# accounting homework 43

#### Problem 1:

Horowitz Company is planning to produce 2,000 units of product in 2012. Each unit requires 3 pounds of materials at $6 per pound and a half-hour of labor at $14 per hour. The overhead rate is 70$ of direct labor.

- Compute the budgeted amounts for 2012 for direct materials to be used, direct labor, and applied overhead.
- Compute the standard cost of one unit of product.
- What are the potential advantages to a cooperation of using standard costs?

#### Problem 2

Armand Company is considering a capital investment of $150,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $18,000 and $48,000, respectively. Armando has a 12% cost of capital rate, which is the minimum acceptable rate of return on the investment.

- Compute (1) the annual rate of return and (2) the cash payback period on the proposed capital expenditure.
- Using the discounted cash flow technique, compute the net present value.
- (Round to two decimals)