Question 1

Kinsi Corporation manufactures three different products. All five of these products must pass through a stamping machine in its fabrication department. This machine is Kinsi's constrained resource. Kinsi would make the most profit if it produces the product that:

Question 1 options:

	uses the lowest number of stamping machine hours.
	generates the highest contribution margin per unit.
	uses the highest number of stamping machine hours.
	generates the highest contribution margin per stamping machine hour.

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Question 2 (2.5 points)

The Cowboy's Company needs 20,000 units of a certain part to use in its production cycle. Cowboys is considering the possibility of buying the part from Dolphins Company instead of making it. Sixty percent of the fixed overhead will remain regardless of the decision made. Accounting records indicate the following data: Cost to Cowboys to make the part: Direct materials, $4 Direct labor, $16 Variable factory overhead, $18 Fixed factory overhead, $10 Cost to buy the part for Dolphins Company, $36 Which decision should Cowboys make & what is the total cost savings that would result?

Question 2 options:

	Make, $80,000
	Buy, $80,000
	Buy, $120,000
	Make, $120,000

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Question 3 (2.5 points)

Company X has gathered the following data for it's three product lines, X, Y, and Z.

	Product X	Product Y	Product Z
Contribution Margin	$10,000	$12,000	$22,500
Units Produced	1,000	2,400	1,800
Labor hours required/unit	4	4	5
Machine hours required/unit	4	4	5

If Company X has a limited supply of labor hours, which product(s) should it prefer most?

Question 3 options:

	Product X
	Products X and Z
	Product Z
	Product Y

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Question 4 (2.5 points)

Which of the following statements is true

Question 4 options:

	The accounting rate of return method ignores the time value of money concept
	The payback period ignores the time value of money concept and ignores cash flows received after the payback period
	The net present value method considers the time value of concept and also considers cash flows during the entire life of the investment project
	When the above methods yield conflicting results, the decision indicated by the net present value method should be considered
	All of the above are true

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Question 5 (2.5 points)

A company uses the net present value method to evaluate planned capital expenditures. Everything else being equal, the lower the required rate of return they use, the ____ will be the net present value.

Question 5 options:

	higher
	can't be determined
	lower
	identical

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Question 6 (2.5 points)

The Sip & Dip Donut company is considering the acquisition of a new automatic donut dropper for $600,000. The machine will have a six-year life and will produce before tax cash savings of $200,000 each year. The asset is to be depreciated using the straight-line method with no salvage value. The company's tax rate is 40 percent. The after-tax net cash inflow on the investment is

Question 6 options:

	$120,000.
	$ 80,000.
	$200,000.
	$160,000.

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Question 7 (2.5 points)

The Sip & Dip Donut company is considering the acquisition of a new automatic donut dropper for $600,000. The machine will have a six-year life and will produce before tax cash savings of $200,000 each year. The asset is to be depreciated using the straight-line method with no salvage value. The company's tax rate is 40 percent. The payback period is

Question 7 options:

	3.75 years
	7.50 years
	5 years
	3 years

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Question 8 (2.5 points)

Equipment is purchased at a cost of $39,000. As a result, annual cash revenues will increase by $20,000; annual cash operating expenses will increase by $7,000; straight-line depreciation is used; the asset has a ten-year life; the salvage value is $3,000. Assuming a tax bracket of 34%, determine the accounting rate of return? (round to the nearest %)

Question 8 options:

	16 percent
	13 percent
	33 percent
	27 percent

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Question 9 (2.5 points)

Shirt Co. wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual net cash inflows of $30,000, have a useful life of 8 years, and an estimated salvage value of $10,000. If Shirt Co. has a required rate of return of 12%, the maximum amount they will be willing to spend for this machine is

Question 9 options:

	$153,080
	$198,720
	$300,000
	$149,040

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Question 10 (2.5 points)

Darlington Company is considering investing in an equipment, which will increase yearly cash revenues by $65000, and yearly cash expenses to operate the equipment by $30,000. The asset will cost $200,000, and will last 8 years, with a salvage value of $40,000. Assuming a tax rate of 39%, determine the net present value of this asset, if the company requires a 10% return on investments.

Question 10 options:

	($5,405)
	$174,195.25
	$5,405
	($25,804.75)

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