ACIS
Which of the following statements is true when computing the net cash provided by (used in) operating activities using the indirect method?
If the accounts payable balance increases during the period, the amount of the increase is added to net income.
Which of the following statements is true when computing the net cash provided by (used in) operating activities?
If the accounts receivable balance increases during the period, the amount of the increase is subtracted from net income.
Assume a merchandising company is deciding whether to keep or drop one of the many product lines that it sells at its retail store location. Which of the following would be irrelevant to the decision?
The store manager's salary
Assume that you are trying to decide between watching a movie at the local theatre or renting a movie at home. After watching the movie at your chosen venue, you plan to order a pizza to be delivered to your home. Regarding the decision at hand, the cost of the pizza is a:
future cost that does not differ between the alternatives
Which of the following statements is false regarding the net present value method?
A net present value of zero indicates that the project should be rejected.
Assume that a company makes 30,000 units of Part A each year. At this level of production, the company's accounting system reports the following cost per unit: Direct materials$ 16Direct labor10Variable manufacturing overhead4Fixed manufacturing overhead8Total cost per unit$ 38 An outside supplier has offered to sell the company 30,000 parts per year for a price of $33 per part. The company believes that $160,000 of the fixed manufacturing overhead cost being allocated to this part will continue to be incurred even if the part is purchased from the outside supplier. What is the financial advantage (disadvantage) of buying the parts from the outside supplier?
(10000)
Assume a retailing company has two departments—Department A and Department B. The company's most recent contribution format income statement follows: TotalDepartment ADepartment BSales$ 800,000$ 350,000$ 450,000Variable expenses320,000120,000200,000Contribution margin480,000230,000250,000Fixed expenses400,000140,000260,000Net operating income (loss)$ 80,000$ 90,000$ (10,000) The company says that $120,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 12%. What is the financial advantage (disadvantage) of discontinuing Department B?
(137600)
Assume that a company is choosing between two alternatives—keep an existing machine or replace it with a machine. The costs associated with the two alternatives are summarized as follows: Existing MachineNew MachinePurchase cost (new)$ 15,000$ 26,000Remaining book value$ 6,000 Overhaul needed now$ 5,000 Annual cash operating costs$ 11,000$ 7,000Salvage value (now)$ 2,000 Salvage value (eight years from now)$ 1,000$ 6,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be used for eight years. Based on a net present value analysis with a discount rate of 19%, what is the financial advantage (disadvantage) of replacing the existing machine with a new machine?
(1939)
ssume a company is considering buying 10,000 units of a component part rather than making them. A supplier has agreed to sell the company 10,000 units for a price of $40 per unit. The company's accounting system reports the following costs of making the part: Per Unit10,000 Unitsper YearDirect materials$ 18$ 180,000Direct labor12120,000Variable manufacturing overhead220,000Fixed manufacturing overhead, traceable880,000Fixed manufacturing overhead, allocated440,000Total cost$ 44$ 440,000 Three-fourth's of the traceable fixed manufacturing overhead relates to supervisory salaries and the remainder relates to depreciation of equipment with no salvage value. If the company chooses to buy this component part from a supplier, then the supervisor who oversees its production would be discharged. What is the financial advantage (disadvantage) of buying 10,000 units from the supplier?
(20000)
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value)$ 500,000Annual revenues and costs: Sales revenues$ 300,000Variable expenses$ 130,000Depreciation expense$ 50,000Fixed out-of-pocket costs$ 40,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.If the company's discount rate is 12%, then the net present value for this investment is closest to:
(31350)
Assume that a company is considering buying a new piece of equipment for $250,000 that would have a useful life of five years and a salvage value of $30,000. The equipment would generate the following estimated annual revenues and expenses: Revenues $ 120,000Less operating expenses: Commissions$ 15,000 Insurance5,000 Depreciation44,000 Maintenance30,00094,000Net operating income $ 26,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.Assuming a discount rate of 15%, what is the net present value of this investment?
(450)
Assume that a company is choosing between two alternatives—keep an existing machine or replace it with a new machine. The costs associated with the two alternatives are summarized as follows: Existing MachineNew MachinePurchase cost (new)$ 15,000$ 22,000Remaining book value$ 6,000 Overhaul needed now$ 5,000 Annual cash operating costs$ 11,000$ 7,000Salvage value (now)$ 2,000 Salvage value (eight years from now)$ 1,000$ 6,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new machine, it will be used for eight years. Assuming a discount rate of 19%, what is the net present value of the cash flows associated with keeping the existing machine?
(48245)
Assume that a company manufactures numerous component parts, one of which is called Part A. The company's absorption costing system indicates that it costs $23.00 to make one unit of Part A as shown below: Direct materials$ 10.00Direct labor6.00Variable overhead2.00Fixed overhead5.00Total absorption cost per unit$ 23.00 The company is trying to decide between two alternatives:Alternative 1: Continue making 80,000 units of Part A per year using its existing equipment at the unit cost shown above. The equipment used to make this part does not wear out through use and it has no resale value.Alternative 2: Replace the existing equipment with a new piece of equipment that the company would rent for $150,000 per year. The new piece of equipment would be used to make 80,000 units per year and it would reduce Part A's direct labor cost per unit by 20% and its variable overhead per unit by 30%. The direct materials cost
(6000)
Assume the following excerpts from a company's balance sheet: Beginning BalanceEnding BalanceProperty, plant, and equipment$ 3,750,000$ 3,500,000Long-term investments$ 950,000$ 1,100,000 During the year, the company purchased property, plant, and equipment for $130,000 in cash. It sold equipment that had accumulated depreciation of $150,000 for a loss of $20,000. The company did not sell any long-term investments during the period. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be: Multiple Choice
(70000)
ssume the following excerpts from a company's balance sheet: Beginning BalanceEnding BalanceProperty, plant, and equipment$ 3,750,000$ 3,500,000Long-term investments$ 950,000$ 1,100,000 During the year, the company did not purchase any property, plant, and equipment. It sold equipment that had accumulated depreciation of $150,000 for a loss of $20,000. The company did not sell any long-term investments during the period. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be:
(70000)
Assume the following excerpts from a company's balance sheet: Beginning BalanceEnding BalanceProperty, plant, and equipment$ 3,500,000$ 3,750,000Long-term investments$ 950,000$ 1,100,000 During the year, the company sold a piece of equipment for $200,000. The equipment originally cost $500,000 and had accumulated depreciation of $290,000. The company did not sell any long-term investments during the period. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be:
(700000)
Assume that a company manufactures and sells a variety of products, one of which it refers to as Product A. The company is considering dropping Product A because the income statement for this product is reporting a net operating loss as shown below: Sales $ 500,000Variable expenses: Variable manufacturing expenses$ 240,000 Sales commissions75,000 Shipping25,000 Total variable expenses 340,000Contribution margin 160,000Fixed expenses: Salary of product-line manager$ 65,000 Advertising for this product35,000 General factory overhead25,000 Depreciation on equipment20,000 Insurance on this product's inventories8,000 Purchasing department15,000 Total fixed expenses 168,000Net operating loss $ (8,000) If Product A is dropped, the company would transfer its product-line manager to another department and discontinue a search for a new manager that the company anticipated paying a salary of $45,000. The general factory ove
(72000)
Assume that a company is considering a capital investment project with a four-year time horizon and the following cash flows: Cost of new equipment$ 210,000Working capital required$ 50,000Annual net cash inflows$ 100,000Maintenance and repairs in third year$ 40,000Salvage value of equipment in fourth year$ 30,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming the company's required rate of return is 20%, the profitability index of the project is closest to:
1.05
Assume that a company purchased a new machine for $20,000 that has a salvage value of $3,000 at the end of its useful life of five years. The machine is expected to save the company $6,000 a year in cash operating costs for five years. The company's discount rate is 15%. The profitability index of this investment opportunity is closest to:Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.
1.08
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value)$ 400,000Annual revenues and costs: Sales revenues$ 300,000Variable expenses$ 130,000Depreciation expense$ 50,000Fixed out-of-pocket costs$ 40,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.Assuming a discount rate of 12%, this proposal's profitability index is closest to:
1.17
Assume the beginning and ending balances in a company's Bonds Payable account were $380,000 and $480,000, respectively. Also assume that the company retired $60,000 in bonds payable during the year. Based solely on the information provided, the company's net cash provided by (used in) financing activities would be:
100000
Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: You can rent a location for your business at a cost of $36,000 per year. The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000. Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. Other operating costs would include $60,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming a five-year time horizon and a 17% discount rate, the net present value of this investment opportunity is closest to:
111801
Assume that a company is considering a $2,500,000 capital investment in a project that would earn net income for each of the next five years as follows: Sales $ 1,900,000Variable expenses 800,000Contribution margin 1, 100,000Fixed expenses: Out-of-pocket operating costs$ 300,000 Depreciation400,000700,000Net operating income $ 400,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.If the company's discount rate is 16%, then the project's net present value is closest to:
119200
Assume that a company purchased a new machine for $24,000 that has no salvage value. The machine is expected to save the company $6,000 a year in cash operating costs for seven years. The company also expects the machine to provide annual intangible benefits that are difficult to quantify. Assuming the company's hurdle rate is 23%, the minimum value of the intangible benefits that would be required to make this investment acceptable is closest to:Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided
1214
Assume that a company makes three products—Product A, Product B, and Product C—and provides the following information with respect to those products: Product AProduct BProduct CSelling price$ 70$ 75$ 85Variable costs per unit: Direct materials162420Direct labor402832Variable overhead223Total variable cost per unit585455Contribution margin per unit$ 12$ 21$ 30 The company incurs total fixed costs of $50,000. The maximum demand for each of its products is 600 units. Its direct material cost is $8.00 per pound. The company has only 4,000 pounds of direct materials available for production. Assuming the company has made optimal use of its 4,000 pounds of direct material, what is the maximum amount per pound the company should be willing to pay for additional direct materials?
14.00
Assume that a company is considering a $2,500,000 capital investment in a project that would earn net income for each of the next five years as follows: Sales $ 1,900,000Variable expenses 800,000Contribution margin 1, 100,000Fixed expenses: Out-of-pocket operating costs$ 300,000 Depreciation400,000700,000Net operating income $ 400,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The project's internal rate of return is closest to:
18%
Assume a company has three products—A, B, and C—that emerge from a joint process. The selling prices and outputs for each product at the split-off point are as follows: ProductSelling PriceOutputA$ 33per pound14,000poundsB$ 29per pound18,000poundsC$ 24per pound19,000pounds Each product can be processed further beyond the split-off point. The additional processing costs for each product and their respective selling prices after further processing are as follows: ProductAdditional Processing CostsSelling PriceA$ 65,000$ 37per poundB$ 72,000$ 34per poundC$ 70,000$ 30per pound What is financial advantage (disadvantage) of further processing Product B?
18000
Assume a company has two products—A and B—that emerge from a joint process. A total of 2,000 units of Product A are produced from the joint process. Product A can be sold at the split-off point for $16 per unit, or it can be processed further for an additional total cost of $16,000 and then sold for $25 per unit. What is the incremental revenue earned by further processing Product A?
18000
Assume a company has three products—A, B, and C—that emerge from a joint process. The joint processing costs that are incurred up to the split-off point equal $1,300,000. The selling prices and outputs for each product at the split-off point are as follows: ProductSelling PriceOutputA$ 33per pound14,000poundsB$ 29per pound18,000poundsC$ 24per pound19,000pounds Each product can be processed further beyond the split-off point. The additional processing costs for each product and their respective selling prices after further processing are as follows: ProductAdditional Processing CostsSelling PriceA$ 65,000$ 37per poundB$ 72,000$ 34per poundC$ 88,000$ 30per pound The company is trying to decide whether to retain or discontinue the entire joint manufacturing process. What is the financial advantage (disadvantage) of continuing to operate the entire joint manufacturing process?
184000
Assume a company has two products—A and B—that emerge from a joint process. Product A has been allocated $24,000 of the total joint costs of $48,000. A total of 2,000 units of Product A are produced from the joint process. Product A can be sold at the split-off point for $16 per unit, or it can be processed further for an additional total cost of $16,000 and then sold for $25 per unit. What is the financial advantage (disadvantage) of further processing Product A?
2000
Assume that a company manufactures numerous component parts, one of which is called Part A. The company makes 50,000 units of Part A per year and its absorption costing system indicates that, at this volume of production, it costs $23.00 per unit to make this part: Direct materials$ 10.00Direct labor6.00Variable overhead2.00Fixed overhead5.00Total absorption cost per unit$ 23.00 The company is trying to decide between two alternatives:Alternative 1: Continue making 50,000 units of Part A annually using its existing equipment at the unit cost shown above. The equipment used to make this part does not wear out through use and it has no resale value.Alternative 2: Purchase 50,000 units of Part A from a supplier at a cost of $19.00 per unit.If the company chooses alternative 2, it believes that $180,000 of the fixed manufacturing overhead cost being allocated to Part A will continue to be incurred. What is the financial
20000
Assume that a company provided the following statement of cash flows (all sales are on account): Operating activities: Net income $ 45Adjustments to convert net income to a cash basis: Depreciation$ 15 Decrease in accounts receivable2 Increase in inventory(10) Increase in accounts payable411Net cash provided by (used in) operating activities 56Investing activities: Additions to property, plant, & equipment(40) Net cash provided by (used in) investing activities (40)Financing activities: Issuance of common stock5 Cash dividends paid(14) Net cash provided by (used in) financing activities (9)Net increase in cash and cash equivalents 7Beginning cash and cash equivalents 6Ending cash and cash equivalents $ 13 If the company's sales were $200, then its cash collections from customers were:
202
Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The internal rate of return on this investment is closest to: Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.
21%
Assume a company's beginning and ending balances in the Accumulated Depreciation account are $30,000 and $45,000, respectively. During the period the company sold one noncurrent asset that had an original cost of $8,000. The cash proceeds from the sale were $3,000 and the gain on the sale was $1,000. What is the amount of the depreciation charges that the company would include in the operating activities section of its statement of cash flows?
21000
Assume a company's balance sheet showed beginning and ending balances in the Long-Term Investments account of $1,100,000 and $900,000, respectively. The company sold a long-term investment that cost $300,000 and recorded a gain on this sale of $15,000. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be:
215000
Assume a company did not purchase any equipment during the year, but it did sell a piece of equipment that had an original cost of $500,000 and accumulated depreciation of $300,000. The gain on the sale was $20,000. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be:
220000
Assume a company sold a piece of equipment that had an original cost of $500,000 and accumulated depreciation of $300,000. The cash proceeds from the sale were $220,000. The gain on the sale was $20,000. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be:
220000
Assume that a company makes three products—Product A, Product B, and Product C—and provides the following information with respect to those products: Product AProduct BProduct CSelling price$ 70$ 75$ 85Variable costs per unit: Direct materials162428Direct labor403224Variable overhead233Total variable cost per unit585955Contribution margin per unit$ 12$ 16$ 30 The company incurs total fixed costs of $50,000. The maximum demand for each of its products is 600 units. It pays a direct labor wage rate of $16 per hour. The company has only 2,000 direct labor-hours available for production. Assuming the company has made optimal use of its 2,000 direct labor-hours, what is the maximum hourly rate the company should be willing to pay for additional labor-hours of capacity?
24
Assume a company is considering whether to accept or reject a special order opportunity to sell a customer 300 units of a slightly customized version of one of its products for $42. The normal selling price of this product is $48 per unit. It can fulfill the order using existing manufacturing capacity. The company's accounting system estimates the following unit product cost for this product: Per UnitDirect materials$ 18Direct labor12Manufacturing overhead10Total cost$ 40 The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced. The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range. Assuming that this decision will have no effect on sales to other customers, what is the financial advantage (disadvantage) of accepting the special order?
2700
Assume that a company buys a new machine for $220,000 that has a useful life of five years and a $20,000 salvage value. The new machine will replace an old machine that can be sold for a salvage value of $10,000. The machine will generate incremental contribution margin of $60,000 per year. The only fixed expense associated with the new machine is its annual depreciation of $40,000 per year. What is the payback period for this investment?
3.5
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value)$ 500,000Annual revenues and costs: Sales revenues$ 300,000Variable expenses$ 130,000Depreciation expense$ 50,000Fixed out-of-pocket costs$ 40,000 The payback period for this investment is closest to:
3.85
Assume that a company makes three products—Product A, Product B, and Product C—and provides the following information with respect to those products: Product AProduct BProduct CSelling price$ 70$ 75$ 85Variable costs per unit: Direct materials162920Direct labor402432Variable overhead243Total variable cost per unit585755Contribution margin per unit$ 12$ 18$ 30 The company incurs total fixed costs of $50,000. The maximum demand for each of its products is 600 units. It pays a direct labor wage rate of $16 per hour. The company has only 1,100 direct labor-hours available for production. Assuming the company has made optimal use of its 1,100 direct labor-hours, what is the maximum hourly rate the company should be willing to pay for additional labor-hours of capacity?
31.00
Assume that a company is considering purchasing a machine for $100,000 that will have a seven-year useful life and a $16,000 salvage value. The machine will lower operating costs by $18,000 per year and increase sales volume by 1,000 units per year. The company earns a contribution margin of $3.00 per unit. The company also expects this investment to provide qualitative benefits that it is struggling to incorporate into its financial analysis. Assuming the company's required rate of return is 17%, the minimum dollar value per year that must be provided by the machine's qualitative benefits to justify the $100,000 investment is closest to:Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.
3139
Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. What is the net present value of this investment? Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
3159
Assume a company has three products—A, B, and C—that emerge from a joint process. The selling prices and outputs for each product at the split-off point are as follows: ProductSelling PriceOutputA$ 33per pound14,000poundsB$ 29per pound18,000poundsC$ 24per pound19,000pounds Each product can be processed further beyond the split-off point. The additional processing costs for each product and their respective selling prices after further processing are as follows: ProductAdditional Processing CostsSelling PriceA$ 65,000$ 37per poundB$ 72,000$ 34per poundC$ 88,000$ 30per pound What is financial advantage (disadvantage) of further processing if the company decides to further process all three products?
35000
Assume a company manufactures many products, one of which normally sells for $48 per unit. The company's accounting system reports the following unit product cost for this product: Per UnitDirect materials$ 18Direct labor12Manufacturing overhead10Total cost$ 40 The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced. The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range.A customer has approached the company with an offer to buy 300 units of a customized version of the product mentioned above for $39. The company can fulfill this order using existing manufacturing capacity. To accommodate the customer's desired product design, the company would incur additional direct materials cost per unit of $3. It would also have to buy a special tool for $520 that has no other use or resale value after the specia
380
Assume that a company buys a new machine for $120,000 that has a useful life of six years and a $20,000 salvage value. The machine will reduce operating costs by $25,000 per year. What is the payback period for this investment?
4.8
Assume a company is considering using available space to make 10,000 units of a component part that it has been buying from a supplier for a price of $40 per unit. The company's accounting system estimates the following costs of making the part: Per Unit10,000 Unitsper YearDirect materials$ 18$ 180,000Direct labor12120,000Variable manufacturing overhead220,000Fixed manufacturing overhead, traceable880,000Fixed manufacturing overhead, allocated440,000Total cost$ 44$ 440,000 One-half of the traceable fixed manufacturing overhead relates to a supervisor that would have to be hired to oversee production of the part. The remainder of the traceable fixed manufacturing overhead relates to depreciation of equipment that the company already owns. This equipment has 20,000 units of unused capacity, no resale value, and it does wear out through use. The allocated fixed manufacturing overhead relates to general overhead costs
40000
Assume that a company is considering purchasing a new piece of equipment for $240,000 that would have a useful life of 10 years and a salvage value of $24,000. The new equipment would cost $20,000 per year to operate and it would replace an old piece of equipment that costs $60,000 per year to operate. The old equipment currently being used could be sold for a salvage value of $40,000. The payback period for the new equipment is closest to:
5 years
Assume a company makes only three products, A, B, and C: Product AProduct BProduct CEstimated customer demand in units700600800Selling price per unit$ 80$ 65$ 45Variable cost per unit$ 35$ 26$ 20Machine-hours per unit2.53.01.25 The company has only 2,700 machine-hours available. What is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource?
50600
Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and a $5,000 salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. The net present value of this investment is closest to:Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.
5334
Assume a company is considering adding a new product. The expected cost and revenue data for this product are as follows: Annual sales5,000unitsUnit selling price$ 60 Unit variable costs: Production$ 33.00 Selling$ 6.00 Incremental fixed costs per year: Production$ 35,000 Selling$ 45,000 If the company adds this new product, it expects the contribution margin of other product lines to drop by $18,500 per year. What is the lowest price the company could charge and still break-even on the new product?
58.70
Assume a company makes only three products, A, B, and C: Product AProduct BProduct CSelling price per unit$ 80$ 65$ 45Variable cost per unit$ 35$ 26$ 20Machine-hours per unit2.53.01.25 The company has only 3,000 machine-hours available and unlimited demand for each of its three products. The highest total contribution margin that the company can earn if it makes optimal use of its constrained resource is closest to:
60000
Assume a company's net cash provided by operating activities is $86,000. It provided the following excerpts from its balance sheet: This YearLast YearCurrent assets: Accounts receivable$ 40,000$ 46,000Inventory$ 53,000$ 50,000Prepaid expenses$ 13,000$ 11,000Current liabilities: Accounts payable$ 38,000$ 44,000Accrued liabilities$ 18,000$ 15,000Income taxes payable$ 13,000$ 10,000 Also assume the company incurred a loss on the sale of equipment of $4,000 and the credits to its accumulated depreciation account are $21,000.Based solely on the information provided, the company's net income would be:
60000
Assume a company is considering adding a new product. The expected cost and revenue data for this product are as follows: Annual sales5,000unitsUnit selling price$ 60 Unit variable costs: Production$ 33 Selling$ 6 Incremental fixed costs per year: Production$ 35,000 Selling$ 45,000 If the company adds the new product, it expects the contribution margin of other product lines to drop by $18,500 per year. What is the financial advantage (disadvantage) of adding the new product?
6500
Assume that a company is planning to invest $150,000 in a project that will last three years. The project will produce the following net cash inflows: Year 1$ 60,000Year 2$ 75,000Year 3$ ? Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.Assuming the project's internal rate of return is exactly 16%, the expected net cash inflow for year 3 is closest to:
66388
Assume that a company makes three products—Product A, Product B, and Product C—and provides the following information with respect to those products: Product AProduct BProduct CSelling price$ 70$ 75$ 85Variable costs per unit: Direct materials162420Direct labor402832Variable overhead223Total variable cost per unit585455Contribution margin per unit$ 12$ 21$ 30Machine-hours per unit1.03.04.0 The company incurs total fixed costs of $50,000. The maximum demand for each of its products is 600 units. The company has only 3,600 machine-hours available for production. Assuming the company has made optimal use of its 3,600 machine-hours, what is the maximum amount per hour the company should be willing to pay to rent additional machine-hours of capacity?
7.00
Assume a company had net income of $60,000. It provided the following excerpts from its balance sheet: This YearLast YearCurrent assets: Accounts receivable$ 46,000$ 46,000Inventory$ 53,000$ 53,000Current liabilities: Accounts payable$ 44,000$ 49,000Income taxes payable$ 10,000$ 14,000 If the company did not sell any noncurrent assets during the period and its depreciation charges for the period were $21,000, thenbased solely on the information provided, the net cash provided by operating activities would be:
72000
Assume a company had net income of $60,000. It provided the following excerpts from its balance sheet: This YearLast YearCurrent assets: Accounts receivable$ 41,000$ 46,000Inventory$ 57,000$ 53,000Current liabilities: Accounts payable$ 42,000$ 49,000Income taxes payable$ 14,000$ 14,000 The company sold a piece of equipment for cash proceeds of $25,000. The original cost of the asset was $85,000 and its accumulated depreciation at the time of sale was $65,000. The company's accumulated depreciation account has beginning and ending balances of $320,000 and $280,000, respectively.Based solely on the information provided, the net cash provided by operating activities would be:
74000
Assume a company had net income of $60,000 that included a gain on the sale of equipment of $4,000. It provided the following excerpts from its balance sheet: This YearLast YearCurrent assets: Accounts receivable$ 40,000$ 46,000Inventory$ 53,000$ 50,000Prepaid expenses$ 13,000$ 11,000Current liabilities: Accounts payable$ 38,000$ 44,000Accrued liabilities$ 18,000$ 15,000Income taxes payable$ 13,000$ 10,000 If the credits to the company's accumulated depreciation account were $21,000, thenbased solely on the information provided, the company's net cash provided by (used in) operating activities would be:
78000
Assume that a company is considering purchasing a new piece of equipment for $240,000 that would have a useful life of 10 years and no salvage value. The new equipment would cost $20,000 per year to operate and it would replace an old piece of equipment that costs $60,000 per year to operate. The old equipment currently being used could be sold for a salvage value of $40,000. The simple rate of return for the new equipment is closest to:
8.00%
Assume a company had net income of $60,000. It provided the following excerpts from its balance sheet: This YearLast YearCurrent assets: Accounts receivable$ 41,000$ 46,000Inventory$ 57,000$ 53,000Current liabilities: Accounts payable$ 42,000$ 49,000Income taxes payable$ 14,000$ 14,000 If the company recorded a $6,000 loss on the sale of a noncurrent asset and its depreciation charges for the period were $21,000, thenbased solely on the information provided, the net cash provided by operating activities would be:
81000
Assume that a company is considering buying a new piece of equipment for $280,000 that would have a useful life of five years and a salvage value of $30,000. The equipment would generate the following estimated annual revenues and expenses: Revenues $ 120,000Less operating expenses: Commissions$ 15,000 Insurance5,000 Depreciation50,000 Maintenance30,000100,000Net operating income $ 20,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.The company also believes that this investment would provide some annual intangible benefits that are difficult to quantify. Assuming a discount rate of 15%, the minimum dollar value per year that must be provided by the equipment's intangible benefits to justify the $280,000 investment is closest to:
9084
Assume a company makes four products (A, B, C, and D) in a single facility. Data concerning these products appear below: Product AProduct BProduct CProduct DSelling price per unit$ 42.30$ 50.00$ 37.60$ 33.50Variable manufacturing cost per unit$ 20.80$ 30.70$ 21.00$ 19.90Variable selling cost per unit$ 2.70$ 2.10$ 1.00$ 2.40Milling machine minutes per unit3.304.102.601.30Monthly demand in units1,0004,0003,0003,000 The milling machines are the constraint in the production facility. A total of 14,000 minutes is available per month on these machines. The highest possible contribution margin that the company can earn if it makes optimal use of its constraining resource is closest to: (Round "Contribution margin per minute" to 2 decimal places.)
93528
Which of the following statements is true when the indirect method is used to determine the net cash provided by operating activities?
A gain recorded on the sale of a noncurrent asset is subtracted from net income in the operating activities section of the statement of cash flows.
The first step of the indirect method is to:
Add depreciation charges to net income.
Which of the following equations is used to calculate the simple rate of return?
Annual incremental net operating income ÷ Initial investment
Which of the following is the basic equation for asset accounts?
Beginning balance + Debits − Credits = Ending balance
Which of the following cash flows relates to a company's investing activities?
Collecting the principal on a loan to another entity
When making volume trade-off decisions managers should focus on which of the following?
Contribution margin per unit of the constraining resource
The term capital budgeting describes how companies:
plan significant investments in projects that have long-term implications.
Which of the following statements is true regarding the internal rate of return?
It represents the rate of return earned by an investment project.
Assume a company sold a piece of equipment that had an original cost of $15 million and accumulated depreciation of $10 million. The cash proceeds from the sale were $8 million and the gain on the sale was $3 million. Which of the following statements is true when the indirect method is used to prepare the operating activities section of the company's statement of cash flows?
It will include an adjustment that subtracts $3 million from net income.
When the indirect method is used to determine the net cash provided by operating activities, the gain on the sale of a noncurrent asset is:
Subtracted from net income to ensure the amount of the gain is excluded from net cash provided by (used in) operating activities.
hich of the following four options is true? ChoicesCapital Budgeting MethodDoes Consider the Time Value of MoneyDoes Consider Cash FlowsOption 1Payback methodYesNoOption 2Net present value methodNoYesOption 3Internal rate of return methodYesYesOption 4Simple rate of returnYesNo
Option 3
When a company pays a dividend it:
Subtracts the amount of the dividend in the financing activities section of the statement of cash flows.
Which of the following cash flows relates to a company's investing activities?
Selling property, plant, and equipment
If a company's accrued liabilities balance increases during the period, when the indirect method is used:
The amount of the increase is added within the operating activities section of the statement of cash flows.
If the operating activities section of a company's statement of cash flows includes an addition of $15 related to accounts receivable, then it means that:
The cash collections from customers were $15 greater than the credit sales.
Assume that a company's accounts payable balance does not change during the period. If the company's operating activities section of its statement of cash flows (prepared using the indirect method) includes a deduction of $15 related to inventory, then it means that:
The cash paid for inventory purchases was $15 greater than the cost of goods sold.
Assume a merchandising company is deciding whether to keep or drop one of the many product lines that it sells at its retail store location. Which of the following would be relevant to the decision?
The contribution margin earned by this product line
The depreciation charges added to net income represent:
The credits to the Accumulated Depreciation account during the period.
Which of the following costs is not relevant when deciding whether to keep or replace a piece of equipment?
The original cost of the asset that would be replaced
Which of the following capital budgeting methods considers cash flows, but not the time value of money?
The payback method
Which of the following statements is true with respect to the direct and indirect methods?
They are two equivalent ways to compute the net cash provided by (used in) operating activities.
Every decision involves choosing between:
at least two alternatives
Which of the following statements is true regarding the profitability index?
it is used for preference decisions
Which of the following statements is true regarding the payback period?
it measures the length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates.
When making volume trade-off decisions managers should:
never produce more of a product than is demanded by customers.
Avoidable costs are always
relevant costs
Differential costs are alway
relevant costs
Which of the following should be ignored when making decisions?
sunk costs
