Practice Questions. Offshore Company makes 2 different types of boats, sail and fishing boats. The company consists of two different departments,...

Practice Questions.Offshore Company makes 2 different types of boats, sail and fishing boats. The company consists of two different departments, design & engineering and production. The company has decided to allocate overhead costs in each of the two cost pools. Data on estimated overhead follows:EstimatedSailFishActivity:DriverOverhead CostEstimateEstimateDesign# of designs$180,00022 designs23 designsProductionLabor hours$994,0004,500 hours2,500 hoursWhat overhead rates will be used in each department to assign costs to the sail boats?DesignProductionA.$8,182$220.89B.$88,000$639,000C.$4,000$142.00D.$4,000$220.89Offshore Company makes 2 different types of boats sail and fishing boats. The company consists of two different departments, design & engineering, and production. The company has decided to allocate overhead costs in each of the two cost pools. Data on estimated overhead follows:EstimatedSailFishingActivity:DriverOverhead CostEstimateEstimateDesign# of designs$180,00022 designs18 designsProductionLabor hours$945,0004,000 hours3,500 hoursIf the company produces and sells 22 sail boats, and each sail boat requires 180 labor hours, how much overhead will be assigned to each sail boat produced?A.$27,180B$22,680C$36,900D.$32,400Bristle Company produces brooms. Utility costs are allocated to products based on a percentage of material costs. Utility costs of $15,000 per month are budgeted and the store anticipates spending $30,000 in materials. By the end of the month, it was determined that actual utility costs were $14,500. If the company spends $6.50 per broom for materials, how much of the utility costs will be allocated to each broom?A.$0.50B.$0.48C.$3.14D.$3.25AC Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. The copier is estimated to provide 1 million copies over its life. Each department has estimated the number of copies which will be made in their department over the life of the copier.DepartmentCopiesPurchasing350,000Accounting200,000Information Tech400,000How much overhead will be allocated each time a copy is made if cost allocations are computed to 4 significant digits?A.$63.3333B.$0.0158C.$66.6667D.$0.0150AC Consulting Company has purchased a new $18,038 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. Each department has estimated the number of copies which will be made over the life of the copier.DepartmentCopiesPurchasing250,000Accounting300,000Information Tech425,000If cost allocations are computed to 4 significant digits and the purchasing department makes 58,000 copies this year, how much overhead will be allocated to purchasing?A.$4,185B.$4,624C.$77,750D.$1,073Sierra Company allocates the estimated $200,000 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows:DepartmentEmployeesAccounting4Production36Sales12How much of the accounting department costs will be allocated to the production and sales departments?EmployeesDepartmentA.$150,000$50,000B.$180,000$60,000C.$1,800,000$600,000D.$22,222$66,667The building maintenance department for Jones Manufacturing Company budgets annual costs of $4,200,000 based on the expected operating level for the coming year. The costs are allocated to two production departments. The following data relate to the potential allocation bases:Production Dept. 1Production Dept. 2Square footage15,00045,000Direct labor hours25,00050,000If Jones assigns costs to departments based on square footage, how much total costs will be allocated to Production Department 1?A.$1,400,000B.$1,050,000C.$1,575,000D.$2,100,000The building maintenance department for Jones Manufacturing Company budgets annual costs of $4,200,000 based on the expected operating level for the coming year. The costs are allocated to two production departments. The following data relate to the potential allocation bases:Production Dept. 1Production Dept. 2Square footage15,00045,000Direct labor hours25,00050,000If Jones assigns costs to departments based on direct labor hours, how much total costs will be allocated to Production Department 2?A.$1,400,000B.$1,050,000C.$2,800,000D.$2,100,000Sweet Products produces mint syrup used by gum and candy companies. Recently, the company has had excess capacity due to a foreign supplier entering its market. Sweet Products is currently bidding on a potential order from Red Sugar Candy for 5,000 cases of syrup. The estimated cost of each case is $27.50, as follows: direct material, $10; direct labor, $5; and manufacturing overhead, $12.50. The overhead rate of $2.50 per direct labor dollar is based on estimated annual overhead of $1,500,000 and estimated direct labor of $600,000, composed of $400,000 of variable costs and $1,100,000 of fixed costs. The largest fixed cost relates to depreciation of plant and equipment. With respect to overhead, how much is the variable cost of producing a case of syrup?A.$13.33B.$15.00C.$18.33D.$17.50Kind, Meek, and Clean, attorneys-at-law, specialize in three areas: criminal, civil, and family law. When specifications for a new computer system were established, the partners agreed to allocate usage based on each department’s needs. Criminal law division needed 60% of the capacity, civil law 25%, and family law 15%. Variable costs for the computer department would be allocated on the number of computer minutes each division used. The computer department’s budgeted fixed costs are $700,000, and the budgeted variable costs $150,000. The firm estimates that 400,000 minutes of computer time will be used year.What amount of the computer department’s fixed costs will be allocated to the civil and family law divisions, respectively? (Compute cost allocation rates to 3 significant digits.)A.$37,500 and $22,500B.$175,000 and $105,000C.$233,333 and $233,333D.$212,500 and $ 127,500Maintenance costs at Winter Company are allocated to the production departments based on area occupied. Maintenance costs of $300,000 are budgeted to maintain a 60,000 square foot production area. If the finishing department occupies 25,000 square feet, how much of the maintenance department costs will be allocated to the finishing department?A.$125,000B.$175,000C.$100,000D.$5,000Mexican Spices Company makes two types of salsa, hot and mild. Information for the two flavors appears below:HotMildSales$400,000$600,000Direct materials$100,000$200,000Direct labor$50,000$150,000Labor hours5,00010,000Mexican Spices incurred $240,000 in overhead costs for the period.Assume that Mexican Spices allocates overhead cost to products based on the labor hours worked on each product. What is the overhead application rate?$10.00$15.00$16.00$13.33Memphis Manufacturing has two service departments, maintenance and personnel, and three production departments, fabrication, assembly, and packaging. Service costs are allocated to producing departments using the direct method. Information on overhead in each department and possible allocation bases appears below:MaintenancePersonnelFabricationAssemblyPackagingCost$180,000$224,000Machine Hours10,00030,00050,000Employees84403030How much maintenance cost will be allocated to assembly?A.$20,000B.$50,000C.$60,000D.$100,000Memphis Manufacturing has two service departments, maintenance and personnel, and three production departments, fabrication, assembly, and packaging. Service costs are allocated to producing departments using the direct method. Information on overhead in each department and possible allocation bases appears below:MaintenancePersonnelFabricationAssemblyPackagingCost$180,000$224,000Machine Hours10,00030,00050,000Employees84403030How much maintenance cost will be allocated to packaging?A.$20,000B.$50,000C.$60,000D.$100,000Memphis Manufacturing has two service departments, maintenance and personnel, and three production departments, fabrication, assembly, and packaging. Service costs are allocated to producing departments using the direct method. Information on overhead in each department and possible allocation bases appears below:MaintenancePersonnelFabricationAssemblyPackagingCost$180,000$224,000Machine Hours10,00030,00050,000Employees84403030How much personnel cost will be allocated to fabrication?A.$56,000B.$89,600C.$82,963D.$67,200Rand, Land, and Stan, CPA’s, has three divisions: audit, tax, and business consulting. When the specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20%. The fixed computer department costs are allocated based on these percentages. The variable costs of the computer department are allocated based on the minutes of computer time that each department uses. The computer division budget for fixed costs is $450,000, and the budget for variable costs is $145,600. The company anticipates using 520,000 minutes of computer time.What amount of variable costs will be allocated when a division uses a minute of computer time?A.$4.50B.$2.80C.$1.15D.$0.28Rand, Land, and Stan, CPA’s, has three divisions: audit, tax, and business consulting. When the specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20%. The fixed computer department costs are allocated based on these percentages. The variable costs of the computer department are allocated based on the minutes of computer time that each department uses. The computer division budget for fixed costs is $450,000, and the budget for variable costs is $145,600. The company anticipates using 520,000 minutes of computer time.If the audit division uses 250,000 minutes of computer time, what amount of variable costs will be allocated to the audit division (rounded to the nearest dollar)?A.$70,000B.$302,848C.$286,346D.$48,533Rand, Land, and Stan, CPA’s, has three divisions: audit, tax, and business consulting. When the specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20%. The fixed computer department costs are allocated based on these percentages. The variable costs of the computer department are allocated based on the minutes of computer time that each department uses. The computer division budget for fixed costs is $450,000, and the budget for variable costs is $145,600. The company anticipates using 520,000 minutes of computer time.If the tax division uses 105,000 minutes of computer time this year, what is the total amount of computer department costs that will be allocated to the tax division (rounded to the nearest dollar)?A.$29,400B.$119,400C.$120,267D.$119,120Rand, Land, and Stan, CPA’s, has three divisions: audit, tax, and business consulting. When the specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20%. The fixed computer department costs are allocated based on these percentages. The variable costs of the computer department are allocated based on the minutes of computer time that each department uses. The computer division budget for fixed costs is $450,000, and the budget for variable costs is $145,600. The company anticipates using 520,000 minutes of computer time.What amount of the computer department fixed costs will be allocated to the business consulting division?A.$150,000B.$29,120C.$90,000D.$119,120Elrod Electronics is a manufacturer of data storage devices. Elrod consists of two service departments, maintenance and computing, and two production departments, assembly and testing. Maintenance costs are allocated on the basis of square footage occupied, and computing costs are allocated on the basis of the number of computer terminals. The following data relate to allocations of service department costs:MaintenanceComputingAssemblyTestingService department costs$600,000$900,000Square footage20,00030,00090,00060,000 Terminals10302060How much service department costs will be allocated to the testing department using the direct method?A.$675,000B.$1,035,000C.$915,000D.$630,000Velvet Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory.Information about the departments is presented below:Number ofNumber of SquareDepartmentCostsEmployeesFeet OccupiedPayroll (S1)$150,00022,000Maintenance (S2)$220,000864,000Molding (P1)75100,000Finishing (P2)5060,000Packaging (P3)2540,000Velvet uses the direct method to allocate costs. Round all answers to the nearest dollar.What amount of the payroll department costs will be allocated to the molding department?A.$70,313B.$185,000C.$75,000D.$132,353Velvet Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory.Information about the departments is presented below:Number ofNumber of SquareDepartmentCostsEmployeesFeet OccupiedPayroll (S1)$150,00022,000Maintenance (S2)$220,000864,000Molding (P1)75100,000Finishing (P2)5060,000Packaging (P3)2540,000Velvet uses the direct method to allocate costs. Round all answers to the nearest dollar.When the payroll department costs are allocated, what is the amount per employee that will be charged to each of the departments?A.$937.50B.$15,000C.$6.67D.$1,000Velvet Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory.Information about the departments is presented below:Number ofNumber of SquareDepartmentCostsEmployeesFeet OccupiedPayroll (S1)$150,00022,000Maintenance (S2)$220,000864,000Molding (P1)75100,000Finishing (P2)5060,000Packaging (P3)2540,000Velvet uses the direct method to allocate costs. Round all answers to the nearest dollar.What amount of the payroll department costs will be allocated to the packaging department?A.$23,438B.$73,333C.$25,000D.$36,667Velvet Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory.Information about the departments is presented below:Number ofNumber of SquareDepartmentCostsEmployeesFeet OccupiedPayroll (S1)$150,00022,000Maintenance (S2)$220,000864,000Molding (P1)75100,000Finishing (P2)5060,000Packaging (P3)2540,000Velvet uses the direct method to allocate costs. Round all answers to the nearest dollar.When the maintenance department costs are allocated, what amount will be charged to the packaging department?A.$44,000B.$33,083C.$70,400D.$52,932Velvet Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory.Information about the departments is presented below:Number ofNumber of SquareDepartmentCostsEmployeesFeet OccupiedPayroll (S1)$150,00022,000Maintenance (S2)$220,000864,000Molding (P1)75100,000Finishing (P2)5060,000Packaging (P3)2540,000Velvet uses the direct method to allocate costs. Round all answers to the nearest dollar.When the maintenance department costs are allocated, what amount will be charged to the molding department?A.$44,000B.$82,707C.$110,000D.$52,932Bill Klinger, the manager of the service department at the Abscond Electronics Company, is evaluated based on the profit performance of his department. The profit of the department is down this year because the service department’s share of allocated general and administrative costs (allocated based on relative sales dollars) is much higher than last year. In the current year, service revenue has increased slightly while sales of handheld electronic game devices, the company’s major product, have decreased substantially. Why is the allocation of general and administrative costs to the service department higher in the current year?A.Due to the decrease of revenue in the sales departmentB.Due to the increase in total service revenueC.Due to the increase in costs of providing servicesD.Due to increased usage by the service departmentRand Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:Cost PoolTotal CostsCost DriverAnnual ActivityPackaging and shipping$170,000Number of boxes shipped25,000 boxesFinal inspectionNumber of individual$200,000items shipped100,000 itemsGeneral operationsand supervision$85,000Number of orders10,000 ordersHow much are the packaging and shipping costs for each box shipped?A.$6.80B.$2.00C.$3.37D.$8.50Rand Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:Cost PoolTotal CostsCost DriverAnnual ActivityPackaging and shipping$170,000Number of boxes shipped25,000 boxesFinal inspectionNumber of individual$200,000items shipped100,000 itemsGeneral operationsand supervision$85,000Number of orders10,000 ordersWhat amount is allocated to each order for the general operations and supervision of the department?A.$2.00B.$8.50C.$11.76D.$3.37Rand Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:Cost PoolTotal CostsCost DriverAnnual ActivityPackaging and shipping$170,000Number of boxes shipped25,000 boxesFinal inspectionNumber of individual$200,000items shipped100,000 itemsGeneral operationsand supervision$85,000Number of orders10,000 ordersAn order is shipped to a retail customer who has ordered 10 individual items. This order will be shipped in 3 separate boxes. What is the shipping department cost that will be allocated to the order?A.$17.30B.$173.00C.$48.90D.$40.40Rand Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below:Cost PoolTotal CostsCost DriverAnnual ActivityPackaging and shipping$170,000Number of boxes shipped25,000 boxesFinal inspectionNumber of individual$200,000items shipped100,000 itemsGeneral operationsand supervision$85,000Number of orders10,000 ordersDuring the period, the Far East sales office generated 680 orders for a total of 6,120 items. These orders were shipped in 1,495 boxes. What amount of shipping department costs should be allocated to these sales?A.$28,186B.$22,406C.$10,588D.$16,590Mall Rack Company uses activity-based costing. The company produces soft and hard-cover books. The estimated costs and expected activity for each of the activity pools follow:ActivityEstimatedExpected ActivityCost PoolCostHard-CoverSoft-CoverTotalActivity 1$15,0008007001,500Activity 2$14,9005001,5002,000Activity 3$27,6008004001,200How much are total costs to be charged to hard-cover books?A.$30,125B.$8,000C.$84,945D.$25,691Magazine Company uses activity-based costing. The company produces weekly and monthly magazines. The estimated costs and expected activity for each of the activity pools follow:ActivityEstimatedExpected ActivityCost PoolCostWeeklyMonthlyTotalActivity 1$15,6758004001,200Activity 2$11,900500200700Activity 3$27,6008003001,100How much is the activity rate for activity 1?A.$19.00B.$13.06C.$18.10D.$14.25Magazine Company uses activity-based costing. The company produces weekly and monthly magazines. The estimated costs and expected activity for each of the activity pools follow:ActivityEstimatedExpected ActivityCost PoolCostWeeklyMonthlyTotalActivity 1$15,6758004001,200Activity 2$11,900500200700Activity 3$27,6008003001,100Total costs which would be charged to monthly magazines would be:A.$10,300B.$6,900C.$55,175D.$16,151Pewter Company produces two products, A and B. The annual production and sales of product A and B are 800 and 500 units, respectively. The company has traditionally used direct labor hours to apply manufacturing overhead. Product A requires 0.3 labor hours per unit and product B requires 0.2 labor hours per unit. The company has decided to utilize activity based costing with three cost pools. Estimated costs for each pool are as follows:EstimatedActivityOverheadExpected ActivityCost PoolCostsProduct AProduct BTotalActivity 1$24,025450420870Activity 2$16,8802,0007502,750General Factory $32,014120150270Total $72,919To which of the following is the overhead rate for activity 1 using activity based costing closest?A.$81.81B.$53.39C.$57.20D.$27.61Rolling Rock Company produces two products, A and B. The annual production and sales of product A and B are 800 and 500 units, respectively. The company has traditionally used direct labor hours to apply manufacturing overhead. Product A requires 0.3 labor hours per unit and product B requires 0.2 labor hours per unit. The company has decided to utilize activity based costing with three cost pools. Estimated costs for each pool are as follows:EstimatedActivityOverheadExpected ActivityCost PoolCostsProduct AProduct BTotalActivity 1 $33,0004505501,000Activity 2$12,6302,0001,0003,000General factory $32,014120150270Total $77,644When using activity based costing, to which of the following is the total overhead cost for one unit of product A closest?A.$18.56B.$346.43C.$59.73D.$46.87Vivian’s Flowers produces floral bouquets for commercial businesses (i.e. hotels) and uses an activity-based costing system. Data concerning overhead costs and activity pools is as follows:Activity Cost PoolEstimated WagesEstimated OtherBouquets$48,000$18,000Deliveries24,00010,00012,000Total$80,000$40,000During the year Vivian made 60,000 bouquets and made 5,000 deliveries. Using activity-based costing what is the approximate cost per bouquet?A.$2.00B.$1.10C.$0.91D.$0.80Vivian’s Flowers produces floral bouquets for commercial businesses (i.e. hotels) and uses an activity-based costing system. Data concerning overhead costs and activity pools is as follows:Activity Cost PoolEstimated WagesEstimated OtherBouquets$48,000$18,000Deliveries24,00010,00012,000Total$80,000$40,000During the year Vivian made 60,000 bouquets and made 5,000 deliveries. Using activity-based costing what is the approximate cost per delivery?A.$6.80B.$24.00C.$4.80D.$16.00Robin Company currently produces 8,000 units of part B13. Current costs for part B13 are as follows:Direct materials$12Direct labor9Factory rent7Administrative107Total$45If the company decides to buy part B13, 50% of the administrative costs would be avoided. All of the Robin Company items, including part B13, are manufactured in the same rented production facility. The company has an offer from a wholesaler that wishes to sell the part to Robin for $31 per unit. What effect will occur if the company decides to accept the offer?A.The cost for this part will increase by $5 per unit.B.The cost for this part will be the same.C.The cost for this part will decrease by $14 per unit.D.The cost for this part will decrease by $10 per unit.Walter Jewelry Company produces a bracelet which normally sells for $79.95. The company produces 1,500 units annually but has the capacity to produce 2,000 units. A special order for manufacturing and selling 200 bracelets at $49.95 has been received which would not disrupt current operations. Current costs for the bracelet are as follows:Direct materials$17.00Direct labor14.50Variable overhead4.005.00Total$40.50In addition, the customer would like to add a monogram to each bracelet which would require an additional $2 per unit in additional labor costs and Walter Jewelry would also have to purchase a piece of equipment to create the monogram which would cost $1,600. This equipment would not have any other uses. With regard to this special order, onlyA.incremental revenues will exceed incremental costs by $2,490.B.incremental revenues will exceed incremental costs by $890.C.incremental revenues will exceed incremental costs by $2,890D.incremental revenues will exceed incremental costs by $1,290NY Memorabilia Company produces a souvenir plate which normally sells for $79.95. The company produces 1,500 plates annually but has the capacity to produce 2,000 plates. A special order for manufacturing and selling 200 plates at $49.95 has been received which would not disrupt current operations. Current costs for the plate are as follows:Direct materials$17.00Direct labor14.50Variable overhead4.005.00Total$40.50In addition, the customer would like to add a date to each plate which would require an additional $2 per plate in additional labor costs and NY Memorabilia Company would also have to purchase a piece of equipment to create the date which would cost $1,200. This equipment would not have any other uses. Which statement is true with regard to this special order?A.Incremental revenues will exceed incremental costs by $2,490.B.Incremental revenues will exceed incremental costs by $890.C.Incremental revenues will exceed incremental costs by $2,890.D.Incremental revenues will exceed incremental costs by $1,290.Rockwell Company owns a single restaurant which has a cantina primarily used to seat patrons while they wait on their tables. The company is considering eliminating the cantina and adding more dining tables. Segmented contribution income statements are as follows and fixed costs applicable to both segments are allocated on the basis of sales.RestaurantCantinaTotalSales$800,000$200,000$1,000,000Variable costs475,000160,000635,000Direct fixed costs50,00015,00065,00037,500250,000Net Income$ 62,500($12,500)$50,000What financial effect will occur to profit if Rockwell eliminates the cantina but no more dining customers are served?A.Net income will increase by $12,500B.Net income will decrease to $37,500.C.Net income will decline by $25,000D.Net income will be $25,000Hydra Company has two locations, downtown and at a suburban mall. During March, the company reported total net income of $337,000 and sales of $1.2 million. The contribution margin in the downtown store was $320,000 (40% of sales). The contribution margin in the mall store is $200,000. Total fixed costs are $90,000 in the downtown store and $93,000 in the mall location. How much are sales at the mall location?A.$400,000B.$800,000C.$666,667D.Not enough information is provided to answer.Collegebooks Company has two locations, downtown and on campus. During March, the company reported net income of $164,000 and sales of $1.2 million. The contribution margin in the downtown store was $320,000 (32% of sales). The contribution margin in the campus store is $110,000. Direct fixed costs are $90,000 in the downtown store and $93,000 in the campus location. How much are total variable costs?A.$410,000B.$3,750,000C.$192,000D.$853,000Ricket Company has 1,500 obsolete calculators that are carried in inventory at a cost of $13,200. If these calculators are upgraded at a cost of $9,500, they could be sold for $22,500. Alternatively, the calculators could be sold “as is” for $9,000. What is the net advantage or disadvantage of reworking the calculators?A.$13,000 advantageB.$4,000 advantageC.$9,200 disadvantageD.$200 disadvantageBigByte Company has 12 obsolete computers that are carried in inventory at a cost of $13,200. If these computers are upgraded at a cost of $7,500, they could be sold for $15,300. Alternatively, the computers could be sold “as is” for $9,000. What is the net advantage or disadvantage of reworking the computers?A.$6,300 advantageB.$1,200 disadvantageC.$5,400 disadvantageD.$3,000 advantageThe following are production and cost data for two products, buckets and pails.BucketsPailsContribution margin per unit$450$280Machine set-ups needed per unit2014The company can only perform 14,000 set-ups each period yet there is unlimited demand for each product. What is the maximum contribution margin for the year?A.$315,000B.$35,000C.$280,000D.$595,000The following are production and cost data for two products, A and B.Product AProduct BContribution margin per unit$450$340Machine set-ups needed per unit2520The company can only perform 12,000 set-ups each period yet there is unlimited demand for each product. What is the maximum contribution margin for the year?A.$216,000B.$204,000C.$420,000D.$18,050,000Central Apparel Company owns two stores and management is considering eliminating the east store due to declining sales. Contribution income statements are as follows and common fixed costs are allocated on the basis of sales.WestEastTotalSales$420,000$90,000$510,000Variable costs210,00045,000255,000Direct fixed costs50,00025,00075,000Allocated fixed costs 110,000 35,000145,000Net Income$ 50,000($15,000)$35,000Central’s management feels that if they eliminate the east store, that sales in the west store will increase by 20%. If the east store is closed, what effect will occur to the overall company net income?A.Increase by $25,000B.Increase by $22,000C.Increase by $12,000D.Increase by $15,000Explorer Company manufactures two products, hard-tops and covers for its convertible vehicles. Data for each follows:Hard-topCoversDirect labor hours required per unit48Contribution margin per unit$240$390Only 4,200 direct labor hours are available per month. How many units of each product should Explorer make in order to maximize profits?Hard-topsCoversA.4,200400B.1,0500C.1,050250D.0250Urban Athletics Company has two store locations, north and south. During October, the company reported net income of $192,000 on sales of $905,000. Sales in the north store were $680,000 and variable costs in the south store were 60% of sales. The contribution margin in the north store was $204,000. If total direct costs are $50,000, how much will allocated fixed costs be?A.$102,000B.$2,000C.$52,000D.$30,000The Abbott Company currently makes 10,000 units annually of a part it utilizes in the products it manufactures. Current costs for the part are as follows:Direct materials$16.25Direct labor11.85Variable manufacturing overhead6.30Fixed manufacturing overhead 10.20Total$44.60If the company decides to buy the part the empty warehouse space could be rented for $35,000 annually. In addition, half of the fixed manufacturing overhead costs would be avoided if the company decides to buy the part. The company has an offer from a manufacturer to produce the part for $42 per unit. If the company decides to accept the offer the net advantage or disadvantage to the company’s annual net income would be:A.An advantage of $10,000.B.An advantage of $35,000.C.A disadvantage of $25,000.D.An advantage of $26,000.Manor Homes plans to discontinue a segment which last year generated a contribution margin of $65,000 and incurred $40,000 in fixed costs. If the segment is discontinued, half of the fixed costs will not be avoided. If Manor Homes decides to discontinue this segment the overall effect on profits will be:A.a decrease of $65,000.B.a decrease of $25,000.C.a decrease of $45,000.D.an increase of $45,000.Rumper Company has 2,000 obsolete ratchers in its inventory which have a cost of $22 each. If the ratchers are reworked they could be sold for $37 each. If sold as-is, the revenue would be only $10 each. If Rumper Company decides to rework the ratchers, how much should the company be willing to invest to ensure that no additional loss occurs on the sale of the ratchers?A.$44,000B.$54,000C.$20,000D.$22,000Wester Company sells product Z for $23 per unit. Unit product costs are as follows:Direct materials$4Direct labor5Manufacturing overhead 12Total$21A special order to purchase 20,000 units was recently received. There is enough capacity to fill the order and filling this order would not disrupt current operations. Wester Company would incur an additional $3 per unit for shipping costs. Half of the manufacturing overhead costs are fixed and would be incurred no matter how many units are produced. In negotiating a price, how much is the minimum acceptable selling price?A.$18B.$19C.$22D.$15Rogertree Company manufactures a number of products from the same raw material. Joint processing costs total $10,000 per month. Product A could be sold at the cut-off point for $18,000 per month or it can be further processed at a cost of $9,000 per month and then sold for $35,000. Rogertree Company should:A.Further process product A because its incremental revenues will exceed incremental costs by $8,000.B.Further process product A because its incremental revenues will exceed incremental costs by $26,000.C.Sell as-is because the incremental loss is $2,000 if processed further.D.Further process product A because its incremental revenues will exceed incremental costs by $16,000.Tilma Company sells product X for $23 per unit. Unit product costs are as follows:Direct materials$4Direct labor512Total$21A special order to purchase 20,000 units was recently received. There is enough capacity to fill the order and filling this order would not disrupt current operations. Tilma Company would incur an additional $3 per unit for shipping costs. 40% of the manufacturing overhead costs are fixed and would be incurred no matter how many units are produced. In negotiating a price, how much is the minimum acceptable selling price?A.$19.20B.$19.00C.$16.80D.$12.00Meadows Company manufactures a number of products from the same raw material. Joint processing costs total $10,000 per month. Product Z could be sold at the cut-off point for $18,000 per month or it can be further processed at a cost of $9,000 per month and then sold for $26,000. Meadows Company should:A.further process product Z because its incremental revenues will exceed incremental costs by $7,000.B.further process product Z because its incremental revenues will exceed incremental costs by $17,000.C.sell product Z at the split-off point because its incremental costs will exceed incremental revenues by $1,000.D.sell product Z at the split-off point because its incremental costs will exceed incremental revenues by $7,000.Hardline Flooring produced 2,500 yards of its economy-grade carpet. In the coloring process, there was a pigment defect and the resulting color appeared to be faded. The carpet normally sells for $15 per yard, with $8 of variable cost per yard and $4 of fixed cost per yard assigned to the carpet. The company realizes that it cannot sell the carpet for $15 per yard through its normal channels, unless the coloring process is repeated. The incremental cost of the process is $3 per yard. Reliable Home Solutions is willing to buy the carpet in its current faded condition for $10 per yard. Should Hardline repeat the coloring process or sell the carpet to Reliable Home Solutions and what is the benefit?A.Repeat coloring for $5,000 benefit.B.Sell as is to Reliable for $17,500 benefit.C.Repeat coloring for $30,000 benefit.D.Sell as is to Reliable for $5,000 benefit.Ulti Pharm Company produces XltaA and a related product called XltaB. XltaB, which sells for $14.00 per gallon, is made from a base of XltaA plus additional ingredients. It takes 35 minutes to manufacture a gallon of XltaA and an additional 15 minutes to manufacture a gallon of XltaB. XltaA sells for $9.00 per gallon. The cost per gallon of manufacturing XltaA and the additional costs to convert it into XltaB are:Additional Cost to ConvertXltaAXltaA into XltaBMaterial$2.00$1.75Labor2.500.50Variable overhead2.251.10Both products have been successful and demand for both products is strong and beyond the company’s capacity. Since it takes additional time to manufacture XltaB, the vice president of production is trying to determine whether XltaB should be produced. Which product makes the largest contribution to company profit, given a capacity constraint measured in terms of production time?A.XltaA because it contributes more contribution margin per minute.B.XltaB because it contributes more contribution margin per minute.C.XltaB because it generates more revenue per unit.D.XltaA because more units can be produced per hour.Oakland College is considering outsourcing its grounds maintenance. In this regard, Oakland has received a bid from Highline Grounds Maintenance for $395,000 per year. Highline states that their bid will cover all services and planting materials required to “keep Oakland’s grounds in a condition comparable to prior years.” Oakland’s cost for grounds maintenance in the preceding year were $412,000 as follows:Salary of three full-time gardeners$295,000Plant materials85,000Fertilizer9,000Fuel8,000Depreciation of tractor, mowers, and othermiscellaneous equipment15,000Total$412,000If Oakland College outsources maintenance, it will be able to sell equipment for $30,000, and the three gardeners will be laid off. What will savings be in the second year?A.$2,000B.$32,000C.($70,000)D.$83,000Curtis Corporation is beginning to manufacture Mighty Mint, a new mouthwash in a small spray container. The product will be sold to wholesalers and large drugstore chains in packages of 30 containers for each $20 per package. Management allocates $225,000 of fixed manufacturing overhead costs to Mighty Mint. The manufacturing cost per package of 30 containers for expected production of 200,000 packages is as follows:Direct material$ 8.00Direct labor5.003.50Total$15.00The company has contacted a number of packaging suppliers to determine whether it is better to buy or manufacture the spray containers. The lowest quote for the containers is $1.85 per 30 units. It is estimated that purchasing the containers from a supplier will save 10 percent of direct materials, 20 percent of direct labor, and 15 percent of variable overhead. Curtis’s manufacturing space is highly constrained. By purchasing the spray containers, the company will not have to lease additional manufacturing space that is estimated to cost $17,000 per year. If the containers are purchased, one supervisory position can be eliminated. Salary plus benefits for this position are $80,000 per year. What is the incremental cost (benefit) of buying the containers as opposed to making them?A.$124,500 net benefit.B.$192,000 net benefit.C.$27,500 net benefit.D.Some other answer.Hale Company makes sets of wrenches. They are trying to decide whether to continue to make the case the wrenches are sold in, or to outsource it to another company. The direct material and direct labor cost to produce the cases total $2.00 per case. The overhead cost is $1.00 per case which consists of $0.40 in variable overhead which would all be eliminated if the case were bought from the outside supplier. The $0.60 of fixed overhead is based on expected production of 200,000 cases per year and consists of the salary of the case production manager of $40,000 per year and $80,000 in depreciation on equipment that would have no resale value. The manager would be laid off if the cases were bought externally. Additionally, if the case production were stopped, the space that it is using could be rented out for $20,000 per year. The outside supplier has offered to supply the cases for $2.80 per case. How much will Hale save or lose if the cases are bought externally?A.Save $0.40 per case.B.Lose $0.20 per case.C.Lose $0.80 per case.D.Save $0.20 per case.Smith Company manufactures widgets. Richardson Company has approached Smith with a proposal to sell the company one of the components used to make widgets at a price of $100,000 for 50,000 units. Smith is currently making these components in its own factory. The following costs are associated with this part of the process when 50,000 units are produced:54,000Direct labor20,00070,000Total$144,000The manufacturing overhead consists of $32,000 of costs that will be eliminated if the components are no longer produced by Smith. The remaining manufacturing overhead will continue whether or not Smith makes the components. What is the amount of avoidable costs if Smith buys rather than makes the components?A.$106,000B.$74,000C.$144,000D.$112,000Smith Company manufactures widgets. Richardson Company has approached Smith with a proposal to sell the company one of the components used to make widgets at a price of $100,000 for 50,000 units. Smith is currently making these components in its own factory. The following costs are associated with this part of the process when 50,000 units are produced:54,000Direct labor20,00070,000Total$144,000The manufacturing overhead consists of $32,000 of costs that will be eliminated if the components are no longer produced by Smith. The remaining manufacturing overhead will continue whether or not Smith makes the components. What is the total cost that Smith will incur if it buys the components from Richardson Company?A.$6,000B.$176,000C.$138,000D.$100,000Molina Medical Supply Company is trying to decide whether or not to continue distributing hospital supplies. The following information is available for Molina’s business segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if a segment is dropped.Hospital SuppliesRetail StoresMail OrderSales$120,000$440,000$360,00064,000 200,000 140,000Contribution margin56,000240,000220,000Direct fixed costs50,00080,00090,00020,000 70,000 60,000Net Income($14,000)$90,000$70,000Assume that if hospital supplies were dropped, retail store sales would increase by 25%. What would the impact of the increase in retail store sales have on overall profitability?A.Income would increase by $54,000B.Income will increase by $104,000C.Income will increase by $14,000D.Income will increase by $60,000Rally Shoe Company is trying to decide whether or not to continue making bowling shoes. The following information is available for the segments.Bowling ShoesAthletic ShoesBootsSales$120,000$420,000$360,00064,000 220,000 140,000Contribution Margin56,000200,000220,000Direct Fixed Costs45,00070,00090,00060,000Net Income ($9,000) $60,000 $70,000On what basis have the common fixed costs been allocated to the segments?A.Sales.B.Number of employees.C.Number of shoes sold.D.Not enough information to answer.Eager Electronics has just developed a low-end electronic calendar that it plans on selling via a cable channel marketing program. The cable program’s fee for selling the item is 12 percent of revenue. For this fee, the program will sell the calendar over six 10-minute segments in September.Eager’s fixed costs of producing the calendar are $62,000 per production run. The company plans to wait for all orders to come in, and then it will produce exactly the number of units ordered. Production time will be less than three weeks. Variable production costs are $14 per unit. In addition, it will cost approximately $2 per unit to ship the calendars to customers. Wonyoni Fletcher, a product manager at Eager, is charged with recommending a price for the item. Based on her experience with similar items, focus group responses, and survey information, she has estimated the number of units that can be sold at various prices:PriceQuantity$425,000$388,000$3411,000$3013,000At which price should the company sell it products? A.$42B.$38C.$34D.$30Gypsum Company has offered to purchase 2,000 units of a special edition of the utility bench from Phillips at a price of $12.50 per unit. This special edition will have additional variable costs of $0.35 per unit. Phillips has the capacity to produce this order and it will not affect any of its other operations.Phillips Manufacturing Corporation produces a single product, a utility bench. Budgeted amounts for the coming year are as follows:Revenues (20,000 units at $12 each)$240,000Direct material$40,000Direct labor70,000Variable manufacturing overhead50,000190,000Net income$ 50,000Gypsum Company has offered to purchase 2,000 units of a special edition of the utility bench from Phillips at a price of $12.50 per unit. This special edition will have additional variable costs of $0.35 per unit. Phillips has the capacity to produce this order and it will not affect any of its other operations.What is the incremental cost of accepting the special order?A.$16,000B.$46,000C.$16,700D.$19,000Phillips Manufacturing Corporation produces a single product, a utility bench. Budgeted amounts for the coming year are as follows:Revenues (20,000 units at $12 each)$240,000Direct material$40,000Direct labor70,000Variable manufacturing overhead50,00030,000 190,000Net income$ 50,000Gypsum Company has offered to purchase 2,000 units of a special edition of the utility bench from Phillips at a price of $12.50 per unit. This special edition will have additional variable costs of $0.35 per unit. Phillips has the capacity to produce this order and it will not affect any of its other operations.What is the incremental profit (loss) associated with the special order?A.$8,300B.$9,000C.($21,000)D.($11,700)Core Manufacturing makes a single product. Budget information regarding the current period is given below:Revenue (100,000 units at $8.00)$800,000Direct materials$170,000Direct labor125,000Variable manufacturing overhead235,000640,000Net income $160,000Deer Company approaches Core with a special order for 15,000 units at a price of $8.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company’s orders. However, Core is operating at capacity and will incur an additional $55,000 in fixed manufacturing overhead if the order is accepted. What is the incremental revenue associated with accepting the special order?A.($7,000)B.$927,500C.$47,500D.$127,500Joos Company is considering the purchase of a new machine costing $245,000. This machine is estimated to use about $5,400 per year in operating expenses, but it will allow the company to earn an additional $92,000 per year in revenues. At the end of 3 years the machine will have a salvage value of $35,000. If the income tax rate is 30%, and the required rate of return is 8% what is the net present value of this project? (Round the answer to the nearest whole dollar.)A.($34,657)B.$210,343C.($60,993)D.($6,874)The Crescent Company is considering the purchase of a new machine costing $200,000. This machine is estimated to cost $5,000 per year in operating expenses but it will allow the company to earn an additional $100,000 per year in revenues. However, on average, only 75% of sales are collected in the year of the sale, the remaining 25% are collected in the following year. At the end of 3 years the machine will have a salvage value of $10,000. If the required rate of return is 10% what is the net present value of this project, rounded to the answer to nearest whole dollar?A.$21,032B.$39,212C.($18,411)D.$13,519Warner Roberts Company is considering the purchase of a new machine costing $325,000. This machine is estimated to cost $12,000 per year in operating expenses but it will allow the company to earn an additional $68,000 per year in revenues. The machine will be depreciated using the straight-line method over its 10 year life. There is no expected salvage value at the end of its life. If the required rate of return is 8%, and the income tax rate is 28%, what is the net present value of this project?A.$35,020B.($54,449)C.$6,613D.$131,287CarMax Engine Shop is considering the purchase of a new computer system for diagnosing engine problems. The company estimates that the computer system will result in increased operating cash flows of $5,100 in year 1, $5,900 in year 2, and $5,400 in year 3. The company’s required return is 8%. What is the most money the company would be willing to pay for the computer?A.$16,400B.$14,067C.$42,264D.$15,185Melton Company’s required rate of return on capital budgeting projects is 16%. The company is considering an investment which would yield an after-tax cash flow of $30,000 in four years. What is the most that the company would be willing to invest in this project?A.$10,721B.$16,569C.$54,318D.$83,946The following data pertains to an investment proposal:Required equipment investment$124,000Annual cost savings$52,000Projected life of investment4 yearsProjected salvage value$0Required rate of return8%The income tax rate is 28%. To which amount is the internal rate of return on this investment closest?A.12.5%B.less than 6%C.25%D.2.38%The following data pertains to an investment proposal:Required equipment investment$385,000Annual cost savings$105,700Projected life of investment6 yearsProjected salvage value$0Required rate of return8%The income tax rate is 28%. To which amount is the internal rate of return on this investment closest?A.4.1%B.3.6%C.16.5%D.12.2%82.An investment that costs $120,000 will reduce operating cash flows by $40,000 per year after taxes for 4 years. Based on the internal rate of return of the investment, should the investment be undertaken if the required rate of return is 11 percent?A.No, the actual return of 3.00% is less than the required rate of return.B.Yes, because the return of 33.3% is more than the hurdle rate.C.Yes, because the IRR is 25%.D.Yes, because the internal rate of return of 12.5% is more than the required rate of 11%.83.An investment that costs $120,000 will reduce operating cash flows by $40,000 per year after taxes for 4 years. The required rate of return is 10 percent. How much is the payback period assuming an inflation rate of 8 percent of operating costs after taxes?A.About 2.79 years.B.About 2.92 years.C.About 2.66 years.D.About 3 years.84.A company is making an investment of $2,200,000 that yielded a net present value of zero. Which statement is true?A.The internal rate of return of the investment is zero.B.The investment will yield an internal rate of return equal to the required rate of return.C.The investment will yield an accounting rate of return equal to the required rate of return.D.The investment will result in zero profit.85.Scholastic Works Company is evaluating a classroom remodeling project. The cost of the remodel will be $400,000 and will be depreciated over five years using the straight-line method. The remodeled room will accommodate ten extra students per year. Each student pays annual tuition of $16,000. The before-tax incremental cost of a student (e.g., the cost of supplies and teacher’s wages) is $2,000 per year. The company’s tax rate is 40 percent, and the company requires a 12% rate of return on the remodeling project.How much is the internal rate of return of the remodeling project?A.3.45%B.13.9%C.4.44%D.12%86.Depreciation has an indirect effect on cash flow because itA.reduces the amount of taxes a company must pay.B.reduces the original cash outflow associated with the asset.C.increases the periodic maintenance expenditures made in conjunction with the project.D.creates a pool of cash which can be used to replace the item.Handy Wrappers is considering investing in a piece of machinery which will cost $500,000. It will provide an additional $160,000 is additional sales each year and its annual operating expenses are expected to be $35,000. The machine will be depreciated on a straight-line basis over a 10 year life with no estimated salvage value. The company has a 40% tax rate and its required rate of return is 16%. How much is the annual depreciation tax shield?A.$20,000B.$96,664C.$241,660D.$72,498A company is considering investing in a piece of machinery costing $400,000. It will provide an additional $142,000 is additional sales each year and its annual operating expenses are expected to be $51,000. The machine will be depreciated on a straight-line basis over an 8-year life with no estimated salvage value. The company has a 40% tax rate. How much is annual operating cash flows?A.$54,600B.$24,600C.$4,600D.$74,600Jughead Company is considering a $10,000 investment. Which of the following alternative cash inflows has the shortest payback period?A.$12,000 in Year 1.B.$0 in Year 1, $20,000 in Year 2.C.$2,000 per year for Years 1 through 10.D.$5,000 per year for Years 1 through 5.A company with $2,000,000 in operating assets is considering purchasing a machine that costs $300,000 and which is expected to reduce operating costs by $60,000 each year. The payback period for this machine in years is closest to:A.2 years.B.5 years.C.6.7 years.D.15 years.The Diamond Oaks Company is deciding whether to purchase a machine for $80,000 which will yield the following cost savings:Year 1$25,000Year 2$40,000Year 3$45,000The expected rate of return on this project is closest to:A.12%.B.14%.C.16%.D.18%.The Higston Company has just purchased a piece of equipment at a cost of $500,000. This equipment will reduce operating costs by $100,000 each year for the next eight years. This equipment replaces old equipment that was sold for $10,000 cash. Ignoring income taxes, the new equipments has a pay-back period of:A.4.9 years.B.5 years.C.5.1 years.D.4.8 years.A proposed project will cost $684,805 and will provide returns of $150,000 in Year 1, $300,000 in Year 2, and $400,000 in Year 3. There will not be any cash flows associated with the project after Year 3. If taxes are ignored, what is the internal rate of return for the project?A.14%B.10%C.8%D.12%An investment of $250,000 will generate cash flows of $110,000 per year in Years 1 and 2 and $40,000 in Year 3. If the company’s required rate of return is 8%, what is the net present value of the investment?A.$28,443B.$227,904C.$22,096D.($22,085)An investment of $36,510 promises to return $8,000 each year for the next 7 years. If taxes are ignored, what is the internal rate of return?A.less than 9%B.10%C.12%D.More than 14%A proposed project is expected to generate returns of $50,000 per year for each of the next four years. If the project will cost $145,685 and taxes are ignored, what is the internal rate of return?A.Less than 10%B.More than 16%C.11%D.14%A proposed project will require an initial investment of $1,000,000 and will generate returns of $250,000 per year for five years. If taxes are ignored, what is the internal rate of return?A.Less than 9%B.11%C.13%D.Over 15%An investment is expected to generate returns of $60,000 per year for each of the next six years. If the initial amount invested is $240,000 and taxes are ignored, which of the following is closest to the internal rate of return?A.15%B.13%C.10%D.7%A project which requires an investment of $150,000 is expected to generate $65,000 of net income in Year 1, $45,000 of net income in Year 2, and $35,000 of net income in Year 3. Operating cash flows expected in Year 1 are $115,000, with Year 2 as $95,000, and year 3 as $85,000. What is the accounting rate of return for this investment?A.32.22%B.64.44%C.65.56%D.13.11%Geronimo Company is considering entering a new line of business. Starting the business will require an initial investment in equipment of $400,000 with a salvage value of $40,000. It is expected that the new business will increase net income by $80,000 per year for five years. The equipment will be depreciated over a five-year period using straight-line depreciation with no residual value. How much is the accounting rate of return of the new business?A.20.00%B.40.00%C.36.36%D.111.11%Arcano Corporation is considering producing a new automobile product, Shine. Research has determined that the company will be able to sell 60,000 units per year at $12. The product will be produced in a section of an existing factory that is currently not in use.To produce Shine, Arcano must buy a machine that costs $400,000. The machine has an expected life of five years and will have an ending residual value of $15,000. Arcano will depreciate the machine over five years using the straight-line method. In addition to the cost of the machine, the company will incur incremental manufacturing costs of $570,000. Arcano has a tax rate of 30 percent, and the company’s required rate of return is 8 percent. How much is the payback period?A.3.12 yearsB.7.82 yearsC.3.80 yearsD.2.67 yearsA project that required a $420,000 investment generated no net income for the first year of operations, net income of $86,000 in the second year, and net income of $100,000 in year 3. How much is the accounting rate of return for this investment?A.88.57%B.44.29%C.14.76%D.29.52%ShoGun Sushi buys a piece of equipment for $109,536 that will last for 4 years. The equipment will generate operating cash flows of $34,000 per year and will have no salvage value at the end of its life. The income tax rate is 30%. Straight line depreciation is used. What is the net present value using a 7% required rate of return?A.($28,921)B.$5,782C.$5,629D.$115,165ShoGun Sushi buys a piece of equipment for $109,536 that will last for 4 years. The equipment will generate operating cash flows of $34,000 per year and will have no salvage value at the end of its life. The income tax rate is 30%. Straight line depreciation is used. What is the internal rate of return?A.10.8%B.3.2%C.31%D.9.2%ShoGun Sushi buys a piece of equipment for $109,536 that will last for 4 years. The equipment will generate operating cash flows of $34,000 per year and will have no salvage value at the end of its life. The income tax rate is 30%. Straight line depreciation is used. What is the payback period?A.9.2 years.B.3.22 years.C.0.31 years.D.4.6 years.Atom Productions bought a piece of equipment for $55,898 that will last for 5 years. The equipment will generate after tax operating cash flows