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##### acct 212 home work 8 chapter 25

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Question;acct 212 home work 8 chapter 25acct 212 home work 8 chapter 251.;award:3 out of;3.00 points;Exercise 25-1 Payback period computation, even cash flows L.O. P1;Compute;the payback period for each of these two separate investments;a.;A new;operating system for an existing machine is expected to cost $300,000 and;have a useful life of four years. The system yields an incremental after-tax;income of $86,538 each year after deducting its straight-line depreciation.;The predicted salvage value of the system is $12,000. (Round your intermediate calculations to the nearest dollar;amount and final answer to 2 decimal places.);b.;A;machine costs $180,000, has a $16,000 salvage value, is expected to last nine;years, and will generate an after-tax income of $47,000 per year after;straight-line depreciation. (Round your;intermediate calculations to the nearest dollar amount and final answer;to 2 decimal places.);eBook LinkView Hint #1;Worksheet;Difficulty: Medium;Exercise 25-1 Payback period computation, even cash flows L.O. P1;2.;award:2 out of;2.00 points;Exercise 25-2 Payback period computation, uneven cash flows L.O. P1;Wenro;Company is considering the purchase of an asset for $70,000. It is expected;to produce the following net cash flows. The cash flows occur evenly;throughout each year.;Year 1;Year 2;Year 3;Year 4;Year 5;Total;Net;cash flows;$;20,000;$;10,000;$;20,000;$;30,000;$;9,000;$;89,000;Compute;the payback period for this investment. (Round;your intermediate calculations to 3 decimal places and final answer to 1;decimal place.);eBook LinkView Hint #1;Worksheet;Difficulty: Medium;Exercise 25-2 Payback period computation, uneven cash flows;3.;award:2 out of;2.00 points;Exercise 25-3 Payback period computation, declining-balance depreciation;L.O. P1;A;machine can be purchased for $320,000 and used for 5 years, yielding the;following net incomes. In projecting net incomes, double-declining balance;depreciation is applied, using a 5-year life and a $60,000 salvage value.;Year 1;Year 2;Year 3;Year 4;Year 5;Net;incomes;$;22,000;$;52,000;$;102,000;$;77,000;$;202,000;Compute;the machine's payback period (ignore taxes). (Round;your intermediate calculations to 3 decimal places and final answer to 2;decimal places.);eBook LinkView Hint #1;Worksheet;Difficulty: Medium;Exercise 25-3 Payback period computation, declining-balance;depreciation L.O. P1;Learning Objective: 25-P1 Compute payback period and describe its use.;4.;award:2 out of;2.00 points;Exercise 25-4 Accounting rate of return L.O. P2;A;machine costs $500,000 and is expected to yield an after-tax net income of;$19,000 each year. Management predicts this machine has a 10-year service life;and a $100,000 salvage value, and it uses straight-line depreciation. Compute;this machine?s accounting rate of return. (Round;your answer to the nearest whole number. Omit the "%" sign in your;response.);eBook LinkView Hint #1;Worksheet;Difficulty: Medium;Exercise 25-4 Accounting rate of return L.O. P2;Learning Objective: 25-P2 Compute accounting rate of return and;explain its use.;5.;award:3 out of;3.00 points;Exercise 25-5 Payback period and accounting rate of return on investment;L.O. P1, P2;K2B 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 $160,000 with a;12-year life and no salvage value. It will be depreciated on a straight-line;basis. The company expects to sell 64,000 units of the equipment?s product;each year. The expected annual income related to this equipment follows.;Sales;$;100,000;Costs;Materials;labor, and overhead (except depreciation);53,000;Depreciation;on new equipment;13,333;Selling;and administrative expenses;10,000;Total;costs and expenses;76,333;Pretax;income;23,667;Income;taxes (50%);11,834;Net;income;$;11,833;1.;Compute;the payback period. (Round your answer to 2;decimal places.);2.;Compute;the accounting rate of return for this equipment. (Round your answer to 2 decimal places. Omit the;%" sign in your response.);eBook Links (2)View Hint #1;Worksheet;Difficulty: Medium;Learning Objective: 25-P2 Compute accounting rate of return and;explain its use.;Exercise 25-5 Payback period and accounting rate of return on;investment L.O. P1, P2;Learning Objective: 25-P1 Compute payback period and describe its use..;award:3 out of;3.00 points;Exercise 25-6 Computing net present value L.O. P3;K2B 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 $384,000 with a;4-year life and no salvage value. It will be depreciated on a straight-line;basis. K2B Co. concludes that it must earn at least a 9% return on this;investment. The company expects to sell 153,600 units of the equipment?s;product each year. The expected annual income related to this equipment;follows. (Use Table B.3);Sales;$;240,000;Costs;Materials;labor, and overhead (except depreciation);84,000;Depreciation;on new equipment;96,000;Selling;and administrative expenses;24,000;Total;costs and expenses;204,000;Pretax;income;36,000;Income;taxes (30%);10,800;Net;income;$;25,200;Compute;the net present value of this investment. (Round;PV Factor" to 4 decimal places. Round your intermediate;calculations and final answer to the nearest dollar amount. Omit the;$" sign in your response.);rev: 08_13_2011;eBook LinkView Hint #1;Worksheet;Difficulty: Medium;Exercise 25-6 Computing net present value L.O. P3;Learning Objective: 25-P3 Compute net present value and describe its;use.;7.;award:2.40 out of;4.00 points;Exercise 25-8 NPV and profitability index L.O. P3;Following;is information on two alternative investments being considered by Jin;Company. The company requires a 8% return from its investments. (Use Table B.1);Project A;Project B;Initial;investment;$;(177,325;$;(141,960;Expected;net cash flows in year;1;49,000;28,000;2;41,000;48,000;3;82,295;67,000;4;81,400;77,000;5;61,000;31,000;1(a);For;each alternative project compute the net present value. (Round "PV Factor" to 4 decimal places. Round;your intermediate and final answers to the nearest dollar amount. Omit the;$" sign in your response.);1(b);For;each alternative project compute the profitability index. (Round "PV Factor" to 4 decimal places. Round;your intermediate and final answers to the nearest dollar amount.);2;Assume;If the company can only select one project, which should it choose?;rev: 08_13_2011;eBook LinkView Hint #1;Worksheet;Difficulty: Medium;Exercise 25-8 NPV and profitability index L.O. P3;Learning Objective: 25-P3 Compute net present value and describe its;use.;8.;award:1 out of;3.00 points;Exercise 25-11 Scrap or rework L.O. A1;A;company must decide between scrapping or reworking units that do not pass;inspection. The company has 17,000 defective units that cost $5.30 per unit;to manufacture. The units can be sold as is for $2.50 each, or they can be;reworked for $3.50 each and then sold for the full price of $9.90 each. If;the units are sold as is, the company will also be able to build 17,000;replacement units at a cost of $5.30 each, and sell them at the full price of;$9.90 each.;(1);What is;the incremental income from selling the units as scrap? (Omit the "$" sign in your response.);(2);What is;the incremental income from reworking and selling the units? (Omit the "$" sign in your response.);(3);What;must the company decide?;rev: 05_02_2012;eBook Link;Worksheet;Difficulty: Medium;Exercise 25-11 Scrap or rework L.O. A1;Learning Objective: 25-A1 Evaluate short-term managerial decisions;using relevant costs.;9.;award:4 out of;4.00 points;Exercise 25-12 Keep or replace L.O. A1;Xu;Company is considering replacing one of its manufacturing machines. The;machine has a book value of $38,000 and a remaining useful life of 5 years;at which time its salvage value will be zero. It has a current market value;of $48,000. Variable manufacturing costs are $33,100 per year for this;machine. Information on two alternative replacement machines follows.;Alternative A;Alternative B;Cost;$;124,000;$;112,000;Variable;manufacturing costs per year;22,900;11,000;Calculate;the total change in net income if Alternative A is adopted. (Input all amounts as positive values, except cash outflows;and any negative total change in net income which should be indicated by a;minus sign. Omit the "$" sign in your response.);Calculate;the total change in net income if Alternative B is adopted. (Input all amounts as positive values, except cash;outflows and any negative total change in net income which should be;indicated by a minus sign. Omit the "$" sign in your response.);Should;Xu keep or replace its manufacturing machine? If the machine should be replaced;which alternative new machine should Xu purchase?;eBook Link;Worksheet;Exercise 25-12 Keep or replace L.O. A1;Learning Objective: 25-A1 Evaluate short-term managerial decisions;using relevant costs.;10.;award:4 out of;4.00 points;Exercise 25-13 Decision to accept additional business or not L.O. A1;Feist;Co. expects to sell 500,000 units of its product in the next period with the;following results.;Sales;(500,000 units);$;7,500,000;Costs;and expenses;Direct;materials;1,000,000;Direct;labor;2,000,000;Overhead;500,000;Selling;expenses;750,000;Administrative;expenses;1,285,000;Total;costs and expenses;5,535,000;Net;income;$;1,965,000;The;company has an opportunity to sell 50,000 additional units at $12 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 $215,000.;Calculate;the combined total net income if the company accepts the offer to sell;additional units at the reduced price of $12 per unit. (Leave no cells blank - be certain to enter "0";wherever required. Input all amounts as positive values. Omit the;$" sign in your response.);Should;the company accept or reject the offer?;eBook LinkView Hint #1;Worksheet;Difficulty: Medium;Exercise 25-13 Decision to accept additional business or not L.O. A1;Learning Objective: 25-A1 Evaluate short-term managerial decisions;using relevant costs.;11.;award:4 out of;4.00 points;Exercise 25-14 Make or buy decision L.O. A1;Santos;Company currently manufactures one of its crucial parts at a cost of $5.40;per unit. This cost is based on a normal production rate of 50,000 units per;year. Variable costs are $3.50 per unit, fixed costs related to making this;part are $50,000 per year, and allocated fixed costs are $45,000 per year.;Allocated fixed costs are unavoidable whether the company makes or buys the;part. Santos is considering buying the part from a supplier for a quoted;price of $3.10 per unit guaranteed for a three-year period.;Calculate;the total incremental cost of making 50,000 units. (Omit the "$" sign in your response.);Calculate;the total incremental cost of buying 50,000 units. (Omit the "$" sign in your response.);Should;the company continue to manufacture the part, or should it buy the part from;the outside supplier?;eBook LinkView Hint #1;Worksheet;Difficulty: Medium;Exercise 25-14 Make or buy decision L.O. A1;Learning Objective: 25-A1 Evaluate short-term managerial decisions;using relevant costs.;12.;award:3 out of;3.00 points;Exercise 25-15 Sell or process decision L.O. A1;Cantrell;Company has already manufactured 23,000 units of Product A at a cost of $25;per unit. The 23,000 units can be sold at this stage for $520,000.;Alternatively, the units can be further processed at a $400,000 total;additional cost and be converted into 4,100 units of Product B and 7,500;units of Product C. Per unit selling price for Product B is $76 and for;Product C is $52.;1.;Calculate;the Incremental Net Income (or loss) if processed further. (Negative amount should be indicated by a minus sign. Omit;the "$" sign in your response.);2.;Indicate;whether the 23,000 units of Product A should be processed further or not.;eBook LinkView Hint #1;Worksheet;Difficulty: Medium;Exercise 25-15 Sell or process decision L.O. A1;Learning Objective: 25-A1 Evaluate short-term managerial decisions;using relevant costs.

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