1. Ignore income taxes in this problem.) Purvell Company has just acquired a new machine. Data on the machine follow:
The company uses straight-line depreciation and a $5,000 salvage value. (The company considers salvage value in making depreciation deductions.) Assume cash flows occur uniformly throughout a year.
The simple rate of return would be closest to Purchase cost $50,000 Annual cost savings $15,000 Life of the machine 8 years
A. 18.75%.
B. 12.5%.
C. 17.5%.
D. 30.0%.
2. The net cash provided by (used by) operations for the year was
A. $117.
B. $112.
C. $30.
D. $52.
3. Cridwell Company's selling and administrative expenses for last year totaled $210,000. During the year, the company's prepaid expense account balance increased by $18,000, and accrued liabilities increased by $12,000. Depreciation charges for the year were $24,000. Based on this information, selling and administrative expenses adjusted to a cash basis under the direct method on the statement of cash flows would be
A. $192,000.
B. $240,000.
C. $180,000.
D. $228,000.
4. Products A, B, and C are produced from a single raw material input. The raw material costs $90,000, from which 5,000 units of A, 10,000 units of B, and 15,000 units of C can be produced each period. Product A can be sold at the split-off point for $2 per unit, or it can be processed further at a cost of $12,500 and then sold for $5 per unit. Product A should be
A. sold at the split-off point, since further processing will result in a loss of $2,500 each period.
B. processed further, since this will increase profits by $12,500 each period.
C. processed further, since this will increase profits by $2,500 each period.
D. sold at the split-off point, since further processing would result in a loss of $0.50 per unit.
5. The net cash provided by (used by) financing activities for the year was
A. ($18).
B. $5.
C. $1.
D. ($12).
6. Brittman Corporation makes three products that use the current constraint-a particular type of machine. Data concerning those products appear below:
Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource?
IP NI YD
Selling price per unit $183.57 $207.74 $348.15
Variable cost per unit $144.42 $155.04 $269.50
Minutes on the constraint 2.90 3.40 5.50
A. $15.50 per minute
B. $39.15 per unit
C. $78.65 per unit
D. $13.50 per minute
Attachment:- File.pdf