AC 505 AC505 Unit 2 Quiz Answers (Kaplan University)

AC 505 Unit 2 Quiz (Kaplan University)

1. Which of the following statements about capital budgeting is true?
2. The Kelso Company has two divisions: Eastern and Western. The Eastern division has the following revenues and expenses: Sales: $900,000 
   Variable costs: 450,000 
   Fixed costs: 260,000
   Allocated corporate costs: 240,000 
   Net income (loss): $(50,000) 
3. A new machine that costs $87,200 is expected to save annual cash operating costs of $20,000 over each of the next six years. The machine's internal rate of return is:
4. Xebex Company is considering whether to make or buy a component that is used in the production of fax machines. The annual cost of producing the 100,000 units needed by the company is as follows:
5. Susan Jackson is considering buying a machine to produce silk-screened T-shirts. The following estimated data are available for her proposed project: 
6. Pearson Co. is considering the purchase of a $200,000 machine that is expected to reduce operating cash expenses by $65,000 per year. This machine, which has no salvage value, has an estimated useful life of 5 years and will be depreciated on a straight-line basis. For this machine, the simple rate of return would be:
7. The term "outsourcing" is most closely associated with:
8. The Vector Company produces four products with the following costs and selling prices:
9. The Salty Snacks Co. is considering launching a new product that is expected to have a life of 7 years. The initial investment in equipment will cost $480,000. The projected cash revenues and cash expenses for the product are:
10. Lido manufactures products A and B from a common raw material and have a joint process cost of $80,000. Ten thousand pounds of B can be sold at split-off for $15 per pound or processed further at an additional cost of $20,000 and later sold for $16. If Lido decides to process B beyond the split-off point, operating income will: