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fundamentals engineering economics
Fundamentals Of Engineering Economic Analysis 2nd Edition White, John A., Grasman, Kellie S., Case, Kenneth E., LaScola Needy, Kim, Pratt, David B. - Solutions
Economic value added compares the difference between which two of the following?I. Net operating profit after taxes II. Net operating profit before taxes III. Internal rate of return IV. Cost of capitala. I and IIb. II and IIIc. III and IVd. I and IV
Deviations from standard costs can be caused by I. Variations in the per unit cost of labor and/or material II. Variations in the quantity used of labor and/or materiala. I onlyb. II onlyc. I and IId. neither I nor II
Activity‐based costing achieves more realistic allocation of overhead costs by associating these costs witha. Activities that drive themb. Activities under the direct control of the Board of Directorsc. Profitd. Management activities
The sum of overhead costs is the numerator for calculating the overhead application ratio in traditional overhead allocation methods. Possible denominators include all of the following except a. Direct labor hoursb. Profitc. Direct labor dollarsd. The sum of direct labor dollars and material
Which of the following is not one of the typical uses of financial ratios?a. Comparisons to a company’s historic valuesb. Comparison to benchmarksc. Comparison to competitors’ valuesd. Comparison to zero with positive values indicating desirable ratios and negative values indicating undesirable
An income statement documents revenues and expenses incurred during a period in order to determinea. Change in the value of assets for the periodb. Profit (or loss) for the periodc. Depreciation for the periodd. Value of the company’s net worth at the end of the period
A balance sheet classifies items into one of three main groups. These groups area. Income, expenses, and profitb. Assets, liabilities, and profitc. Assets, liabilities, and net worthd. Income, expenses, and net worth
As the level of detail in a cost estimate increases, the cost of making the estimate usually ____ and the cost of errors resulting from the estimate usually ____.a. increases; decreasesb. increases; increasesc. decreases; decreasesd. decreases; increases
The ratio of total cost to number of units produced definesa. Incremental costb. Average costc. Marginal costd. Opportunity cost
The concept of a break‐even pointa. Applies only to two functionsb. Applies only to linear functionsc. Applies only to two linear functionsd. Is general and can be applied to multiple functions, including both linear and nonlinear functions.
The three major components of cost of goods sold area. Direct labor, direct material, and profitb. Direct labor, overhead, and profitc. Direct labor, direct material, and overheadd. Direct material, indirect material, and marketing
Which of the following terms is associated with giving up the chance to earn a return on investment funds?a. Opportunity costb. Cost of capitalc. Sunk costd. Past cost
The life cycle costs of an asset include which of the following?I. Purchase cost of the asset II. Shipping and installation cost of the asset III. Operating and maintenance cost of the asset IV. Salvage value of the asseta. I and IV onlyb. I, III, and IV onlyc. I and III onlyd. I, II, III, and IV
13.05-PR015 A company invests $5,000,000 in MACRS GDS 5-year property. Measured in constant dollars, the investment yields savings of$1,500,000 the first year; thereafter, annual savings decrease $100,000 per year for 10 years, at which time the equipment has a constant dollar salvage value of
13.05-PR014 For the investment described in Problem 13.05-PR0012, let the maximum Section 179 expense deduction be taken and let 50% bonus depreciation apply. For the investment, calculatea. After-tax present worth,b. After-tax annual worth measured in then-current dollars,c. Real internal rate of
13.05-PR013 For the investment described in Problem 13.05-PR0012, let 50%bonus depreciation apply. For the investment, calculatea. After-tax present worth,b. After-tax annual worth measured in then-current dollars,c. Real internal rate of return, andd. EVA measured in then-current dollars.
13.05-PR012 An investment of $4,500,000 is made in equipment qualifying as 5-year equipment for MACRS-GDS depreciation. Measured in constant dollars, the investment yields annual returns of $1,200,000, plus a salvage value of $300,000 at the end of the 6-year planning horizon. Based on a 25%income
13.05-PR011 For the investment described in Problem 13.05-PR009, let the maximum Section 179 expense deduction be taken and let 50% bonus depreciation apply. For the investment, calculatea. After-tax present worth,b. After-tax annual worth measured in then-current dollars,c. Real internal rate of
13.05-PR010 For the investment described in Problem 13.05-PR009, let 50%bonus depreciation apply. For the investment, calculatea. After-tax present worth,b. After-tax annual worth measured in then-current dollars,c. Real internal rate of return, andd. EVA measured in then-current dollars.
13.05-PR009 An investment of $1,400,000 is made in 5-year MACRS-GDS equipment. Measured in constant dollars, the investment yields annual returns of $400,000 and a salvage value of $500,000 at the end of the 7-year planninghorizon. A 25% tax rate and a 3% inflation rate apply. The real after-tax
13.05-PR008 For the investment described in Problem 13.05-PR006, let the maximum Section 179 expense deduction be taken. For the investment, calculatea. After-tax present worth,b. After-tax annual worth, andc. EVA.
13.05-PR007 For the investment described in Problem 13.05-PR006, let 50%bonus depreciation apply. For the investment, calculatea. After-tax present worth,b. After-tax annual worth, andc. EVA.
13.05-PR006 An investment of $1,250,000 is made in 7-year MACRS-GDS equipment. The investment yields annual before-tax returns of $200,000, plus a salvage value of $500,000 at the end of the 10-year planning horizon. The MARRAT is 7%, the income tax rate is 25%, the maximum Section 179 expense
13.05-PR005 Find three Web sites where “economic value added” (EVA) is a topic.a. State the URL for each of the sites.b. Identify the one you would likely find most useful if you wanted to learn more about EVA.c. In 25 words or less, what does the site you identified in part b have that is most
13.05-PR004 A company is considering purchasing a new piece of machinery at a cost $50,000. It is expected to generate revenues of $25,000 per year for 4 years against $1,500 of annual operating expenses. The machinery is MACRS 3-year property. The income tax rate is 25%. MARR is 10%. What is the
13.05-PR003 A company is considering purchasing a new piece of machinery at a cost $60,000. It is expected to generate revenues of $20,000 per year for 4 years against $3,000 of annual operating expenses. The machinery is MACRS 3-year property. The income tax rate is 25%. MARR is 10%. What is the
13.05-PR002 Consider the following table (shown in two parts):a. What is the EVA in year 5?b. What is the capital charge (Cost of Capital) in year 6? EOY Revenue Operating Expenses Depreciation Net Operating Taxes Profit 5 $2,765,000 $2,379,200 $49,536 $336,264 $84,066 6 $2,765,000 $2,379,200
13.05-PR001 Consider the following table (shown in two parts):a. What is the EVA in year 8?b. What is the beginning-of-year book value (BOYBV) in year 9? EOY Revenue Operating Depreciation Net Operating Taxes Expenses Profit 8 $2,765,000 $2,379,200 $38,400 $347,400 $86,850 9 $2,765,000 $2,379,200
13.04-PR011 Reconsider Problem 13.04-PR010.a. What is the cost per unit of Virtually Impenetrable if LockTite uses traditional overhead allocation based on number of units produced?b. What is the cost per unit of Virtually Impenetrable if LockTite uses activity-based costing to allocate overhead?
13.04-PR010 LockTite Company produces two products, Pretty Safe (PS) and Virtually Impenetrable (VI). The following two tables give pertinent information about these products.a. What is the cost per unit of Pretty Safe if LockTite uses traditional overhead allocation based on number of units
13.04-PR009 Reconsider Problem 13.04-PR008.a. What is the cost per unit of Lower if Skrunchy uses traditional overhead allocation based on direct labor hours?b. What is the cost per unit of Lower if Skrunchy uses activity-based costing to allocate overhead?
13.04-PR008 Video Solution Skrunchy Company produces two products, Lower and Upper. The following two tables give pertinent information about these two productsa. What is the cost per unit of Upper if Skrunchy uses traditional overhead allocation based on direct labor hours?b. What is the cost per
13.04-PR007 Find three Web sites where “activity-based costing” (ABC) is a topic.a. State the URL for each of the sites.b. Identify the one you would likely find most useful if you wanted to learn more about ABC.c. In 25 words or less, what does the site you identified in part b have that is
13.04-PR006 Cost Center D within the Welding Department of the Mizer Corporation collected the following data during 2019.Cost Center D Overhead Expenses: $4,800 Cost Center D Direct Labor Hours: 2,800 Cost Center D Direct Labor Cost: $11,200 Cost Center D Direct Material Cost: $3,000 Compute the
13.04-PR005 Given the following information for Live Wire Electronics,construct an income statement for the month ending June 30. Sales $500,000 Cost of goods sold $170,000 Administration cost $75,000 Advertising expense $25,000 Taxes $70,000
13.04-PR004 To make a batch of 1,000 units of a certain item, it is estimated that 120 direct labor hours are required at a cost of $10/hour. Direct material costs are estimated at $1,500 per batch. The overhead costs are calculated based on an overhead rate of $7.50 per direct labor hour. The item
13.04-PR003 For a small manufacturing firm, a current-period job that requires 35 hours of direct labor is to be allocated $437.50 of overhead cost based on a rate developed from previous-period data. The following additional information is available:Overhead is allocated based on direct labor
13.04-PR002 EmKay Company is divided into two departments for accounting purposes. The direct labor hours and overhead costs for the last year are as follows:What selling price should the company quote on Job Order A54 if the following conditions apply?Raw material costs are estimated as
The Bryant Company manufactures a custom-designed part for the aerospace industry. Within the production facility, there are five operating departments. The sequence of departments through which the part passes during production is shown in the table below.The table also contains other production
13.03-PR010 Find three Web sites where “financial ratios” is a topic.a. State the URL for each of the sites.b. Identify the one you would likely find most useful if you wanted to learn more about financial ratios.c. In 25 words or less, what does the site you identified in part b have that is
Consider the comparative balance sheet and income statement for Starbucks provided in Figures 13.8 and 13.9.Based on these financial statements, determine the following for the year September 30, 2018:a. Return on assets employed.b. Return on owner’s equity.c. Current ratio.d. Acid test ratio.e.
13.03-PR008 The annual report from a major energy company contains the following: Net income represented 9% return on average total assets of approximately $27 billion and a 19% return on average stockholders’ equity.Net income per gallon on products sold worldwide averaged $0.035. Net income was
As published in its annual report, the consolidated balance sheet of Packers includes the items shown below (listed alphabetically).a. Determine the values for the missing items.b. Prepare a balance sheet for Packers. Accounts payable Accounts receivable ? Other assets $30,350 $8,739 Other
13.03-PR006 As published in its annual report, the balance sheet and income statements of JanCo include the items shown below (listed alphabetically). All balances are as shown on the statements; no additional transaction processing or adjustments are required.a. Prepare a balance sheet for
Betty Smith is the owner of Accurate Tax Service. For the year ending April 30, 2019, the following information is available for this service business. At the beginning of this accounting period, the balance in the Betty Smith Capital account was $32,000. Following is a summary of activities during
13.03-PR004 In addition to the account balances in the previous problem,Scott Company recorded the following summary transactions for the year ending December 31, 2018.Construct an income statement for Scott Company for the period 1/1/2018 to 12/31/2018. Category Amount Administrative expenses
The Scott Company shows the following alphabetical list of account balances as of December 31, 2018.a. Construct a balance sheet for Scott Company as of December 31, 2018.b. Demonstrate that the fundamental accounting equation holds by stating the dollar values of the terms in the equation. Account
13.03-PR002 Following is a list of balance sheet accounts for Branman Co. as of December 31, 2018.a. Classify each of the following accounts as an asset, liability, or net worth.b. What is the balance in the Retained Earnings account if the data forms a valid balance sheet? Account Balance Cash
Determine the missing values below to produce a valid balance sheet BALANCE SHEET Year Ending December 31, 2020 ASSETS Cash (a) Accounts receivable $8,000 Raw materials inventory $10,000 Work-in-process inventory $15,000 Finished goods inventory $18,500 Land $30,000 Building $80,000 Less:
13.02-PR004 A circuit board manufacturer is trying to determine the appropriate cost driver for estimating the cost of circuit board assembly support. The list of potential cost drivers has been narrowed to three: direct labor hours, number of circuit boards completed, and average cycle time. In
13.02-PR003 For each of the situations below, identify a potential source of analogy data for the costs under each of the following cases: (1) this project/activity is a first of its kind for the company, and (2) this project/activity is similar to projects that the company has completed before.a.
A distributor has learned that an estimate for the packaging and processing costs can be predicted based on the weight of an order. To this end, a regression analysis is performed resulting in the mixed cost function: cost = 63.63 + 0.279 weight.a. What is the fixed cost within this cost
13.02-PR001 Find three Web sites where “cost estimating” is a topic.a. State the URL for each of the sites.b. Identify the one you would likely find most useful if you wanted to learn more about cost estimating.c. In 25 words or less, what does the site you identified in part b have that is
13.01-PR012 The variable cost of producing specialty value-added stainlesssteel tubing varies according to the quantity produced per year. The variable cost is $500 per ton from 0 to 700 tons. Above this level, the variable cost is different. At this time, we are producing 600 tons per year, and
Two processes are put in place for production. Neither will be removed. Process R is designed to produce 10,000 units per year and has a fixed cost of $90,000 per year. Process T has the same design capacity and has a fixed cost of $80,000 per year. Process R produces the initial 4,000 units at a
The KMP Metal Machining Company produces widgets according to customer order. The company has determined that widgets can be produced on three different machine tools: M1, M2, or M3. An analysis of widget production cost reveals the following data:a. Using a graphical approach, determine the most
13.01-PR009 A new engineering building at a state university is to contain 10,000,000 square feet. The total cost of the building (TC) is given by the following expression:TC = (200 + 80X + 2X2)A where X = number of floors and A = floor area in ft2 /floor.a. Create a table that shows the total
13.01-PR008 A manufacturer of precision cutting tools has the capacity to make 1,000,000 cutting tools per year. Each sells for $15. The variable cost per unit to produce the cutting tools is $9. Annual fixed costs for the manufacturer are $3,500,000.a. If the plant is operating at 50% of design
The cost curve for producing widgets passes through the following points and is piecewise linear in between.a. What is the fixed cost of producing 600 widgets?b. What is the variable cost of producing 600 widgets?c. What is the cost per unit if only 400 widgets are produced?d. What is the
13.01-PR006 Product X is sold for $500 per unit. The total cost of production per year, including capital recovery and a return, is given by the expression TC = 0.04n 3 − 700n + 50, 000 where n is the number of units sold. If TC represents the total of all fixed and variable costs, determine the
13.01-PR005 The maker of Winglow is purchasing a new stamping machine. Two options are being considered, Rooney and Blair. The sales forecast for Winglow is 8,000 units for next year. If purchased, the Rooney will increase plant fixed costs by $20,000 and reduce variable costs by $5.60 per unit.
13.01-PR004 Two production methods are being considered for making thermal dryers. Method 1 has a fixed cost of $1,000 and a variable cost of $20 per unit. Method 2 has a fixed cost of $400 and a variable cost of $100 per unit. For what range of production volumes would you prefer each method?
13.01-PR003 A firm has the capacity to produce 1,000,000 units of a product each year. At present, it is operating at 70% of capacity. The firm’s annual revenue is $700,000. Annual fixed costs are $300,000, and the variable costs are $0.50 per unit.a. What is the firm’s annual profit or loss?b.
13.01-PR002 Match the terms in the first column with the appropriate definition in the second column. Terms (a) First cost Definitions (1) Any cost occurring after "time now"
13.01-PR001 Reconsider the scenario presented in Example 13.1, which details a firm considering purchasing a small turret lathe to manufacture part number 163H for the B&K Corporation.a. What additional assumptions/data would be required to complete an economic analysis to determine if the turret
13-FE010 When an organization considers its work-in-process, how should it be classified on a balance sheet?a. Assetb. Liabilityc. Net worthd. Expense
13-FE009 Fixed cost isa. Any cost that does not vary with the quantity of outputb. The ratio of total cost to total quantity of outputc. The market value of an asset at the end of its life less its disposal costsd. The incremental cost of producing one more unit of output
13-FE008 The total cost equation for producing X widgets is given by TC= $1,000 + $6X. The marginal cost per widget at a production level of 300 units is closest to which of the following?a. $2,800b. $6c. $8d. $4,000
13-FE007 The total cost equation for producing X widgets is given by TC= $1,000 + $6X. The variable cost per widget is closest to which of the following?a. $1,000b. $6c. $8d. $4,000
13-FE006 The total cost equation for producing X widgets is given by TC= $1,000 + $6X. The average cost per widget for producing 500 widgets is closest to which of the following?a. $1,000b. $6c. $8d. $4,000
The three major categories that comprise cost of goods manufactured area. Material, labor, and overheadb. Average, marginal, and instantaneousc. Past, present, and futured. Initial, operating, and salvage
13-FE004 Marginal cost isa. Any cost occurring after “time now”b. The ratio of total cost to total quantity of outputc. The market value of an asset at the end of its life less its disposal costsd. The incremental cost of producing one more unit of output
13-FE003 The fundamental equation used within an accounting balance sheet isa. Net profit = gross profit − expenses − taxesb. Assets + liabilities = net worthc. Assets + liabilities + net worth = 0d. Assets = liabilities + net worth
13-FE002 The information below has been extracted from the books of the Shelley Company. Which of the following represents Shelley’s current ratio?a. 0.76b. 1.48c. 2.05d. 2.51 Current Assets Cash Current Liabilities $86 Accounts payable $78 Accounts receivable $130 Wages payable Inventory Total
13-FE001 On a balance sheet, a corporation’s economic obligations to nonowners are calleda. Owners’ equityb. Liabilitiesc. Assetsd. Retained earnings
Consider the following statement: In a capital rationing problem with divisible investments, if all projects have positive present worths, all of the investment capital will be used.a. This statement is trueb. This statement is falsec. Not enough information is given; the numeric values of the
Four indivisible projects, A, B, C, and D, are being considered in a capital rationing problem. Which of the following constraints could be incorporated in an Excel® Solver formulation of the problem?I. Either project A or project B can be done but not both II. Project C cannot be done unless
Because new investment opportunities can become available throughout a company’s fiscal year, companies frequentlya. Wait until the end of the year to make capital budgeting decisionsb. Reserve some capital for use later in the yearc. Ignore opportunities that occur after the initial capital
Reasons why a company facing a capital rationing problem may choose not to raise additional capital to invest in all projects having a positive after-tax present worth include which of the following?I. Borrowing money increases a company’s debt-to-equity ratio II. Issuing stock dilutes
12.03-PR014 Consider the 6 divisible investment alternatives shown below.The planning horizon is 8 years. The MARR is 15%. $60,000 is available forinvestment.a. What proportion of each investment is to be included in the optimum investment portfolio?b. Solve part a when full or partial investment
12.03-PR013 Consider the 6 divisible investment alternatives shown below.The planning horizon is 5 years. The MARR is 12%. $50,000 is available for investment.a. What proportion of each investment is to be included in the optimum investment portfolio?b. Solve part a when full or partial investment
12.03-PR012 Rex Electric has decided to move into low-rise (2–8 floors)commercial building electrical wiring. After great success in upscale residential and small commercial wiring, they have identified 4 independent and divisible investments, any or all of which will help make the move to the
12.03-PR011 A lending firm is considering 6 independent and divisible investment alternatives which, at any time the firm chooses, can be exited with a full refund of the initial investment. A total of $200,000 is available for investment, and the MARR is 10% (Note! There is no planning horizon
12.03-PR010 A division of Conoco-Phillips is involved in their periodic capital budgeting activity and the engineering and operations staffs have identified 10 divisible investments with cash flow parameters shown below.Conoco-Phillips uses a 10-year planning horizon and a MARR of 10% in evaluating
12.03-PR009 A laboratory within Bayer is considering the five divisible investment proposals below to further upgrade their diagnostic capabilities to ensure continued leadership and state-of-the-art performance. The laboratory uses a 10-year planning horizon, has a MARR of 10%, and a capital
12.03-PR008 Suppose your own consulting firm has been doing well and you believe it is time to make a move to add a new, related area of engineering services. To do so, you have identified the following 5 independent, divisible, equal-lived investments, each of which guarantees you can exit it
Yaesu America wishes to enhance their already fine line of electronic equipment for commercial and individual use. Their engineering staff has proposed 5 independent, divisible, equal-lived investments, cutting across different product lines, with each estimated to return the initial investment if
12.03-PR006 Gymnastics4Life is a high-end facility for beginning,intermediate, and elite gymnasts. The latter are drawn from the nearby region for exclusive and dedicated training. In order to maintain their edge, G4L trustees wish to invest up to $350,000 in new methods for critical evaluation and
12.03-PR005 Video Solution CustomMetalworks is considering the expansion of their cable fabrication business for towers, rigging, winches, and many other uses. They have available $250,000 for investment and have identified the following divisible alternatives, each of which will provide an exit
12.03-PR004 Polaris Industries has $1,250,000 available for additional innovations on the Victory Vision motorcycle. These include the five divisible, equal-lived alternatives, each of which guarantees the investment can be exited after 6 years with the initial investment returned. In addition,
12.03-PR003 Aerotron Radio Inc. has $250,000 available and its engineering staff has proposed the following divisible investments. With each, Aerotron can exit at the end of its planning horizon of 5 years and have its initial investment returned. In addition, each year Aerotron will receive the
12.03-PR002 True or False: In solving a capital budgeting problem involving investment opportunities that are divisible (i.e., you can invest in portions of the opportunities instead of “all or nothing”), you rank the opportunities on the basis of internal rate of return and add to the
True or False: In solving a capital budgeting problem involving investment opportunities that are divisible (i.e., you can invest in portions of the opportunities instead of “all or nothing”), you rank the opportunities on the basis of present worth and add to the portfolio opportunities and
12.02-PR016 The American Radio Relay League is using a binary linear programming (BLP) formulation to select from among several possible investments. Each investment continues for 5 years. Given the incompleteSOLVER parameter box shown, respond to parts a–f below in order to obtain the optimum
12.02-PR015 The City of Clyde, Ohio, is using the binary linear programming(BLP) formulation of a capital budgeting problem shown below. Assume$175,000 is available for investment and all investments are indivisible;MARR = 12%; n = 10 yrs. Given the incomplete SOLVER parameter box shown, respond to
12.02-PR014 Consider the six indivisible investment alternatives shown below. The planning horizon is 8 years. The MARR is 15%. $60,000 is available for investmenta. Which investments should be made in order to maximize present worth?b. Solve part a when investments N and P are mutually exclusive
12.02-PR013 Consider the six indivisible investment alternatives shown below. The planning horizon is 5 years. The MARR is 12%. $50,000 is available for investment.a. Which investments should be made in order to maximize present worth?b. Solve part a when investments B and D are mutually exclusive
12.02-PR012 Consider the following five indivisible investment alternatives which, at the end of 5 years, fully refund the initial investment. Given the annual returns shown below, $150,000 of investment capital available, and a MARR of 10%, determine the optimum investment portfolio. What are the
12.02-PR011 Rex Electric has decided to move into low-rise (2–8 floors)commercial building electrical wiring. After great success in upscale residential and small commercial wiring, they have identified four independent and indivisible investments, any or all of which will help make the move to
12.02-PR010 A lending firm is considering six independent and indivisible investment alternatives which, at any time the firm chooses, can be exited with a full refund of the initial investment. A total of $200,000 is available for investment, and the MARR is 10% (Note! There is no planning
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