Once you have determined the net present value of a project, if the net present value is
less than zero, the project should be
a. Accepted
b. Rejected
c. Before making a decision, calculate the future value of the project
d. Before making a decision, recalculate the present value using another discount rate
ROI can be viewed as
a. A variance.
b. An absolute measure of return.
c. A rate of return.
d. A dollar amount of return.
Which of the following activities would be classified as non-value-added in the
manufacture of dresses?
a. Cutting
b. Sewing
c. Hemming
d. Inspecting
Which of the following is an example of an internal operating nonfinancial measure?
a. Accidents per month
b. Labor productivity
c. Market share
d. Product flexibility
Terra Mesa Manufacturing uses a job order cost system to account for its production of
specialty patio furniture. On June 30, the company had the following balances in its
inventory accounts:
On June 30, the total of all open job order cost sheets would be
a. $755,000
b. $612,320
c. $469,640
d. $601,680
Answer the following questions related to common-size financial statements? a. What
are common-size financial statements? How are common-size financial statements
used? b. What is the base for a common-size income statement? c. What is the base for
a common-size balance sheet?
The variable costs associated with the segment ‘s sales are always
a. Sunk
b. Avoidable
c. Unavoidable
d. Irrelevant
In the activity identification stage of implementing an activity-based costing system, the
greater the level of detail
a. The less likely the company will be to have a net loss.
b. The greater the chance of misclassifying some costs and activities
c. The less likely to misclassify some costs and activities
d. None of these answer choices are correct.
Lingh Suit Co. has received a shipment of suits that cost $200 each. If the company
uses cost-plus pricing and applies a markup percentage of 60%, what is the sales price
per suit?
a. $333
b. $320
c. $280
d. $500
People ‘s Construction Company has set a 15% required minimum rate of return. The
company ‘s CFO is considering investing in a $125,000 crane that is expected to
generate $25,000 of additional operating income. People ‘s weighted-average cost of
capital is 10% and its tax rate is 30%. What is the crane ‘s EVA?
a. $5,000
b. $12,500
c. $17,500
d. $100,000
Clear Blue Pools builds custom in-ground pools ranging in price from $18,000 to
$36,000. Dr. Jim Hardin, a local plastic surgeon has asked Clear Blue Pools to show
him a portfolio of pools. Dr. Hardin has selected a model that calls for materials of
$18,000 and labor of $13,000, but Dr. Hardin wants some handicap features not
included in the model that would add another $4,000 to the cost but does not want to
pay more than $32,000. Clear Blue Pools typically prices its pools based on the total
cost of construction plus 15%.
Required:
a. What price would Clear Blue Pools normally quote for this pool?
b. What is the target cost Clear Blue Pools would need to meet to sell the pool for
$32,000 at a 15% markup? (Round to the nearest dollar)
c. What could Clear Blue Pools do to meet the target cost in part b?
One of your managers has requested the purchase of a new capital asset and as part of
your analysis you are calculating the present value of the project’s cash flow. Your
manager has argued that your analysis is flawed. You believe the manager is trying to
manipulate the analysis. You have determined the amount and timing of the project’s
cash flow.
Required:
a. Discuss how a manager can increase the project’s present value without substantially
altering it.
b. How can a company prevent managers from using such a method to their benefit?
In making a capital budgeting decision, one needs to compare cash flows in terms of
a. Their amounts
b. When they occur
c. Both their amounts and when they occur
d. Neither their amounts nor when they occur
Durango Corporation ‘s Midwestern region operates as an investment center. Rich
Ruhlman, the division ‘s manager, has set a 15% required minimum rate of return.
Ruhlman is considering investing in computerized manufacturing equipment with a cost
of $220,000. The equipment is expected to generate $65,000 in additional operating
income. What is the equipment ‘s residual income?
a. $65,000
b. $33,000
c. $32,000
d. None of these answer choices are correct
On a pro-forma balance sheet, the accounts receivable balance comes directly from
a. The cash receipts budget.
b. The general ledger.
c. The cash budget.
d. The sales journal.
If you wish to have $25,000 at the end of five years, how much must your deposit each
year if you earn 12% compounded annually?
The first step in developing a balanced scorecard is to clarify the strategic focus. As part
of the process, many organizations develop a strategy map. Assume you are asked by
your supervisor to develop a strategy for your organization. You have determined that
the following strategies have been established by the company.
ï€ Achieve operational excellence
ï€ Develop trained workforce
ï€ Infuse corporate culture of quality throughout workforce
ï€ Develop reputation for quick turnaround
ï€ Retain and grow customer base
ï€ Manage customer relationships
ï€ Increase profit
Required:
Prepare a strategy map using the four balanced scorecard perspectives.
Define markup and explain cost-plus pricing.
workf
orce
throughou
t
workforce
The formula for preparing a common-size income statement is
The following items were gathered from Ledbetter Company’s general ledger:
Required:
Using the indirect method, construct Ledbetter’s statement of cash flows.
New Rock, Inc. sells video games it has purchased from a local distributor. The
following static budget is based on sales of 8,000 games. However, New Rock only sold
7,800 games during the year. Fixed costs are 30% of total operating expenses
Required:
Prepare a flexible budget.
In a decentralized organization, upper managers need a way to evaluate the
performance of unit managers. Based on factors under the unit manager ‘s control,
organizational units are categorized as cost centers, profit centers, or investment
centers. Classify each of the following centers by placing an “X” in the appropriate
column.
