Question 1 Kinsi Corporation manufactures three different products. All five of these products must pass

Question 1 (2.5 points)

Kinsi Corporation manufactures three different products. All five of these products must pass through a stamping machine in
its fabrication department. This machine is Kinsi's constrained resource. Kinsi would make the most profit if it produces the
product that:
Question 1 options:

uses the lowest number of stamping machine hours.
generates the highest contribution margin per unit.
uses the highest number of stamping machine hours.
generates the highest contribution margin per stamping machine hour.
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Question 2 (2.5 points)

The Cowboy's Company needs 20,000 units of a certain part to use in its production cycle. Cowboys is considering the
possibility of buying the part from Dolphins Company instead of making it. Sixty percent of the fixed overhead will remain
regardless of the decision made. Accounting records indicate the following data:

Cost to Cowboys to make the part:
Direct materials, $4
Direct labor, $16
Variable factory overhead, $18
Fixed factory overhead, $10
Cost to buy the part for Dolphins Company, $36
Which decision should Cowboys make & what is the total cost savings that would result?
Question 2 options:

Make, $120,000
Buy, $120,000
Buy, $80,000
Make, $80,000
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Question 3 (2.5 points)


Company X has gathered the following data for it's three product lines, X, Y, and Z.

Contribution Margin
Units Produced
Labor hours required/unit

Product X
$10,000
1,000
4

Product Y
$12,000
2,400
4

Product Z
$22,500
1,800
5

Machine hours required/unit

4

4

5

If Company X has a limited supply of labor hours, which product(s) should it prefer most?
Question 3 options:

Product Y
Product Z
Product X
Products X and Z
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Question 4 (2.5 points)

Which of the following statements is true
Question 4 options:

The accounting rate of return method ignores the time value of money concept
The payback period ignores the time value of money concept and ignores cash
flows received after the payback period
The net present value method considers the time value of concept and also
considers cash flows during the entire life of the investment project
When the above methods yield conflicting results, the decision indicated by the net
present value method should be considered
All of the above are true
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Question 5 (2.5 points)

A company uses the net present value method to evaluate planned capital expenditures. Everything else being equal, the
lower the required rate of return they use, the ____ will be the net present value.
Question 5 options:

lower
can't be determined
identical
higher
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Question 6 (2.5 points)


The Sip & Dip Donut company is considering the acquisition of a new automatic donut dropper
for $600,000. The machine will have a six-year life and will produce before tax cash savings of
$200,000 each year. The asset is to be depreciated using the straight-line method with no salvage
value. The company's tax rate is 40 percent.
The aftertax net cash inflow on the investment is

Question 6 options:

$160,000.
$ 80,000.
$120,000.
$200,000.
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Question 7 (2.5 points)


The Sip & Dip Donut company is considering the acquisition of a new automatic donut dropper
for $600,000. The machine will have a six-year life and will produce before tax cash savings of
$200,000 each year. The asset is to be depreciated using the straight-line method with no salvage
value. The company's tax rate is 40 percent.
The payback period is
Question 7 options:

3.75 years
3 years
7.50 years
5 years
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Question 8 (2.5 points)

Equipment is purchased at a cost of $39,000. As a result, annual cash revenues will increase by $20,000; annual cash
operating expenses will increase by $7,000; straightline depreciation is used; the asset has a tenyear life; the salvage
value is $3,000. Assuming a tax bracket of 34%, determine the accounting rate of return? (round to the nearest %)
Question 8 options:

13 percent
16 percent
27 percent
33 percent
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Question 9 (2.5 points)

Shirt Co. wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual net
cash inflows of $30,000, have a useful life of 8 years, and an estimated salvage value of $10,000. If Shirt Co. has a required
rate of return of 12%, the maximum amount they will be willing to spend for this machine is
Question 9 options:

$198,720
$300,000
$149,040

$153,080
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Question 10 (2.5 points)

Darlington Company is considering investing in an equipment, which will increase yearly cash revenues by $65000, and
yearly cash expenses to operate the equipment by $30,000. The asset will cost $200,000, and will last 8 years, with a
salvage value of $40,000. Assuming a tax rate of 39%, determine the net present value of this asset, if the company
requires a 10% return on investments.
Question 10 options:

($25,804.75)
$174,195.25
$5,405
($5,405)
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Question 11 (2.5 points)

A company uses the net present value methodology in making capital expenditure decisions. In making a decision where
they have to choose among two pieces of equipment, which of the following pieces of information will be considered
irrelevant
Question 11 options:

Initial cost of each machine
Estimated life of each machine
Salvage value of each machine
Cash flow generated by each machine during the estimated life of the machine
All of the above are relevant
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Question 12 (2.5 points)

Baton Rouge Company is considering purchasing new equipment which will cost $950,000. This equipment is expected to
have a useful life of 15 years, have a salvage value of $50,000 and is expected to have an annual net cash inflow (before
taxes) of $80,000. Assume the company is in the 34% tax bracket.
What is Baton Rouge's annual net cash inflow (after taxes)?
Question 12 options:

$13,200
$52,800
$73,200
$112,800

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Question 13 (2.5 points)

Co. X has gathered the following estimates:

Machine Machine
A
B
Cost $600,000 $600,000
Life 5 yrs
5 yrs
Net Cash Inflow:
Yr
1
Yr
2
Yr
3
Yr
4
Yr
5

$100,000 $500,000
$200,000 $400,000
$300,000 $300,000
$400,000 $200,000
$500,000 $100,000

Co. X uses the net present value method to evaluate capital expenditures. Which of the following two machines has the
higher net present value?
Question 13 options:

They are the same
Machine A
Machine B
Cannot be determined from the information provided
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Question 14 (2.5 points)


Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned
tomatoes. During November, they incurred joint processing costs of $420,000. Production and
sales value information for November are as follows:
Product
Catsup
Tomato
Juice

Selling
Additional
Price/Case Costs/Case
100,000 $10
$2
Cases

150,000 $8

$1

Canned
250,000 $12
Tomatoes

$3

The joint cost allocated to Canned Tomatoes (using the net realizable value method) is (round to the closest $)
Question 14 options:

$230,496
$210,000
$81,942
$107,562
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Question 15 (2.5 points)


Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned
tomatoes. During November, they incurred joint processing costs of $420,000. Production and
sales value information for November are as follows:
Product

Selling
Additional
Price/Case Costs/Case
100,000 $10
$2
Cases

Catsup
Tomato
150,000 $8
Juice
Canned
250,000 $12
Tomatoes

$1
$3

Red Sauce Canning Company is considering an option to further refine Catsup. By incurring an additional cost of $60,000,
they will be able to increase their selling price of Catsup to $11.20 per case. Determine the incremental advantage
(disadvantage) of this option? (round to the closest $)
Question 15 options:

($60,000)
$60,000
($260,000)
$260,000
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Question 16 (2.5 points)


Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned
tomatoes. During November, they incurred joint processing costs of $420,000. Production and
sales value information for November are as follows:
Product

Cases Selling

Additional

Price/Case Costs/Case
100,000 $10
$2

Catsup
Tomato
150,000 $8
Juice
Canned
250,000 $12
Tomatoes

$1
$3

If the company has a philosophy of marking up their products 20% over cost, the selling price per case of Tomato Juice
should be (using the net realizable value method) (round to 2 decimal places)
Question 16 options:

$7.00
$2.06
$1.00
$0.86
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Question 17 (2.5 points)


Red Sauce Canning Company processes tomatoes into catsup, tomato juice, and canned
tomatoes. During November, they incurred joint processing costs of $420,000. Production and
sales value information for November are as follows:
Product

Selling
Additional
Price/Case Costs/Case
100,000 $10
$2
Cases

Catsup
Tomato
150,000 $8
Juice
Canned
250,000 $12
Tomatoes

$1
$3

The unit cost per case of Canned Tomatoes (using the physical volume method) is (round to 2 decimal places)
Question 17 options:

$0.84
$3.84
$2.84
$1.84
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Question 18 (2.5 points)

A cost that is incurred between the splitoff point and the point of sale is known as a:
Question 18 options:

Unit cost
Splitoff cost
Separable cost
Joint cost
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