Accounting 203 - Exam #2 Review (19e)

Instructions
Select the best answer for each question.

This assessment is worth 230 points.

  1. A cost that remains the same in total even when volume of activity varies is a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  2. A cost that changes in proportion to changes in volume of activity is a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  3. A cost that changes with volume, but not at a constant rate, is called a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  4. A cost that remains constant over a limited range of volume, but increases by a lump sum when volume increases beyond a maximum amount, is a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  5. A cost that can be separated into fixed and variable components is called a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  6. Curvilinear costs always increase:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  7. Which one of the following statements is not true?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  8. An important tool in predicting the volume of activity, the costs to be incurred, the sales to be earned, and the profit to be received is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  9. Select cost information for Winfrey Enterprises is as follows:

     Picture 

    Based on this information:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  10. A company's normal operating range, which excludes extremely high and low volumes that are not likely to occur, is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  11. A term describing a firm's normal range of operating activities is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  12. Cost-volume-profit analysis is based on three basic assumptions. Which of the following is not one of these assumptions?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  13. A target income refers to:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  14. The margin of safety is the excess of:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  15. If a firm's forecasted sales are $250,000 and its break-even sales are $190,000, the margin of safety in dollars is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  16. The excess of expected sales over the sales level at the break-even point is known as the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  17. A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $5, total fixed costs must be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  18. During its most recent fiscal year, Simon Enterprises sold 200,000 electric screwdrivers at a price of $15 each. Fixed costs amounted to $400,000 and pretax income was $600,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  19. Hartman Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  20. A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  21. Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales. What will pretax income equal if sales are $325,000?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  22. Conan Company has total fixed costs of $112,000. Its product sells for $35 per unit and variable costs amount to $25 per unit. Next year Conan Company wishes to earn a pretax income that equals 10% of fixed costs. How many units must be sold to achieve this target income level?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  23. Ivan Company has a goal of earning $70,000 after-tax income. Ivan would need to pay $20,000 of income taxes at the target level of income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  24. Use the following information to determine the margin of safety in dollars:

     Picture    (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  25. The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year:

     Picture 
     
    If Griffith Corporation's income tax rate is 40%, compute the number of units that must be sold in order to achieve a target pretax income of $130,000.   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  26. The budgeted income statement presented below is for Griffith Corporation for the coming fiscal year:

     Picture 
     
    If Griffith Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  27. In cost-volume-profit analysis, the unit contribution margin is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  28. The contribution margin ratio:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  29. Total contribution margin in dollars divided by pretax income is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  30. Which of the following is the correct interpretation of a degree of operating leverage of 5?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  31. A statistical method for deriving an estimated line of cost behavior is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  32. The least-squares regression method is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  33. A graph used to analyze past cost behaviors by displaying costs and volume levels for each period as points on the diagram is called a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  34. A line on a scatter diagram that is intended to reflect the past relation between cost and volume is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  35. A method that estimates cost behavior by connecting the costs linked to the highest and lowest volume levels on a scatter diagram with a straight line is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  36. The sales level at which a company neither earns a profit nor incurs a loss is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  37. A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000.
     
    The contribution margin per unit is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  38. A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000.
     
    The break-even point in units is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  39. Brown Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Brown's break-even point in sales dollars?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  40. A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. What is the break-even point in dollar sales?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  41. A product sells for $30 per unit and has variable costs of $18 per unit. The fixed costs are $720,000. If the variable costs per unit were to decrease to $15 per unit and fixed costs increase to $900,000, and the selling price does not change, break-even point in units would:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  42. The difference between sales price per unit and variable cost per unit is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  43. The contribution margin per unit expressed as a percentage of the product's selling price is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  44. A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. The company's break-even point in units is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  45. A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. The company's break-even point in dollars is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  46. A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product sells for $75 per unit. What is the company's break-even point in dollar sales?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  47. Lee Company manufactures and sells widgets for $2.00 per unit. Its variable cost per unit is $1.70. Lee's total fixed costs are $10,500. How many widgets must Lee Company sell to break even?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  48. The Haskins Company manufactures and sells radios. Each radio sells for $23.75 and the variable cost per unit is $16.25. Haskin's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  49. Ginger Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%. What is the selling price of the product?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  50. Yamaguchi Company's break even point in units is 1,000. The sales price per unit is $10 and variable cost per unit is $7. If the company sells 2,500 units, what will net income be?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  51. Mueller Corp. manufactures compact discs that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mueller can buy a newer production machine that will increase fixed costs by $8,000 per year, but will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mueller's break-even point in units?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  52. At Flint Company's break-even point of 9,000 units, fixed costs are $180,000 and variable costs are $540,000 in total. The unit sales price is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  53. Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  54. During a recent fiscal year, Dawson Company reported pretax income of $125,000, a contribution margin ratio of 25% and total contribution margin of $400,000. Total variable costs must have been:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  55. In Davis Corporation's most recent fiscal year, the company reported pretax earnings of $215,000.
    Fixed costs totaled $325,800, the unit selling price of the firm's only product was $60, and the variable costs per unit were 40% of the selling price. Based on this information, the firm's break-even point in units was:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  56. A cost-volume-profit chart is also known as a(n)   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  57. When graphing cost-volume-profit data on a CVP chart:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  58. A CVP graph presents data on:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  59. A firm sells two products, A and B. For every unit of A the firm sells, two units of B are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow:

     Picture 
     
    The contribution margin per composite unit is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  60. A firm sells two products, A and B. For every unit of A the firm sells, two units of B are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow:

     Picture 
     
    What is the firm's break-even point in units of A and B?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  61. The ratio of the sales volume for the various products sold by a company is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  62. Baker Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in composite units?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  63. Camden Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are:

     Picture 

    Total fixed costs are $340,000. The break-even point in sales dollars for the current sales mix is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  64. Wayward Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's break-even point in sales dollars.   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  65. A formal statement of future plans, usually expressed in monetary terms, is a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  66. The process of planning future business actions and expressing them as a formal plan is called:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  67. For budgets to be effective:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  68. Which of the following is not a benefit of following a well-designed budgeting process?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  69. Which of the following is a benefit derived from budgeting?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  70. Which of the following statements about budgeting is false?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  71. A budget is best described as:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  72. The overall coordinating activity of the budget process is the responsibility of the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  73. The set of periodic budgets that are prepared and periodically revised in the practice of continuous budgeting is called:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  74. Preparing a master budget is usually the responsibility of:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  75. The most useful budget figures are developed:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  76. The practice of preparing budgets for each of several future periods and revising those budgets as each period is completed, adding a new budget each period so that the budgets always cover the same number of future periods, is called:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  77. The usual budget period is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  78. Assuming a bottom-up process of budget development, which of the following should be initially responsible for developing sales estimates?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  79. A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise or materials to be purchased, the expense to be incurred, the long-term assets to be purchased, and the amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet, is called a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  80. Operating budgets include all the following budgets except the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  81. Financial budgets include all the following except the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  82. The master budget includes:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  83. The usual starting point for preparing a master budget is forecasting or estimating:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  84. The master budget process usually ends with:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  85. Which of the following budgets is not an operating budget?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  86. A budget system based on expected activities and their levels that enables management to plan for resources required to perform the activities is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  87. A plan that lists the types and amounts of operating expenses expected that are not included in the selling expenses budget is a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  88. A June sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit. The desired ending inventory of units is 15% higher than the beginning inventory of 1,000 units. Total June sales are anticipated to be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  89. Bentels Co. desires a December 31 ending inventory of 2,840 units. Budgeted sales for December are 4,000 units. The November 30 inventory was 1,800 units. Budgeted purchases are:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  90. A plan that lists dollar amounts to be received from disposing of plant assets and dollar amounts to be spent on purchasing additional plant assets is called a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  91. A plan that reports the units or costs of merchandise to be purchased by a merchandising company during the budget period is called a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  92. A plan showing the units of goods to be sold and the revenue to be derived from sales, that is the usual starting point in the budgeting process, is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  93. A plan that lists the types and amounts of selling expenses expected during the budget period is called a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  94. Which of the following factors is least likely to be considered in preparing a sales budget?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  95. A department store has budgeted sales of 12,000 men's suits in September. Management wants to have 6,000 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 suits. What is the dollar amount of the purchase of suits? Each suit has a cost of $75.   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  96. A sporting goods store purchased $7,000 of ski boots in October. The store had $3,000 of ski boots in inventory at the beginning of October, and expects to have $2,000 of ski boots in inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  97. Ecology Co. sells a biodegradable product called Dissol and has predicted the following sales for the first four months of the current year:

     Picture 

    Ending inventory for each month should be 20% of the next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  98. Fairway's April sales forecast projects that 6,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units. Budgeted purchases of units in April would be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  99. Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units.
     
    Total budgeted sales of both products for the year would be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  100. Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units.
     
    Budgeted purchases of Product A for the year would be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  101. Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units.
     
    Budgeted purchases of Product B for the year would be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  102. A quantity of merchandise or materials over the minimum needed reduce the risk of running short is called:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  103. Stritch Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  104. If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and budgeted cost of goods sold is $10,260, budgeted purchases should be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  105. Barrett's Fashions forecasts sales of $125,000 for the quarter ended December 31. Its gross profit rate is 20% of sales, and its September 30 inventory is $32,500. If the December 31 inventory is targeted at $41,500, budgeted purchases for the fourth quarter should be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  106. When preparing the cash budget, all the following should be considered except:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  107. A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is called a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  108. Which of the following accounts would appear on a budgeted balance sheet?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  109. Which of the following budgets must be completed before a cash budget can be prepared?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  110. Which of the following would not be used in preparing a cash budget for October?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  111. Northern Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during June. Northern Company has an agreement with its bank to maintain a cash balance of at least $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  112. A managerial accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is called a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  113. Julia's Candy Co. reports the following information from its sales account and sales budget:

     Picture 

    Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  114. A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  115. Lara Company's budget includes the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Lara Company expect to collect in November as a result of current and past credit sales?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  116. In preparing a budgeted balance sheet, the amount for Accounts Receivable is primarily determined from:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  117. Long-term liability data for the budgeted balance sheet is derived from:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  118. In preparing financial budgets:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  119. A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, 25% the following month, and 5% is uncollectible. Projected sales for December, January, and February are $60,000, $85,000 and $95,000, respectively. The February expected cash receipts from all current and prior credit sales is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  120. A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 30% in the month of the sale, 50% in the next month, and 15% the following month. Projected sales for January, February, and March are $60,000, $85,000 and $95,000, respectively. The March expected cash receipts from all current and prior credit sales is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  121. Harold's expects its September sales to be 20% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $7,500. The ending cash balance on September 30 would be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  122. The Palos Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month following sale, 45% in the second month following sale, and 5% are not collected. What are the company's expected cash receipts for August from its current and past sales?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  123. Berkley Co.'s sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the following month. On December 31, the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales.
     
    Assume that total sales for January are budgeted to be $50,000. What are the expected cash receipts for January from the current and past sales?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  124. Berkley Co.'s sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the following month. On December 31, the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales.
     
    Assume that total sales for January and February are budgeted to be $50,000 and $100,000, respectively. What are the expected cash receipts for February from current and past sales?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  125. A plan that shows the predicted costs for direct materials, direct labor, and overhead to be incurred in manufacturing the units in the production budget is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  126. To determine the production budget for an accounting period, consideration is given to the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  127. Which of the following budgets is part of the manufacturing budget?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  128. A plan that states the number of units to be manufactured during each future period covered by the budget, based on the budgeted sales for the period and the levels of inventory needed to support future sales, is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  129. Kyoto, Inc. predicts the following sales in units for the coming four months:

     Picture 

    Although each month's ending inventory of finished units should be 60% of the next month's sales, the March 31 finished goods inventory is only 100 units. A finished unit requires five pounds of raw material B. The March 31 raw materials inventory has 200 pounds of B. Each month's ending inventory of raw materials should be 30% of the following month's production needs.
     
    The budgeted production for May is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  130. Kyoto, Inc. predicts the following sales in units for the coming four months:

     Picture 

    Although each month's ending inventory of finished units should be 60% of the next month's sales, the March 31 finished goods inventory is only 100 units. A finished unit requires five pounds of raw material B. The March 31 raw materials inventory has 200 pounds of B. Each month's ending inventory of raw materials should be 30% of the following month's production needs.
     
    The budgeted purchases of pounds of raw material B during May should be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  131. Standard costs are:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  132. The costs that should be incurred under normal conditions to produce a specific product or component or to perform a specific service are:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  133. The difference between actual and standard cost caused by the difference between the actual price and the standard price is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  134. The difference between actual and standard cost caused by the difference between the actual quantity and the standard quantity is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  135. The difference between the actual cost incurred and the standard cost is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  136. A process of examining the differences between actual and budgeted costs and describing them in terms of the amounts that resulted from price and quantity differences is called:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  137. Standard costs are used to measure:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  138. A company had the following direct materials cost information:

     Picture 

    What was the cost variance?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  139. An analytical technique used by management to focus on the most significant variances and give less attention to the areas where performance is satisfactory is known as:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  140. A planning budget based on a single predicted amount of sales or production volume is called a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  141. A report based on predicted amounts of revenues and expenses corresponding to the actual level of output is called a:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  142. Static budget is another name for:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  143. Variable budget is another name for:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  144. Identify the situation that will result in a favorable variance.   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  145. A performance report compares the differences between:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  146. Sales analysis is useful for:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  147. An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity), and which presents the differences between actual and budgeted amounts as variances, is called a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  148. A flexible budget is prepared:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  149. A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  150. Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  151. Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  152. A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000. Calculate the expected level of operating income if the company produces and sells 13,000 units.   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  153. Based on a predicted level of production and sales of 12,000 units, a company anticipates reporting operating income of $26,000 after deducting variable costs of $72,000 and fixed costs of $10,000.
    Based on this information, the budgeted amounts of fixed and variable costs for 15,000 units would be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  154. Which department is often responsible for the direct materials price variance?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  155. Kyle, Inc., has collected the following data on one of its products:

     Picture 
     
    The actual cost of the direct materials used is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  156. Kyle, Inc., has collected the following data on one of its products:

     Picture 
     
    The direct materials quantity variance is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  157. Kyle, Inc., has collected the following data on one of its products:

     Picture 
     
    The direct materials price variance is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  158. Bartels Corp. produces woodcarvings. It takes 2 hours of direct labor to produce a carving. Bartels' standard labor cost is $12 per hour. During August, Bartels produced 10,000 carvings and used 21,040 hours of direct labor at a total cost of $250,376. What is Bartels' labor rate variance for August?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  159. Use the following data to find the direct labor cost variance.

     Picture    (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  160. The following company information is available for January:

     Picture 

    The direct material price variance is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  161. The following company information is available:

     Picture 

    The direct materials quantity variance is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  162. Bradford Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units.
     
    What is the direct materials quantity variance?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  163. Bradford Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units.
     
    What is the direct materials price variance?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  164. A company has established 5 pounds of Material M at $2 per pound as the standard for the material in its Product A. The company has just produced 1,000 units of this product, using 5,200 pounds of Material M that cost $9,880.
     
    The direct materials quantity variance is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  165. A company has established 5 pounds of Material M at $2 per pound as the standard for the material in its Product A. The company has just produced 1,000 units of this product, using 5,200 pounds of Material M that cost $9,880.
     
    The direct materials price variance is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  166. A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the total labor cost variance?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  167. The standard materials cost to produce 1 unit of Product M is 6 pounds of material at a standard price of $50 per pound. In manufacturing 8,000 units, 47,000 pounds of material were used at a cost of $51 per pound. What is the total direct material cost variance?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  168. The following information describes a company's usage of direct labor in a recent period:

     Picture 
     
    The direct labor quantity variance is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  169. The following information describes a company's usage of direct labor in a recent period:

     Picture 
     
    The direct labor price variance is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  170. A company has determined that its standard costs to produce a single unit of output is as follows:

     Picture 

    During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400.
     
    Based on this information, the direct materials price variance for the month was:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  171. A company has determined that its standard costs to produce a single unit of output is as follows:

     Picture 

    During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400.
     
    Based on this information, the direct materials quantity variance for the month was:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  172. A company has determined that its standard costs to produce a single unit of output is as follows:

     Picture 

    During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400.
     
    Based on this information, the direct labor rate variance for the month was:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  173. A company has determined that its standard costs to produce a single unit of output is as follows:

     Picture 

    During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400.
     
    Based on this information, the direct labor quantity variance for the month was:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  174. Overhead cost variance is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  175. The sum of the variable overhead spending variance, the variable overhead efficiency variance, and the fixed overhead spending variance is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  176. When standard manufacturing costs are recorded in the accounts and the cost variances are immaterial at the end of the accounting period, the cost variances should be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  177. Capital budgeting decisions usually involve analysis of:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  178. The process of analyzing alternative investments and deciding which assets to acquire or sell is known as:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  179. Capital budgeting decisions are generally based on:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  180. The net cash flow of a particular investment project:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  181. Capital budgeting decisions are risky because:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  182. The process of restating future cash flows in today's dollars is known as:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  183. A minimum acceptable rate of return for an investment decision is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  184. In business decision-making, managers typically examine the two fundamental factors of:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  185. A major limitation of the internal rate of return method is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  186. An opportunity cost:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  187. The potential benefits of one alternative that are lost by choosing another is known as a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  188. A cost that requires a current and/or future outlay of cash, and is usually an incremental cost, is a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  189. A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to future decisions, is called a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  190. A company paid $200,000 ten years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $10,000 depreciation on the machine is an example of a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  191. An additional cost incurred only if a particular action is taken is a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  192. A company is considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next 5 years. The $19,000 cost is an example of a(n):   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  193. Patrick Corporation inadvertently produced 10,000 defective personal radios. The radios cost $8 each to produce. A salvage company will purchase the defective units as they are for $3 each. Patrick's production manager reports that the defects can be corrected for $5 per unit, enabling them to be sold at their regular market price of $12.50. Patrick should:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  194. Product A requires 5 machine hours per unit to be produced, Product B requires only 3 machine hours per unit, and the company's productive capacity is limited to 240,000 machine hours. Product A sells for $16 per unit and has variable costs of $6 per unit. Product B sells for $12 per unit and has variable costs of $5 per unit. Assuming the company can sell as many units of either product as it produces, the company should:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  195. Alpha Co. can produce a unit of Beta for the following costs:

     Picture 

    An outside supplier offers to provide Alpha with all the Beta units it needs at $60 per unit. If Alpha buys from the supplier, Alpha will still incur 40% of its overhead. Alpha should:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  196. Marcus processes four different products that can either be sold as is or processed further.
    Listed below are sales and additional cost data:

     Picture 

    Which product(s) should not be processed further?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  197. Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export on hand. The variable production costs per bag are $1.80 and total fixed costs are $10,000. The cat food can be sold as it is for $9.00 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,000 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of Feline Surprise, which can be sold for $8 and $6 per bag, respectively.
     
    The net advantage (incremental income) of processing Special Export further into Prime and Feline Surprise would be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  198. Marsden manufactures a cat food product called Special Export. Marsden currently has 10,000 bags of Special Export on hand. The variable production costs per bag are $1.80 and total fixed costs are $10,000. The cat food can be sold as it is for $9.00 per bag or be processed further into Prime Cat Food and Feline Surprise at an additional $2,000 cost. The additional processing will yield 10,000 bags of Prime Cat Food and 3,000 bags of Feline Surprise, which can be sold for $8 and $6 per bag, respectively.
     
    If Special Export is processed further into Prime Cat Food and Feline Surprise, the total gross profit would be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  199. Parker Plumbing has received a special one-time order for 1,500 faucets (units) at $5 per unit. Parker currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production.
     
    Should the company accept the special order?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  200. Parker Plumbing has received a special one-time order for 1,500 faucets (units) at $5 per unit. Parker currently produces and sells 7,500 units at $6.00 each. This level represents 75% of its capacity. Production costs for these units are $4.50 per unit, which includes $3.00 variable cost and $1.50 fixed cost. To produce the special order, a new machine needs to be purchased at a cost of $1,000 with a zero salvage value. Management expects no other changes in costs as a result of the additional production.
     
    If Parker wishes to earn $1,250 on the special order, the size of the order would need to be:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  201. Textel is thinking about having one of its products manufactured by a subcontractor.

    Currently, the cost of manufacturing 1,000 units follows:

     Picture 

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

    a.  
    b.  
    c.  
    d.  
    e.  

  202. A company has the choice of either selling 1,000 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $4.00 per unit. Alternatively, it could rebuild them with incremental costs of $1.00 per unit for materials, $2.00 per unit for labor, and $1.50 per unit for overhead, and then sell the rebuilt units for $8.00 each. What should the company do?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

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

     Picture 

    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:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  204. The break-even time (BET) method is a variation of the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  205. The calculation of the payback period for an investment when net cash flow is even (equal) is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  206. Coffer Co. is analyzing two projects for the future. Assume that only one project can be selected.

     Picture 

    If the company is using the payback period method and it requires a payback of three years or less, which project should be selected?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  207. The time expected to pass before the net cash flows from an investment would return its initial cost is called the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  208. 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 payback period for the new machine?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  209. A company is considering the purchase of a new piece of equipment for $90,000. Predicted annual cash inflows from this investment are $36,000 (year 1), $30,000 (year 2), $18,000 (year 3), $12,000 (year 4) and $6,000 (year 5). The payback period is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  210. A disadvantage of using the payback period to compare investment alternatives is that:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  211. A company is considering the purchase of a new machine for $48,000. Management predicts that the machine can produce sales of $16,000 each year for the next 10 years. Expenses are expected to include direct materials, direct labor, and factory overhead totaling $8,000 per year plus depreciation of $4,000 per year. The company's tax rate is 40%. What is the payback period for the new machine?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  212. A company is planning to purchase a machine that will cost $24,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below.

     Picture 
     
    What is the payback period for this machine?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  213. A company is planning to purchase a machine that will cost $24,000, have a six-year life, and be depreciated over a three-year period with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below.

     Picture 
     
    What is the accounting rate of return for this machine?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  214. After-tax net income divided by the annual average investment in an investment, is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  215. 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 each year. What is the accounting rate of return?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  216. 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?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  217. 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?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  218. The accounting rate of return is calculated as:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  219. The following data concerns a proposed equipment purchase:

     Picture 

    Assuming that net cash flows are received evenly throughout the year, the accounting rate of return is:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  220. An estimate of an asset's value to the company, calculated by discounting the future cash flows from the investment at an appropriate rate and then subtracting the initial cost of the investment, is known as:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  221. Which of the following cash flows is not considered when using the net present value method?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  222. Which one of the following methods considers the time value of money in evaluating alternative capital expenditures?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  223. The hurdle rate is often set at:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  224. 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 present value of an annuity of 1 for different periods follows:

     Picture 

    What is the net present value of the machine?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  225. The following present value factors are provided for use in this problem:

     Picture 

    Norman Co. wants to purchase a machine for $40,000, but needs to earn an 8% return. The expected year-end net cash flows are $12,000 in each of the first three years, and $16,000 in the fourth year. What is the machine's net present value (round to the nearest whole dollar)?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  226. Saxon Manufacturing is considering purchasing two machines. Each machine costs $9,000 and will produce cash flows as follows:

     Picture 

    Saxon Manufacturing uses the net present value method to make the decision, and it requires a 15% annual return on its investments. The present value factors of 1 at 15% are: 1 year, 0.8696; 2 years, 0.7561; 3 years, 0.6575. Which machine should Saxon purchase?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  227. A company is considering the purchase of new equipment for $45,000. The projected after-tax net income is $3,000 after deducting $15,000 of depreciation. The machine has a useful life of 3 years and no salvage value. Management of the company requires a 12% return on investment. The present value of an annuity of 1 for various periods follows:

     Picture 

    What is the net present value of this machine assuming all cash flows occur at year-end?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  228. A company can buy a machine that is expected to have a three-year life and a $30,000 salvage value. The machine will cost $1,800,000 and is expected to produce a $200,000 after-tax net income to be received at the end of each year. If a table of present values of 1 at 12% shows values of 0.8929 for one year, 0.7972 for two years, and 0.7118 for three years, what is the net present value of the cash flows from the investment, discounted at 12%?   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  229. The rate that yields a net present value of zero for an investment is the:   (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  

  230. A company is considering a 5-year project. The company plans to invest $60,000 now and it forecasts cash flows for each year of $16,200. The company requires a hurdle rate of 12%. Calculate the internal rate of return to determine whether it should accept this project. Selected factors for a present value of an annuity of 1 for five years are shown below:

     Picture    (1 point)

    a.  
    b.  
    c.  
    d.  
    e.  



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