To Expand Sales, Sandine Corporation Is Evaluating Whether to Purchase

question 3

Multiple Choice

To expand sales, Sandine Corporation is evaluating whether to purchase a machine to manufacture a new product line. Which of the following statements is correct concerning an expansion analysis like the one Sandine faces?

• A)The machine's annual depreciation expenses will be deducted from the firm's net income to calculate its supplemental operating cash flows.
• B)The new machine will be acceptable as long as the sum of its net cash flows is positive.
• C)The shipping and installation costs associated with purchasing the new machine are included in the computation of its initial investment outlay.
• D)The cost of a feasibility study that Sandine conducted last year to determine whether to further evaluate the introduction of the new product line should be included in the calculation of the new machine's initial investment outlay.
• E)The salvage value of the new machine should be included in the computation of its initial investment outlay.

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Definitions:

Cost Reconciliation Report

A financial document that adjusts and aligns cost elements within a specific period or project to ensure accounting accuracy.

Units Transferred

The total number of units moved from one stage of production to the next or from one department to another during a period.

Department

A distinct area, division, or branch of an organization designated to perform specific functions or tasks.

Cost Reconciliation Report

A financial report that explains the differences or reconciles the variances between the cost of beginning and ending inventories in cost accounting.