pounds of Material J at $2 per pound as the standard for the material In its Product Z. The company has just produced 1,000 units of its product, using 5,200 pounds of Material J that cost $9,880. The direct materials quantity variance is:

$400 unfavorable

The following company information is available for March. The direct materials price variance is: DM purchase & used: 2,500ft @ 55 per foot S cost for DM For March: 2,600ft @ 53 per foot

$5,000 fav

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials quantity variance is: Direct materials standard (7 lb. @ $2/lb) $14 per finished unit Actual cost of materials purchased $322,500 Actual direct materials purchased and used 150,000 kg

$50,000 favorable

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the total labor cost variance?

$6,000 unfavorable.

A company provided the following direct materials cost information. Compute the cost variance. $810,000 $888,250

$78,250 unfav

A new manufacturing machine is expected to cost $278,000, have an eight-year life, and a $30,000 salvage value. The machine will yield an annual incremental after-tax income of $35,000 after deducting the straight-line depreciation. Compute the accounting rate of return for the investment

22.7%

A company manufactures and sells a product for $120 per unit. The company's fixed cost are $68,760, and it's variable costs are $90 per unit. The company's break-even point in units is:

2292

A company has fixed costs of $320,000 and a contribution margin per unit of $15. If the firm wants to earn a target $40,000 pretax income, how many units must be sold?

24,000

A company is considering the purchase of a new piece of equipment for $90,000. Predicted annual cash inflows from this investment are $36,000 (yr 1), 30,000 (yr2)....

3.50 yrs

A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value. The company anticipates a yearly after tax net income of $1,805. What is the accounting rate of return?

47.5%

A company considering purchasing a machine for $21,000. The machine will generate and after-tax net income of $2,000 per year. Annual depreciation expense would be $1,500. What is the payback period for the new machine

6 yrs

A flexible budge may be prepared

At any time in the planning period

An opportunity cost

Is the potential benefit lost by choosing a specific alternative course of action among two or more.

A company's required rate of return, typically it's cost of capital is called the

Hurdle cost

An additional cost incurred only if a company pursues a particular course of action is a

Incremental cost

A company considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next 5 years. The $19,000 cost is an example of a(n)

Incremental cosy

The accounting rate of return is calculated as

The after-tax income divided by the annual average investment.