Cost Accounting 11th Edition Lawrence H. Hammer, William K. Carter, Milton F. Usry - Solutions

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Evaluate capital expenditure proposals using the accounting rate of return on investment method.LO.1
Evaluate capital expenditure proposals using the payback period method.LO.1
Use a "present value of $1"table to compute the present value of a future cash flow.LO.1
Compute the present value of a proposed capital expenditure using a "present value of $1"table.LO.1
Compute the present value of a proposed capital expenditure using a "present value of an annuity of $1" table, where appropriate.LO.1
Compute the net present value of a capital expenditure.LO.1
Evaluate capital expenditure proposals using the discounted benefit-cost index.LO.1
Estimate the time-adjusted rate of return (discounted rate of return) from future cash flows from a proposed capital expenditure.LO.1
Properly consider the impact of income taxes in evaluating capital investment proposals.LO.1
What are capital assets?LO.1
Why do proposed investments that are necessary to meet legal or safety requirements have top priority among capital investment proposals?LO.1
How does the effect on net profit of a cash outlay to acquire a capital asset differ from its effect on cash flows?LO.1
In general, would management prefer an investment that requires a short or a long period before the investment is recovered from cash flows? Why?LO.1
In the accounting rate of return on investment approach to evaluating a proposal to invest in new equipment, how is the cost of the new asset used in the calculation?LO.1
In computing the accounting rate of return on average investment, how is average investment determined?LO.1
Should income taxes be considered in measuring the accounting rate of return on investment? Explain.LO.1
If an asset is expected to have a salvage value at the end of its economic usefulness, how is the salvage value treated in computing return on average investment?LO.1
A company is analyzing two capital expenditure proposals to decide which opportunity to invest in and, among other analyses, is using the accounting rate of return on investment as a basis for comparing the two projects.Should the company use the initial investment in the assets or the average
How does the cash sales price of an asset that is being replaced by the purchase of a new asset affect the payback period?LO.1
(Use the "present value of $1 table" in answering this question.) Find the present value of $1, due 10 years from now, assunning a 10 percent rate of return. What factor is given in the table? What does that number mean?LO.1
Why can't the "present value of an annuity of $1 " table be used to determine the present value of a future series of annual cash receipts if the annual amounts are not equal?LO.1
How is the discounted benefit-cost index computed? How is it used in capital budgeting?LO.1
What is meant by the time-adjusted rate of return?LO.1
What is meamt by the term capital expenditures?LO.1
Capital expenditures become sunk costs. Explain.LO.1
List various classifications of capital expenditures that might permit easier evaluation by management.LO.1
How, if at all, does the book value of assets being replaced affect the investment decision?LO.1
In what way do opportunity costs affect the decision to enlarge a facility through the purchase of new assets?LO.1
How is the accounting rate of return calculated? What basis or bases can be used for computing the rate?LO.1
What is meant by the payback period? How is the payback period computed?LO.1
In general, would management prefer a project with a short payback period or a long one? Why?LO.1
What is the major shortcoming of the payback period method?LO.1
What is meant by the time-adjusted rate of return? Why is it useful for evaluating investment opportunities?LO.1
How much would you have to invest today to receive $70,000 five years from now if there were no income taxes involved and you are to earn 15 percent compound interest?LO.1
Explain what the term net present value means.LO.1
How would you compute the discounted benefit- cost ratio?LO.1
Suppose that you know that you can invest $20,000 today and receive $6,000 per year for five years. Explain briefly how you would determine the approximate compound rate of return on your investment, using an annuity table.LO.1
Explain the relationship between a "present value of $1" table and a "present value of an annuity of $1" table.LO.1
Explain the relationship between the net present value of cash flows from a proposed investment and the discounted benefit- cost ratio.LO.1
How does the book value of an asset being abandoned and replaced by a new asset affect the cash flow for purposes of computing the time-adjusted rate of return on investment?LO.1
An existing asset is to be sold at an amount in excess of its tax basis, and a new replacement asset is to be purchased. Explain how the sale of the old asset would affect the cash flows used in computing the time-adjusted rate of return on the new asset.LO.1
What type of guidelines might management set in analyzing and evaluating proposed capital outlays?LO.1
What impact does the availability of funds have on management's evEiluation of capital investment opportunities?LO.1
Explain to management the strengths and weaknesses of the payback period method as a means for evaluating capital outlays.LO.1
The manager of your company states that in evaluating capital expenditure proposals, it does not matter whether one uses the accounting rate of return, the payback period, or the time-adjusted rate of return methods because the ranking of the proposals will always be the same. Is he correct?
Evaluate capital expenditure proposals using the accounting rate of return method. (Obj. 1). An asset costing $100,000 will have an estimated net salvage value of $10,000 at the end of its 10-year life. It is expected to produce a net cash inflow, before taxes, of $20,000 per year. Straight-line
Evaluate capital expenditure proposals using the accounting rate of return method. (Obj. 1). The City Concrete Company is considering the purchase of an additional machine that will cost$120,000. It has an expected useful life of eight years and will have no salvage value. It is estimated that the
Evaluate capital expenditure proposals using the accounting rate of return method. (Obj. 1). Brookline Corporation is considering purchasing a new machine costing $100,000 to replace an existing machine, which has a book value of $20,000 and has no sales or trade-in value. The old machine has a
Evaluate capital expenditure proposals using payback period analysis (additional asset). (Obj. 2). An asset costing $100,000 will have an estimated net salvage value of $10,000 at the end of its 10-year life. It is expected to produce a net cash inflow, before taxes, of $20,000 per year.
Evaluate capital expenditure proposals using payback period analyses (additional asset). (Obj. 2). Playtime Clothing Manufacturers is considering the purchase of an additional machine that will cost $120,000. It has an expected useful life of 10 years and will have no salvage value. It is estimated
Compute the present value of a capital expenditure using the "present value of $1" table. (Obj. 4). Clementine Corporation is considering making an investment that will provide a one-time return of$44,000 three years later. If the company wants to earn 10 percent compound interest on its
Compute the net present value of a capital expenditure using the"present value of $1" table. (Obj. 4). Peak Corporation has prepared a schedule of after-tax cash flows expected during an asset's three -year life. The amounts expected are $8,000 in the first year,$12,000 in the second year, and
Compute the present value of a proposed capital expenditure, using the "present value of an annuity of $1" table. (Obj. 5).Domino Manufacturing Corporation has prepared a schedule showing expected after-tax net cash flows during each year of life of a proposed capital investment. The analysis shows
Compute the present value of a proposed capital expenditure, using the "present value of an annuity of $1" table. (Obj. 5). A company has analyzed the expected cash flows from a capital investment and has estimated that the net cash flow after taxes should be$12,000 per year during the asset's
Compute the net present value of a capital expenditure. (Obj. 6).Beacon Light Manufacturing Company has computed the present value of expected after-tax cash flows from a proposed investment in a new machine to be $120,000, reflecting a discount rate of 15 percent. The purchase price of the asset
Must a part of common costs be allocated to by-products? Explain.
Account for losses of material in the form of scrap by preparing and recording the necessary entries to the cost accounting records.LO.1
Account for losses incurred in the form of goods spoiled in the manufacturing process by preparing and recording the necessary entries in the cost accounting records.LO.1
Account for losses incurred in the form of defective goods by preparing and recording the necessary entries to the cost accounting records.LO.1
Texas Supply Company sold scrap material on credit for $580. What general journal entry would the company make if the scrap is to be charged to Job 367?LO.1
A scrap report should be prepared for what type of scrap materials?LO.1
What is the term used for spoiled goods that can be sold "as is" at a discount?LO.1
When are rework costs on defective goods charged to manufacturing overhead?LO.1
What are the three categories of lost materials?LO.1
What is scrap? Give three examples.LO.1
What are two factors that should be considered by the cost accountant in selecting a procedure for recording scrap?LO.1
When scrap has a low value, what account is credited for the proceeds of its sale?LO.1
If scrap can be identified with a special job, what account is credited with the proceeds of its sale?LO.1
If scrap can be identified with a specific department, what account is credited with the proceeds of its sale?LO.1
What is a scrap report and when is it used?LO.1
Scrap may have a high value that changes often. If this is the case, when is the transfer from the factory to the storeroom recorded? What information is given?LO.1
Scrap may have a high value that is relatively stable. If this is the case, when is the transfer of the scrap from the factory to the storeroom recorded? What information is given?LO.1
Are gains and losses recorded on the sale of scrap? Explain.LO.1
What are spoiled goods?LO.1
What are seconds?LO.1
What are two ways of accounting for the loss due to spoiled goods?LO.1
When spoilage is routine and recurring, what account should be charged for the loss?LO.1
Define defective goods. What are rework costs?LO.1
List two ways of accounting for rework costs.LO.1
When would management want the cost of spoiled goods to be considered as a part of the cost of the specific job on which the spoilage occurred?LO.1
At the Sampson Company, the cost of spoiled goods averages about 4 percent of the total manufacturing costs. Management learns that the cost of spoiled goods at the Armstrong Supply Company, a competitor that produces a similar product, averages less than 1 percent of the total manufacturing costs.
The management of the PhoentK Manufacturing Corporation learns that the cost allocated to spoiled goods on Job 833 totals $3,860.It is also determined that the goods could be sold for $3,450 if additional costs of $950 are incurred. What would be your recommendation to management regarding these
When would management want to maintain a perpetual inventory for scrap?LO.1
Record a sale of scrap. (Obj. 1). On June 15, 19X9, the Cox Manufacturing Company sold scrap with a low value. The scrap was sold on credit for $925, and the company records such proceeds as Miscellaneous Income. Prepare the general journal entry to record this sale.LO.1
Record a sale of scrap. (Obj. 1). The partially completed job cost sheet for Job 351 is shown on page 281. On April 19, 19X9, scrap material was recovered from this job and sold on credit for $475.a. Prepare the general journal entry to record the sale of this scrap.b. How should the sale of scrap
Record a sale of scrap. (Obj. 1). The Wilson Manufacturing Company sold scrap for $1,789 on credit. The scrap was sold on May 31, 19X9, and had accumulated during the month in the Assembly Department, which is to receive credit for the proceeds.a. Prepare the general journal entry to record the
At what point in the production process do joint costs occur?LO.1
Identify ways in which activity-based management can achieve improvements in an organization. LO9
What role is played by activities in assigning costs to products using ABC? How does this dif¬ fer from traditional costing? LO9
Name the four levels of costs and drivers in ABC. LO9
What aspect of ABM follows directly from ABCs revision of product costs? LO9
What specific information from ABC sometimes leads management to focus on the need to improve a process? LO9
Discuss the three different procedures that a company’s management might follow to set profit objectives. LO3
Differentiate between long-range profit plan¬ ning and short-range budgeting. LO3
What is a budget and how is it related to the control function? LO3
The development of a budgetary control pro¬ gram requires specific systems and procedures needed in canying out management’s functions of planning, organizing, and control. Enumerate these steps. LO3
Explain whether the periodic budget represents a formal or an informal communication channel within a company. (ICMA adapted) LO3
The human factors in budget preparation are more important than its technical intricacies. Explain. LO3
While the budget is usually thought to be an important and necessary tool for management, it has been subject to some criticism from man¬ agers and researchers studying organizations and human behavior. LO3(a) Describe and discuss the benefits of bud¬ geting from the behavioral point of view.(b)
Commercial expenses are generally identified as marketing and administrative expenses. How should these expenses be grouped for bud¬ getary purposes? LO3

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Cost Accounting 11th Edition Lawrence H. Hammer, William K. Carter, Milton F. Usry - Solutions

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