A Company Has Just Sold a Product with the Following

question 221

Multiple Choice

A company has just sold a product with the following payment plan: $75,000 today, $50,000 at the end of year 1, and $25,000 at the end of year two. If the payments
Are deposited into an account earning 4.5% per year, calculate the present value for the cash flow.

• A) $145,740
• B) $165,323
• C) $175,536
• D) $185,643
• E) $193,466

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Definitions:

Raw Material Price

This refers to the cost of basic materials that are used in the production of goods.

FOH Budget Variance

The difference between the budgeted factory overhead costs and the actual overhead costs incurred.

FOH Volume Variance

The difference between the budgeted fixed overhead and the applied amount based on the actual activity level.

Fixed Manufacturing Overhead

Costs that do not vary with the level of production or sales, including rent, depreciation, and salaries of certain employees in a manufacturing facility.