1
award:
1.68 out of
2.50 points
1.
award:
1.68 out of
2.50 points
Woh Che Co. has four departments: materials,
personnel, manufacturing, and packaging. In a recent month, the four
departments incurred three shared indirect expenses. The amounts of these
indirect expenses and the bases used to allocate them follow.
Indirect Expense
Cost
Allocation Base
Supervision
$
83,600
Number
of employees
Utilities
61,000
Square
feet occupied
Insurance
28,000
Value
of assets in use
Total
$
172,600
Departmental
data for the companyâs recent reporting period follow.
Department
Employees
Square Feet
Asset Values
Materials
22
21,000
$
17,750
Personnel
11
5,250
2,130
Manufacturing
44
68,250
36,210
Packaging
33
10,500
14,910
Total
110
105,000
$
71,000
(1)
Use
this information to allocate each of the three indirect expenses across the
four departments.
2
2.
award:
0 out of
2.50 points
Marathon Running Shop has two service
departments (advertising and administration) and two operating departments
(shoes and clothing). During 2013, the departments had the following direct
expenses and occupied the following amount of floor space.
Department
Direct Expenses
Square Feet
Advertising
$
17,000
1,620
Administrative
18,600
1,980
Shoes
101,500
9,360
Clothing
12,000
5,040
The advertising department developed and
distributed 120 advertisements during the year. Of these, 90 promoted shoes
and 30 promoted clothing. The store sold $350,000 of merchandise during the
year. Of this amount, $273,000 is from the shoes department, and $77,000 is
from the clothing department. The utilities expense of $64,000 is an
indirect expense to all departments.
Complete the departmental expense allocation
spreadsheet for Marathon Running Shop. Assign (1) direct expenses to each
of the four departments, (2) the $64,000 of utilities expense to the four
departments on the basis of floor space occupied, (3) the advertising
departmentâs expenses to the two operating departments on the basis of the
number of ads placed that promoted a departmentâs products, and (4) the
administrative departmentâs expenses to the two operating departments based
on the amount of sales.
3.
award:
0 out of
2.50 points
You
must prepare a return on investment analysis for the regional manager of Fast
& Great Burgers. This growing chain is trying to decide which outlet of
two alternatives to open. The first location (A) requires a $500,000
investment and is expected to yield annual net income of $70,000. The second
location (B) requires a $200,000 investment and is expected to yield annual
net income of $44,000.
Compute
the return on investment for each Fast & Great Burgers alternative.
4.
award:
0 out of
2.50 points
Heart
& Home Properties is developing a subdivision that includes 450 home
lots. The 200 lots in the Canyon section are below a ridge and do not have
views of the neighboring canyons and hills; the 250 lots in the Hilltop
section offer unobstructed views. The expected selling price for each Canyon
lot is $51,000 and for each Hilltop lot is $98,000. The developer acquired
the land for $2,500,000 and spent another $2,200,000 on street and utilities
improvements.
Assign
the joint land and improvement costs to the lots using the value basis of
allocation and determine the average cost per lot. (Do not round your intermediate calculations.)
.
award:
0 out of
2.50 points
Beyer
Company is considering the purchase of an asset for $280,000. It is expected
to produce the following net cash flows. The cash flows occur evenly
throughout each year.
Year 1
Year 2
Year 3
Year 4
Year 5
Total
Net
cash flows
$
68,000
$
40,000
$
74,000
$
140,000
$
21,000
$
343,000
Compute
the payback period for this investment. (Cumulative
net cash outflows must be entered with a minus sign. Round your answers to 2
decimal places.)
6.
award:
0 out of
2.50 points
Compute
the payback period for each of these two separate investments:
a.
A new
operating system for an existing machine is expected to cost $260,000 and
have a useful life of five years. The system yields an incremental after-tax
income of $75,000 each year after deducting its straight-line depreciation.
The predicted salvage value of the system is $10,000.
b.
A
machine costs $180,000, has a $14,000 salvage value, is expected to last ten
years, and will generate an after-tax income of $41,000 per year after
straight-line depreciation.
.
award:
0 out of
2.50 points
B2B Co.
is considering the purchase of equipment that would allow the company to add
a new product to its line. The equipment is expected to cost $380,800 with a
6-year life and no salvage value. It will be depreciated on a straight-line
basis. B2B Co. concludes that it must earn at least a 9% return on this
investment. The company expects to sell 152,320 units of the equipmentâs
product each year. The expected annual income related to this equipment
follows. (.mhhe.com/connect/0077429923/Images/tableb.1.JPG”>PV of $1, .mhhe.com/connect/0077429923/Images/tableb.2.JPG”>FV of $1, .mhhe.com/connect/0077429923/Images/tableb.3.jpg”>PVA of $1,
and .mhhe.com/connect/0077429923/Images/tableb.4.JPG”>FVA of $1) (Use appropriate factor(s) from the tables provided.)
Sales
$
238,000
Costs
Materials,
labor, and overhead (except depreciation)
83,000
Depreciation
on new equipment
63,467
Selling
and administrative expenses
23,800
Total
costs and expenses
170,267
Pretax
income
67,733
Income
taxes (30%)
20,320
Net
income
$
47,413
Compute
the net present value of this investment. (Round
“PV Factor” to 4 decimal plac
8.
award:
0 out of
2.50 points
Farrow
Co. expects to sell 200,000 units of its product in the next period with the
following results.
Sales
(200,000 units)
$
3,000,000
Costs
and expenses
Direct
materials
400,000
Direct
labor
800,000
Overhead
200,000
Selling
expenses
300,000
Administrative
expenses
514,000
Total
costs and expenses
2,214,000
Net
income
$
786,000
The
company has an opportunity to sell 20,000 additional units at $13 per unit.
The additional sales would not affect its current expected sales. Direct
materials and labor costs per unit would be the same for the additional units
as they are for the regular units. However, the additional volume would
create the following incremental costs: (1) total overhead would increase by
16% and (2) administrative expenses would increase by $86,000.
Calculate
the combined total net income if the company accepts the offer to sell
additional units at the reduced price of $13 per unit.
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