Variable Production Cost Variance Analysis Iron Products Inc. produces prefabricated iron fencing used in commercial construction. Variable overhead is applied to products based on direct labor hours. The company uses a just-in-time production system and thus has insignificant inventory levels at the end of each month.

The company's income statement for the month of November comparing actual results with the flexible budget based on actual sales of 2,000 units is shown below.

Iron Products is disappointed with the actual results and has hired you as a consultant to provide further information as to why the company has been struggling to meet budgeted net profit. Your review of the above budget versus actual analysis identifies variable cost of goods sold as the main culprit. The unfavorable variance for this line item is $67,400.

After further research, you are able to track down the following standard cost information for variable production costs:

Direct materials (50 pounds per unit at $5 per pound)            $250

Direct labor (3 hours at $20 per hour)                                    60

Variable overhead (3 direct labor hours at $30 per hour)      90

Standard variable production cost per unit                         $400

Actual production information related to variable cost of goods sold for the month of November is as follows:

• 2,000 units were produced and sold.

• 110,000 pounds of material were purchased and used at a total cost

of $528,000.

• 5,600 direct labor hours were used during the month at a total cost

of $134,400.

• Variable overhead costs totaled $205,000.

Required

a. Calculate the material s price variance and materials quantity variance. Clearly

label each variance as favorable or unfavorable.

b. Identify the highest favorable variance and highest Calculate the labor rate

variance and labor efficiency variance. Clearly label each variance as favorable or

unfavorable.

c. Calculate the variable overhead spending variance and variable overhead

efficiency variance. Clearly label each variance as favorable or unfavorable.

d. List each of the six variances calculated in requirements a, b, and c, and total the

variances to show one net variance. Clearly label the net variance as favorable

or unfavorable. Explain how this net variance relates to variable cost of goods

sold on the income statement.

e. Identify the highest favorable variance and highest unfavorable variance from the

six listed in requirement d, and provide one possible cause of each variance.

A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

1. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations.
   Project M    $
   Project N    $

   Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

2. Assuming the projects are independent, which one(s) would you recommend?  
   -Select-Only Project M would be accepted because NPV(M) > NPV(N).Only Project N would be accepted because NPV(N) > NPV(M).Both projects would be accepted since both of their NPV's are positive.Only Project M would be accepted because IRR(M) > IRR(N).Both projects would be rejected since both of their NPV's are negative.Item 11
3. If the projects are mutually exclusive, which would you recommend?
   -Select-If the projects are mutually exclusive, the project with the highest positive NPV is chosen. Accept Project N.If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the shortest Payback Period is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project N.Item 12
4. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?
   -Select-The conflict between NPV and IRR is due to the fact that the cash flows are in the form of an annuity.The conflict between NPV and IRR is due to the difference in the timing of the cash flows.There is no conflict between NPV and IRR.The conflict between NPV and IRR occurs due to the difference in the size of the projects.The conflict between NPV and IRR is due to the relatively high discount rate.

7- CAPITAL BUDGETING CRITERIA

A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

1. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations.
   Project M    $
   Project N    $

   Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

2. Assuming the projects are independent, which one(s) would you recommend?
   -Select-Only Project M would be accepted because NPV(M) > NPV(N).Only Project N would be accepted because NPV(N) > NPV(M).Both projects would be accepted since both of their NPV's are positive.Only Project M would be accepted because IRR(M) > IRR(N).Both projects would be rejected since both of their NPV's are negative.Item 11
3. If the projects are mutually exclusive, which would you recommend?
   -Select-If the projects are mutually exclusive, the project with the highest positive NPV is chosen. Accept Project N.If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the shortest Payback Period is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project N.Item 12
4. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?
   -Select-The conflict between NPV and IRR is due to the fact that the cash flows are in the form of an annuity.The conflict between NPV and IRR is due to the difference in the timing of the cash flows.There is no conflict between NPV and IRR.The conflict between NPV and IRR occurs due to the difference in the size of the projects.The conflict between NPV and IRR is due to the relatively high discount rate.Item 13

7.  Problem 11.07 (Capital Budgeting Criteria)

CAPITAL BUDGETING CRITERIA

A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

1. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations.
   Project M    $
   Project N    $

   Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

2. Assuming the projects are independent, which one(s) would you recommend?
   -Only Project M would be accepted because NPV(M) > NPV(N). -Only Project N would be accepted because NPV(N) > NPV(M). -Both projects would be accepted since both of their NPV's are positive. -Only Project M would be accepted because IRR(M) > IRR(N). -Both projects would be rejected since both of their NPV's are negative.
3. If the projects are mutually exclusive, which would you recommend? -If the projects are mutually exclusive, the project with the highest positive NPV is chosen. Accept Project N. -If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project M. -If the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept Project M. -If the projects are mutually exclusive, the project with the shortest Payback Period is chosen. Accept Project M. -If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project N.

4. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?

   -The conflict between NPV and IRR is due to the fact that the cash flows are in the form of an annuity. -The conflict between NPV and IRR is due to the difference in the timing of the cash flows. -There is no conflict between NPV and IRR. -The conflict between NPV and IRR occurs due to the difference in the size of the projects. -The conflict between NPV and IRR is due to the relatively high discount rate.

Please explain step by step and in simplest terms as possible. Thank You

A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

1. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations.
   Project M    $
   Project N    $

   Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

2. Assuming the projects are independent, which one(s) would you recommend?
   -Select-Only Project N would be accepted because NPV(N) > NPV(M).Both projects would be accepted since both of their NPV's are positive.Only Project M would be accepted because IRR(M) > IRR(N).Both projects would be rejected since both of their NPV's are negative.Only Project M would be accepted because NPV(M) > NPV(N).Item 11
3. If the projects are mutually exclusive, which would you recommend?
   -Select-If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the shortest Payback Period is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project N.If the projects are mutually exclusive, the project with the highest positive NPV is chosen. Accept Project N.Item 12
4. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?
   -Select-The conflict between NPV and IRR is due to the relatively high discount rate.The conflict between NPV and IRR is due to the fact that the cash flows are in the form of an annuity.The conflict between NPV and IRR is due to the difference in the timing of the cash flows.There is no conflict between NPV and IRR.The conflict between NPV and IRR occurs due to the difference in the size of the projects.

12-

CAPITAL BUDGETING CRITERIA

A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

1. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations.
   Project M    $
   Project N    $

   Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

2. Assuming the projects are independent, which one(s) would you recommend?
   -Select-Only Project M would be accepted because NPV(M) > NPV(N).Only Project N would be accepted because NPV(N) > NPV(M).Both projects would be accepted since both of their NPV's are positive.Only Project M would be accepted because IRR(M) > IRR(N).Both projects would be rejected since both of their NPV's are negative.Item 11
3. If the projects are mutually exclusive, which would you recommend?
   -Select-If the projects are mutually exclusive, the project with the highest positive NPV is chosen. Accept Project N.If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the shortest Payback Period is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project N.Item 12
4. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?
   -Select-The conflict between NPV and IRR is due to the fact that the cash flows are in the form of an annuity.The conflict between NPV and IRR is due to the difference in the timing of the cash flows.There is no conflict between NPV and IRR.The conflict between NPV and IRR occurs due to the difference in the size of the projects.The conflict between NPV and IRR is due to the relatively high discount rate.Item 13

Please show work

A firm with a 14% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

1. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations.
   Project M    $
   Project N    $

   Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

2. Assuming the projects are independent, which one(s) would you recommend?  
   -Select-Only Project M would be accepted because IRR(M) > IRR(N).Both projects would be rejected since both of their NPV's are negative.Only Project M would be accepted because NPV(M) > NPV(N).Only Project N would be accepted because NPV(N) > NPV(M).Both projects would be accepted since both of their NPV's are positive.Item 11
3. If the projects are mutually exclusive, which would you recommend?
   -Select-If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project N.If the projects are mutually exclusive, the project with the highest positive NPV is chosen. Accept Project N.If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept Project M.If the projects are mutually exclusive, the project with the shortest Payback Period is chosen. Accept Project M.Item 12
4. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?
   -Select-There is no conflict between NPV and IRR.The conflict between NPV and IRR occurs due to the difference in the size of the projects.The conflict between NPV and IRR is due to the relatively high discount rate.The conflict between NPV and IRR is due to the fact that the cash flows are in the form of an annuity.The conflict between NPV and IRR is due to the difference in the timing of the cash flows.

CAPITAL BUDGETING CRITERIA

A firm with a 13% WACC is evaluating two projects for this year's capital budget. After-tax cash flows, including depreciation, are as follows:

1. Calculate NPV for each project. Round your answers to the nearest cent. Do not round your intermediate calculations.
   Project M    $
   Project N    $

   Calculate IRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate MIRR for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      %
   Project N      %

   Calculate payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

   Calculate discounted payback for each project. Round your answers to two decimal places. Do not round your intermediate calculations.
   Project M      years
   Project N      years

2. Assuming the projects are independent, which one(s) would you recommend?  
   -Select-
   1. Both projects would be accepted since both of their NPV's are positive
   2. .Only Project M would be accepted because IRR(M) > IRR(N).
   3. Both projects would be rejected since both of their NPV's are negative.
   4. Only Project M would be accepted because NPV(M) > NPV(N).
   5. Only Project N would be accepted because NPV(N) > NPV(M).Item 11
3. If the projects are mutually exclusive, which would you recommend?
   -Select-
   1. If the projects are mutually exclusive, the project with the shortest Payback Period is chosen. Accept Project M.
   2. If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project N.
   3. If the projects are mutually exclusive, the project with the highest positive NPV is chosen. Accept Project N.
   4. If the projects are mutually exclusive, the project with the highest positive IRR is chosen. Accept Project M.
   5. If the projects are mutually exclusive, the project with the highest positive MIRR is chosen. Accept Project M.
4. Notice that the projects have the same cash flow timing pattern. Why is there a conflict between NPV and IRR?
   1. The conflict between NPV and IRR occurs due to the difference in the size of the projects.
   2. The conflict between NPV and IRR is due to the relatively high discount rate.
   3. The conflict between NPV and IRR is due to the fact that the cash flows are in the form of an annuity.
   4. The conflict between NPV and IRR is due to the difference in the timing of the cash flows.
   5. There is no conflict between NPV and IRR.