1. Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?
1. direct materials
2. salary of a factory supervisor
3. direct labor
4. units-of-production depreciation on factory equipment.
2. (Ignore income taxes in this problem) The management of Favreau Corporation is considering the purchase of a machine that would cost $310,464 and would have a useful life of 5 years. The machine would have no salvage value. The machine would reduce labor and other operating costs by $84,000 per year. The internal rate of return on the investment in the new machine is closest to:
12%
14%
11%
13%