The profitability index (PI) is one of the techniques of capital budgeting which helps to identify the financial viability of the project. The profitability index is calculated by dividing the present value of cash inflow by the present value of cash outflows . The profitability index must more than 1 to make it acceptable. the profitability index for each project.

Question

Pugh Sporting Goods manufactures two types of kayaks: River Explorers and Lake Cruisers. The company incurred manufacturing overhead costs of $320,000 in May. They have decided to allocate these costs based on units produced. During May, the company used 10,500 direct labor hours for River Explorers and 12,000 direct labor hours for Lake Cruisers. In total, the company produced 8,000 River Explorers and 6,000 Lake Cruisers. The amount of overhead allocated to each product, respectively, would be: a) $182,880 and $137,160 b) $140,000 and $180,000 c) $160,000 and $160,000 d) $175,000 and $145,000 e) $168,000 and $152,000

Answer 1

Question

Chapter 8, Problem 8.5E

1.

To determine

Concept Introduction:

The profitability index (PI) is one of the techniques of capital budgeting which helps to identify the financial viability of the project. The profitability index is calculated by dividing the present value of cash inflow by the present value of cash outflows. The profitability index must more than 1 to make it acceptable.

the profitability index for each project.

2.

To determine

Concept Introduction:

The profitability index (PI) is one of the techniques of capital budgeting which helps to identify the financial viability of the project. The profitability index is calculated by dividing the present value of cash inflow by the present value of cash outflows. The profitability index must more than 1 to make it acceptable.

the ranking for each project.

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