11 May WHAT SELLING PRICE PER UNIT WILL THIS COMPANY REQUIRE TO EARN $3,000 ON THE ORDER?
What is one advantage and one
disadvantage of using the accounting rate of return to evaluate investment
alternatives?
109.You have evaluated three projects using the net present
value (NPV) method. How would you decide which one of the projects to
select?
110.Identify at least three reasons for managers to favor the
internal rate of return (IRR) over other capital budgeting approaches.
111.For each of the capital budgeting methods listed below,
place an X in the correct column, indicating the measurement basis of each, the
ability to make comparison among projects, and whether each method reflects or ignores
the time value of
1clip_image002.jpg”>
money.
112.A company inadvertently
produced 6,000 defective portable CD players. The CD players cost $20 each to
be manufactured. A salvage company will purchase the defective units as they
are for $16 each. The production manager reports that the defects can be
corrected for $9 per unit, enabling the company to sell them at the regular
price of $30.00. The repair operations would not affect other production
operations. Prepare an analysis that shows which action should be taken.
113.A company manufactures two products. Each unit of product
X requires 10 machine hours and each unit of product Y requires 4 machine
hours. The company’s productive capacity is limited to 180,000 machine hours.
Each unit of product X sells for $15 and has variable costs of $7. Each unit of
product Y sells for $8 and has variable costs of $3. If the company can sell
all that it produces of both products, what should the sales mix be?
114.Fleming Company had the
following results of operations for the past
1clip_image004.jpg”>
year:
A foreign
company (whose sales will not affect Fleming’s regular sales) offers to buy
2,000 units at $5.00 per unit. In addition to variable manufacturing costs,
there would be shipping costs of $1,200 in total on these units. Should Fleming
take this order? Explain.
115.A company produces three
different products that all require processing on the same machines. There are
only 27,000 machine hours available in each year. Production information for
each product
1clip_image006.jpg”>
is:
Required:
(1)
Determine the preferred sales mix if there are no
market constraints on any of the products.
(2)
Determine the preferred sales mix if the demand is
limited to 5,000 units for each product.
(3)
Determine the preferred sales mix if the demand is
limited to 3,000 units for each product.
116.A company puts four products through a common production
process. This process costs $100,000 each year. The four products can be sold
when they emerge from this process at the “split-
off
point”, or processed further and then sold. Data about the four products
for the coming period
1clip_image008.jpg”>
are:
Determine which products
should be sold at the split-off point and which should be processed further.
117.A company has just received a special, one-time order for
1,000 units. Producing the order will have no effect on the production and
sales of other units. The buyer’s name will be stamped on each unit, at a total
cost of $2,000. Normal cost data, excluding stamping,
1clip_image010.jpg”>
follows:
What
selling price per unit will this company require to earn $3,000 on the order?
108.What is one advantage and one
disadvantage of using the accounting rate of return to evaluate investment
alternatives?109.You have evaluated three projects using the net present
value (NPV) method. How would you decide which one of the projects to
select?110.Identify at least three reasons for managers to favor the
internal rate of return (IRR) over other capital budgeting approaches.111.For each of the capital budgeting methods listed below,
place an X in the correct column, indicating the measurement basis of each, the
ability to make comparison among projects, and whether each method reflects or ignores
the time value of1clip_image002.jpg”>money.112.A company inadvertently
produced 6,000 defective portable CD players. The CD players cost $20 each to
be manufactured. A salvage company will purchase the defective units as they
are for $16 each. The production manager reports that the defects can be
corrected for $9 per unit, enabling the company to sell them at the regular
price of $30.00. The repair operations would not affect other production
operations. Prepare an analysis that shows which action should be taken.113.A company manufactures two products. Each unit of product
X requires 10 machine hours and each unit of product Y requires 4 machine
hours. The company’s productive capacity is limited to 180,000 machine hours.
Each unit of product X sells for $15 and has variable costs of $7. Each unit of
product Y sells for $8 and has variable costs of $3. If the company can sell
all that it produces of both products, what should the sales mix be?114.Fleming Company had the
following results of operations for the past1clip_image004.jpg”>year:A foreign
company (whose sales will not affect Fleming’s regular sales) offers to buy
2,000 units at $5.00 per unit. In addition to variable manufacturing costs,
there would be shipping costs of $1,200 in total on these units. Should Fleming
take this order? Explain.115.A company produces three
different products that all require processing on the same machines. There are
only 27,000 machine hours available in each year. Production information for
each product1clip_image006.jpg”>is:Required:(1)
Determine the preferred sales mix if there are no
market constraints on any of the products. (2)
Determine the preferred sales mix if the demand is
limited to 5,000 units for each product. (3)
Determine the preferred sales mix if the demand is
limited to 3,000 units for each product. 116.A company puts four products through a common production
process. This process costs $100,000 each year. The four products can be sold
when they emerge from this process at the “split-off
point”, or processed further and then sold. Data about the four products
for the coming period1clip_image008.jpg”>are:Determine which products
should be sold at the split-off point and which should be processed further.117.A company has just received a special, one-time order for
1,000 units. Producing the order will have no effect on the production and
sales of other units. The buyer’s name will be stamped on each unit, at a total
cost of $2,000. Normal cost data, excluding stamping,1clip_image010.jpg”>follows:What
selling price per unit will this company require to earn $3,000 on the order?
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