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1.(TCO 9) An investment of $185,575 is expected to generate returns of $65,000 per year for each of the next four years. What is the investment’s internal rate of return? (Points : 25)
2. (TCO 4) Legal Docs Inc is a legal services firm that files incorporation papers for small businesses. They charge $1,000 per application. This year’s income statement shows the following:
Sales $1,295,000
Variable Expenses $1,023,000
Contribution margin $272,000
Fixed costs $250,000
Profit $22,000
Required:
(a) Compute the break-even point in units.
(b) Compute the contribution margin ratio.
(c) Compute the current margin of safety.
(d) How many applications must the company sell to make a profit of $350,000? (Points : 25)
3. (TCO 5) The following data has been taken from Air-Tite company in its first year of business.
Units produced 200,000
Units sold 180,000
Units in ending inventory 20,000
Fixed manufacturing overhead $600,000
(a) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if full absorption costing is used.
(b) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if variable costing is used.
(c) Compute the amount of fixed manufacturing overhead that would be included in ending inventory under full absorption costing. (Points : 25)