Net Present Value and Materials Price Variance - 1317 Words

1. The direct materials quantity standard should A) exclude unavoidable waste. B) exclude quality considerations. C) allow for normal spoilage. D) always be expressed as an ideal standard. Use the following to answer questions 2-4: Stiner Company has a materials price standard of $2.00 per pound. Five thousand pounds of materials were purchased at $2.20 a pound. The actual quantity of materials used was 5,000 pounds, although the standard quantity allowed for the output was 4,500 pounds. 2. Stiner Company’s materials price variance is A) $100 U. B) $1,000 U. C) $900 U. D) $1,000 F. = (AQ Ãâ€" AP) – (AQ Ãâ€" SP) = (5,000 Ãâ€" $2.2)-(5,000 Ãâ€" $2) = $1,000 U 3. Stiner Company’s†¦show more content†¦The profitability index is computed by dividing the A) total cash flows by the initial investment. B) present value of cash flows by the initial investment. C) initial investment by the total cash flows. D) initial investment by the present value of cash flows. 18. To avoid rejecting projects that actually should be accepted, 1. intangible benefits should be ignored. 2. conservative estimates of the intangible benefits’ value should be incorporated into the NPV calculation. 3. calculate net present value ignoring intangible benefits and then, if the NPV is negative, estimate whether the intangible benefits are worth at least the amount of the negative NPV. A) 1 B) 2 C) 3 D) both 2 and 3 are correct 19. The standard direct materials quantity does not include allowances for A) unavoidable waste. B) normal spoilage C) unexpected spoilage D) all of the above are included. 20. A project with a zero net present value indicates that it is A) unacceptable B) profitable C) acceptable D) going to have an acceptable cash payback period. 21. The capital budget for the year is approved by a company’s A) board of directors B) capital budgeting committee C) officersShow MoreRelatedBusiness Question Paper3119 Words   |  13 PagesRamanujam 1. 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