Question

# CT expects sales for June, July, and August of \$48,000, \$54,000, and \$44,000, respectively. Experience suggests...

CT expects sales for June, July, and August of \$48,000, \$54,000, and \$44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month following sale, 45% in the second month following sale, and 5% are not collected. What are the company's expected cash receipts for August from all customers?

A. \$29,160

B. \$61,160

C. \$46,760

D. \$78,800

E. \$66,200

How is depreciation handled by the following capital budgeting techniques? (Ignore income taxes in this problem.)

A. IRR: Included; AARR: Included; Payback: Excluded

B. IRR: Excluded; AARR: Excluded; Payback: Included

C. IRR: Excluded; AARR: Included; Payback: Excluded

D. IRR: Included; AARR: Excluded; Payback: Included

Which of the following is not a batch-level activity?

A. Inspecting the product prior to inserting it in the each individual packaging.

B. Preparation of shipping documents for an order; the minimum order size is 50 units .

C. Preparing the duplicating machine to generate copies of the product from a master mould.

The net present value method of capital budgeting assumes that cash flows are reinvested at what rate?

A. The rate of return on the company's debt.

B. The discount rate used in the analysis.

C. A zero rate of return.

D. The internal rate of return on the project.

1. Cash receipts for august = (August Sales * 40%) + (July Sales * 60% * 50%) + (June month Sales * 60% * 45%)

= (44000*40%) + (54000*60%*50%) + (48000*60%*45%)

= 17600 + 16200 + 12960 = \$ 46760 (Option C)

2. Depreciation is excluded in computation of Net Cash flows. Net cash flows are used in computation of IRR and payback period that implies depreciation is excluded in computation of IRR and payback period. (Option C)

3. Option A - Here individual product is inspected for packing.

4. Option D: IRR of the project, otherwise the return will get affected

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