Managerial Accounting
1. Scorpion Production Company planned to use 1 yard of plastic per unit budgeted at $81 a yard. However, the plastic actually cost $80 per yard. The company actually made 3,900 units, although it had planned to make only 3,300 units. Total yards used for production were 3,960. How much is the total materials variance?
a. $48,600 U
b. $4,860 U
c. $3,960 F
d. $900 U
2. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month was
a. $5,700 favorable.
b. $300 favorable.
c. $150 favorable.
d. $300 unfavorable.
3. The standard rate of pay is $20 per direct labor hour. If the actual direct labor payroll was $117,600 for 6,000 direct labor hours worked, the direct labor price (rate) variance is
a. $2,400 unfavorable.
b. $2,400 favorable.
c. $3,000 unfavorable.
d. $3,000 favorable.
Bark Company is considering buying a machine for $240,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $6,000 each year. The cash payback period on this investment is
a. 20 years.
b. 10 years.
c. 8 years.
d. 4 years.
A company is considering purchasing a machine that costs $280,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the machine is purchased, annual revenues are expected to be $100,000 and annual operating expenses exclusive of depreciation expense are expected to be $38,000. The straight-line method of depreciation would be used.
If the machine is purchased, the annual rate of return expected on this machine is
a. 22.1%.
b. 44.3%.
c. 9.6%.
d. 19.3%.
Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return.
Present Value of an Annuity of 1
Period 8% 9% 10% 11% 12% 15%
6 4.623 4.486 4.355 4.231 4.111 3.784
What is the approximate internal rate of return for this investment?
a. 9%
b. 10%
c. 11%
d. 12%
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:
Year Net Annual Cash Flow
1 $ 3,000
2 8,000
3 15,000
4 9,000
The cash payback period is
a. 2.29 years.
b. 2.60 years.
c. 2.40 years.
d. 2.31 years.
Cash inflows from investing activities include
a. sale of common stock.
b. purchase of equipment.
c. sale of land.
d. issuance of long-term debt.
Which of the following would decrease net cash provided by operating activities?
a. Decrease in short-term notes payable.
b. Depreciation expense.
c. Decrease in inventory.
d. Loss on sale of equipment.
Noncash investing and financing activities
a. may represent significant investing and financing activities.
b. do not involve cash receipts or cash payments.
c. are disclosed on a separate schedule.
d. all of the above.
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Hank Itzek manufactures and sells homemade wine, and he wants to develop a
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standard cost per gallon.The following are required for production of a
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40
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-gallon batch.
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2,500
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ounces of grape concentrate at
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$0.060
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per ounce
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50
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pounds of granulated sugar at
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0.300
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per pound
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45
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lemons at
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0.600
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each
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60
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yeast tablets at
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0.250
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each
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55
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nutrient tablets at
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0.200
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each
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2,700
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ounces of water at
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0.005
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per ounce
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Hank estimates that
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4%
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of the grape concentrate is wasted,
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10%
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of the sugar is lost, and
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25%
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of the lemons cannot be used.
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Instructions:
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Compute the standard costs of the ingredients for one gallon of wine. (Carry the computations to two decimal places.)
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Ingredient
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Amount Per Gallon
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Unit of Measure
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Standard Waste
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Standard Usage
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Standard Price
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Standard Cost Per Gallon
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Grape Concentrate
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ounces (a)
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Sugar
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pounds (b)
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Lemon
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each (c)
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Yeast
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tablet
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Nutrient
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tablet
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Water
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ounces
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Vilas Company is considering a capital investment of
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$175,000
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in additional
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new machinery is expected to have a useful life of
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5
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years with no salvage value. Depr. is
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straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $12,000
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$12,000
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and
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$50,000
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respectively. Vilas has a
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15%
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cost of capital rate which is the required rate of return on investment.
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Instructions:
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(a)(1) Compute the cash payback period. (Round to two decimals.)
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÷
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=
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years
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(a)(2) Compute the annual rate of return on the proposed capital expenditure. (Round to two decimals.)
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÷ [(
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+
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) ÷
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] =
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13.71%
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(b) Using the discounted cash flow technique, compute the net present value. (Round to two decimals.)
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Item
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Amount
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Years
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PV Factor
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Present Value
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Net annual cash flows
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1~5
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3.35216
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Capital investment
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Net present value
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