Assignment
1.
Which of the following best describes a sunk cost?
Costs that were incurred in the past and cannot be changed
Benefits foregone by choosing a particular alternative course of action
A factor that restricts the production or sale of a product
Expected future data that differ among alternatives
2.
Opportunity cost is best described by which of the following?
Benefits foregone by choosing a particular alternative course of action
Costs that were incurred in the past and cannot be changed
The distribution of all products to be sold
Expected future costs that differ among alternatives
3.
Expected future data that differs among alternative courses of action are referred to as
relevant information.
historical information.
predictable information.
irrelevant information.
4.
Which of the following is a sunk cost?
Operating costs for a new vehicle
Trade in value of old vehicle
Purchase price of vehicle to be traded in
Purchase price of new vehicle
5.
Managers should consider all of the following when deciding whether to accept a special order, except
available excess capacity.
the variable costs associated with the special order.
the effect of the order on regular sales.
fixed costs that will not be affected by the order.
6.
A company should ________ when making a short-term special decision.
focus on qualitative factors only
focus on quantitative factors only
separate variable costs from fixed costs
use a traditional direct costing approach
7.
Comfort Cloud manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is currently producing and selling 75,000 seats per year. The following information relates to current production:
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Sale price per unit
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$400
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|
Variable costs per unit:
|
|
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Manufacturing
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$220
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Marketing and administrative
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$50
|
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Total fixed costs:
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|
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Manufacturing
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$750,000
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|
Marketing and administrative
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$200,000
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If a special sales order is accepted for 3,200 seats at a price of $350 per unit, and fixed costs increase by $12,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)
Decrease by $244,000
Increase by $404,000
Increase by $256,000
Increase by $244,000
8.
Which of the following types of cash outlays has its own budget?
Capital expenditures
Dividends
Income taxes
All of the above
9.
A company should ________ when projecting cash receipts for a given month.
include only cash collections from sales made in that month
only list COD sales made in that month
only list credit sales made in that month
include cash to be collected in that month regardless of when the sale was made
10.
The term cash budget is best defined by which of the following?
A company's plan for purchases of property, plant and equipment, and other long-term assets
Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance
A system for evaluating the performance of each responsibility center and its manager
A budget that projects cash inflows and outflows and the end of period budgeted balance sheet
11.
All of the following are considered when preparing the cash budget except
payments for inventory.
cash receipts from customers.
depreciation expense.
cash payments to suppliers.
12.
The final step in creating the financial budget is the preparation of which of the following?
Master budget
Cash budget
Operating budgets
Budgeted balance sheet
13.
Einstein Company is preparing its cash budget for the upcoming month. The beginning cash balance for the month is expected to be $14,000. Budgeted cash receipts are $84,000, while budgeted cash disbursements are $72,000. Einstein Company wants to have an ending cash balance of $40,000. The excess (deficiency) of cash available over disbursements for the month would be
$170,000.
$(26,000).
$112,000.
$26,000.
14.
Roman Company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $40,000. Budgeted cash receipts are $101,000, while budgeted cash disbursements are $123,000. Roman Company wants to have an ending cash balance of $45,000. How much would Roman Company need to borrow to achieve its desired ending cash balance?
$18,000
$27,000
$23,000
$63,000
15.
Lubrizol is a chemical company that specializes in producing lubricants. Lubrizol was acquired in 2011 for $9 billion by investment holding company Berkshire Hathaway. Lubrizol is likely to be classified as a(n)
cost center.
investment center.
profit center.
revenue center.
16.
The reservations department for a car rental chain is likely to be classified as a(n)
cost center.
investment center.
profit center.
revenue center.
17.
A potential advantage of decentralization is which of the following?
Benchmarking
Promotes goal congruence and coordination
Provides training
Provides feedback
18.
Pizza Hut, a division of Yum! Brands, is most likely treated as a(n)
cost center.
investment center.
profit center.
revenue center.
19.
Honda's East Liberty Auto Plant which builds Honda cars is most likely treated as a(n)
cost center.
investment center.
profit center.
revenue center.
20.
The manager of the corporate division of Anthropologie (a retail clothing chain) would be in charge of a(n)
investment center.
cost center.
profit center.
revenue center.
21.
The store manager for the Dick's Sporting Goods location in Columbus, Ohio, is in charge of a(n)
cost center.
investment center.
profit center.
revenue center.
22.
Rzepka Corporation manufactures jeweled cell phone cases. The following materials standards have been established for the jewels used to decorate the cell phone cases.
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Standard quantity per case (grams)
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3.5
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Standard price per gram of jewels
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$ 3.00
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The following data relates to the production of the cell phone cases during June:
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Actual jewels purchased and used (grams)
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1,400
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Actual cost of jewels purchased
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$ 4,100
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Actual number of cases produced
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500
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What is the materials price variance for jewels in June?
$100 favorable
$100 unfavorable
$4,200 favorable
$4,200 unfavorable
23.
An LCD screen is purchased to be used in the manufacturing of a digital watch. The standard price for the LCD screen used is $40.00. During the month of February, 3,400 screens were purchased and used. The materials price variance was $6,000 unfavorable. The standard number of screens allowed for the actual number of watches manufactured during the period was 25,000 screens. The actual purchase price of each LCD screen would be closest to
$39.76 per LCD screen.
$40.24 per LCD screen.
$38.24 per LCD screen.
$41.76 per LCD screen.
24.
Madden Corporation manufactures t-shirts, which is its only product. The standards for t-shirts are as follows:
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Standard direct materials cost per yard
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$ 8
|
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Standard direct materials quantity per t-shirt (yards)
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1.5
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During the month of May, the company produced 1,250 t-shirts. Related production data for the month follows:
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Actual yards of direct material purchased
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1,400
|
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Actual direct materials total cost
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$ 15,500
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What is the direct materials quantity variance for the month?
$ 4,300 favorable
$ 4,300 unfavorable
$ 3,800 favorable
$ 3,800 unfavorable
25.
A favorable direct labor efficiency variance might indicate that
higher skilled workers were used that performed the task slower than expected.
higher skilled workers were used that performed the task faster than expected.
lower skilled workers were paid a higher wage than expected.
lower skilled workers were paid a lower wage than expected.
26.
A company receives an unusually high number of orders in a month. To produce all of the orders within the scheduled dates of delivery, the company pays employees an extra $8 per hour for every hour of overtime the employees work. Which variance would be directly impacted?
Materials price variance
Materials quantity variance
Labor efficiency variance
Labor rate variance
27.
A favorable direct labor efficiency variance and an unfavorable direct labor rate variance might indicate which of the following?
Unskilled workers using more actual hours than standard, paid at a higher rate per hour than the standard rate
Unskilled workers using less actual hours than standard, paid a lesser rate per hour than the standard rate
Skilled workers using less actual hours than standard, paid at a higher rate per hour than the standard rate
Skilled workers using more actual hours than standard, paid at a higher rate per hour than the standard rate
28.
The ________ variance measures whether the quantity of direct labor used to make the actual number of outputs is within the standard allowed for that number of outputs.
production volume
overhead flexible budget
rate
efficiency
29.
The process of choosing among different alternative investments due to limited resources is referred to as
capital investing.
capital rationing.
resource rationing.
resource allocation.
30.
The term ________ is best described as the length of time required to recover the cost of an investment.
time value of money
payback period
capital budgeting
annuity
31.
All else being equal, a company would choose to invest in a capital asset if which of the following is true?
If the payback period equals the amount invested
If the expected accounting rate of return is less than the required rate of return
If the expected accounting rate of return is greater than the required rate of return
If the average amount invested is equal to the net cash inflows
32.
The formula for calculating the accounting rate of return for a capital asset is
average annual operating income from asset/amount invested in asset.
average annual net cash inflow from asset/amount invested in asset.
(average annual operating income + depreciation expense)/amount invested in asset.
D) (average annual cash inflows - depreciation expense)/(amount invested in asset + residual value of asset).
33.
Gomez Corporation is considering two alternative investment proposals with the following data:
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Proposal X
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Proposal Y
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Investment
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$ 850,000
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$ 468,000
|
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Useful life
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8 years
|
8 years
|
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Estimated annual net cash inflows for eight years
|
$ 125,000
|
$ 78,000
|
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Residual value
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$ 40,000
|
$ -
|
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Depreciation method
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Straight-line
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Straight-line
|
|
Required rate of return
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14%
|
10%
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10.90 years
6.00 years
6.80 years
21.25 years
34.
Gomez Corporation is considering two alternative investment proposals with the following data:
|
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Proposal X
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Proposal Y
|
|
Investment
|
$ 850,000
|
$ 468,000
|
|
Useful life
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8 years
|
8 years
|
|
Estimated annual net cash inflows for eight years
|
$ 125,000
|
$ 78,000
|
|
Residual value
|
$ 40,000
|
$ -
|
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Depreciation method
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Straight-line
|
Straight-line
|
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Required rate of return
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14%
|
10%
|
How long is the payback period for Proposal Y?
21.25 years
6.00 years
6.80 years
11.70 years
35.
(Use present value tables in textbook.) Hincapie Manufacturing is evaluating investing in a new metal stamping machine costing $30,924. Hincapie estimates that it will realize $12,000 in annual cash inflows for each year of the machine's 3-year useful life. The internal rate of return (IRR) for the machine is approximately
8%.
10%.
5%.
6%.