102.

The management of Furrow Corporation is considering dropping product L07E. Data from the companys budget for the upcoming year appear below:

Sales	$	970,000
Variable expenses	$	393,000
Fixed manufacturing expenses	$	375,000
Fixed selling and administrative expenses	$	255,000

In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $243,000 of the fixed manufacturing expenses and $204,000 of the fixed selling and administrative expenses are avoidable if product L07E is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be:

Multiple Choice

• $(53,000)

• $130,000

• $53,000

• $(130,000)

112.

Jark Corporation has invested in a machine that cost $57,000, that has a useful life of six years, and that has no salvage value at the end of its useful life. The machine is being depreciated by the straight-line method, based on its useful life. It will have a payback period of four years. Given these data, the simple rate of return on the machine is closest to (Ignore income taxes.):

Multiple Choice

• 4.7%

• 5.8%

• 8.3%

• 41.7%

117

Almendarez Corporation is considering the purchase of a machine that would cost $180,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $18,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $42,000. The company requires a minimum pretax return of 10% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.

The net present value of the proposed project is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Multiple Choice

• $(9,600)

• $18,520

• $(30,000)

• $(24,947)