Posted: April 30th, 2016

15. Toshi Company incurred the following costs in manufacturing desk calculators:

Direct materials $14

Indirect materials (variable) 4

Direct labor 8

Indirect labor (variable) 6

Other variable factory overhead 10

Fixed factory overhead 28

Variable selling expenses 20

Fixed selling expenses 14

During the period, the company produced and sold 1,000 units.

What is the inventory cost per unit using variable costing?

a. $52

b. $62

c. $42

d. $70

16. Meulo Company is considering the purchase of production equipment that costs $800,000. The equipment is expected to generate an annual cash flow of $250,000 and have a useful life of five years with no salvage value. The firm’s cost of capital is 12 percent. The company uses the straight-line method of depreciation with no mid-year convention. There are no income taxes.

The payback period in years for the project is

a. 2.90 years.

b. 3.20 years.

c. 3.25 years.

d. 4.20 years.

17. Dunkin, Inc., is considering the purchase of production equipment that costs $300,000. The equipment is expected to generate an annual cash flow of $100,000 and have a useful life of five years with no salvage value. The firm’s cost of capital is 14 percent. The company uses the straight-line method of depreciation with no mid-year convention. Ignore income taxes.

Payback for the project is

a. 5.00 years.

b. 3.50 years.

c. 3.00 years.

d. 2.38 years.

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