Question 1

The process used to identify the financial data that change under alternative courses of action is called allocation of limited resources.

Accepted Answer

A) True 
 B)False

Question 2

Pederson Enterprises produces giant stuffed bears. Each bear consists of $12 of variable costs and $9 of fixed costs and sells for $45. A wholesaler offers to buy 8,000 units at $14 each, of which Pederson has the capacity to produce. Pederson will incur extra shipping costs of $1.25 per bear.
Instructions
Determine the incremental income or loss that Pederson Enterprises would realize by accepting the special order.

Accepted Answer

The answer of Pederson Enterprises produces giant stuffed bears. Each...

Question 3

Ace Corporation recently purchased a new machine for its factory operations at a cost of $840,000. The investment is expected to generate $250,000 in annual cash flows for a period of five years. The required rate of return is 12%. The new machine is expected to have zero salvage value at the end of the five-year period.
Instructions
Calculate the internal rate of return. (Table 2 from Appendix C is needed.)

Accepted Answer

IRR = Capital investment ÷ Ann

Question 4

Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity?

Accepted Answer

A)  Net income will not be affected. 
B)  Net income will increase if the special sales price per unit exceeds the unit variable costs. 
C)  Net income will decrease. 
D)  Additional fixed costs will probably be incurred. 
A)  Net income will not be affected. 
B)  Net income will increase if the special sales price per unit exceeds the unit variable costs. 
C)  Net income will decrease. 
D)  Additional fixed costs will probably be incurred.

Question 5

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs:   If Tex's Manufacturing Company can purchase the component externally for $110,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

Accepted Answer

A)  Make and save $5,000 
B)  Buy and save $5,000 
C)  Make and save $15,000 
D)  Buy and save $15,000 
A)  Make and save $5,000 
B)  Buy and save $5,000 
C)  Make and save $15,000 
D)  Buy and save $15,000

Question 6

In an environment where there are limited resources, the products with the highest contribution per unit of ______________ should identify the products to be produced.

Accepted Answer

The answer of In an environment where there are limited...

Question 7

A negative net present value means that the

Accepted Answer

A)  project's rate of return exceeds the required rate of return. 
B)  project's rate of return is less than the required rate of return. 
C)  project's rate of return equals the required rate of return. 
D)  project is acceptable. 
A)  project's rate of return exceeds the required rate of return. 
B)  project's rate of return is less than the required rate of return. 
C)  project's rate of return equals the required rate of return. 
D)  project is acceptable.

Question 8

An important purpose of management accounting is to provide _____________________ for decision making.

Accepted Answer

relevant i

Question 9

Humphrey, Inc. is considering purchasing equipment costing $30,000 with a 6-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over its useful life with no salvage value. Humphrey, Inc. requires a 10% rate of return.   What is the approximate net present value of this investment?

Accepted Answer

A)  $13,800 
B)  $1,792 
C)  $886 
D)  $2,748 
A)  $13,800 
B)  $1,792 
C)  $886 
D)  $2,748

Question 10

The technique which identifies the time period required to recover the cost of the investment is called the ________________ method.

Accepted Answer

The answer of The technique which identifies the time period...

Question 11

The internal rate of return method differs from the net present value method in that it results in finding the ___________________ of the potential investment.

Accepted Answer

The answer of The internal rate of return method differs...

Question 12

A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to

Accepted Answer

A)  assign responsibility for the decision. 
B)  provide relevant revenue and cost data about each course of action. 
C)  determine the amount of money that should be spent on a project. 
D)  decide which actions that management should consider. 
A)  assign responsibility for the decision. 
B)  provide relevant revenue and cost data about each course of action. 
C)  determine the amount of money that should be spent on a project. 
D)  decide which actions that management should consider.

Question 13

If a company anticipates that other sales will be affected by the acceptance of a special order, then

Accepted Answer

A)  lost sales should be considered in the incremental analysis. 
B)  lost sales should not be considered in the incremental analysis. 
C)  the order should not be accepted. 
D)  the order will only be accepted if the plant is below capacity. 
A)  lost sales should be considered in the incremental analysis. 
B)  lost sales should not be considered in the incremental analysis. 
C)  the order should not be accepted. 
D)  the order will only be accepted if the plant is below capacity.

Question 14

Holt Co. is considering investing in a new facility to extract and produce salt. The facility will increase revenues by $240,000, but will also increase annual expenses by $160,000. The facility will cost $980,000 to build, but will have a $20,000 salvage value at the end of its 20-year useful life.
Instructions
Calculate the annual rate of return on this facility.

Accepted Answer

The annual rate of return is calculated

Question 15

If an asset cost $210,000 and is expected to have a $30,000 salvage value at the end of its ten-year life, and generates annual net cash inflows of $30,000 each year, the cash payback period is

Accepted Answer

A)  8 years. 
B)  7 years. 
C)  6 years. 
D)  5 years. 
A)  8 years. 
B)  7 years. 
C)  6 years. 
D)  5 years.

Question 16

Humphrey, Inc. is considering purchasing equipment costing $30,000 with a 6-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over its useful life with no salvage value. Humphrey, Inc. requires a 10% rate of return.   What is the approximate internal rate of return for this investment?

Accepted Answer

A)  9% 
B)  10% 
C)  11% 
D)  12% 
A)  9% 
B)  10% 
C)  11% 
D)  12%

Question 17

A major advantage of the annual rate of return technique is that it considers the time value of money.

Accepted Answer

A) True 
 B)False

Question 18

The rate that management expects to pay on borrowed or equity funds is known as

Accepted Answer

A)  the hurdle rate. 
B)  the cost of capital. 
C)  the cutoff rate. 
D)  all of these. 
A)  the hurdle rate. 
B)  the cost of capital. 
C)  the cutoff rate. 
D)  all of these.

Question 19

The cash payback method is frequently used as a screening tool but it does not take into consideration the profitability of a project.

Accepted Answer

A) True 
 B)False

Question 20

The net present value method can only be used in capital budgeting if the expected cash flows from a project are an equal amount each year.

Accepted Answer

A) True 
 B)False

Exam 26: Standard Costs and Balanced Scorecard

The process used to identify the financial data that change under alternative courses of action is called allocation of limited resources.

Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity?

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs: If Tex's Manufacturing Company can purchase the component externally for $110,000 and only $5,000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

In an environment where there are limited resources, the products with the highest contribution per unit of ______________ should identify the products to be produced.

A negative net present value means that the

An important purpose of management accounting is to provide _____________________ for decision making.

The technique which identifies the time period required to recover the cost of the investment is called the ________________ method.

The internal rate of return method differs from the net present value method in that it results in finding the ___________________ of the potential investment.

A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to

If a company anticipates that other sales will be affected by the acceptance of a special order, then

If an asset cost $210,000 and is expected to have a $30,000 salvage value at the end of its ten-year life, and generates annual net cash inflows of $30,000 each year, the cash payback period is

A major advantage of the annual rate of return technique is that it considers the time value of money.

The rate that management expects to pay on borrowed or equity funds is known as

The cash payback method is frequently used as a screening tool but it does not take into consideration the profitability of a project.

The net present value method can only be used in capital budgeting if the expected cash flows from a project are an equal amount each year.

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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