Question 1

Accounting's contribution to the decision-making process occurs in all of the following steps except to

Accepted Answer

A)  identify the problem and assign responsibility. 
B)  determine possible courses of action. 
C)  review results of the decision. 
D)  make a decision. 
A)  identify the problem and assign responsibility. 
B)  determine possible courses of action. 
C)  review results of the decision. 
D)  make a decision.

Question 2

The annual rate of return method is based on

Accepted Answer

A)  accounting data. 
B)  time value of money data. 
C)  market values. 
D)  replacement values. 
A)  accounting data. 
B)  time value of money data. 
C)  market values. 
D)  replacement values.

Question 3

BE 166
Sedgwick Inc. is considering Plan 1 which is estimated to have sales of $40,000 and costs of $15,000. The company currently has sales of $38,000 and costs of $14,000.
Instructions
Compare plans using incremental analysis.

Accepted Answer

The answer of BE 166
Sedgwick Inc. is considering Plan 1...

Question 4

Notson, Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Notson for $420 each. Notson needs 1,200 clocks annually. Notson has provided the following unit costs for its commercial clocks:   
Instructions
Prepare an incremental analysis which shows the effect of the make-or-buy decision.

Accepted Answer

The answer of Notson, Inc. produces several models of clocks....

Question 5

Benaflek Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(450). Annual cost savings were: $5,000 for year 1; $4,000 for year 2; and $3,000 for year 3. The amount of the initial investment was

Accepted Answer

A)  $10,239. 
B)  $9,158. 
C)  $10,058. 
D)  $9,339. 
A)  $10,239. 
B)  $9,158. 
C)  $10,058. 
D)  $9,339.

Question 6

The appropriate table to use when an investment promises to return unequal cash flows is the

Accepted Answer

A)  future value of 1 table. 
B)  future value of annuity table. 
C)  present value of 1 table. 
D)  present value of annuity table. 
A)  future value of 1 table. 
B)  future value of annuity table. 
C)  present value of 1 table. 
D)  present value of annuity table.

Question 7

Which of the following steps in the management decision-making process does not generally involve the managerial accountant?

Accepted Answer

A)  Determine possible courses of action 
B)  Make the appropriate decision based on relevant data 
C)  Prepare internal reports that review the impact of decisions 
D)  None of these 
A)  Determine possible courses of action 
B)  Make the appropriate decision based on relevant data 
C)  Prepare internal reports that review the impact of decisions 
D)  None of these

Question 8

If an unprofitable segment is eliminated

Accepted Answer

A)  it is impossible for net income to decrease. 
B)  fixed expenses allocated to the eliminated segment will be eliminated. 
C)  variable expenses of the eliminated segment will be eliminated. 
D)  it is impossible for net income to increase. 
A)  it is impossible for net income to decrease. 
B)  fixed expenses allocated to the eliminated segment will be eliminated. 
C)  variable expenses of the eliminated segment will be eliminated. 
D)  it is impossible for net income to increase.

Question 9

Fehr Company is considering two capital investment proposals. Estimates regarding each project are provided below:   The company requires a 10% rate of return on all new investments.  
The annual rate of return for Project Blue is

Accepted Answer

A)  5%. 
B)  10%. 
C)  25%. 
D)  50%. 
A)  5%. 
B)  10%. 
C)  25%. 
D)  50%.

Question 10

Coyle Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs:   
Another company has offered to sell the same component part to the company for $12 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Coyle Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $14,000.
Instructions
Prepare an incremental analysis report for Coyle Company which can serve as informational input into this make or buy decision.

Accepted Answer

@#IMG-DLM& Income is expected to increas

Question 11

Ridley Company has 8,000 machine hours available to use to produce either Product A or Product B. The cost accounting department developed the following unit information for each of the products:   
Management desires to make a decision regarding which product to produce in order to maximize the company's income.
Instructions
Taking into consideration the constraint under which the company operates, prepare a report to show which product should be produced and sold.

Accepted Answer

@#IMG-DLM& The compa

Question 12

In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered a sunk cost.

Accepted Answer

A) True 
 B)False

Question 13

An opportunity cost

Accepted Answer

A)  should be initially recorded as an asset. 
B)  is the cost of a new product proposal. 
C)  is the potential benefit that may be obtained by following an alternative course of action. 
D)  is classified as manufacturing overhead. 
A)  should be initially recorded as an asset. 
B)  is the cost of a new product proposal. 
C)  is the potential benefit that may be obtained by following an alternative course of action. 
D)  is classified as manufacturing overhead.

Question 14

A company should never accept an order for its product at less than its regular sales price.

Accepted Answer

A) True 
 B)False

Question 15

In a decision on whether an order should be accepted at a special price when there is plant capacity available, a major consideration is whether the special price exceeds __________________.

Accepted Answer

variable c

Question 16

A company can produce and sell only one of the following two products:   If the company has machine capacity of 2,000 hours, what is the total contribution margin of the product it should produce to maximize net income?

Accepted Answer

A)  $20,000 
B)  $24,000 
C)  $25,000 
D)  $16,000 
A)  $20,000 
B)  $24,000 
C)  $25,000 
D)  $16,000

Question 17

How is annual cash inflow determined?

Accepted Answer

A)  Depreciation is subtracted from net income because it is an expense. 
B)  Depreciation is added back to net income because it is not an outflow of cash. 
C)  Depreciation is subtracted from net income because it is an outflow of cash. 
D)  Depreciation is added back to net income because it is an inflow of cash. 
A)  Depreciation is subtracted from net income because it is an expense. 
B)  Depreciation is added back to net income because it is not an outflow of cash. 
C)  Depreciation is subtracted from net income because it is an outflow of cash. 
D)  Depreciation is added back to net income because it is an inflow of cash.

Question 18

Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered:   If the old machine is replaced, it can be sold for $20,000.
Which of the following amounts is a sunk cost?

Accepted Answer

A)  $200,000 
B)  $150,500 
C)  $500,000 
D)  $175,000 
A)  $200,000 
B)  $150,500 
C)  $500,000 
D)  $175,000

Question 19

A company is considering purchasing factory equipment which costs $480,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $225,000 and annual operating expenses exclusive of depreciation expense are expected to be $95,000. The straight-line method of depreciation would be used. If the equipment is purchased, the annual rate of return expected on this project is

Accepted Answer

A)  54.2%. 
B)  14.6%. 
C)  29.2%. 
D)  27.1%. 
A)  54.2%. 
B)  14.6%. 
C)  29.2%. 
D)  27.1%.

Question 20

Sargent Company is considering two new projects, each requiring an equipment investment of $72,000. Each project will last for three years and produce the following annual net income.   
The equipment will have no salvage value at the end of its three-year life. Sargent Company uses straight-line depreciation. Sargent requires a minimum rate of return of 12%. Present value data are as follows:   
Instructions
(a) Compute the net present value of each project.
(b) Which project should be selected? Why?

Accepted Answer

(a)
 @#IMG-DLM& *Net income plus annual depreciati

Exam 26: Standard Costs and Balanced Scorecard

Accounting's contribution to the decision-making process occurs in all of the following steps except to

The annual rate of return method is based on

BE 166 Sedgwick Inc. is considering Plan 1 which is estimated to have sales of $40,000 and costs of $15,000. The company currently has sales of $38,000 and costs of $14,000. Instructions Compare plans using incremental analysis.

Benaflek Co. purchased some equipment 3 years ago. The company's required rate of return is 12%, and the net present value of the project was $(450). Annual cost savings were: $5,000 for year 1; $4,000 for year 2; and $3,000 for year 3. The amount of the initial investment was

The appropriate table to use when an investment promises to return unequal cash flows is the

Which of the following steps in the management decision-making process does not generally involve the managerial accountant?

If an unprofitable segment is eliminated

Fehr Company is considering two capital investment proposals. Estimates regarding each project are provided below: The company requires a 10% rate of return on all new investments. The annual rate of return for Project Blue is

In a decision concerning replacing old equipment with new equipment, the book value of the old equipment can be considered a sunk cost.

An opportunity cost

A company should never accept an order for its product at less than its regular sales price.

In a decision on whether an order should be accepted at a special price when there is plant capacity available, a major consideration is whether the special price exceeds __________________.

A company can produce and sell only one of the following two products: If the company has machine capacity of 2,000 hours, what is the total contribution margin of the product it should produce to maximize net income?

How is annual cash inflow determined?

Sala Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered: If the old machine is replaced, it can be sold for $20,000. Which of the following amounts is a sunk cost?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

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