Starburst Manufacturing Reports the Following Long-Term Assets for Its Lighting

question 2

Multiple Choice

Starburst Manufacturing reports the following long-term assets for its lighting division: $\begin{array}{|l|r|r|} \hline& \text { Carrying value } & \begin{array}{c}\text { Estimated fair } \\\text { value }\end{array} \\\hline \text { Factory building (shared with other divisions) } & \$ 2,500,000 & \\\hline \text { Less: Accumulated depreciation } & (1,000,000 & \\\hline \text { Net book value } & \$ 1,500,000 & \$ 3,800,000 \\\hline \text { Land } & \$ 1,750,000 & \$ 3,500,000 \\\hline \text { Manufacturing equipment for lighting division } & \$ 525,000 & \\\hline \text { Less: Accumulated depreciation } &(150,000 ) & \\\hline \text { Net book value } & \$ 375,000 & \$ 340,000 \\\hline \text { General factory equipment (used in several } & \\\text { divisions) } &\$ 1,600,000 & \\\hline \text { Less: Accumulated depreciation } &(900,000 ) \\\hline \text { Net book value } & \$ 700,000 & \$ 650,000\\\hline\text { Total net fixed assets }& \$ 4,325,000\\ \hline\end{array}$

As a result of new technology, Starburst believes that the lighting division's equipment in their manufacturing facility is nearly obsolete. They project the following future cash flows for the lighting division's operations:
Future period Cash-flow projection
Year 1 $50,000
Year 2 $35,000
Year 3 $20,000
Year 4 $12,000
Year 5 $6,000
What is the impairment loss, if any, for the appropriate asset group, assuming a discount rate of 8%? (Use spreadsheet software or a financial calculator to calculate your answer.)

• A) $105,084
• B) $269,916
• C) $0
• D) $375,000

Recognize the differences between push and pull production systems.

Learn how to calculate the ending balance in finished goods inventory.

Understand the impact of lean principles on reducing waste and its importance to the triple bottom line.

Understand the components of a simple regression model and the meaning of its parameters.

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Definitions:

Segmented Income Statements

Financial statements that divide a company's financial performance into segments, such as departments or product lines, to assess each segment's profitability separately.

CM Ratio

The contribution margin ratio, calculated as the contribution margin divided by net sales revenue, indicating the proportion of sales revenue available to cover fixed costs and generate profit.

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific department, project, or segment of a business.

Common Fixed Expenses

Overhead costs that do not vary with the level of production or sales, shared across different segments of a business.