The difference between a firm’s current assets and its current liabilities is
a. Cash flow.
b. Working capital.
c. Current ratio.
d. None of these answer choices are correct.
Companies that carry a high level of fixed costs relative to variable costs are considered
to have
a. A greater risk than companies with a high level of variable costs relative to fixed
costs.
b. A lesser risk than companies with a high level of variable costs relative to fixed costs.
c. The same level of risk as companies with a high level of variable costs relative to
fixed costs.
d. Either a greater or lesser risk, depending on product costs relative to period costs.
Which of the following is a limitation of the payback period?
a. This method is complex to calculate.
b. The cash flows after the payback period needed for the calculation are difficult to
determine.
c. This method ignores the time value of money.
d. The discount rate used in the calculation may change before the end of the payback.
Hobart Company manufactures patio umbrellas. The direct labor standard for each
umbrella is 1.25 direct labor hours at a standard rate of $12.00 per hour. During June,
Hobart used 36,000 direct labor hours to produce 30,000 umbrellas. Hobart’s direct
labor payroll totaled $428,400. What is Hobart’s direct labor rate variance for
November?
a. $3,600 unfavorable
b. $3,600 favorable
c. $18,000 favorable
d. $18,000 unfavorable
The flexible budget variance is the difference between
a. The static budget and the flexible budget.
b. The flexible budget and actual results.
c. The actual quantity and budgeted quantity.
d. The actual price and the standard price.
When a company accepts an outsourcing offer, managers must take specific action to
eliminate internal costs. Which of the following is not a quantitative or qualitative
factor managers should consider when accepting an outsourcing offer?
a. How to reduce direct labor
b. How to eliminate shipping charges
c. Impact on employee morale
d. All of these answer choices are correct.
During the current year, ABC Corporation purchased a warehouse for $1,200,000. In
order to pay for the warehouse, ABC sold its investment in another company’s common
stock costing $900,000 for $1,400,000. What amount is reported in ABC’s investing
section of its statement of cash flows?
a. $0
b. $1,200,000 use of cash
c. $900,000 source of cash
d. $200,000 net cash provided by investing activities
Channing Company is a large internet retailer with fulfillment warehouses in numerous
locations throughout the U.S. One of Channing ‘s warehouses has been showing losses
over several quarters, and management is considering closing the warehouse. If the
warehouse is closed, only the warehouse manager will be retained by Channing. The
warehouse manager ‘s annual salary is $65,000. The warehouse fixtures and equipment
have no resale value. Following is the most recent income statement for the warehouse:
What would be the impact on Channing ‘s overall operating income if the warehouse is
eliminated?
a. Increase by $18,600 per year.
b. Decrease by $68,000 per year.
c. Decrease by $86,600 per year.
d. Increase by $46,400 per year.
Pam’s Puppy Parlor is a pet grooming parlor and boutique. Pam sells personalized
puppy blankets at $20 each. Her contribution margin is $5. If Pam has an additional
$100 in blanket sales, how much will her profit increase?
a.$5
b.$25
c.$50
d.$100
Which of the following is not a qualitative issue that must be considered before
reaching a decision to outsource?
a. Quality of the outsourced product.
b. Number of employees terminated.
c. Ability to bring outsourced item back in house.
d. All of these answer choices are qualitative issues to be considered.
The amount of income presented on a contribution format income statement
a.Will always be greater than that shown on a traditional GAAP income statement.
b.Will always be less than that shown on a traditional GAAP income statement.
c.Will always be the same as that shown on a traditional GAAP income statement.
d.May or may not differ from that shown on a traditional GAAP income statement
depending on the level of production and sales.
In making a capital budgeting decision, one needs to compare cash flows in terms of
their amounts and when they occur. One way to do so is to determine the
a. Future value
b. Present value
c. Average cash outflows
d. Opportunity costs