1) (ignore income taxes in this problem) the management of nagata corporation is
investigating buying a small used aircraft to use in making airborne inspections of its
above-ground pipelines. the aircraft would have a useful life of 6 years. the company
uses a discount rate of 13% in its capital budgeting. the net present value of the
investment, excluding the intangible benefits, is -$326,237. to the nearest whole dollar
how large would the annual intangible benefit have to be to make the investment in the
aircraft financially attractive?
a.$326,237
b.$54,373
c.$81,600
d.$42,411
2) rippelmeyer kennel uses tenant-days as its measure of activity; an animal housed in
the kennel for one day is counted as one tenant-day. during june, the kennel budgeted
for 3,600 tenant-days, but its actual level of activity was 3,550 tenant-days. the kennel
has provided the following data concerning the formulas used in its budgeting and its
actual results for june:
the administrative expenses in the planning budget for june would be closest to:
a.$7,996
b.$7,885
c.$7,555
d.$7,560
3) tedder corporation has provided the following financial data (in thousands of
dollars):
net income for year 2 was $80 thousand. interest expense was $16 thousand. the tax rate
was 30%. dividends on common stock during year 2 totaled $40 thousand. dividends on
preferred stock totaled $10 thousand. the market price of common stock at the end of
year 2 was $6.79 per share.
required:
compute the following for year 2:
a. earnings per share (of common stock).
b. price-earnings ratio.
c. dividend payout ratio.
d. dividend yield ratio.
e. return on total assets.
f. return on common stockholders’ equity.
g. book value per share.
4) within the relevant range, the variable cost per unit:
a.remains constant as activity changes
b.increases as activity increases
c.decreases as activity increases
d.can increase or decrease as the activity changes
5) green company’s costs for the month of august were as follows: direct materials,
$27,000; direct labor, $34,000; selling, $14,000; administrative, $12,000; and
manufacturing overhead, $44,000. the beginning work in process inventory was
$16,000 and the ending work in process inventory was $9,000. what was the cost of
goods manufactured for the month?
a.$105,000
b.$132,000
c.$138,000
d.$112,000
6) kappen corporation’s contribution format income statement for october appears
below:
the degree of operating leverage is closest to:
a.0.15
b.0.28
c.3.63
d.6.79
7) labossiere corporation has provided the following data for november.
the volume variance for november is:
a.$8,760 u
b.$2,920 f
c.$2,920 u
d.$8,760 f
8) management of parrent corporation has asked your help as an intern in preparing
some key reports for april. the company started the month with raw materials
inventories of $32,000. during the month, the company made raw materials purchases
amounting to $68,000. at the end of the month, raw materials inventories totaled
$35,000. direct labor cost was $43,000 and manufacturing overhead was $62,000. the
beginning balance in the work in process account was $19,000 and the ending balance
was $12,000. the beginning balance in the finished goods account was $35,000 and the
ending balance was $58,000. sales totaled $240,000. selling expense was $18,000 and
administrative expense was $42,000.
the cost of goods manufactured for april was:
a.$177,000
b.$173,000
c.$170,000
d.$163,000
9) financial statements for larkins company appear below:
dividends during year 2 totaled $135 thousand, of which $12 thousand were preferred
dividends. the market price of a share of common stock on december 31, year 2 was
$150.
larkins company’s dividend yield ratio on december 31, year 2 was closest to:
a.4.6%
b.5.0%
c.2.1%
d.4.1%
10) the higher the denominator level of activity:
a.the higher the unit product cost
b.the lower the unit product cost
c.the less likely is the occurrence of a volume variance
d.the more profitable operations likely will be
11) data from gofman corporation’s most recent balance sheet appear below:
sales on account in year 2 amounted to $1,300 and the cost of goods sold was $900.
the working capital at the end of year 2 is:
a.$320
b.$500
c.$1,210
d.$1,070
12) (ignore income taxes in this problem.) pare long-haul, inc. is considering the
purchase of a tractor-trailer that would cost $104,520, would have a useful life of 6
years, and would have no salvage value. the tractor-trailer would be used in the
company’s hauling business, resulting in additional net cash inflows of $24,000 per
year. the internal rate of return on the investment in the tractor-trailer is closest to:
a.10%
b.8%
c.13%
d.11%
13) an increase in the activity level within the relevant range results in:
a.an increase in fixed cost per unit
b.a proportionate increase in total fixed costs
c.an unchanged fixed cost per unit
d.a decrease in fixed cost per unit
14) if sales increase from $80,000 per year to $120,000 per year, and if the operating
leverage is 5, then net operating income should increase by:
a.167%
b.250%
c.100%
d.334%
15) hamblet corporation’s net cash provided by operating activities was $130; its net
income was $94; its capital expenditures were $116; and its cash dividends were $19.
the company’s free cash flow was:
a.$89
b.-$41
c.$359
d.-$5
16) pratt corporation uses the fifo method in its process costing system. data concerning
the first processing department for the most recent month are listed below:
note: your answers may differ from those offered below due to rounding error. in all
cases, select the answer that is the closest to the answer you computed. to reduce
rounding error, carry out all computations to at least three decimal places.
the total cost transferred from the first processing department to the next processing
department during the month is closest to:
a.$629,304
b.$652,500
c.$635,900
d.$696,455
17) carner lumber sells lumber and general building supplies to building contractors in a
medium-sized town in montana. data regarding the store’s operations follow:
sales are budgeted at $370,000 for november, $360,000 for december, and $340,000 for
january.
collections are expected to be 85% in the month of sale, 13% in the month following
the sale, and 2% uncollectible.
the cost of goods sold is 70% of sales.
the company purchases 30% of its merchandise in the month prior to the month of sale
and 70% in the month of sale. payment for merchandise is made in the month following
the purchase.
other monthly expenses to be paid in cash are $24,600.
monthly depreciation is $17,000.
ignore taxes.
retained earnings at the end of december would be:
a.$224,500
b.$147,900
c.$88,700
d.$209,900
18) guynn corporation’s most recent balance sheet and income statement appear below:
dividends on common stock during year 2 totaled $10 thousand. dividends on preferred
stock totaled $5 thousand. the market price of common stock at the end of year 2 was
$7.05 per share.
the return on total assets for year 2 is closest to:
a.5.56%
b.5.70%
c.3.85%
d.3.94%
19) (ignore income taxes in this problem.) the wisbley company is contemplating the
purchase of a helicopter for its executives to use in their business trips. this helicopter
could be either purchased or leased from the manufacturer. the useful life of the
helicopter is four years. data concerning these two alternatives follow:
if the helicopter is leased, it would be returned to the manufacturer in four years.
wisbley’s required rate of return is 22%.
the incremental net present value in favor of leasing rather than purchasing is (rounded
off to the nearest hundred dollars):
a.$78,300
b.$65,100
c.$188,100
d.$132,600