4 per frame. For the month of July t. Peixoto Framing\'s cost formula for its su
ID: 2397471 • Letter: 4
Question
4 per frame. For the month of July t. Peixoto Framing's cost formula for its suppies cost is S1.150 per month plus $1 the company planned for activity of $56 frames, but the actual level of activity was 555 frames. The actual supplies cost for the month was $9,190. The supplies cost in the planning budget for July wou A. $8,920 B. $9,207 C. $8,934 D. $9,190 15. Chee Corporation has gathered the following data on a proposed investment project: Investment required in equipment 240,000 $50,000 Annual cash inflows Salvage valae Life of the investmem 8 years 10% Required rane of return The company uses straight-line depreciation. Assume cash flows occur uniformly throughout a year except for the initial investment The payback period for the investment is closest tor A. 0.2 years B. 25 yeans C. 4.3 years D. 5.0 years 6. The management of Cantell Corporation is considering a project that would require an initial investment of No other cash outflows would be required. The present value of the cash inflows would be $55,930. The index of the project is closest to A. 1.19 B.0.81 C 0.19 D. 0.16 17. The management of Stanforth Corporation is investigating automating a process. Old equipment, with a current salvage value of S24,000, would be replaced by a new machine. The new machine would be purchased for $$16,000 amd would have a 6 year useful life and no salvage value. By automating the process, the company would save $173,000 per year in cash operating costs. The simple rate of return on the investment is closest to: A.17.7% B. 16.9% C. 33.5% D. 16.7% 18. All other things being the same, which of the following would increase the residual income? A. Decrease in average operating assets. B. Decrease in sales C. Increase in minimum required retun. D. Decrease in net operating income.Explanation / Answer
Answer to question 14.
Cost of frame =cost per frame*no of budgeted frame to produce=556*14=7784
Add:monthly planned cost =1150
Planning budget cost =8934.option c is correct.
Answer to question 15.
Payback period =intial investment/annual cash inflow=240000/50000=4.8years.option c is correct.
Answer to question 16.
Profitability index= Present value of cash inflows/initial outflow=55930/47000=1.19 option a is correct.
Answer to question 17.
Net outflow = purchase cost of new machine -scrap value of old machine =516000-24000=492000
Annual saving =173000
Simple return on investment=Annual saving/Net outflow*100 =173000/492000*100 =35.16% or 35.5% option c is correct.
Answer to question 18.
Residual income =operating income -(cost of capital *operating assets)
Option a is correct because if average operating assets is decrease it will lead to increase in residual income.
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