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Question: Jones Excavation Company is planning an investment

Jones Excavation Company is planning an investment of $125,000 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged $90 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $7,500. The bulldozer uses fuel that is expected to cost $15 per hour of bulldozer operation. a. Determine the equal annual net cash flows from operating the bulldozer. b. Determine the net present value of the investment, assuming that the desired rate of return is 10%. Use the present value of an annuity table appearing in Exhibit 5 of this chapter. Round to the nearest dollar. c. Should Jones invest in the bulldozer, based on this analysis? Explain. d. Determine the number of operating hours such that the present value of cash flows equals the amount to be invested. Round all calculations to whole numbers. Table appearing in Exhibit 5:
Jones Excavation Company is planning an investment of $125,000 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged $90 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $7,500. The bulldozer uses fuel that is expected to cost $15 per hour of bulldozer operation.
a. Determine the equal annual net cash flows from operating the bulldozer.
b. Determine the net present value of the investment, assuming that the desired rate of return is 10%. Use the present value of an annuity table appearing in Exhibit 5 of this chapter. Round to the nearest dollar.
c. Should Jones invest in the bulldozer, based on this analysis? Explain.
d. Determine the number of operating hours such that the present value of cash flows equals the amount to be invested. Round all calculations to whole numbers.

Table appearing in Exhibit 5:



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> Collegiate Publishing Inc. began printing operations on March 1. Jobs 301 and 302 were completed during the month, and all costs applicable to them were recorded on the related cost sheets. Jobs 303 and 304 are still in process at the end of the month, a

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> The following is a manufacturing cost report of Marching Ants Inc. a. List the errors in the preceding report. b. Prepare a corrected report.

> What are some drawbacks of applying support department costs using a single plant-wide rate?

> A partial list of the costs for Wisconsin and Minnesota Railroad, a short hauler of freight, follows. Classify each cost as either indirect or direct. For purposes of classifying each cost, use the train as the cost object. a. Costs of accident cleanup b

> From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences: a. An example of factory overhead is (electricity used to run assembly line, CEO salary). b. Direct materials costs combined with direc

> The balance sheet for Garcon Inc. at the end of the current fiscal year indicated the following: Bonds payable, 8% ……………………….. $5,000,000 Preferred $4 stock, $50 par …………….. 2,500,000 Common stock, $10 par ………………….. 5,000,000 Income before income tax exp

> An analysis of the general ledger accounts indicates that office equipment, which cost $245,000 and on which accumulated depreciation totaled $112,500 on the date of sale, was sold for $105,900 during the year. Using this information, indicate the items

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> Buffalo BBQ Restaurant is trying to become more efficient in training its chefs. It is experimenting with two training programs aimed at this objective. Both programs have basic and advanced training modules. The restaurant has provided the following dat

> Why does support department cost allocation matter to service businesses (such as colleges and universities)?

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> American Express Company is a major financial services company noted for its American Express® card. Some of the performance measures used by the company on its balanced scorecard follow: For each measure, identify whether the measure best fi

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> Jackson Fabricators Inc. machines metal parts for the automotive industry. Under the traditional manufacturing approach, the parts are machined through two processes: milling and finishing. Parts are produced in batch sizes of 40 parts. A part requires 6

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> Furry Friends Inc. manufactures toy stuffed animals. The direct labor time required to cut, sew, and stuff a toy is 10 minutes per unit. The company makes two types of stuffed toys—a lion and a bear. The lion is assembled in lot sizes of 50 units per bat

> Rag Swag Inc. manufactures various styles of men’s casual wear. Shirts are cut and assembled by a workforce that is paid by piece rate. This means that they are paid according to the amount of work completed during a period of time. To illustrate, if the

> How can support department and joint cost allocation affect production employee performance evaluations?

> The procurement process for Jarom Wholesale Company includes a series of activities that transforms a materials requisition into a vendor payment. The process begins with a request for materials. The requesting department prepares and sends a materials r

> The American textile industry has moved much of its operations offshore in the pursuit of lower labor costs. Textile imports have risen from under 5% of all textile production in the early 1960s to over 95% today. Offshore manufacturers make long runs of

> Eon Technologies has recently implemented a lean manufacturing approach. A production manager has approached the controller with the following comments: I am very upset with our accounting system now that we have implemented our new lean manufacturing me

> The chief executive officer (CEO) of Cobalt Inc. just read an article written by a business professor at Harvard University describing the benefits of the lean philosophy. The CEO issued the following statement after reading the article: This company wil

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> Why are support department costs difficult to apply to products?

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> For each of the following support departments, select the cost driver listed that is most appropriate for allocating support department costs to responsible units:

> For each of the following support departments, identify a cost driver that could be used for allocating the support department costs to the profit center: a. Legal b. Duplication services c. Electronic data processing d. Central purchasing e. Telecommuni

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> Based on Ziegler Inc.’s data in Exercise 17, assume that a transfer price of $1,200 has been established and that 75,000 units of materials are transferred, with no reduction in the Components Division’s current sales. a. How much would Ziegler Inc.’s to

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> Data are presented in the following table of returns on investment and residual incomes: Determine the missing items, identifying each item by the appropriate letter.

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> Based on the data in Exercise 10 assume that management has established a 15% minimum acceptable return for invested assets. a. Determine the residual income for each division. b. Which division has the most residual income? Data from Exercise 10:

> The operating income and the amount of invested assets in each division of Conley Industries are as follows: a. Compute the return on investment for each division. b. Which division is the most profitable per dollar invested?

> How can activity-based costing be used in service companies?

> Partially completed budget performance reports for Delmar Company, a manufacturer of light duty motors, follow: a. Complete the budget performance reports by determining the correct amounts for the lettered spaces. b. Compose a memo to Randi Wilkes, vic

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> De Soto Inc. produces tablet computers. The company uses Thin Film Crystal (TFC) LCD displays for its products. Each tablet uses one display. The company produced 770 tablets during July. However, due to LCD defects, the company actually used 800 LCD dis

> The following data relate to the direct materials cost for the production of 50,000 automobile tires: Actual: …………………… 725,000 lbs. at $3.00 per lb. Standard: ……………….. 730,000 lbs. at $2.95 per lb. a. Determine the direct materials price variance, direct

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> Lowell Manufacturing Inc. has a normal selling price of $20 per unit and has been selling 125,000 units per month. In November, Lowell Manufacturing decided to lower its price to $19 per unit expecting it can increase the units sold by 16%. a. Compute th

> Rosenberry Company computed the following revenue variances for January: Revenue price variance ……………. $(350,000) Favorable Revenue volume variance …………… 50,000 Unfavorable Assuming that the planned selling price per unit was $10 and that actual sales we

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> Rockport Industries Inc. gathered the following data for March: a. Compute the revenue price variance. b. Compute the revenue volume variance. c. Compute the total revenue variance.

> How does the “Cost of goods sold” section of the income statement differ between retail and manufacturing companies?

> Why would management be concerned about the accuracy of product costs?

> “Two dollars of gross margin per briefcase? That’s ridiculous!” roared Roy Thurmond, president of First-Line Cases, Inc. “Why do we go on producing those standard briefcases when we&

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> In recent years, public universities have experienced major budget cuts due to reduced funding from their state governments. These budget cuts usually occur at the most inopportune time—during the school year when contractual commitments with faculty and

> A form for using Excel to recreate the Review Problem related to Aerodec, Inc., is shown below. For simplicity, the form excludes the Parts Administration and Material Receipts activities that were included in the Review Problem. Download the workbook co

> Greenwood Company manufactures two products—14,000 units of Product Y and 6,000 units of Product Z. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) s

> Comparative financial statements for Weaver Company follow. During this year, Weaver sold some equipment for $20 that had cost $40 and on which there was accumulated depreciation of $16. In addition, the company sold long-term investments for $10 that ha

> Refer to the financial statement data for Joyner Company in Problem 13–10. Sam Conway, president of the company, considers $15,000 to be the minimum cash balance for operating purposes. As can be seen from the balance sheet data, only $4,000 in cash was

> Refer to the financial statement data for Weaver Company in Problem 13–7. Required: 1. Using the direct method, adjust the company’s income statement for this year to a cash basis. 2. Using the information obtained in

> Refer to the financial statements for Rusco Company in Problem 13–13. Because the Cash account decreased so dramatically during this year, the company’s executive committee is anxious to see how the income statement would appear on a cash basis. Required

> Adria Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company’s five activity cost pools: Required: 1. Compute the activity

> Puget World, Inc., manufactures two models of television sets, the N 800 XL model and the N 500 model. Data regarding the two products follow: Additional information about the company follows: a. Model N 800 XL requires $75 in direct materials per unit,

2.99

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