12.

The following are the Jensen Corporation's unit costs of making and selling an item at a volume of 2,800 units per month (which represents the company's capacity):

Manufacturing:
Direct materials	$2.80
Direct labor	$3.80
Variable overhead	$2.30
Fixed overhead	$0.75
Selling and Administrative:
Variable	$3.80
Fixed	$1.15

Present sales amount to 1,600 units per month. An order has been received from a customer in a foreign market for 280 units. The order would not affect current sales. Fixed costs, both manufacturing and selling and administrative, are constant within the relevant range between 1,600 units and 2,800 units. The variable selling and administrative expenses would have to be incurred on this special order as well as for all other sales. Direct labor is a variable cost.

Assume the company has 90 units left over from last year which have small defects and which will have to be sold at a reduced price for scrap. The sale of these defective units will have no effect on the company's other sales. Which of the following costs is relevant in this decision?

a) $8.90 veriable manufacturing cost

b) $9.65 unit product cost

c) $3.80 variable selling and administrative cost

d) $14.60 full cost

15.

(Ignore income taxes in this problem.) The Zinger Corporation is considering an investment that has the following data:

	Year 1	Year 2	Year 3	Year 4	Year 5
Investment	$11,500	$3,700
Cash inflow	$2,700	$2,700	$8,000	$4,700	$4,700

Cash inflows occur evenly throughout the year. The payback period for this investment is: (Round your answer to 1 decimal place)

a) 3 years

b) 3.4 years

c) 4 years

d) 4.4 years

19.

(Ignore income taxes in this problem.) The following data pertain to an investment proposal:

Cost of the investment	$68,000
Annual cost savings	$20,000
Estimated salvage value	$6,000
Life of the project	5 years
Discount rate	13%

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table.

The net present value of the proposed investment is closest to: (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount.)

a) $5,598

b) $2,340

c) $3,258

d) $42,000

23.

Blaine Corporation is considering replacing a technologically obsolete machine with a new state-of-the-art numerically controlled machine. The new machine would cost $240,000 and would have a fifteen-year useful life. Unfortunately, the new machine would have no salvage value. The new machine would cost $38,000 per year to operate and maintain, but would save $77,000 per year in labor and other costs. The old machine can be sold now for scrap for $24,000. The simple rate of return on the new machine is closest to: (Ignore income taxes in this problem.)

a) 9.58%

b) 32.08%

c) 21.30%

d) 10.65%

24.

(Ignore income taxes in this problem.) Baldock Inc. is considering the acquisition of a new machine that costs $358,000 and has a useful life of 5 years with no salvage value. The incremental net operating income and incremental net cash flows that would be produced by the machine are:

	Incremental Net Operating Income	Incremental Net Cash Flows
Year 1	$65,000	$147,000
Year 2	$71,000	$150,000
Year 3	$82,000	$181,000
Year 4	$45,000	$147,000
Year 5	$87,000	$149,000

Assume cash flows occur uniformly throughout a year except for the initial investment.

The payback period of this investment is closest to:

a) 3.3 years

b) 5.0 years

c) 4.7 years

d) 2.3 years