4) The following is a partially completed departmental expense allocation spreadsheet for Brickland. It reports the total amounts of direct and indirect expenses for its four departments. Purchasing department expenses are allocated to the operating departments on the basis of purchase orders. Maintenance department expenses are allocated based on square footage. Compute the amount of Maintenance department expense to be allocated to Fabrication. (Do not round your intermediate calculations.)
| |
Purchasing
|
Maintenance
|
Fabrication
|
Assembly
|
|
Operating costs
|
$51,000
|
$29,400
|
$115,000
|
$81,000
|
|
No. of purchase orders
|
|
|
15
|
5
|
|
Sq.ft. of space
|
|
|
4,250
|
1,750
|
$38,250.
$12,750.
$8,575.
$20,825.
$14,700.
5) Canfield Technical School allocates administrative costs to its respective departments based on the number of students enrolled, while maintenance and utilities are allocated per square feet of the classrooms. Based on the information below, what is the total amount of administrative cost to the Accounting Department (rounded to the nearest dollar) if administrative costs for the school were $52,000, maintenance fees were $12,200, and utilities were $6,100?
|
Department
|
Students
|
Classrooms
|
|
Electrical
|
122
|
10,100 sq. ft.
|
|
Welding
|
71
|
12,100 sq. ft.
|
|
Accounting
|
51
|
8,100 sq. ft.
|
|
Carpentry
|
41
|
6,100 sq. ft.
|
|
Total
|
285
|
36,400 sq. ft.
|
$9,305.
$17,680.
$19,180.
$23,588.
$11,571.
6) Lattimer Company had the following results of operations for the past year:
|
Sales (15,000 units at $12.20)
|
|
$183,000
|
|
Variable manufacturing costs
|
$100,500
|
|
|
Fixed manufacturing costs
|
24,000
|
|
|
Selling and administrative expenses (all fixed)
|
39,000
|
(163,500)
|
|
Operating income
|
|
$19,500
|
A foreign company whose sales will not affect Lattimer's market offers to buy 5,400 units at $7.90 per unit. In addition to existing costs, selling these units would add a $0.29 selling cost for export fees. If Lattimer accepts this additional business, the special order will yield a:
$6,480 profit.
$2,160 loss.
$3,726 loss.
$4,914 profit.
$9,126 loss.
7) Granfield Company has a piece of manufacturing equipment with a book value of $44,000 and a remaining useful life of four years. At the end of the four years the equipment will have a zero salvage value. The market value of the equipment is currently $22,800. Granfield can purchase a new machine for $128,000 and receive $22,800 in return for trading in its old machine. The new machine will reduce variable manufacturing costs by $19,800 per year over the four-year life of the new machine. The total increase or decrease in net income by replacing the current machine with the new machine (ignoring the time value of money) is:
$26,000 increase
$79,200 decrease
$21,200 decrease
$54,800 increase
$26,000 decrease
8) Ahngram Corp. has 1,000 defective units of a product that cost $3.70 per unit in direct costs and $7.20 per unit in indirect cost when produced last year. The units can be sold as scrap for $4.70 per unit or reworked at an additional cost of $3.20 and sold at full price of $14.10. The incremental net income (loss) from the choice of reworking the units would be:
$6,200.
$0.
($3,200).
$10,900.
$3,200.
9) Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $43,000. The division sales for the year were $979,000 and the variable costs were $485,000. The fixed costs of the division were $537,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be:
$279,200 increase
$494,000 decrease
$214,800 increase
$279,200 decrease
$494,000 increase
10) Markson Company had the following results of operations for the past year:
|
Sales (8,000 units at $19.60)
|
|
$156,800
|
|
Variable manufacturing costs
|
$84,400
|
|
|
Fixed manufacturing costs
|
14,600
|
|
|
Variable selling and administrative expenses
|
10,400
|
|
|
Fixed selling and administrative expenses
|
19,600
|
(129,000)
|
|
Operating income
|
|
$27,800
|
A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $13.40 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,560 for the purchase of special tools. If Markson accepts this additional business, its profits will:
Increase by $1,540.
Decrease by $1,560.
Decrease by $4,660.
Increase by $3,100.
Decrease by $5,450.
11) Soar Incorporated is considering eliminating its mountain bike division, which reported an operating loss for the recent year of $2,700. The division sales for the year were $1,047,000 and the variable costs were $857,000. The fixed costs of the division were $190,000. If the mountain bike division is dropped, 30% of the fixed costs allocated to that division could be eliminated. The impact on operating income for eliminating this business segment would be:
$57,000 decrease
$133,000 decrease
$54,300 decrease
$190,000 increase
$190,000 decrease
12) Chang Industries has 1,100 defective units of product that have already cost $13.10 each to produce. A salvage company will purchase the defective units as they are for $4.10 each. Chang's production manager reports that the defects can be corrected for $6.90 per unit, enabling them to be sold at their regular market price of $19.20. The incremental income or loss on reworking the units is:
$9,020 loss.
$9,020 income.
$7,590 loss.
$16,610 income.
$13,530 income.
13) Bluebird Mfg. has received a special one-time order for 15,000 bird feeders at $3.70 per unit. Bluebird currently produces and sells 75,000 units at $7.70 each. This level represents 80% of its capacity. Production costs for these units are $4.55 per unit, which includes $2.60 variable cost and $1.95 fixed cost. If Bluebird accepts this additional business, the effect on net income will be:
$55,500 increase.
$16,500 increase.
$39,000 increase.
$12,750 decrease.
$39,000 decrease.
14) Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,100 and will produce cash flows as follows:
|
End of Year
|
Investment
|
|
A
|
B
|
|
1
|
$8,100
|
$0
|
|
2
|
8,100
|
0
|
|
3
|
8,100
|
24,300
|
The present value factors of $1 each year at 15% are:
|
1
|
0.8696
|
|
2
|
0.7561
|
|
3
|
0.6575
|
The present value of an annuity of $1 for 3 years at 15% is 2.2832
The net present value of Investment A is:
$15,977.
$(15,100).
$9,200.
$(18,495).
$3,394.
15) Alfarsi Industries uses the net present value method to make investment decisions and requires a 15% annual return on all investments. The company is considering two different investments. Each require an initial investment of $15,500 and will produce cash flows as follows:
|
End ofYear
|
Investment
|
|
A
|
B
|
|
1
|
$8,500
|
$0
|
|
2
|
8,500
|
0
|
|
3
|
8,500
|
25,500
|
The present value factors of $1 each year at 15% are:
|
1
|
0.8696
|
|
2
|
0.7561
|
|
3
|
0.6575
|
The present value of an annuity of $1 for 3 years at 15% is 2.2832
The net present value of Investment B is:
$1,266.
$(16,766).
$10,000.
$3,907.
16) The following data concerns a proposed equipment purchase:
|
Cost
|
$159,200
|
|
Salvage value
|
$4,800
|
|
Estimated useful life
|
4 years
|
|
Annual net cash flows
|
$46,900
|
|
Depreciation method
|
Straight-line
|
The annual average investment amount used to calculate the accounting rate of return is:
$79,600
$77,200
$39,800
$82,000
$56,150
17) The following present value factors are provided for use in this problem.
|
Periods
|
Present Valueof $1 at 8%
|
Present Value of an Annuity of $1 at 8%
|
|
1
|
0.9259
|
0.9259
|
|
2
|
0.8573
|
1.7833
|
|
3
|
0.7938
|
2.5771
|
|
4
|
0.7350
|
3.3121
|
Xavier Co. wants to purchase a machine for $36,000 with a four year life and a $1,200 salvage value. Xavier requires an 8% return on investment. The expected year-end net cash flows are $11,000 in each of the four years. What is the machine's net present value (round to the nearest whole dollar)?
$1,315.
$433.
$37,315.
$(1,315).
$(433).
18) A company is planning to purchase a machine that will cost $30,600, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below. What is the payback period for this machine?
|
Sales
|
|
$123,000
|
|
Cost:
|
|
|
|
Manufacturing
|
$53,100
|
|
|
Depreciation on machine
|
5,100
|
|
|
Selling and administrative expenses
|
41,000
|
(99,200)
|
| |
|
|
|
Income before taxes
|
|
$23,800
|
|
Income tax (30%)
|
|
(7,140)
|
| |
|
|
|
Net income
|
|
$16,660
|
| |
|
|
1.41 years.
3.59 year.
1.84 years.
6.00 years.
3.67 years.
19) Carmel Corporation is considering the purchase of a machine costing $36,000 with a 6-year useful life and no salvage value. Carmel uses straight-line depreciation and assumes that the annual cash inflow from the machine will be received uniformly throughout each year. In calculating the accounting rate of return, what is Carmel's average investment?
$36,000.
$18,000.
$21,000.
$7,000.
$6,000.