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Question
Rocko Inc. has a machine with a book value of $50,000 and a five-year remaining life. A new machine is available at a cost of $85,000 and Rocko can also receive $38,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $14,000 per year over its five-year life. Should the machine be replaced?
A. Yes, because income will increase by $14,000 per year.
B. Yes, because income will increase by $23,000 in total.
C. No, because the company will be $23,000 worse off in total.
D. No, because the income will decrease by $14,000 per year.
E. Rocko will be not be better or worse off by replacing the machine.
Answer
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Related questions
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A. Sell the units as scrap.
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C. It does not matter because both alternatives have the same result.
D. Neither sell nor rebuild because both alternatives produce a loss. Instead, the company should store the units permanently.
E. Throw the units away.
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Q:
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Q:
Periods
12 Percent 1
8929 2
1.6901 3
2.4018 4
3.0373 Assuming all revenue is to be received at the end of each year, what are the net cash flows for this investment if net present value equals ($11,790)?
A. $78,210
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D. $237,547
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Q:
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B. $(251.52) and Scott would be willing to pay $29,748.48 for the machine.
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Q:
A disadvantage of using the payback period to compare investment alternatives is that:
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B. It includes the time value of money.
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D. It cannot be used if a company records depreciation.
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Q:
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Year 2
Year 3
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$15,000
$6,000
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i = 10% n = 2
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.8264
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Q:
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Q:
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D. To reverse past decisions.
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Q:
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Q:
What is the difference between an opportunity cost and a sunk cost?
Q:
A company expects its three departments to yield the following income for next year: Dept. Q
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Q:
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42
25 A. 15,000 croquet sets.
B. 12,000 volleyball games.
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Q:
A company has already incurred a $24,000 cost in partially producing its two products. Their selling prices when partially and fully processed are shown in the following table with the additional costs necessary to finish their processing. Based on this information, should any products be processed further? Product
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76 A. Both product A and product B should be processed further.
B. Neither product A nor product B should be processed further.
C. Only product B should be processed further.
D. Only product A should be processed further.
E. A processing further decision cannot be made from the available data.
Q:
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20 Overhead (fixed and variable)
22 Total
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A. Income will decrease by $7 per unit.
B. Income will increase by $7 per unit.
C. Income will increase by $12 per unit.
D. Income will decrease by $12 per unit.
E. Income will increase by $10 per unit.
Q:
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$20 Nonproduction costs
$3 Fixed costs (in total) Overhead
$175,000 Nonproduction
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A. $23
B. $45
C. $27
D. $50
E. $5
Q:
Assume markup percentage equals desired profit divided by total costs. What is the correct calculation to determine the dollar amount of the markup per unit?
A. Total cost times markup percentage.
B. Total cost per unit times markup percentage per unit.
C. Total cost per unit divided by markup percentage per unit.
D. Markup percentage per unit divided by total cost per unit.
E. Markup percentage divided by total cost.
Q:
Capital budgeting decisions are generally based on:
A. Tentative predictions of future outcomes.
B. Perfect predictions of future outcomes.
C. Results from past outcomes only.
D. Results from current outcomes only.
E. Speculation of interest rates and economic performance only.
Q:
If net present values are used to evaluate two investments that have equal costs and equal total cash flows, the one with more cash flows in the early years has the higher net present value.
Q:
The payback method, unlike the net present value method, does not ignore cash flows after the point of cost recovery.