Question 32

Which of the following is a weakness of using the accounting rate of return to evaluate capital investment alternatives?

A. It is based on cash flow figures, not accrual accounting data

B. It requires complicated calculations

C. It is based on accrual accounting, not cash flow

D. It takes the time value of money into account

Question 33

When using NPV to evaluate alternatives, you should accept a project if:

A. NPV is positive

B. the present value of future cash inflows is positive

C. the present value of future cash flows is zero or greater

D. NPV is zero or greater

Question 34

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Truckee Corp. currently manufactures part 92Q, which is used in many of its products. The unit manufacturing costs of this product, assuming a production level of 6,100 units, are as follows: Direct Materials $4.00 Direct Labor $4.50 Variable manufacturing overhead $3.20 Fixed manufacturing overhead $1.50 Total cost $13.20 The fixed costs are unavoidable. Karo corp. has offered to sell part 92Q to Truckee for $14.40 per part. Assuming that Truckee has no other use for its facilities, what should the company do in this situation? O Make the part for a savings of $2.70 per unit Make the part and save $10.20 per unit Make the part for a savings of $5.70 per unit O Buy the part and save $1.20 per unit