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##### Managerial Accounting Exam 3

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**Question**

MIS EXAM3;Question 1 (12 points);;1. Company X has gathered the following data for its three product lines, X, Y, and Z.;Product X;Product Y;Product Z;Contribution margin;$10,000;$12,000;$22,500;Units produced;1,000;2,400;1,800;Labor hours required per unit;4;4;5;Machine hours required per unit;4;4;5;If Company X has a limited supply of labor hours, which product(s) should it prefer most?;Question 1 options;Product X;Product Y;Products X and Y;Products X and Z;Save;Question 2 (12 points);;The Cowboys 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 overheead, $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;Make, $80,000;Buy, $120,000;Buy, $80,000;Save;Question 3 (12 points);;Zell Company derives two products, Great and Grand, from a single process. Great and Grand can be sold either as is or after further processing. Costs and selling prices are as follows;Product;Gallons;Selling Price (as is);Additional Processing Costs;Selling price (after processing);Great;30,000;$8/gallon;$50,000;$10/gallon;Grand;20,000;$6/gallon;$80,000;$9.50/gallon;Which of the following products should Zell Company process further?;Question 3 options;Great only;Grand only;Both Great and Grand;Neither Great nor Grand;Save;Question 4 (8 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.;(Fill in the blank above with correct choice from the ones provided below);Question 4 options;higher;lower;identical;can't be determined;Save;Question 5 (12 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, straight-line depreciation is used, the asset has a ten-year life, the salvage value is $3,000. Assuming a tax bracket of 34%, determine the accounting rate of return? (round to the nearest %);Question 5 options;13%;16%;27%;33%;Save;Question 6 (8 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 6 options;Initial cost of each machine;Estimated life of each machine;MACRS Depreciation;Cash flow generated by each machine during the estimated life of the machine;Save;Question 7 (16 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 7 options;($5,405);($25,804.75);$25,804.75;$5,405;Save;Question 8 (12 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 8 options;$149,040;$153,080;$198,720;$300,000;Save;Question 9 (8 points);;Which of the following statements is true--;Question 9 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.;Save;Question 10

Paper#75501 | Written in 18-Jul-2015

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