The appropriate discount rate that analysts use in computing the present value of future
cash flows is composed of a pure interest rate increased to reflect expected inflation.
What is this pure rate called?
A.risk-free rate.
B.real interest rate.
C.nominal interest rate.
D.none of the above.
Why are the costs of operating service departments allocated to other departments?
A.Many departments consume the services provided by service departments and should
be assigned a share of the costs associated with the services consumed.
B.Allocating service costs to other departments for services provided gives department
managers incentives to control the use of support services.
C.External reporting regulations (for tax and financial reporting) require allocating
manufacturing overhead to the units produced.
D.All of the answers are correct.
An activity-based costing system
A.can provide a much more complete picture of cost-volume-profit relationships.
B.is not compatible with cost-volume-profit relationships because not all costs are
based on volumes.
C.is too expensive to combine with a cost-volume-profit model.
D.cannot utilize cost-volume-profit relationships.
When sales dollars are used as the measure of volume in the cost-volume-profit
equation, the focus is on solving for total revenue required to break even or a target
profit rather than total units. Target Profit in Sales Dollars equals which of the
following?
A.total contribution margin divided by total sales.
B.unit contribution margin divided by unit sales price.
C.total fixed costs divided by the contribution margin ratio.
D.(sum of total fixed costs plus target profit) divided by the contribution margin ratio.
Which of the following is a valid assumption of the theory of constraints?
A.few costs are variable-generally only materials, purchased parts, piecework labor, and
energy to run machines.
B.most direct labor costs are fixed.
C.most overhead costs are fixed.
D.All of the answers are correct.
Which product pricing factor is primarily used by the majority of American companies?
A.Market-based
B.Cost-based
C.Quality-based
D.Quantity-based
Justification of investments in advanced manufacturing systems by using discounted
cash flow analysis is
A.required by generally accepted accounting principles.
B.easy.
C.a difficult problem.
D.based on quantifiable benefits, only.
PB Investigators LLC hires one private investigator for every 5 clients. The annual
salary for each private investigator is $60,000 per year. The cost to PB Investigators
LLC for investigators is known as which of the following?
A.fixed cost.
B.variable cost.
C.mixed cost.
D.semi-fixed cost.
Which of the following terms describes a cost that firms can identify specifically with,
or trace directly to, a particular product, department, or process?
A.direct cost.
B.process cost.
C.marginal cost.
D.variable cost.
Which of the following is false about short-run and long-run pricing decisions?
A.Short-run decisions include pricing for a special order with no long-term
implications.
B.Short-run decisions typically have a time horizon of six months or less.
C.Long-run decisions include pricing a main product in a major market.
D.Long-run decisions include pricing for a special order with no short-term
implications.
Stephanie Company
Stephanie Company has two production departments: D and J. Stephanie also has 3
service departments: Personnel, Administration, and Shipping. Shipping costs are
allocated on the basis of number of packages, while Personnel and Administration costs
are allocated using number of employees. Assume that the ranking of the benefits
provided is in the order listed below.
Refer to Stephanie Company. Using the step method, what amount of Shipping costs is
allocated to Department D (rounded to the nearest $)?
A.$304,348
B.$500,000
C.$524,570
D.$629,484
The Knott Division of Wright Company produces rope. One-third of the Knott
Division’s output is sold to the Hammock Products division of Wright and the
remainder is sold to outside customers. The Knott Division’s estimated sales and
standard cost data for the fiscal year ending Sept. 30 are as follows:
The Knott Division has an opportunity to purchase 10,000 feet of identical quality rope
from an outside supplier at a cost of $1.50 per unit on a continuing basis. Assume that
the Knott Division cannot sell any additional product to outside customers.
Should Wright allow its Knott Division to purchase the rope from the outside supplier,
and why?
A.Yes, because buying the rope would save Wright Company $2,500
B.No, because making the rope would save Wright Company $2,500.
C.Yes, because buying the rope would save Wright Company $5,000.
D.No, because making the rope would save Wright Company $5,000
Which of the following is not one of the factors that companies using JIT find essential
for JIT to work?
A.total quality – all employees must be involved in quality.
B.smooth production flow – fluctuations in production lead to delays.
C.purchasing quality materials – defective materials disrupt the production flow.
D.specialized, inflexible workforce – workers are unique specialized experts.
JM Company uses standard costing. The company reported the following information
for the current period:
REQUIRED:
Calculate the following variances:
Explain how to identify the costs of producing joint products and the relevant costs for
decisions to sell or process further.
How can financial modeling be used with multiple cost drivers?
Jose plans to see his friend in San Francisco on New Year’s Day weekend. The plan
ticket will cost him $550. Unfortunately, Jose’s supervisor at work has asked if he
would work overtime for 20 hours during the weekend at overtime pay of $40 per hour.
What will be the opportunity cost if Jose decides to visit his friend?
Explain the effect of taxes on financial modeling.
Define Break-even time (BET) and describe how it works. Include any limitations from
using this approach.
Define the two most common types of fraud and discuss their impact on financial
statements. Also discuss incentives for managers to commit financial fraud.