Project a Project B
1) Initial Investment ($2,000.00) ($4,000.00)
PV of cash inflows $2,600.00 $3,400.00
Net Present value $600.00 ($600.00)
Based upon profitability index which project(s) would be acceptable?
2) Sales Price 6.00 Per Unit
Variable costs 2.25 per Unit
Fixed costs 10,000
Units sold 20,000
What is the break-even point in sales dollars?
4) If the contribution margin ratio is 65% and fixed costs are 15,000, what would sales have to be for a before-tax net income of 50,00? Round to the nearest dollar.
Based on net present value, profitability index, and internal rate of return, which investment(s) would be preferable?
6) Which of the following statements best describes a comparsion of net present value (NPV) and internal rate of return (IRR)?
7) Management of a bookbinder is considering whether the hard cardboard for binding should
be made internally or purchased froma supplier for 2.35 per book. The current internal production costs for the cardboard average
2.50 of variable costs and 10,000 of fixed costs for the 20,000 books bound annually. What would you recommend management
do, and what is the effect on net income?
8) Project A Project B
Investment 40,000 50,000
Annuals 7,000 5,000
If a company has a policy of accepting projects with a paycheck period of seven ya=ears of less, which project(s) would be acceptable?
10) Variable selling & admin, costs 2.00 per unit
Direct materials 7.50 per unit
Variable overhead 2.25 per unit
Direct labor 1.25 per unit
Fixed selling & admin, costs 50,000
Fixed overhead 75,000
Units sold 25,000
What is the product cost per unit under variable costing?
What is the product cost per unit under absorption costing?
13) The cost equation y=$0+$1.75x represents which type of cost?
What are the total relevant costs in this make-or-buy decision?
15) TNL Co is considering an investment with a cost of 55,000. Annual cash savings of 10,000, with a present value at 12%
(TNL’s discount rate) of 56,502, are expected for the next 10 years. What can you conclude?
19) Hotdogs, Inc sells hot dogs for $2 each. The variable costs per hot dog are $1, and the fixed overhead costs are 0.35.
A summer camp wants to place a one-time order for 100 hot dogs at a price of 1.25 each. What is the minium price Hotdogs should charge for this special order?
20) Production Overhead cost
Jan 10,500 pairs 40,250
Feb 10,675 pairs 41,000
March 11,500 pairs 44,250
April 12,500 pairs 45,250
May 11,000 pairs 43,750
Using the hig/low method what is the variable cost per unit?
Using the high/low method what is the fixed cost?
What is the operating leverage? Round to two decimals.
21) The cost of producing whole kernal corn is $0.20 per can, and the can sells for $0.40. Additional processing costs
to produce creamed corn are $0.06 per can, and each can sells for $0.45. If the corn is processed further and 1,000 cans are sold as creamed
corn rather than whole kernal corn, what is the effect on net income?
22) Which of the following will increase contribution margin?
23) If a manager is considering a project that will increase sales revenue by $120 without affecting expenses, what would the after-tax revenue be,
given a 30% tax rate?