1.Which of the statements below is correct?
Sol. Simple (no-return) payback is always shorter than discounted payback.
2.All of the below are disadvantages of the simple (no-return) payback method of
evaluation when compared to the present worth, annual worth, and rate of return
methods, except:
Sol. It is more time consuming to compute.
3.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 $2,000 salvage value. Machine Y will cost $11,000 and
have a life of 4 years with no salvage value. The annual maintenance cost for
machines X and Y are $6,000 and $5,000 per year, respectively. A total of 4
operators will be required for the two machines at a rate of $22.50 per hour per
person. In a normal 8-hour day, the 4 operators and two machines can produce
1,000 cartons. The variable cost per carton associated with the in-house option is
closest to
Sol. $0.72.
4.The economic service life of the cha
Sol. 3 years.
5.The annual worth values for a defender, which can be replaced with a similar
used asset, and a challenger are estimated. The defender should be replaced
Sol. 2 years from now.
6.All of the below are assumptions needed in a replacement study with an
unlimited time horizon, except:
Sol. Once the challenger replaces the defender, the challenger cannot be repeated
for succeeding life cycles
7.Only 2 years ago, Techtron purchased for $275,000 a fully loaded SCADA
(supervisory control and data acquisition) system including hardware and software
for a processing plant operating on the Houston ship channel. When it was
purchased, a life of 5 years and salvage of $55,000 were estimated. Actual
maintenance and operating (M&O) costs were $20,000 in year 1 and $25,000 in
year 2. The M&O costs are expected to be $30,000 in year 3, $35,000 in year 4, and
$40,000 in year 5. For the purposes of evaluating whether to keep the SCADA
system or replace it with a newer model, which of the costs given above are sunk
costs?
Sol. The $275,000 purchase price and the $45,000 M&O costs in years 1 and 2.
8.All of the below are reasons to conduct a replacement study, except:
Sol. reduced market value of the existing asset
9.In a replacement analysis, the presently-owned asset is usually known as the
_____.
Sol. Defender
10.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 2
workers at $80 per day each. Together, these workers can generate 100 units.
Process B will have fixed costs of $56,000 per year, but with this process, 3 workers
will generate 200 units of product. If x is the number of units, the variable cost
(VC) per year for B is best represented as
Sol. VC per Year = [3(80)/200]x.
Other Links:
Statistics Quiz
Networking Quiz
See other websites for quiz:
Check on QUIZLET
Check on CHEGG