13. Laramie Corporation is considering an investment in equipment for $20,000. L

Question

13. Laramie Corporation is considering an investment in equipment for $20,000. Laramie uses the straight-line method of depreciation. In addition, its tax rate is 40 percent, and the life of the equipment is five years with no salvage value. The expected savings in operating costs that would occur as a result of the investment are expected to be $10,000 per year before income taxes. The cost of capital is 20 percent. What is the net present value of the investment? a. $(1,366) b. $2,732 c. $22,991 d. $22,000 Use the following to answer questions 14: Carlton Manufacturing Company has the following information available for its process-costing system for the month of May in the finishing department. The finishing department is the second of a multiple- department manufacturing plant. Materials are added at the end of the process in finishing. Work-in-Process Materials Conversion Prior department Units Beginning inventory 100,000 30,000Transferred-in from prior department 200,000 50,000 S50,000 Ending inventory Costs added this month Materials Conversion Prior department $225,000 S510,000 S550,000 Beginning inventory is 30% complete as to conversion costs, ending inventory is 80% complete as to conversion costs. 14. The cost per finished equivalent unit for conversion is: A. $0.75 B. $2.00 C. $1.86 D. $0.94

Explanation / Answer

13 OPTION B

15 OPTION C

. F.O/H VOLUME VARAINACE = F.O/H ACTUALLY APPLIED - F. O/H BUDGTED

-5000 = APPLIED -350000

APPLIED = 345000

16 OPTION D

. IN NRV METHOD JOIN COST IS SEGREGATE BY FOLLOWING FORMULA

=JOINT COST * NRV OF PRODUCT / NRV OF TOTAL COST

NRV = SELLING PRICE - COST TO FURTHER PROCESS

=25000 * 30000/55000

=13636.36

operational saving 10000 depriciation -4000 EBT 6000 taxes@40% -2400 EAT/NET INCOME 3600 depriciation 4000 Cash flow 7600

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