Exam 26: Standard Costs and Balanced Scorecard

Hale Plumbing used the net present value method and determined that project 34 had a zero net present value. What does this tell management about the project?

A capital budgeting technique which takes into consideration the time value of money is the

An important step in management's decision-making process is to determine and evaluate possible courses of action.

A decision whether to sell a product now or to process it further, depends on whether the incremental _____________ from processing further are greater than the incremental processing ______________.

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: If Tex's Manufacturing Company purchases the component externally, $15,000 of the fixed costs can be avoided. At what external price for the 100 units is the company indifferent between making or buying?

The two discounted cash flow techniques used in capital budgeting are (1) the _______________________ method and (2) the ______________________ method.

In a sell or process further decision, management should process further as long as the incremental revenues from additional processing exceed the incremental variable costs.

Accountants are mainly involved in developing nonfinancial information for management's consideration in choosing among alternatives.

Gregg Company supplies schools with floor mattresses to use in physical education classes. Gregg has received a special order from a large school district to buy 600 mats at $45 each. Acceptance of the special order will not affect fixed costs but will result in $1,200 of shipping costs. For the first 6 months of 2010, the company reported the following operating results while operating at 80% capacity: Cost of goods sold was 70% variable and 30% fixed; operating expenses were 75% variable and 25% fixed. Instructions (a) Prepare an incremental analysis for the special order. (b) Should Gregg Company accept the special order? Justify your answer.

Bell's Shop can make 1,000 units of a necessary component with the following costs: Direct Materials $72,000 Direct Labor 18,000 Variable Overhead 9,000 Fixed Overhead ? The company can purchase the 1,000 units externally for $117,000. The avoidable fixed costs are $6,000 if the units are purchased externally. An analysis shows that at this external price, the company is indifferent between making or buying the part. What are the fixed overhead costs of making the component?

Using the net present value method, the total present value of cash inflows for Project A is $30,000 and the total present value of cash inflows of Project B is $36,000. If Project A and Project B both require an initial investment of $30,000 and have the same economic life, the project that should be accepted is

Use the following table, A company has a minimum required rate of return of 10% and is considering investing in a project that requires an investment of $98,000 and is expected to generate cash inflows of $42,000 at the end of each year for three years. The present value of future cash inflows for this project is

Moreland Clean Company spent $4,000 to produce Product 89, which can be sold as is for $5,000, or processed further incurring additional costs of $1,500 and then be sold for $7,000. Which amounts are relevant to the decision about Product 89?

A segment has the following data: What will be the incremental effect on net income if this segment is eliminated, assuming the fixed expenses will be allocated to profitable segments?

Mallory Company manufactures widgets. Bowden Company has approached Mallory with a proposal to sell the company widgets at a price of $80,000 for 100,000 units. Mallory is currently making these components in its own factory. The following costs are associated with this part of the process when 100,000 units are produced: The manufacturing overhead consists of $16,000 of costs that will be eliminated if the components are no longer produced by Mallory. From Mallory's point of view, how much is the incremental cost or savings if the widgets are bought instead of made?

The annual rate of return is computed by dividing expected annual net income by average investment.

It costs Dryer Company $26 per unit ($18 variable and $8 fixed) to produce its product, which normally sells for $38 per unit. A foreign wholesaler offers to purchase 3,000 units at $21 each. Dryer would incur special shipping costs of $2 per unit if the order were accepted. Dryer has sufficient unused capacity to produce the 3,000 units. If the special order is accepted, what will be the effect on net income?

Opportunity cost is usually

Each of the following is a disadvantage of buying rather than making a component of a company's product except that

Incremental analysis is most useful