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chapter_27

# chapter_27 - CHAPTER 27 Incremental Analysis and Capital...

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27-1 CHAPTER 27 Incremental Analysis and Capital Budgeting ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Identify the steps in management’s decision- making process. 1, 2 1 2. Describe the concept of incremental analysis. 3, 4 2 3. Identify the relevant costs in accepting an or- der at a special price. 5 3 1 1A 1B 4. Identify the relevant costs in a make-or-buy decision. 6, 7 4 2 2A 2B 5. Give the decision rule for whether to sell or pro- cess materials further. 8 5 3 6. Identify the factors to be considered in retaining or replacing equipment. 9 6 4 7. Explain the relevant fac- tors in deciding whether to eliminate an unprofit- able segment. 10 7 5 3A 3B 8. Determine which products to make and sell when re- sources are limited. 11 8 6 9. Contrast the annual rate of return and cash pay- back techniques in cap- ital budgeting. 12, 13, 14, 15, 16 9 7, 8, 9 4A, 5A 4B, 5B

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27-2 ASSIGNMENT CLASSIFICATION TABLE (Continued) Study Objectives Questions Brief Exercises Exercises A Problems B Problems 10. Distinguish between the net present value and internal rate of return methods. 17, 18, 19, 20 10 8, 9, 10 4A, 5A 4B, 5B
27-3 ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted (min.) 1A Make incremental analysis for special order and identify nonfinancial factors in decision. Simple 20-30 2A Make incremental analysis related to make or buy; con- sider opportunity cost, and identify nonfinancial factors. Moderate 30-40 3A Compute contribution margin and prepare incremental analysis concerning elimination of divisions. Moderate 30-40 4A Compute annual rate of return, cash payback, and net present value. Moderate 30-40 5A Compute annual rate of return, cash payback, and net present value. Complex 30-40 1B Make incremental analysis for special order and identify nonfinancial factors in decision. Simple 20-30 2B Make incremental analysis related to make or buy; con- sider opportunity cost, and identify nonfinancial factors. Moderate 30-40 3B Compute contribution margin and prepare incremental analysis concerning elimination of divisions. Moderate 30-40 4B Compute annual rate of return, cash payback, and net present value. Moderate 30-40 5B Compute annual rate of return, cash payback, and net present value. Complex 30-40

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BLOOM'S TAXONOMY TABLE 27-4 Correlation Chart between Bloom’s Taxonomy, Study Objectives and End-of-Chapter Exercises and Problems Study Objective Knowledge Comprehension Application Analysis Synthesis Evaluation 1. Identify the steps in management’s decision-making process. BE27-1 Q27-1 Q27-2 2. Describe the concept of incremental analysis. Q27-3 Q27-4 BE27-2 3. Identify the relevant costs in accepting an order at a special price. Q27-5 BE27-3 E27-1 P27-1A P27-1B 4. Identify the relevant costs in a make- or-buy decision.
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