Question

Question 29 Tiberius Manufacturing is considering two alternative investment proposals with the following data: Not yet answered Marked out of 2.00 P Flag question Proposal x Proposal Y Investment $10,500,000 $500,000 Useful life 5 years 5 years Estimated annual net cash inflows for 5 years $2,100,000 $105,000 Residual value $52,000 $32,000 Depreciation method Straight-line Straight-line Required rate of return 13% 12% Calculate the accounting rate of return for Proposal Y. (Round any intermediate calculations and your final answer to two decimal places.) Select one: O A. 4.29% O B. 9.52% O C. 13.87% OD. 12.63%

Answer 1

29)Correct option is "A" -4.29%

Annual Depreciation expense =[Cost-salvage value] /useful life

             = [500000 -32000]/5

            = 468000/5

            = 93600

Net income =annual cash flow -depreciation expense

                 = 105000 -93600

                = 11400

Average investment = [cost+salvage value ]/2

            = [500000+32000]/2

            = 266000

Accounting rate of return = Net income /average investment

              = 11400/266000

             = 4.29%

30)Correct option is "D " - 45400 F

Fixed overhead Volume variance = Budgeted fixed overhead - Standard fixed overhead

                           = 25000 - (2200 actual ouput * 4 hours per unit * 8Rate per hour)

                         = 25000 - 70400

                         = -45400 F (Enter as 45400 F as positive value)