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.

  1. Compute the budgeted amounts for 2012 for direct materials to be used, direct labor, and applied overhead.
  2. Compute the standard cost of one unit of product.
  3. 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.

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

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