FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 16: Costs for Decision Making

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

Essay

Review LaterAdd Note

Review Later

The following data have been collected by capital budgeting analysts at Halda, Inc. concerning an investment in an expansion of the company's product line. Analysts estimate that an investment of $210,000 will be required to initiate the project at the beginning of 2013. Estimated cash returns from the new product line are summarized in the following table; assume that the returns will be received in lump sum at the end of each year.

Correct Answer

verified

The new product line will also require ...

View Answer

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

A principal difference between operational budgeting and capital budgeting is the time frame of the budget. Because of this difference, capital budgeting:

A) is an activity that involves only the financial staff.
B) is done on a rolling budget period basis.
C) focuses on the present value of cash flows from investments.
D) is concerned with a long-term net income forecast.

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

Which of the following qualitative factors favors the buy option in the make or buy decision?

_____________ is a cost management technique in which the firm determines the required cost for a product or service in order to earn a desired profit when the marketplace establishes the product's selling price:

Which of the following is a true statement regarding the net present value method in capital budgeting?

Product Z sells for $18 per unit as is, but if enhanced it can be sold for $24 per unit. The enhancement process will cost $50,000 for 10,000 units. If the 10,000 units of Product Z are sold as is without further processing, the company:

The decision for solving production mix problems involving multiple products and scarce production resources should focus on:

The capital budgeting analytical technique that calculates the rate of return on the investment based on the impact of the investment on the financial statements is known as the:

Which of the following is not an important qualitative factor to consider in the capital budgeting decision?

Macy Co. is considering the investment of $86,000 in a new machine. The machine will generate cash flow of $18,500 per year for each year of its six-year life and will have a salvage value of $5,000 at the end of its life. Macy Co.'s cost of capital is 10 percent. (a.) Calculate the net present value of the proposed investment. Ignore income taxes, and round all answers to the nearest $1. (b.) What will the internal rate of return on this investment be relative to the cost of capital? Explain your answer.

The following product line information is for the Swiss Watch Company. The company is considering dropping its Children's product line due to poor operating income performance. Fixed expenses are allocated to each product line based on sales revenue.

Digger Company realizes three products from a single mining process: Products J1, A2, and V3. Each product may be sold as is in its raw form or processed further into a more refined state. The additional processing requires no expanded capacity and production costs are entirely variable. Sales values and cost information are presented below:

The decision to continue or discontinue a segment of the business should focus on:

In a make or buy decision, which of the following costs would be considered relevant?

A cost is considered relevant if:

If a project promises to generate a higher rate of return than the firm's cost of capital, accepting the project will:

The cost of capital used in the capital budgeting analytical process is primarily a function of:

The market price for low-end laser printers is well established at $400 per unit. ABC Technologies is considering entering this market and has enough available space in its plant to accommodate a new production line. However, several pieces of new manufacturing equipment would be required which are estimated to cost $28,000,000. ABC Technologies requires a minimum ROI of 15% on any product line investment and estimate that it can capture 100,000 units of the low-end laser printer market at the prevailing market price. (a.) Calculate the target cost per unit for ABC Technologies if it is to enter the low-end laser printer market while earning the minimum 15% ROI.

Which of the following cost classifications would not be considered relevant in comparing decision alternatives?

The following production costs are provided for Glenislay Co., a manufacturer of high quality headphones. Manufacturing Costs: