1. Jasper company has a payback goal of three years on acquisitions. Of new equipment. Anew piece...
Question:
1. Jasper company has a payback goal of three years on acquisitions. Of new equipment. Anew piece of equipment that costs $450,000 and a five- year life is being considered. Straight-line (SL)depreciation will be used, with zero salvage value. Jasper is subject to a 30% income tax rate. To meet the company’s payback goal after-tax, the equipment must generate reductions in annual cash operating costs of:
A. $60,000
B. $114,000
C. $150,000
D. 190,000
E. $200,000
2. In cost-plus contracts, the “plus” represents
A. Sales price.
B. The amount of any cost overruns
C. Profit, based on the amount of costs incurred
D. Over applied overhead costs
3. Which of the following is not a characteristic of the payback method for making capital budgeting decisions?
A. It is easy to calculate and comprehend.
B. It considers returns over the entire life of the project.
C. It focuses primarily on liquidity, rather than profitability of an investment project.
D. It can be considered a rough measure of risk
E. It requires estimates of after-tax cash inflows and after-tax cash outflows.
4. A cost management technique that helps managers set goals for cost reductions through product design is called
A. Product costing
B. Value costing
C. Target costing
D. Continuous costing
Expert Answer:
