Question: Determine the number of acceptable mutually

> A mixing process for laboratory-grade sodium phosphate has an estimated first cost of $320,000 with annual costs of $40,000. Income is expected to be $98,000 per year. At a MARR of 20% per year, the payback period is closest to: (a) 3 years (b) 15 years

> A wireless monitored process has fixed cost of $40,000 per year and variable cost of $30 per unit. An IoT-based process using “Internet of Things” technology has fixed costs of $80,000 per year. If the two processes break even at a production level of 40

> A jalapeno canning company is faced with a make/ buy decision. Cardboard shipping cartons can be purchased for $0.60 each or made in-house. If manufactured, two machines will be required. Machine X will cost $20,000 and have a life of 6 years with a $200

> The pieces of equipment required to place 160 cubic yards of concrete in 1 day by experienced workmen are two gasoline engine vibrators and one concrete pump. If the vibrators cost $76 per day and the concrete pump costs $580 per day, the variable cost o

> Revcon Products has two subcontractor bids to automate a composite winding process. Process A will have fixed costs of $42,000 per year and will require two workers at $80 per day each. Together, these workers can generate 100 units. Process B will have

> You saw that there was a gasoline price war going on in a small town 27 miles from where you live (54 miles round trip), so you are thinking about driving there to fill the tank in your pick-up truck, which gets 18 miles per gallon. You think it will tak

> A milling process is accomplished using either method X or Y. Method X has fixed costs of $10,000 per year with a variable cost of $50 per unit. Method Y is an automated process with a fixed cost of $5,000 per year and a variable cost of only $30 per uni

> For the following two AW relations, the breakeven point QBE in miles per year is closest to: AW1 =−23,000(A/P,10%,10) + 4000(A/F,10%,10)− 5000 − 4X AW2 = −8,000(A/P,10%,4) − 2000 − 6X (a) 1984 (b) 1224 (c) 1090 (d) 655

> An automobile leasing company has a contract with a new car dealer to do major repairs for $720 per car. The leasing company estimates that for $400,000, it could buy equipment to service their own cars at a cost of $300 per car. If the equipment will ha

> If hardness removal were to be discontinued at the treatment plant, which alternative would be the most cost-effective?

> In linear breakeven analysis, if process A has a variable cost of $45 per unit and process B has a variable cost of $31 per unit, which alternative would be preferred if the breakeven point is 7400 units and production is expected to be 6200 units? (a) P

> The independent projects shown below are under consideration for possible implementation by Renishaw, Inc. If the company’s MARR is 14% per year and it uses the IROR method of capital budgeting, the projects it should select under a bud

> All of the following are true when formulating mutually exclusive bundles of independent projects, except: (a) One of the bundles is the do-nothing project. (b) A bundle may consist of only one project. (c) The capital limit may be exceeded as long as it

> All of the following are correct when a capital budgeting problem is solved using the 0-1 integer linear programming model, except: (a) Partial investment in a project is acceptable. (b) The objective is to maximize the present worth of the investments.

> The National Potato Cooperative purchased a deskinning machine last year for $150,000. Revenue for the first year was $50,000. Over the total estimated life of 8 years, use a spreadsheet to estimate the remaining equivalent annual revenues (years 2 throu

> Mid-Valley Industrial Extension Service, a state-sponsored agency, provides water quality sampling services to all business and industrial firms in a 10-county region. Last month, the service purchased all necessary lab equipment for full in-house testin

> Mid-Valley Industrial Extension Service, a state-sponsored agency, provides water quality sampling services to all business and industrial firms in a 10-county region. Last month, the service purchased all necessary lab equipment for full in-house testin

> Mid-Valley Industrial Extension Service, a state-sponsored agency, provides water quality sampling services to all business and industrial firms in a 10-county region. Last month, the service purchased all necessary lab equipment for full in-house testin

> Wilson Partners manufactures thermocouples for remote temperature monitoring of electronics applications. The current system has a fixed cost of $400,000 per year and a variable cost of $10 per unit. Wilson sells the units for $14 each. A newly proposed

> A possible disadvantage of the ABC method is: (a) It does not allocate costs to the way production work occurs (b) It is more expensive to operate than a traditional allocation system (c) It does not help understand the economic impact of management deci

> If the efficiency of the sludge recirculation pump were reduced from 90% to 70%, would the net savings difference between alternatives 3 and 4 increase, decrease, or stay the same?

> The delivered equipment cost for setting up a production and assembly line for two-way floating ball valves is $650,000. If the direct cost and indirect cost factors are 1.82 and 0.31, respectively, and only the direct cost factor applies to delivered eq

> If a hospital cafeteria is the activity to receive indirect cost allocation for the year, cost driver(s) for the ABC method that seem reasonable may be: 1 – Number of cafeteria employees 2 – Number of meals 3 – Hospital patient volume (a) 1 (b) 2 (c) 3 (

> The IT department allocates indirect costs to user departments on the basis of CPU time at the rate of $2000 per second. For the first quarter, the two heaviest use departments logged 900 and 1300 seconds, respectively. If the IT indirect budget for the

> The equipment for applying specialty coatings that provide a high angle of skid for the paperboard and corrugated box industries has a delivered cost of $390,000. If the overall cost factor for the complete system is 3.96, the total plant cost is approxi

> The delivered equipment cost for setting up a production and assembly line for high-sensitivity, gas-damped accelerometers is $650,000. If the direct cost and indirect cost factors are 1.36 and 0.31, respectively, and both factors apply to delivered equi

> If the cost of an imported high-speed assemblyline robot is $80,000 and the in-country cost for one with twice the capacity is $120,000, the value of the exponent in the cost-capacity equation is closest to: (a) 0.51 (b) 0.58 (c) 0.62 (d) 0.69

> The cost of an electrode position control system in an electric arc furnace was $16,000 when the applicable equipment cost index had a value of 1192. If the current index value is 1364 and the exponent in the cost-capacity equation has a value of 0.65, t

> The cost for a 200-horsepower pump with a VFD controller is $42,000. The cost estimate of a similar pump of 300 horsepower capacity, provided the exponent in the cost-capacity equation is 0.64, is closest to: (a) $47,240 (b) $48,520 (c) $53,780 (d) $54,4

> An assembly line robot arm with a first cost of $75,000 in 2001 had a cost of $89,750 in 2017. If the equipment cost index for robots was 307 in 1995 and the robot cost increased exactly in proportion to the index, the value of the index in 2017 was clos

> The cost for constructing a small building in 1999 was $700,000. The construction cost index was 6059 at that time. The estimated cost of a similar building when the index value is 10,000 is closest to: (a) $424,130 (b) $1,155,300 (c) $1,347,200 (d) $1,3

> The 3-year MACRS recovery rates are 33.33%, 44.45%, 14.81%, and 7.41%, respectively. (a) What are the corresponding rates for the alternative MACRS straight line ADS method with the half-year convention imposed? (b) Compare the PWD values for these two m

> The total mechanical and electrical unit costs for a library are listed as $40 per square foot, while total project cost is estimated at $119 per square foot. Based on these values, the percentage of total costs represented by mechanical and electrical c

> Wilson Partners manufactures thermocouples for remote temperature monitoring of electronics applications. The current system has a fixed cost of $400,000 per year and a variable cost of $10 per unit. Wilson sells the units for $14 each. A newly proposed

> A stone and gravel quarry in Texas can use a percentage depletion rate of 5% of gross income, or a cost depletion rate of $1.28 per ton. Quarry first cost = $3.2 million; estimated total tonnage = 2.5 million tons; tonnage this year = 65,000; gross incom

> Rayonier Forrest Resources purchased a small tract of timberland for $70,000 that contained 25,000 trees. The value of the bare land was estimated to be $20,000. The annual percentage depletion factor for timber is 10%. In the first year of operation, th

> South African Gold Mines, Inc. is writing off its $210 million investment using the cost depletion method. An estimated 700,000 ounces of gold are available in its developed mines. This year 35,000 ounces were produced at an average price of $400 per oun

> All of the following statements about the Alternative Depreciation System (ADS) are true, except: (a) The half-year convention applies (b) Salvage value is neglected (c) The recovery periods are shorter than in GDS (d) The straight line method is require

> Under the General Depreciation System (GDS) of asset classification, any asset that is not in a stated class is automatically assigned a recovery period of: (a) 5 years (b) 7 years (c) 10 years (d) 15 years

> An industrial robot that is depreciated by the MACRS method has B = $60,000 and a 5-year depreciable life. If the depreciation charge in year 3 is $8640, the salvage value that was used in the depreciation calculation is closest to: (dt values for years

> A currently-owned asset has B = $150,000, S = $95,000, and a 10-year depreciable life. The book value at the end of year 3 according to the MACRS method would be closest to: (Note: dt values for years 1, 2, 3, and 4 are 10.00%, 18.00%, 14.40%, and 11.52%

> Gisele is performing a make/buy study involving the retention or disposal of a 4-year-old machine that was to be in production for 8 years. It cost $500,000 originally. Without a market value estimate, she decided to use the current book value plus 20% f

> Use the computations in Equations [16A.11] through [16A.13] to determine the MACRS annual depreciation for the following asset data: B = $50,000 and a recovery period of 7 years

> An 8-year recovery-period conveyor system for grading eggs is planned for DDB depreciation. The system had a first cost of $30,000 with a $9000 salvage value. The annual operating cost allocated to the conveyor is $7000 per year. The book value at the en

> A motorized cultivator with a first cost of $28,000 and salvage value of 25% of the first cost is depreciated by the DDB method over a 5-year period. If the operating cost is $43,000 per year, the depreciation charge for year 2 is closest to: (a) $18,000

> A commercial generator with an unadjusted basis of $50,000 is straight-line depreciated over a 5-year period. The asset will have an AOC of $35,000 and a salvage value of $10,000. The book value at the end of year 3 will be closest to: (a) $8000 (b) $20,

> Classic straight line depreciation of a $100,000 asset takes place over a 5-year recovery period. If the salvage value is 15% of first cost, the depreciation charge for year 3 is closest to: (a) $17,000 (b) $20,000 (c) $24,000 (d) $28,000

> All of the following assets can be depreciated, except: (a) A bulldozer (b) A copper mine (c) A surgical robot (d) A conveyor belt

> Benjamin used regression analysis to fit quadratic relations to monthly revenue, R, and total cost, TC, data with the following results, where Q is quantity. R = −0.008Q2 + 32Q TC = 0.005Q2 + 2.2Q + 10 (a) Plot R and TC. Estimate the quantities QBE and Q

> When there are a total of four projects involved in a capital budgeting study, the maximum number of bundles that can be formulated is: (a) 6 (b) 8 (c) 15 (d) 16

> Hempstead Industries has a new milling machine with B = $110,000, n = 10 years, and S = $10,000. Determine the depreciation schedule and present worth of depreciation at i = 12% per year, using the 175% DB method for the first 5 years and switching to th

> If B = $45,000, S = $3000, and n = 5-year recovery period, use a spreadsheet and i = 18% per year to maximize the present worth of depreciation, using the following methods: DDB-to-SL switching (this was determined in Problem 16A.6) and MACRS. Given that

> An asset has a first cost of $45,000, a recovery period of 5 years, and a $3000 salvage value. Use the switching procedure from DDB to SL depreciation, and calculate the present worth of depreciation at i = 18% per year.

> A new hybrid car was purchased by Pedernales Electric Cooperative as a courier vehicle to transport items between its 12 city offices. The car cost $35,000 and was retained for 5 years. Alternatively, it could have been retained for 100,000 miles. Salvag

> A robot used in simulated car crashes cost $70,000, has no salvage value, and has an expected capacity of tests not to exceed 10,000 according to the manufacturer. Volvo Motors decided to use the unit-of-production depreciation method because the number

> If B = $400,000, n = 6 years, and S is estimated at 15% of B for a new pavement recycling machine, use the SYD method to determine (a) the book value after 3 years, and (b) the rate of depreciation and the depreciation amount in year 4.

> Earthmoving equipment with a first cost of $150,000 is expected to have a life of 10 years. The salvage value is expected to be 10% of the first cost. Calculate (a) by hand, and (b) by spreadsheet the depreciation charge and book value for years 2 and 7

> From the five independent projects shown below, the one(s) to select with a capital limitation of $35,000 is/are: (a) P (b) PT (c) T (d) Q

> A European manufacturing company has new equipment with a first cost of 12,000 euros, an estimated salvage value of 2000 euros, and a recovery period of 8 years. Use the SYD method to tabulate annual depreciation and book value. Solve by hand and spreads

> Develop all (a) acceptable, and (b) nonacceptable mutually exclusive bundles for four independent projects if the investment limit is $350 and the following project selection restriction applies: Project 2 can be selected only if project 3 is selected. P

> Six projects have been identified for possible implementation by a company that makes dry ice blasters, machines that propel tiny dry ice pellets at supersonic speeds so they flash freeze and then lift grime, paint, rust, mold, asphalt, and other contami

> Develop all of the mutually exclusive bundles from independent projects identified as A, B, and C.

> If the cost of lime were to increase by 50%, would the cost difference between the best alternative and second- best alternative increase, decrease, or remain the same?

> Does a decrease in the efficiency of the aerator motor make the selected alternative of sludge recirculation only more attractive, less attractive, or the same as before?

> What will be the monthly savings in electricity from discontinuation of aeration if the cost of electricity is now 12 ¢∕kWh?

> Well-managed companies set aside money to pay for emergencies that inevitably arise in the course of doing business. A commercial solid-waste recycling and disposal company in Mexico City puts 0.5% of its after-tax income into such an account. (a) How mu

> How many mutually exclusive bundles can be formed from the following number of different independent projects: (a) 5; (b) 8; (c) 13? (d) By what amount is each total reduced if the DN project is not an option?

> State the difference between a contingent project and a dependent project.

> Listed below are bundles, each comprised of three independent proposals for which the PW has been estimated. For a capital investment limit of $45,000 and a MARR of 9% per year, the bundle selected is: (a) 1 (b) 2 (c) 3 (d) 4

> A video recording system was purchased 3 years ago at a cost of $30,000. A 5-year recovery period and MACRS depreciation have been used to write off the basis. The system is to be prematurely replaced with a trade-in value of $5000. Determine the MACRS d

> List at least three characteristics of a capital budgeting study.

> Quantum Electronic Services paid P = $40,000 for its networked computer system. Both tax and book depreciation accounts are maintained. The annual tax recovery rate is based on the previous year’s book value (BV), while the book depreci

> Jobe Concrete Products placed a new sand sifter into production 3 years ago. It had an installed cost of $100,000, a life of 5 years, and an anticipated salvage of $20,000. Book depreciation charges for the 3 years are $40,000, $24,000, and $14,000, resp

> An energy production company has the following information regarding the acquisition of new gasturbine equipment. Purchase price = $780,000 Trans-oceanic shipping and delivery cost = $4300 Installation cost (1 technician at $1600 per day for 4 days) = $6

> Cyber Manufacturing purchased a complete video borescope system for applications that require work in places where eyes cannot see. The purchase price was $18,000, shipping and delivery was $300, installation cost was $1200, tax recovery period was 7 yea

> Ederly Quarry sells a wide variety of cut limestone for residential and commercial building construction. A recent quarry expansion cost $2.9 million and added an estimated 100,000 tons of reserves. (a) Estimate the cost depletion allowance for the next

> Carrolton Oil and Gas, an independent oil and gas producer, is approved to use a 20% of gross income depletion allowance. The write-off last year was $700,000 on its horizontal directional drill wells. Determine the estimated total reserves in barrels if

> There are three different life (recovery period) values associated with a depreciable asset. Identify each by name and explain how it is correctly used.

> SA Forest Resources purchased forest acreage for $500,000 from which an estimated 200 million board feet of lumber are recoverable. The company will sell the lumber for $0.10 per board foot. No lumber will be sold next year because an environmental impac

> A relatively small privately-owned coal-mining company has the sales results summarized below. Determine the annual percentage depletion for the coal mine. Assume the company’s taxable income is $140,000 each year.

> The profitability index at 10% per year for a project that has an initial investment of $400,000, an AOC of $80,000 per year, revenue of $170,000 per year, and a salvage value of $60,000 after its 5-year life is closest to: (a) 0.95 (b) 1.06 (c) 1.38 (d)

> When WTA, Inc. purchased rights to extract silver from a mine for a total price of $2.1 million 3 years ago, the estimated 350,000 ounces of silver was to be removed over the next 10 years. A total of 175,000 ounces has been removed and sold thus far. (a

> What is the difference between depreciation and depletion?

> A plant manager for a fiber optics cable manufacturing company knows that the remaining capital investment in several types of equipment is more closely approximated when the equipment is depreciated linearly by the SL method compared to a rapid write-of

> (a) State the difference between book value and market value. (b) Describe a condition under which they will have significantly different values.

> An automated assembly robot that cost $400,000 has a depreciable life of 5 years with a $100,000 salvage value. The MACRS depreciation rates for years 1, 2, and 3 are 20.00%, 32.00%, and 19.20%, respectively. What is the book value at the end of year 3?

> For the MACRS method of depreciation, identify (a) the six standardized recovery periods for personal property, (b) the two recovery periods for real property, (c) the assumed salvage value for personal property, and (d) the default recovery period for a

> New equipment to read 96-bit product codes that are replacing old bar codes has just been purchased by General Food Stores. As a trial, 1000 of the items will be initially purchased. For book depreciation purposes (not tax), the total investment of $50,0

> A video recording system was purchased 3 years ago at a cost of $40,000. A 5-year recovery period and DDB depreciation have been used to write off the basis. The system is to be replaced this year with a trade-in value of $4000. What is the difference be

> If the salvage value of an asset is nil and it is depreciated by the double declining balance method, what percentage of the asset’s first cost will remain after its 5-year life?

> If an asset is book-depreciated by the DDB method over a 5-year period, how long will it take to reach its salvage value if the estimated salvage is 25% of the first cost?

> In capital budgeting, when the present worth over the respective life of each project is used to select independent projects, all positive net cash flows are assumed to be: (a) Reinvested at the MARR through the end of the shortest-lived project (b) Rein

> Determine the first cost of a machine that is used for making spill-containment pallets if its book value in year 3 is $25,000. The machine has a 5-year life and the double declining balance method is applied.

> What is meant by an asset’s unadjusted basis? Adjusted basis?

> Software and hardware for optimizing cell design of robotic picking lines have an installed cost of $78,000 with no residual value after 5 years. For years 2 and 4, use DDB book depreciation to determine (a) the depreciation charge, and (b) the book valu

> A special-purpose digitizing system just acquired by Bzybee Consultants has B = $50,000 and a 4-year recovery period. (a) What is the accumulated depreciation after year 3 if the salvage value of the system is $5000? (b) What is the total amount of depre

> An asset owned by Photon Environmental was book-depreciated by the straight line method over a 5-year period with book values of $296,000 and $224,000 in years 2 and 3, respectively. Determine (a) the salvage value S used in the calculation, and (b) the

> Kobi Technologies book-depreciated an asset at $27,500 per year for 4 years using the straight line method. If the book value at the end of year 2 was $65,000, determine the asset’s (a) salvage value, and (b) first cost.

> A company that manufactures pulse doppler insertion flow meters uses the straight line method for book depreciation purposes. Newly-acquired equipment has a first cost of $170,000 with a 3-year life and $20,000 salvage value. Determine the depreciation c

> Goodson Healthcare purchased a new sonogram imaging unit for $300,000 and a truck body and chassis for an additional $100,000 to make the unit mobile. The unit-truck system will be depreciated as one asset. The functional life is 8 years, and the salvage