Section V Please answer the following questions.

a. Porter Co. is analyzing two projects for the future. Assume that only one project can be selected.

	Project X	Project Y
Cost of machine	$68,000	$60,000
Net cash flow:
Year 1	24,000	4,000
Year 2	24,000	26,000
Year 3	24,000	26,000
Year 4	0	20,000

The payback period in years for Project X is:

2.00.

3.83.

3.50.

2.83.

4.00.

b. Porter Co. is analyzing two projects for the future. Assume that only one project can be selected.

	Project X	Project Y
Cost of machine	$68,000	$60,000
Net cash flow:
Year 1	24,000	4,000
Year 2	24,000	26,000
Year 3	24,000	26,000
Year 4	0	20,000

If the company is using the payback period method and it requires a payback of three years or less, which project should be selected?

Project Y.

Project X.

Both X and Y are acceptable projects.

Neither X nor Y is an acceptable project.

Project Y because it has a lower initial investment

c. Markson Company had the following results of operations for the past year:

Sales (8,000 units at $20)		$160,000
Variable manufacturing costs	$86,000
Fixed manufacturing costs	15,000
Variable selling and administrative expenses	12,000
Fixed selling and administrative expenses	20,000	(133,000)
Operating income		$27,000

A foreign company whose sales will not affect Markson's market offers to buy 2,000 units at $14 per unit. In addition to variable manufacturing costs, selling these units would increase fixed overhead by $1,600 for the purchase of special tools. If Markson accepts this additional business, its profits will:

Increase by $3,500.

Decrease by $5,650.

Decrease by $1,600.

Increase by $1,900.

Decrease by $5,100.