Which of the following is a key characteristic of divisional incentive compensation
plans for rewarding short-term performance?
A.Cash bonuses and profit sharing
B.Deferred compensation
C.Employee stock options
D.Retirement plans
Fred’s Fine Roasted Coffee
Fred’s Fine Roasted Coffee reports the following data for April 2010 where 500,000
pounds of roasted gourmet coffee beans were actually produced (note: standard costs do
not allow for any wastage),
Refer to Fred’s Fine Roasted Coffee. Calculate the total direct labor variance.
A.$48,000 F
B.$20,000 F
C.$68,000 F
D.$28,000 F
Which of the following describes the cost of maintaining warehouse facilities?
A.carrying costs.
B.set-up costs.
C.order costs.
D.sunk costs.
Which statement is true concerning appraisal costs?
A.Appraisal costs are incurred to prevent defects in the products or services being
produced.
B.Appraisal costs are incurred to detect individual units of products that do not conform
to specifications.
C.Appraisal costs are incurred when the firm discovers nonconforming products and
services before delivery to customers.
D.Appraisal costs are incurred when the customers discover nonconforming products
and services at delivery.
The major cost pool(s) for activity-based costing is/are
A.the “plant.”
B.the department.
C.the activity center.
D.the “plant” and the department.
Island Grills considering purchasing a new machine for $1 million at the end of Year 0
to be put into operation at the beginning of Year 1. The new machine will save
$250,000, before taxes, per year from the cash outflows generated by using the old
machine. For tax purposes, Island will depreciate the new machine in the following
amounts: $100,000 in Year 1, $300,000 in Year 2, and $200,000 per year thereafter until
fully depreciated or sold. The new machine will have no salvage value at the end of
Year 5. Island expects the new machine to have a market value of $400,000 at the end
of three years. If Island acquires the new machine at the end of Year 0, it can sell the old
one for $200,000 at that time. The old machine has a tax basis of $300,000 at the end of
Year 0. If Island keeps the old machine, the company will depreciate it for tax purposes
in the amount of $100,000 per year for three years, when it will have no market value.
Island pays taxes at the rate of 40 percent of taxable income and uses a cost of capital of
12 percent in evaluating this possible acquisition. Island has sufficient
otherwise-taxable income in Year 0 to save income taxes for each dollar of loss it may
incur if it sells the old machine at the end of Year 0.
Required:
a. Compute the net present value of cash flows from each of the alternatives facing
Island Grills.
b. Make a recommendation to Island Grills.
c. Assume that the cash flows described in the problem for Years 2 through 5 are real,
not nominal, amounts, but the 12 percent cost of capital includes an allowance for
inflation of 6 percent. Describe how this will affect your analysis. You need not perform
new computations.
How can budgets motivate people to perform because?
A.Budgets are mandated by the Department of Labor and included in labor union
contracts.
B.Budgets are authorized by generally accepted accounting principles.
C.Budgets are required by the Securities and Exchange Commission.
D.Budgets are standards or targets for people to achieve.
Sensitivity analysis is used to show how the financial model responds to changes in
which of the following?
A.any or all of its variables.
B.fixed costs, only.
C.variable costs, only.
D.operating profit.
What do managers use to analyze the cost-generating and revenue-generating
components of a company’s activities?
A.Low cost solution
B.Critical path
C.Value chain
D.Optimal solution
The value assigned to a transaction where goods are bought by one unit of an
organization from another unit of the same organization known as which of the
following?
A.sales price.
B.intercompany cost basis.
C.transfer price.
D.generally accepted price.
Which of the following statements is true concerning the critical success factors
dealing with quality?
A.Quality means giving the customer what the firm promised; it is the degree to which
the customer is satisfied.
B.Quality is the price of a product which must cover its costs or the organization will no
longer make the product.
C.Quality can be defined as the expectations the customer has about all aspects, both
tangible and intangible, of the product purchase and use.
D.None of the answers is correct.
Which of the following terms describes the use of input from lower-management and
middle-management employees in developing budgets?
A.benchmarking.
B.participative budgeting.
C.bottom-up budgeting.
D.motivational budgeting.
A project requires an initial investment of $43,000 and has the following expected
stream of cash flows:
The internal rate of return for the project is closest to
A.0 percent.
B.10 percent.
C.15 percent.
D.20 percent.
A firm will depreciate a computer costing $10,000 over five years using the
straight-line methods for financial reporting. For tax purposes, the company will use an
accelerated method as follows:
Assuming a tax rate of 40 percent, what is the relevant cash flow for present value
analysis associated with the tax savings related to depreciation for Year 2?
A.$1,280.
B.$1,667.
C.$1,920.
D.$3,200.
To encourage division managers to act in ways consistent with organizational goals,
divisional planning and control systems attempt to create
A.profit maximization.
B.centralization.
C.behavior congruence.
D.non-goal-congruent behavior.
The CVP model is one example of a financial model that can be used to calculate which
of the following?
A.required selling price and conduct sensitivity analysis.
B.new break-even points and calculate multiple break-even points.
C.target profit points and compare alternatives.
D.All of the answers are correct.
Which of the following cost allocation methods would be used to determine the lowest
price that could be quoted for a special order that would utilize idle capacity within a
production area?
A.Job order
B.Process
C.Variable
D.Standard
Which of the following statements are more descriptive of managerial accounting than
of financial accounting?
A.Emphasis is on historical data.
B.Information is more widely distributed.
C.Recognized standards for presentation.
D.Information is tailored to the needs of individual decision makers.