[13] San Marino Electronics uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below: Beginning work in process stock: Units in beginning work in process stock Materials costs Conversion costs Percentage complete with respect to materials Percentage complete with respect to conversion Units started into production during the month Units transferred to the next department during the month Materials costs added during the month Conversion costs added during the month Ending work in process stock: 300 5,900 3,000 85% 20% 5,300 4,800 105,900 225,200 [14] Units in ending work in process stock Percentage complete with respect to materials Percentage complete with respect to conversion 800 50% 40% What is the number of equivalent units for materials for the month in the first processing department? a) 4,500 b) 5,600 c) 400 d) 4,945 A decrease in the discount rate: a) will increase the present value of future cash flows. b) is one way to compensate for greater risk in a project. c) will reduce the present value of future cash flows. d) Responses (a) and (b) are both correct. 3 Marks 1 Mark [15] Vesuvio Plc is considering adding two new projects to its line of production in order to improve its overall competitiveness. The new projects are enthusiastically supported by management and an immediate decision is required. It is normal, for Vesuvio Plc's managers, to calculate the net present value for the projects before they are accepted or rejected. Details of the proposals are provided below: Capital cost Annual volume Project A 750,000 10,000 units 10 years Life of project Per-unit information: Selling price Project B 750,000 6,944 units 10 years [16] 44 90 Labour costs 12 13 Direct material costs 9 33 Variable overheads 4 10 Incremental fixed costs for 53,000 100,000 the project What is the present value of the cash flows for Project A, if the expected interest rate is 12%? a) 725,098 b) 774,077 c) 151,070 d) 495,058 3 Marks In an income statement prepared as an internal report using the variable costing method, variable selling and administrative expenses would: a) not be used. b) be treated the same as fixed selling and administrative expenses. c) be used in the computation of net operating income, but not in the computation of the contribution margin. d) be used in the computation of the contribution margin. 1 Mark