Mr. J's Bagels invested in a new oven for $32,000. The oven reduced the amount of time for baking which increased production and sales for five years by the following amounts of cash inflows:

Ann is trying to decide which one of two job offers she will accept. Several items are presented below:

	Job Offer A				Job Offer B
(1) Base salary	$	50,000			$	50,000
(2) Overtime compensation	Comp. time				Hourly rate
(3) Moving allowance	$	3,000			$	3,000
(4) Signing bonus	$	2,000			$	0
(5) Job search costs incurred	$	300			$	500

Select the items that are irrelevant to Ann's decision.

Explanation

Two primary characteristics distinguish relevant from useless information. Specifically, relevant information (1) differs among the alternatives and (2) is future-oriented.

 The Russell Company provides the following standard cost data per unit of product:

 

Direct material (2 gallons @ $2 per gallon)	$	4.00
Direct labor (1 hours @ $12 per hour)	$	12.00

During the period, the company produced and sold 25,000 units, incurring the following costs:
 

Direct material	53,000	gallons	@	$	1.90	per gallon
Direct labor	25,500	hours	@	$	11.75	per hour

 

The direct labor usage variance was:
 

Explanation

Usage variance = (Actual quantity – Standard quantity) × Standard price
Usage variance = [25,500 hours – (25,000 units × 1 hours per unit)] × $12 per hour
Usage variance = (25,500 hours – 25,000 hours) × $12 per hour = $6,000
Since the actual quantity was greater than the standard quantity, the variance is unfavorable.

 Mr. J's Bagels invested in a new oven for $32,000. The oven reduced the amount of time for baking which increased production and sales for five years by the following amounts of cash inflows:

Year 1	Year 2	Year 3	Year 4	Year 5
$14,000	$12,000	$11,000	$12,000	$11,000

Using the averaging method, the payback period for the investment in the oven would be:

Explanation

Payback period = Initial investment ÷ Average annual cash inflow
Payback period = $32,000 ÷ [($14,000 + $12,000 + $11,000 + $12,000 + $11,000) ÷ 5] = $32,000 ÷ $12,000 = 2.67

Thanks