PART I (32 Points, 2 Points each) Multiple Choice Indicate the answer that best completes the opening statement 1 A static budget is appropriate in evaluating a manager's performance if a actual activity closely approximates the master budget activity b actual activity is less than the master budget activity c the company prepares reports on an annual basis d the company is a not for profit organization 2 A flexible budget a is prepared when management can't agree on objectives for the company b projects budget data for various levels of activity c is only useful in controlling fixed costs d cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results 3 Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets a Direct materials cost b Direct labor cost c Variable manufacturing overhead d Fixed manufacturing overhead 4 The maintenance department of a manufacturing company is a(n) a segment b profit center c cost center d investment center 5 An unfavorable materials quantity variance would occur if a more material is purchased than is used b actual pounds of material used was less than the standard pounds allowed c actual labor hours used was greater than the standard labor hours allowed d actual pounds of material used was greater than the standard pounds allowed 6 A total materials variance is analyzed in terms of a price and quantity variances b buy and sell variances c quantity and quality variances d tight and loose variances 7 A company developed the following per unit standards for its product 2 pounds of direct materials at $4 per pound Last month, 1,000 pounds of direct materials were purchased for $3,800 The direct materials price variance for last month was a $3,800 favorable b $200 favorable c $100 favorable d $200 unfavorable 8 The per unit standards for direct labor are 2 direct labor hours at $12 per hour If in producing 600 units, the actual direct labor cost was $12,800 for 1,000 direct labor hours worked, the total direct labor variance is a $480 unfavorable b $1,600 favorable c $1,000 unfavorable d $1,600 unfavorable 9 A favorable variance a is an indication that the company is not operating in an optimal manner b implies a positive result if quality control standards are met c implies a positive result if standards are flexible d means that standards are too loosely specified 10 The total overhead variance is equal to the a sum of the total materials variance and the total labor variance b difference between the total materials variance and the total labor variance c sum of the controllable variance and the volume variance d total variance minus the controllable variance and the volume variance 11 Capital budgeting is the process a used in sell or process further decisions b of determining how much capital stock to issue c of making capital expenditure decisions d of eliminating unprofitable product lines 12 If a payback period for a project is greater than its expected useful life, the a project will always be profitable b entire initial investment will not be recovered c project would only be acceptable if the company's cost of capital was low d project's return will always exceed the company's cost of capital 13 If a company's required rate of return is 10 and, in using the net present value method, a project's net present value is zero, this indicates that the a project's rate of return exceeds 10 b project's rate of return is less than the minimum rate required c project earns a rate of return of 10 d project earns a rate of return of 0 14 Using the net present value method, the present value of cash inflows for Project A is $44,000 and the present value of cash inflows of Project B is $24,000 If Project A and Project B require initial investments of $40,000 and $20,000, respectively, and have the same useful life, the project that should be accepted is a Project A b Project B c either they are both the same d not capable of being calculated 15 A company's cost of capital refers to the a rate the company must pay to obtain funds from creditors and stockholders b total cost of a capital project c cost of printing and registering common stock shares d rate of return earned on common stock 16 A thorough evaluation of how well a project's actual performance matches the projections made when the project was proposed is called a a pre audit b post audit c risk analysis d sensitivity analysis PART II (15 Points) Hall Company uses flexible budgets to control its selling expenses Monthly sales are expected to be from $200,000 to $240,000 Variable costs and their percentage relationships to sales are Sales commissions 6 Advertising 4 Traveling 5 Delivery 1 Fixed selling expenses consist of Sales Salaries $40,000 and Depreciation on Delivery Equipment $10,000 The actual variable selling expenses incurred in February, by Hall Company are as follows Sales commissions $13,700 Advertising 8,000 Traveling 11,300 Delivery 1,600 The actual fixed selling expenses incurred in February, consist of Sales Salaries $41,000 and Depreciation on Delivery Equipment $10,000 Instructions Prepare a flexible budget performance report, assuming that February sales were $220,000 Expected and actual sales are the same PART III (21 points) Graves Company has developed the following standard costs for its product for the current year GRAVES COMPANY Standard Cost Card Product A Cost Element Standard Quantity Standard Price Standard Cost Direct materials 4 pounds $3 $12 Direct labor 3 hours 8 24 Manufacturing overhead 3 hours 4 12 $48 The company expected to produce 26,000 units of Product A in the current year and work 78,000 direct labor hours Actual results for the current year are as follows 26,000 units of Product A were produced Actual direct labor costs were $627,000 for 76,000 direct labor hours worked Actual direct materials purchased and used during the year cost $283,500 for 105,000 pounds Actual variable overhead incurred was $130,000 and actual fixed overhead incurred was $170,000 Instructions Compute the following variances showing all computations to support your answers Indicate whether the variances are favorable or unfavorable (a) Materials price variance (b) Materials quantity variance (c) Total materials variance (d) Direct labor price variance (e) Direct labor quantity variance (f) Total direct labor variance (g) Total overhead variance PART IV (12 points) Vista Company is considering two new projects, each requiring an equipment investment of $90,000 Each project will last for three years and produce the following cash inflows Year Cool Hot 1 $38,000 $42,000 2 $42,000 $42,000 3 $42,000 $42,000 $122,000 $126,000 The equipment will have no salvage value at the end of its three year life Vista Company uses straight line depreciation, and requires a minimum rate of return of 12 Present value data are as follows Present Value of 1 Present Value of an Annuity of 1 Period 12 Period 12 1 89286 1 89286 2 79719 2 1 69005 3 71178 3 2 40183 Instructions (a) Compute the net present value of each project (b) Compute the profitability index of each project (c) Which project should be selected Why PART V (20 points) Newman Medical Center is considering purchasing an ultrasound machine for $1,170,000 The machine has a 10 year life and an estimated salvage value of $30,000 The center uses straight line depreciation Newman's cost of capital is 9 The medical center estimates that the machine will be used five times a week with the average charge to the patient for ultrasound of $775 There are $5 in medical supplies and $20 of technician costs for each procedure performed using the machine The present value of an annuity factor for 10 years at 9 is 6 41766, and the present value of a single sum factor for 10 years at 9 is 42241 Instructions 1 For the new ultrasound machine, compute the (a) cash payback period (b) net present value (c) annual rate of return 2 Should the Center purchase this new ultrasound machine Explain your answer fully PART I (32 Points, 2 Points each) Multiple Choice Indicate the answer that best completes the opening statement 1 A static budget is appropriate in evaluating a manager's performance if a actual activity closely approximates the master budget activity b actual activity is less than the master budget activity c the company prepares reports on an annual basis d the company is a not for profit organization 2 A flexible budget a is prepared when management can't agree on objectives for the company b projects budget data for various levels of activity c is only useful in controlling fixed costs d cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results 3 Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets a Direct materials cost b Direct labor cost c Variable manufacturing overhead d Fixed manufacturing overhead 4 The maintenance department of a manufacturing company is a(n) a segment b profit center c cost center d investment center 5 An unfavorable materials quantity variance would occur if a more material is purchased than is used b actual pounds of material used was less than the standard pounds allowed c actual labor hours used was greater than the standard labor hours allowed d actual pounds of material used was greater than the standard pounds allowed 6 A total materials variance is analyzed in terms of a price and quantity variances b buy and sell variances c quantity and quality variances d tight and loose variances 7 A company developed the following per unit standards for its product 2 pounds of direct materials at $4 per pound Last month, 1,000 pounds of direct materials were purchased for $3,800 The direct materials price variance for last month was a $3,800 favorable b $200 favorable c $100 favorable d $200 unfavorable 8 The per unit standards for direct labor are 2 direct labor hours at $12 per hour If in producing 600 units, the actual direct labor cost was $12,800 for 1,000 direct labor hours worked, the total direct labor variance is a $480 unfavorable b $1,600 favorable c $1,000 unfavorable d $1,600 unfavorable 9 A favorable variance a is an indication that the company is not operating in an optimal manner b implies a positive result if quality control standards are met c implies a positive result if standards are flexible d means that standards are too loosely specified 10 The total overhead variance is equal to the a sum of the total materials variance and the total labor variance b difference between the total materials variance and the total labor variance c sum of the controllable variance and the volume variance d total variance minus the controllable variance and the volume variance 11 Capital budgeting is the process a used in sell or process further decisions b of determining how much capital stock to issue c of making capital expenditure decisions d of eliminating unprofitable product lines 12 If a payback period for a project is greater than its expected useful life, the a project will always be profitable b entire initial investment will not be recovered c project would only be acceptable if the company's cost of capital was low d project's return will always exceed the company's cost of capital 13 If a company's required rate of return is 10 and, in using the net present value method, a project's net present value is zero, this indicates that the a project's rate of return exceeds 10 b project's rate of return is less than the minimum rate required c project earns a rate of return of 10 d project earns a rate of return of 0 14 Using the net present value method, the present value of cash inflows for Project A is $44,000 and the present value of cash inflows of Project B is $24,000 If Project A and Project B require initial investments of $40,000 and $20,000, respectively, and have the same useful life, the project that should be accepted is a Project A b Project B c either they are both the same d not capable of being calculated 15 A company's cost of capital refers to the a rate the company must pay to obtain funds from creditors and stockholders b total cost of a capital project c cost of printing and registering common stock shares d rate of return earned on common stock 16 A thorough evaluation of how well a project's actual performance matches the projections made when the project was proposed is called a a pre audit b post audit c risk analysis d sensitivity analysis PART II (15 Points) Hall Company uses flexible budgets to control its selling expenses Monthly sales are expected to be from $200,000 to $240,000 Variable costs and their percentage relationships to sales are Sales commissions 6 Advertising 4 Traveling 5 Delivery 1 Fixed selling expenses consist of Sales Salaries $40,000 and Depreciation on Delivery Equipment $10,000 The actual variable selling expenses incurred in February, by Hall Company are as follows Sales commissions Advertising Traveling Delivery $13,700 8,000 11,300 1,600 The actual fixed selling expenses incurred in February, consist of Sales Salaries $41,000 and Depreciation on Delivery Equipment $10,000 Instructions Prepare a flexible budget performance report, assuming that February sales were $220,000 Expected and actual sales are the same PART III (21 points) Graves Company has developed the following standard costs for its product for the current year GRAVES COMPANY Standard Cost Card Product A Cost Element Direct materials Direct labor Manufacturing overhead Standard Quantity 4 pounds 3 hours Standard Price $3 8 Standard Cost $12 24 3 hours 4 12 $48 The company expected to produce 26,000 units of Product A in the current year and work 78,000 direct labor hours Actual results for the current year are as follows 26,000 units of Product A were produced Actual direct labor costs were $627,000 for 76,000 direct labor hours worked Actual direct materials purchased and used during the year cost $283,500 for 105,000 pounds Actual variable overhead incurred was $130,000 and actual fixed overhead incurred was $170,000 Instructions Compute the following variances showing all computations to support your answers Indicate whether the variances are favorable or unfavorable (a) Materials price variance (b) Materials quantity variance (c) Total materials variance (d) Direct labor price variance (e) Direct labor quantity variance (f) Total direct labor variance (g) Total overhead variance PART IV (12 points) Vista Company is considering two new projects, each requiring an equipment investment of $90,000 Each project will last for three years and produce the following cash inflows Year 1 2 3 Cool $38,000 $42,000 $42,000 $122,000 Hot $42,000 $42,000 $42,000 $126,000 The equipment will have no salvage value at the end of its three year life Vista Company uses straight line depreciation, and requires a minimum rate of return of 12 Present value data are as follows Present Value of 1 Annuity of 1 Period 12 12 1 89286 89286 2 79719 1 69005 3 71178 2 40183 Present Value of an Period 1 2 3 Instructions (a) Compute the net present value of each project (b) Compute the profitability index of each project (c) Which project should be selected Why PART V (20 points) Newman Medical Center is considering purchasing an ultrasound machine for $1,170,000 The machine has a 10 year life and an estimated salvage value of $30,000 The center uses straight line depreciation Newman's cost of capital is 9 The medical center estimates that the machine will be used five times a week with the average charge to the patient for ultrasound of $775 There are $5 in medical supplies and $20 of technician costs for each procedure performed using the machine The present value of an annuity factor for 10 years at 9 is 6 41766, and the present value of a single sum factor for 10 years at 9 is 42241 Instructions 1 For the new ultrasound machine, compute the (a) cash payback period (b) net present value (c) annual rate of return 2 Should the Center purchase this new ultrasound machine Explain your answer fully

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jun 27, 2024

PART I (32 Points, 2 Points each) Multiple Choice: Indicate the answer that best completes the opening statement. 1. A static budget is appropriate in

PART I (32 Points, 2 Points each) Multiple Choice: Indicate the answer that best completes the opening statement. 1. A static budget is appropriate in evaluating a manager's performance if a. actual activity closely approximates the master budget activity. b. actual activity is less than the master budget activity. c. the company prepares reports on an annual basis. d. the company is a not-for-profit organization 2. A flexible budget a. is prepared when management can't agree on objectives for the company. b. projects budget data for various levels of activity. c. is only useful in controlling fixed costs. d. cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results. 3. Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets? a. Direct materials cost b. Direct labor cost c. Variable manufacturing overhead d. Fixed manufacturing overhead 4. The maintenance department of a manufacturing company is a(n) a. segment. b. profit center. c. cost center. d. investment center. 5. An unfavorable materials quantity variance would occur if a. more material is purchased than is used. b. actual pounds of material used was less than the standard pounds allowed. c. actual labor hours used was greater than the standard labor hours allowed. d. actual pounds of material used was greater than the standard pounds allowed. 6. A total materials variance is analyzed in terms of a. price and quantity variances. b. buy and sell variances. c. quantity and quality variances. d. tight and loose variances. 7. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,000 pounds of direct materials were purchased for $3,800. The direct materials price variance for last month was a. $3,800 favorable. b. $200 favorable. c. $100 favorable. d. $200 unfavorable. 8. The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in producing 600 units, the actual direct labor cost was $12,800 for 1,000 direct labor hours worked, the total direct labor variance is a. $480 unfavorable. b. $1,600 favorable. c. $1,000 unfavorable. d. $1,600 unfavorable. 9. A favorable variance a. is an indication that the company is not operating in an optimal manner. b. implies a positive result if quality control standards are met. c. implies a positive result if standards are flexible. d. means that standards are too loosely specified. 10. The total overhead variance is equal to the a. sum of the total materials variance and the total labor variance. b. difference between the total materials variance and the total labor variance. c. sum of the controllable variance and the volume variance. d. total variance minus the controllable variance and the volume variance. 11. Capital budgeting is the process a. used in sell or process further decisions. b. of determining how much capital stock to issue. c. of making capital expenditure decisions. d. of eliminating unprofitable product lines. 12. If a payback period for a project is greater than its expected useful life, the a. project will always be profitable. b. entire initial investment will not be recovered. c. project would only be acceptable if the company's cost of capital was low. d. project's return will always exceed the company's cost of capital. 13. If a company's required rate of return is 10% and, in using the net present value method, a project's net present value is zero, this indicates that the a. project's rate of return exceeds 10%. b. project's rate of return is less than the minimum rate required. c. project earns a rate of return of 10%. d. project earns a rate of return of 0%. 14. Using the net present value method, the present value of cash inflows for Project A is $44,000 and the present value of cash inflows of Project B is $24,000. If Project A and Project B require initial investments of $40,000 and $20,000, respectively, and have the same useful life, the project that should be accepted is a. Project A. b. Project B. c. either; they are both the same. d. not capable of being calculated. 15. A company's cost of capital refers to the a. rate the company must pay to obtain funds from creditors and stockholders. b. total cost of a capital project. c. cost of printing and registering common stock shares. d. rate of return earned on common stock. 16. A thorough evaluation of how well a project's actual performance matches the projections made when the project was proposed is called a a. pre-audit. b. post-audit. c. risk analysis. d. sensitivity analysis. PART II (15 Points) Hall Company uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are: Sales commissions 6% Advertising 4% Traveling 5% Delivery 1% Fixed selling expenses consist of Sales Salaries $40,000 and Depreciation on Delivery Equipment $10,000. The actual variable selling expenses incurred in February, by Hall Company are as follows: Sales commissions $13,700 Advertising 8,000 Traveling 11,300 Delivery 1,600 The actual fixed selling expenses incurred in February, consist of Sales Salaries $41,000 and Depreciation on Delivery Equipment $10,000. Instructions: Prepare a flexible budget performance report, assuming that February sales were $220,000. Expected and actual sales are the same. PART III (21 points) Graves Company has developed the following standard costs for its product for the current year: GRAVES COMPANY Standard Cost Card Product A Cost Element Standard Quantity Standard Price = Standard Cost Direct materials 4 pounds $3 $12 Direct labor 3 hours 8 24 Manufacturing overhead 3 hours 4 12 $48 The company expected to produce 26,000 units of Product A in the current year and work 78,000 direct labor hours. Actual results for the current year are as follows: 26,000 units of Product A were produced. Actual direct labor costs were $627,000 for 76,000 direct labor hours worked. Actual direct materials purchased and used during the year cost $283,500 for 105,000 pounds. Actual variable overhead incurred was $130,000 and actual fixed overhead incurred was $170,000. Instructions Compute the following variances showing all computations to support your answers. Indicate whether the variances are favorable or unfavorable. (a) Materials price variance. (b) Materials quantity variance. (c) Total materials variance. (d) Direct labor price variance. (e) Direct labor quantity variance. (f) Total direct labor variance. (g) Total overhead variance. PART IV (12 points) Vista Company is considering two new projects, each requiring an equipment investment of $90,000. Each project will last for three years and produce the following cash inflows: Year Cool Hot 1 $38,000 $42,000 2 $42,000 $42,000 3 $42,000 $42,000 $122,000 $126,000 The equipment will have no salvage value at the end of its three-year life. Vista Company uses straight-line depreciation, and requires a minimum rate of return of 12%. Present value data are as follows: Present Value of 1 Present Value of an Annuity of 1 Period 12% Period 12% 1 .89286 1 .89286 2 .79719 2 1.69005 3 .71178 3 2.40183 Instructions (a) Compute the net present value of each project. (b) Compute the profitability index of each project. (c) Which project should be selected? Why? PART V (20 points) Newman Medical Center is considering purchasing an ultrasound machine for $1,170,000. The machine has a 10-year life and an estimated salvage value of $30,000. The center uses straight-line depreciation. Newman's cost of capital is 9%. The medical center estimates that the machine will be used five times a week with the average charge to the patient for ultrasound of $775. There are $5 in medical supplies and $20 of technician costs for each procedure performed using the machine. The present value of an annuity factor for 10 years at 9% is 6.41766, and the present value of a single sum factor for 10 years at 9% is .42241 Instructions 1. For the new ultrasound machine, compute the: (a) cash payback period. (b) net present value. (c) annual rate of return. 2. Should the Center purchase this new ultrasound machine? Explain your answer fully. image text in transcribed

PART I (32 Points, 2 Points each) Multiple Choice: Indicate the answer that best completes the opening statement. 1. A static budget is appropriate in evaluating a manager's performance if a. actual activity closely approximates the master budget activity. b. actual activity is less than the master budget activity. c. the company prepares reports on an annual basis. d. the company is a not-for-profit organization 2. A flexible budget a. is prepared when management can't agree on objectives for the company. b. projects budget data for various levels of activity. c. is only useful in controlling fixed costs. d. cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results. 3. Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets? a. Direct materials cost b. Direct labor cost c. Variable manufacturing overhead d. Fixed manufacturing overhead 4. The maintenance department of a manufacturing company is a(n) a. segment. b. profit center. c. cost center. d. investment center. 5. An unfavorable materials quantity variance would occur if a. more material is purchased than is used. b. actual pounds of material used was less than the standard pounds allowed. c. actual labor hours used was greater than the standard labor hours allowed. d. actual pounds of material used was greater than the standard pounds allowed. 6. A total materials variance is analyzed in terms of a. price and quantity variances. b. buy and sell variances. c. quantity and quality variances. d. tight and loose variances. 7. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,000 pounds of direct materials were purchased for $3,800. The direct materials price variance for last month was a. $3,800 favorable. b. $200 favorable. c. $100 favorable. d. $200 unfavorable. 8. The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in producing 600 units, the actual direct labor cost was $12,800 for 1,000 direct labor hours worked, the total direct labor variance is a. $480 unfavorable. b. $1,600 favorable. c. $1,000 unfavorable. d. $1,600 unfavorable. 9. A favorable variance a. is an indication that the company is not operating in an optimal manner. b. implies a positive result if quality control standards are met. c. implies a positive result if standards are flexible. d. means that standards are too loosely specified. 10. The total overhead variance is equal to the a. sum of the total materials variance and the total labor variance. b. difference between the total materials variance and the total labor variance. c. sum of the controllable variance and the volume variance. d. total variance minus the controllable variance and the volume variance. 11. Capital budgeting is the process a. used in sell or process further decisions. b. of determining how much capital stock to issue. c. of making capital expenditure decisions. d. of eliminating unprofitable product lines. 12. If a payback period for a project is greater than its expected useful life, the a. project will always be profitable. b. entire initial investment will not be recovered. c. project would only be acceptable if the company's cost of capital was low. d. project's return will always exceed the company's cost of capital. 13. If a company's required rate of return is 10% and, in using the net present value method, a project's net present value is zero, this indicates that the a. project's rate of return exceeds 10%. b. project's rate of return is less than the minimum rate required. c. project earns a rate of return of 10%. d. project earns a rate of return of 0%. 14. Using the net present value method, the present value of cash inflows for Project A is $44,000 and the present value of cash inflows of Project B is $24,000. If Project A and Project B require initial investments of $40,000 and $20,000, respectively, and have the same useful life, the project that should be accepted is a. Project A. b. Project B. c. either; they are both the same. d. not capable of being calculated. 15. A company's cost of capital refers to the a. rate the company must pay to obtain funds from creditors and stockholders. b. total cost of a capital project. c. cost of printing and registering common stock shares. d. rate of return earned on common stock. 16. A thorough evaluation of how well a project's actual performance matches the projections made when the project was proposed is called a a. pre-audit. b. post-audit. c. risk analysis. d. sensitivity analysis. PART II (15 Points) Hall Company uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are: Sales commissions 6% Advertising 4% Traveling 5% Delivery 1% Fixed selling expenses consist of Sales Salaries $40,000 and Depreciation on Delivery Equipment $10,000. The actual variable selling expenses incurred in February, by Hall Company are as follows: Sales commissions Advertising Traveling Delivery $13,700 8,000 11,300 1,600 The actual fixed selling expenses incurred in February, consist of Sales Salaries $41,000 and Depreciation on Delivery Equipment $10,000. Instructions: Prepare a flexible budget performance report, assuming that February sales were $220,000. Expected and actual sales are the same. PART III (21 points) Graves Company has developed the following standard costs for its product for the current year: GRAVES COMPANY Standard Cost Card Product A Cost Element Direct materials Direct labor Manufacturing overhead Standard Quantity 4 pounds 3 hours Standard Price $3 8 = Standard Cost $12 24 3 hours 4 12 $48 The company expected to produce 26,000 units of Product A in the current year and work 78,000 direct labor hours. Actual results for the current year are as follows: 26,000 units of Product A were produced. Actual direct labor costs were $627,000 for 76,000 direct labor hours worked. Actual direct materials purchased and used during the year cost $283,500 for 105,000 pounds. Actual variable overhead incurred was $130,000 and actual fixed overhead incurred was $170,000. Instructions Compute the following variances showing all computations to support your answers. Indicate whether the variances are favorable or unfavorable. (a) Materials price variance. (b) Materials quantity variance. (c) Total materials variance. (d) Direct labor price variance. (e) Direct labor quantity variance. (f) Total direct labor variance. (g) Total overhead variance. PART IV (12 points) Vista Company is considering two new projects, each requiring an equipment investment of $90,000. Each project will last for three years and produce the following cash inflows: Year 1 2 3 Cool $38,000 $42,000 $42,000 $122,000 Hot $42,000 $42,000 $42,000 $126,000 The equipment will have no salvage value at the end of its three-year life. Vista Company uses straight-line depreciation, and requires a minimum rate of return of 12%. Present value data are as follows: Present Value of 1 Annuity of 1 Period 12% 12% 1 .89286 89286 2 .79719 1.69005 3 .71178 2.40183 Present Value of an Period 1 2 3 Instructions (a) Compute the net present value of each project. (b) Compute the profitability index of each project. (c) Which project should be selected? Why? . PART V (20 points) Newman Medical Center is considering purchasing an ultrasound machine for $1,170,000. The machine has a 10-year life and an estimated salvage value of $30,000. The center uses straight-line depreciation. Newman's cost of capital is 9%. The medical center estimates that the machine will be used five times a week with the average charge to the patient for ultrasound of $775. There are $5 in medical supplies and $20 of technician costs for each procedure performed using the machine. The present value of an annuity factor for 10 years at 9% is 6.41766, and the present value of a single sum factor for 10 years at 9% is . 42241 Instructions 1. For the new ultrasound machine, compute the: (a) cash payback period. (b) net present value. (c) annual rate of return. 2. Should the Center purchase this new ultrasound machine? Explain your answer fully