General Accounting The Western and Pacific Railroad has two divisions, the WesternDivision and the Pacific Division. The company recently invested$8,000,000 to maintain its railroad track. Pertinent data for thetwo divisions are as follows:Total miles traveled:Western Division: 800,000 milesPacific Division: 1,200,000 milesThe amount of risk improvement cost that should be allocatedto the Western Division is: (Do not round your intermediatecalculations.)a. $4,000,000.b. $3,200,000.c. $800,000.d. $5,333,333.

Step 1: Define Cost AllocationCost allocation is a technique used to assign a shared manufacturing…

Answered: The Western and Pacific Railroad has…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mace Manufacturing is in the process of analyzing its investment decision-making procedures. Two projects evaluated by the firm recently involved building new facilities in different regions, North and South. The basic variables surrounding each project analysis and the resulting decision actions are summarized in the following table: Basic variables North South Cost $7,000,000 $6,370,000 Life 12 years 12 years Expected return 7.8% 14.7% Least-cost financing Source Debt Equity Cost (after-tax) 5.1% 16.6% Decision Action Invest Don't invest Reason 7.8%>5.1% cost 14.7%<16.6% cost a. An analyst evaluating the North facility expects that the project will be financed by debt that costs the firm 5.1%. What recommendation do you think this analyst will make regarding the investment opportunity? b. Another analyst assigned to study the South facility believes that…
The estimate for the Gross Pointe project is: • market research: $2 million research & development: $5 million • initial investments: $25 million · Cost of salvage and removal: $1 million The project has not undertaken any of the above steps yet. What amount should be considered a SUNK cost? O $2 million $7 million $32 million none of the above is sunk cost--all are relevant costs
Consider a project with the following information: Initial fixed asset investment = $540,000; straight-line depreciation to zero over the 4-year life; zero salvage value; price = $52; variable costs = $33; fixed costs = $222,000; quantity sold = 112,000 units; tax rate = 21 percent. How sensitive is OCF to changes in quantity sold?
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Consider a four-year project with the following information: Initial fixed asset investment = $575,000; straight-line depreciation to zero over the four-year life; zero salvage value; price = $29; variable costs = $19; fixed costs = $235,000; quantity sold = 76,000 units; tax rate = 21 percent. How sensitive is OCF to changes in quantity sold
Consider a three-year project with the following information: initial fixed asset investment = $710,000; straight-line depreciation to zero over the 5-year life; zero salvage value; price = $39.39; variable costs = $28.31; fixed costs = $332,000; quantity sold = 87,000 units; tax rate = 24 percent. How sensitive is OCF to changes in quantity sold? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) AOCF/AQ
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