Reference no: EM132514616

Question 1: The manager of Big Mac Ltd is considering the purchase of equipment to make hamburgers that will reduce annual operating costs by $1500. The equipment will cost $6000 and will have a useful life of ?ve years with no resale value. The new equipment will replace equipment purchased ?ve years ago at a cost of $10 000. that has a book value of $5000 and no resale value. What will be the net effect on pro?t for the next ?ve years in total if the new equipment is purchased? (Ignore tax effects.)

A. $7500 increase

B. $4500 decrease

C. $3500 decrease

D. $1500 increase

Question 2: Jaspar Ltd has 1000 units in inventory that cost $2.00 per unit to produce. Due to changing technology. the sales department is having dif?culty selling the product. It will cost $500 to scrap the units. The company should consider any price over:

A. $2000.

B. $2500.

C. $1500.

D. $0.

Question 3: Mod Clothiers makes women's clothes. It costs $28 000 to produce 5000 pairs of polka-dot polyester pants. They have been unable to sell the pants at their usual price of $50.00. The company is evaluating two alternatives. They could sell the pants 'as is' for a total of $15 000 or they could modify the pants at a cost of $3000 and sell them for a total of $20,000. What would be the effect on pro?t of modifying the pants and selling them as opposed to selling 'as is'?

A. $8000 decrease

B. $11 000 decrease

C. $2000 increase

D. $3000 increase

Question 4: Mod Clothiers makes women's clothes. It costs $28 000 to produce 5000 pairs of polka-dot polyester pants. They
have been unable to sell the pants at their usual price of $50.00. The company is evaluating two alternatives. They could sell the pants 'as is' for a total $15 000 or they could modify the pants and sell them for a total of $20 000. Atghat cost to modify each pair of pants. would Mod Clothiers be indifferent between the two alternatives?

A. 0.40

B. $0.50

C. $0.75

D. $1.00