You are given a choice of taking the simple interest on 100,000 invested for 2 years

The most useful allocation basis for the departmental
costs of an advertising campaign for a storewide sale is likely to be:

Within
a an organizational structure, the person most likely to be evaluated in terms
of controllable costs would be:

A dairy allocates the cost of unprocessed milk to the production of milk, cream,
butter and cheese. For the current period, unprocessed milk was purchased for
$240,000, and the following quantities of product and sales revenues were
produced.

How much of the $240,000 cost should be allocated to milk?

A report that specifies the expected and actual costs under the control of a manager
is a:

An expense that does not require allocation between departments is a(n):

A unit of a business that not only incurs costs, but also generates revenues, is
called a:

A difficult problem in calculating the total costs and expenses of a department
is:

The salaries of employees who spend all their time working in one department are:

Allocations of joint product costs can be based on the relative market values of the
products:

Which of the following is an example of a performance measure of the customer
perspective which would be found in a balanced scorecard?

Costs that the manager has the power to determine or at least strongly influence are
called:

A sawmill paid $70,000 for logs that produced 200,000 board feet of lumber in 3
different grades and amounts as follows:

How much of the $70,000 joint cost should be allocated to No. 2 Common?

Allocating joint costs to products can be based on their relative:

A cost center is a unit of a business that incurs costs but does not directly
generate revenues. Which of the following would definitely not be considered a
cost center?

Which of the following is an example of a financial performance measure which would
be found in a balanced scorecard?

Reardless of the system used in departmental cost analysis:

A responsibility accounting system:

Departmental contribution to overhead is calculated as revenues of the department less:

A responsibility accounting report that compares actual costs and expenses for a
department with the budgeted amounts is called a(n):

The amount by which a department's revenues exceed its direct costs and expenses is
the:

Textel is thinking about having one of its products manufactured by a subcontractor.
Currently, the cost of manufacturing 1,000 units follows:

If Textel can buy 1,000 units from a subcontractor for $100,000, it should:

Roxie Company has 17,500 units of its sole product that it produced last year at a
cost of $45 each. This year's model is superior to last year's and the 17,500
units cannot be sold for their regular selling price of $80 each. Roxie has two
alternatives for these items: (1) they can be sold to a wholesaler for $35
each, or (2) they can be reworked at a total cost of $450,000 and then sold for
$60 each. The company has enough idle capacity to rework these items without
affecting any new production. Which choice would increase the company's profits
the most?

A company paid $400,000 five years ago for a specialized machine that has no
salvage value and is being depreciated at the rate of $40,000 per year. The
company is considering using the machine in a new project that will have
incremental revenues of $48,000 per year and annual cash expenses of $30,000.
In analyzing the new project, the $40,000 depreciation on the machine is an
example of a(n):

Product X requires 10 machine hours per unit to be produced, Product Y requires only 6
machine hours per unit, and the company's productive capacity is limited to
240,000 machine hours. Product A sells for $32 per unit and has variable costs
of $12 per unit. Product B sells for $24 per unit and has variable costs of $7
per unit. Assuming the company can sell as many units of either product as it
produces, the company should:

An additional cost incurred only if a particular action is taken is a(n):

A company expects to produce and sell 15,000 units of a single product.
Management desires a 15% return on assets of $2,000,000. The following
additional company information is available:

Compute selling price per unit given that markup percentage equals desired profit
divided by total costs.

A company expects to produce and sell 20,000 units of a single product.
Management desires a 22% return on assets of $3,000,000. The following
additional company information is available:

Compute selling price per unit given that markup percentage equals desired profit
divided by total costs.

What decision rule should be followed when deciding if a business segment should be
eliminated?

A company expects to produce and sell 8,000 units of a single product. Management
desires a 20% return on assets of $1,520,000. The following additional company
information is available:

Compute markup per unit. Assume that markup percentage equals desired profit divided by
total costs.

Thompson Company had the following results of operations for the past year:

A foreign company (whose sales will not affect Thompson's market) offers to buy
4,000 units at $7.50 per unit. In addition to variable manufacturing costs,
selling these units would increase fixed overhead by $600 and selling and
administrative costs by $300. If Thompson accepts the offer, its profits will:

Rocko Inc. has a machine with a book value of $50,000 and a five year remaining life.
A new machine is available at a cost of $85,000 and Rocko can also receive
$38,000 for trading in the old machine. The new machine will reduce variable
manufacturing costs by $14,000 per year over its five year life. Should the
machine be replaced?

Termus Industries is operating at 85% of its manufacturing capacity of 50,000 product
units per year. A customer has offered to buy an additional 4,000 units at $25
each and sell them outside the country so as not to compete with Termus. The
following data are available:

In producing 4,000 additional units, fixed overhead costs would remain at their
current level but incremental variable overhead costs of $4 per unit would be
incurred. What is the effect on income if Termus accepts this order?

A cost that requires a current and/or future outlay of cash, and is usually an
incremental cost, is a(n):

A company expects its three departments to yield the following income for next
year.

A company expects to produce and sell 7,000 units of a single product. The
following additional company information is available:

Compute this company's total cost per unit.

The Mad Hatter Company owns a machine which manufactures two types of chimney caps.
Production time is .20 hours for cap A and .40 hours for cap B. The machine's capacity
is 2,000 hours per year. Both products are sold to a single customer who has
agreed to buy all of the company's output up to a maximum of 1,000 units of cap
A and 6,000 units of cap B. Selling prices and variable costs per unit are
shown below. Based on this information, what is the Mad Hatter's most
profitable sales mix?

Derby Inc. manufactures a product which contains a small part. The company has always
purchased this motor from a supplier for $125 each. Derby recently upgraded its
own manufacturing capabilities and now has enough excess capacity (including
trained workers) to begin manufacturing the motor instead of buying it. The
company prepared the following per unit cost projections of making the motor,
assuming that overhead is allocated to the part at the normal predetermined
overhead rate of 150% of direct labor cost.

The required volume of output to produce the motors will not require any
incremental fixed overhead. Incremental variable overhead cost is $21 per
motor. What is the effect on income if Derby decides to make the motors?

A company has the choice of either selling 750 defective units as scrap or
rebuilding them. They have already spent $14 per unit making these items. The
company could sell the defective units as they are for $8.00 per unit.
Alternatively, the company could rebuild the units at an incremental cost of
$1.00 per unit.  If it rebuilds the units, they will not be able to
produce 750 new units with a unit cost of $3.00 and a normal selling price of
$15.00 each.  What should the company do?

Daniels Corporation is considering the purchase of new equipment costing $30,000. The
projected annual after-tax net income from the equipment is $1,200, after
deducting $10,000 for depreciation. The revenue is to be received at the end of
each year. The machine has a useful life of 3 years and no salvage value.
Daniels requires a 12% return on its investments. The factors for the present
value of $1 for different periods follow:

What is the net present value of the machine?

Which methods of evaluating a capital investment project use cash flows as a
measurement basis?

There are two basic steps in calculating the Internal Rate of Return. Which of the
following represents those two steps?

A given project requires a $30,000 investment and is expected to generate
end-of-period annual cash inflows as follows:

Assuming a discount rate of 10%, what is the net present value of this investment?
Selected present value factors for a single sum are shown in the table below.

A company is considering the purchase of new equipment costing $91,000. The
machine has a useful life of 4 years and no salvage value. The company requires
a 12% return on its investments. The factors for the present value of an
annuity of 1 for different periods follow:

Assuming all revenue is to be received at the end of each year, what are the net cash
flows for this investment if net present value equals ($11,790)?

Capital budgeting decisions are generally based on:

The process of analyzing alternative investments and deciding which assets to
acquire or sell is known as:

The internal rate of return method is not subject to the limitations of the net
present value method when comparing projects with different amounts invested
because:

A company wishes to buy new equipment for $85,000. The equipment is expected to
generate an additional $35,000 in cash inflows for four years. All cash flows
occur at year-end. A bank will make an $85,000 loan to the company at a 10%
interest rate so that the company can purchase the equipment. Use the table
below to determine the present value of the future cash flows and the net
present value of the investment.

Monterey Corporation is considering the purchase of a machine costing $36,000 with a
6-year useful life and no salvage value. Monterey uses straight-line
depreciation and assumes that the annual cash inflow from the machine will be
received uniformly throughout each year. In calculating the accounting rate of
return, what is Monterey's average investment?

A company is considering purchasing a machine for $21,000. The machine will
generate an after-tax net income of $2,000 per year. Annual depreciation
expense would be $1,500. What is the approximate Accounting Rate of Return?

Capital budgeting decisions usually involve analysis of:

The process of restating future cash flows in terms of their present values is
called:

A company buys a machine for $60,000 that has an expected life of 9 years and no
salvage value. The company anticipates a yearly net income of $2,850 after
taxes of 30%, with the cash flows to be received evenly throughout of each
year. What is the accounting rate of return?

Peng Corporation is considering the purchase of new equipment costing $30,000. The
projected annual after-tax net income from the equipment is $1,200, after
deducting $10,000 for depreciation. The revenue is to be received at the end of
each year. The machine has a useful life of 4 years and no salvage value. Peng
requires a 12% return on its investments. The factors for the present value of
$1 for different periods follow:

Calculate the break-even time for this equipment.

Beyer Corporation is considering buying a machine for $25,000. Its estimated useful
life is 5 years, with no salvage value. Beyer anticipates annual net income
after taxes of $1,500 from the new machine. What is the accounting rate of
return assuming that Beyer uses straight-line depreciation and that income is
earned uniformly throughout each year?

For purposes of applying the net present value and the internal rate of return
methods, the rate chosen to measure the time adjusted value of money is known
as the:

Which of the following cash flows is not considered when using the net present value
method?

A given project requires a $25,000 investment and is expected to generate
end-of-period annual cash inflows as follows:

Assuming a discount rate of 10%, what is the net present value of this investment?
Selected present value factors for a single sum are shown in the table below.

  

    

($6,217.50)

    

    

$6,217.50

    

    

($4,459.80)

    

    

$0.00

    

    

$8,275.00

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