ACCT 245- FINAL
When a manager increases the capacity of constraint or ______, is called relaxing the constraint.
Bottleneck
The higher price customers are willing to pay is called the price ______.
Ceiling
Working Capital
Current Asset minus(-) Current Liability
Less dependence on supplies is in an advantage of:
Vertical Integration
To increase the strength of a chain, efforts should be concentrated on strengthening:
The weakest link
Duffy Inc., had net income of $95,000 for the year just ended. Duffy collected the following additional information to prepare its statement of cash flows for the year. Accounts Receivable increased by $191,000, Inventory decrease by $32,000, Accounts Payable decreased by $49,000, and Depreciation charges amounted to $46,000. Duffy uses the indirect method to prepare its statement of cash flows. What is Duffy's net cash provided by (used on) operating activities?
$(67,000)
Product ABC has a contribution margin per unit of $10.00. Each unit of ABC requires 5 minutes of machine time and 10 minutes of labor time. Product XYZ has a contribution margin per unit of $15.00 and each unit requires 10 minutes of machine time and 5 minutes of labor time. If the company's constraint is labor hours, the contribution margin per unit of constraint for Product XYZ $______ per minute.
3
Adams Inc., began the year with $495,000 in the Equipment account. During the year they sold equipment that had originally cost $50,000 for $20,000. The ending balance in the Equipment account was $650,000. Which of the following statements are true?
-Adams will report a cash inflow investing activities of $20,000 -Adams cash outflow for the purchase of equipment is $205,000
Which of the following are ways in which to calculate the benefit of selecting one alternative over another?
-An analysis that just looks at the relevant costs and benefits -An analysis that looks at all costs and benefits and identifies those that are differential -The difference between the net operating income for the two alternatives
When analyzing a company's earnings quality, earnings are considered to be higher quality or more indicative of performance when they:
-Are computed using conservative estimates -Are not a result of high inflation -Are corrected with cash flow from operating activities
Average Costs:
-Are often misleading -Contain suck costs
Typical capital budgeting cash outflow include:
-Initial equipment investments -Installation costs -Working capital invested
Capital budgeting methods that focus on cash flows rather incremental operating income are:
-Internal Rates of Return -Net Present Value -Payback
Which of the following of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales? A) Make or Buy B) Special Order C) Sell of Process Further D) Keep or Drop
B) Special Order
The involvement by a company in more than one of the activities in the entire value chain from development though production distractions, sales, and after-sales service is called ______. A) Opportunity Cost B) Vertical Integration C) Relevant Cost D) Avoidable Cost
B) Vertical Integration
When a company does not have enough capacity to produce all of the products and sales volume demanded by their customers, this leads to ______. A) Keep or drop decisions B) Volume trade-off decisions C) Sell or process further decisions D) Make or buy decisions
B) Volume trade-off decisions
Which of the following statements are true?
-When using the internal rate of return method, the cost of capital is used as the hurdle rate -When the net present value method is used, the discount rate equals the hurdle rate -The cost of capital may be used to screen out undesirable projects
When preparing a statement of cash flows:
Both financing and investing activities are reported at gross amounts
The machine or process that is limited overall output is a(n):
Bottleneck
If net cash flow from operating activities is less than current liabilities, it indicates the company:
Did not generate enough operation cash flow to pay bills at the end of the period
Calculating the present value of money is referred to as ______ cash flows.
Discounting
Suppose that a project's net present value is negative, but the project would provide intangible benefits that have not yet been estimated. To estimate the annual value of intangible benefits needed to accept the project, ______ the negative net present value excluding intangible benefits by the ______.
Divide, present value factor for an annuity
Retained earnings is decreased by:
Dividends paid
Some decision only have one alternative
False
The first step in computing net cash provided by operating activities is to subtract depreciation from net income.
False
True or False: Opportunity costs are not found in accounting records because they are not relevant to decisions.
False
When calculating the payback period, the deduction on the investment is excluded in the calculation of net cash flow.
False
All transactions (other than interest payments) involving borrowing from creditors or repaying creditors as well as transactions with the company's owners are ______ activities.
Financing
Cardinal Company issues new common stock for $50,000. The transaction is considered a(n) ______ activity on the stamen t of cash flow.
Financing
Salvage Value
Finds gained from the sale of a capital asset
When making a volume-trade-off decision, managers should ignore:
Fixed costs
An investment of $10,000 today is estimated to return $11,500 a year from now. The $11,500 is called the ______ of the investment value
Future Value
In general, the less sensitive customers are to price, the ______ the optimal selling price will be.
Higher
To maximize total contribution margin when a constrained resource exists, produce the products with the:
Highest contribution margin per unit of the constrained resources
The statement of cash flows:
Is one of the required financial statements
Responsibility for designing a product that an be made for no more than the target cost is given to the:
Product Development Team
Responsibility for designing a product that can be made for no more than the target cost is given to the:
Product Development Team
Which method should be used when ranking competing projects with different initial investments?
Profitability Index
A product's economic value to the customers based on the ______ value and the ______ value.
Reference, Differentiation
When using the simple rate of return, the initial investment should be reduced by the ______ value of old equipment.
Salvage
The capacity of a bottleneck can be effectively increased by:
-Focusing business improvements efforts on the bottleneck -Subcontracting some of the processing that would be done in that area
Mangers may choose to retain an unprofitable product line because it:
-Helps sell other products -Attracts customers
Which of the following are ways to increase the capacity of a bottleneck?
-Investing in additional machines as the bottleneck -Shifting workers from process that are bottlenecks to the process that is the bottleneck
The target costing approach was developed because:
-Most of a product's cost is determined in the design stage -The market really determines prices
The formula used to calculate markup percentage on absorption cost includes:
-Selling, general and absorption expenses -Required ROI multiplied by investment -Unit product cost multiplied by unit sales
Factors in determining the markup percentage using the absorption costing approach cost-plus pricing includes:
-Selling, general, and administrative expenses -Absorption costing unit product cost -Adequate return on investment
Which of the following can make a product line look less profitable than it really is?
Allocated common fixed costs
Avoidable or Unavoidable: Rent paid for the division's regional office
Avoidable
Avoidable or Unavoidable: Wages paid to the division's employees who will be downsized if the division is dropped.
Avoidable
The sensitivity of unit sales to changes in price is called ______. A) Markup Percentage B) Profit- Maximizing Price C) Elasticity of Demand D) Latitude
C) Elasticity of Demand
All of the following are relevant to sell or process further decision except ______. A) Costs incurred beyond the split-off point B) Revenues at the split-off point C) Joint costs incurred before the split-off point D) Revenue beyond the spilt-off point
C) Joint costs incurred before the split-off point
Applying a predetermined markup percentage to a cost base to determine the selling price is called:
Cost-Plus Pricing
If a company prices all of its products above the price flow, try will always make a profit.
False
Which of the following best describes the price elasticity of demand?
This is the degree to which a change in price affects the unit sales of product
When considering decision alternatives, both relevant and irrelevant costs are included when using the _______ ______ approach
Total Cost
Avoidable or Unavoidable: Cost of machinery purchased for the Orange County division.
Unavoidable
When making a volume-trade off decision, managers should ignore:
Fixed costs
The lowest price a company can charge and still makes incremental profits the sale is the price ______.
Floor
Initial Investment
Funds needed to purchase a capital asset or begin a capital investment project
Decision Making: Six Key Concepts
1) Define the alternatives 2) Distinguish between relevant and irrelevant costs and benefits 3) Perform differential analysis 4) Identify sunk costs 5) Identify future costs and benefits that do not differ between alternatives 6) Identify opportunity costs
Steps in the absorption costing approach are: A) Multiply unit production costs by 1+ markup percentage B) determine markup percentage on absorption cost C) Calculate unit product costs D) Calculate the price elastically of demand
A) Multiply unit product cost by 1+ markup percentage B) Determine markup percentage on absorption costing C) Calculate unit product costs
A project with a positive net present value would be ______ and a project with a negative net present value would be ______.
Acceptable, Unacceptable
A cost that can be eliminated by choosing one alternative over another is a(n) ______.
Avoidable
Superware, Inc. produces multiple produces multiple products out of a common input. Geratin is one such product, which has a sales value of $15,000 at the spilt-off point. Joint costs allocated to Geratin are $12,000. Sales vale of Geratin increases to $25,000 after further processing, and this processing will cost $7,000. What is net profit or loss of Superware processes the product further? A) ($3,000) loss B) $3,000 profit C) $20,000 profit D) $18,000 profit
B) 3,000 profit
Target cost is determined by subtracting the ______ from the anticipated selling price. A) Manufacturing Overhead B) Desired Profit C) After-Sales Service Costs D) Marketing Costs
B) Desired Profit
When a shortage or limited resources of some type restricts a company's ability to satisfy demand, the company has a(n) _______.
Constraint
If a price change has little effect on unit sales, the demand is considered to be:
Inelastic
Avoidable or Unavoidable: Cost of the private jet purchased for the company management's use.
Unavoidable
The degree to which a change in price affects unit sales of a product or service is the ______ ______ of ______
Price elasticity of demand
Avoidable or Unavoidable: General management expenses allocated to the Orange County division.
Unavoidable
Generally speaking, managers should set higher prices when demand is:
Inelastic
If a cost is traced to a segment using activity-based costing, out:
May or may not be an avoidance cost of this segment
When shoal a special order be accepted?
When the incremental revenue from special order exceeds the incremental costs of the order
Isolating relevant costs is desirable because:
-Critical information may be overlooked with the total cost approach -All information needed for the total cost approach is rarely available - Irrelevant costs may be used incorrectly in the analysis
Which of the following may be an advantage go making a part rather than buying it.
-Less dependence on outside suppliers -A smooth flow of parts and materials for production
Joint costs incurred prior to the split-off point ______ relevant in decisions regarding what to do from the split-off point forward
Are not
Cost of Capital
Average rate of return that must be paid to long-term creditors and shareholders for use of their funds
Prairie, Inc. produces a single product. It has an annual capacity of 10,000 units, but currently uses only 80% of it. Each units is sold for $50 and requires direct material worth $30 and direct labor worth $5. Manufacturing overhead cost is $10 per unit of which 70% is variable. What is Prairie's total incremental cost incurred to produce each unit? A) $30 B) $42 C) $35 D) $45
B) $42
A decision to carry one of the activists in the call chain internally, rather to buy externally from a supplier, is called a(n) ______ or _______ decision.
Make or Buy
A company must make a volume trade-off decision when they
-Do not have enough capacity to satisfy the demand for all its products -Must trade of units of one product for units of another due to limited production capacity
Which of he following techniques describe how a bottleneck should be managed?
-Focus business pieces improvement efforts on the bottleneck -Ensure there is minimal lost time at the bottleneck due to breakdowns and set-ups Find ways to increase the capacity of the bottleneck
One of the great dangers in allocating common ______ costs is that such allocations can make a product lune look less profitable than it really is.
Fixed
A product's markup is the difference between its selling ______ and its ______.
Price, Cost
Effectively managing an organization's continents is a key to increased
Profits
A product's economic value to the customer is based on the _______ value and the ______ value.
Reference, differentiation
Differential revenue is an example of a(n) _______ benefit.
Relavent
Activities raging from development to production to after-sales service are called a(n) ______ ______.
Value chain
When a company is involved in more than one activity in the entire value chain it is, ______ ______.
Vertically Integrated
When demand for products exceeds the production capacity, a ______ ______-______ decision must be made.
Volume trade-off
The capacity of bottleneck can be effectively increased by:
-Focusing business process improvement efforts on the bottleneck -Subcontracting some of the processing that would be done in that area
Managers may choose to retain an unprofitable product line because it:
-Help sell other products -Attracts customers
When making a capital budgeting decision, it is most useful to calculate the payback period:
-If a company is "cash poor" -As part of the screening process
A manager with a current ROI of 22% has been offered a project with a positive net present value and a simple rate of return of 18%. Which of the following statements are true?
-If the manager is evaluated based on ROI he will probably reject the project -The company will want the manager to a accept the project
The simple rate of return:
-Ignores the time value of money -Fluctuates doom year to year along with fluctuation in revenue and expense
To effectively deal with a constraint
-Improvements should focus on the constraint -Efforts should be focused on the weakest link
When preparing the operation activities section using the indirect method, which of the following are added back to net income?
-Increase in wages payable -Decrease in account receivable
The payback method:
-Is not a true measure of investment profitability -Ignores all cash flow that occur after the payback period -Does not consider the time value of money
When using net present value to compare projects, the total cost approach:
-Is the most flexible method available to compare projects -Includes all cash inflows and outflows under each alternative
When preparing the operating activities section of the statement of cash flows using the indirect method:
-Items that do not affect cash flow are removed from net income -Net income is adjusted to a cash basis
Decision Making: Concepts
-Keep or Drop Decisions -Make or Buy Decisions -Special order Decisions -Sell or Process Further Decisions
Typical capital budgeting decision include:
-Lease or buy decisions -Equipment selection decisions -Cost reduction decisions
The capital budgeting approaches that use discounted cash flows.
-Net Present Value Method -Internal Rate of Return Method
When considering accepting a special order:
-Normal sales must not be affected -There must be idle capacity -Incremental revenue should equal increment cost
Which of the following are true regarding the time value of money?
-Project that provides earlier returns are preferable to those that promise later returns -By collecting a project's return quickly, the investors has the opportunity to re-invest that money to earn even more
Preference decisions are also called ______ decision
-Ranking -Rationing
A product's differentiation value can arise by enabling customers to ______ the best available alternative.
-Realize greater cost saving than -Generate more sales and contribution margin than
When preparing the financing activities section of the statement of cash flows:
-Retained earning requires additional analysis -Increases in bonds payable are added
A company is considering buying a component part that they currently make. Which of the following items related to the equipment currently being used to make the components are relevant to the decision?
-Salvage value -Alternative use for the equipment
A company is considering buying a component part that they currently make. Which of the following item related to the equipment currently being used to make the component are relevant to the decision?
-Salvage value -Alternative use of the equipment
A company is considered buying a component part that they currently make. Which of the following items related to the equipment currently being used to make the component are relevant to he decision?
-Salvage value -Alternative used from the equipment
Which of the following are ways to increase of a bottleneck?
-Shifting workers from processes that are not bottlenecks to the process that is the bottleneck -Investing in additional machines at the bottleneck
When preparing the operating activities section under the direct method:
-The difference between cash receipts and disbursementer is calculated -Cash receipts are reported instead of income statement reviews
The net present value of a project is:
-The difference between the present value of cash inflows and present value of cash outflows for a project -Used in determining whether or not a project is an acceptable capital investment
A gain on the sale of an asset is dictated in the operating activities section of the statement of cash flows because:
-The gain increases net income, but is not a cash flow -The entire proceeds from the sale must be reported in the investing section of the statement
Key concepts in preparing the statement of cash flow include:
-The operating actives section may be prepared using the direct or indirect method -The statement is divided into three sections: operating, investing, and financing activities -Gross cash flows must be reported in the investing and financing section
ABC Lumber spent $1,000 cutting down a tree. The result was 40 pieces of unfinished lumber that sell for $20.00 each and 100 bags of sawdust that sell for $1.00 each. If the unfinished pieces of lumber are processed into finished lumber at a cost of $8.00 each, they will sell for $35.00. A bad of sawdust can be processed into Presto Logs that sells fro $1.25 at a cost of $0.75 per bag. Which of the following statements are true concerting whether the unfinished piece of lumber should be processed into finished lumber and whether the sawdust should be processed onto Presto Logs?
-The price of unfinished lumber should be processed -The sawdust should be sold as is without being processed into Presto Logs.
Investing activities include:
-The sale of used equipment -The purchase of a new building
When a product has an established market price
-There is not reason for suppliers to change less than the established price -Consumers will not pay more than the estimated price
Under the direct method, the operating activities section of the statements of cash flows:
-Treats cash disbursements as expenses -Reports cash collected from customers instead of revenue
Typical capital budgeting cash inflows include:
-Working capital released -Cost reduction -Salvage value
Product DGH has a monthly demand of 5,000 units. Its contribution margin is $18 per unit and $36 per direct labor hour. Product RBG has a monthly demand of 4,000 units. It's contribution margin is $15 per unit and $60 per direct labor hour. If a company only has 1,500 direct labor hours available, the company should produce ______ units of Product DGH and ______ units to Product RBG.
1,000 & 4,000
An investment proposal with an initial investment of $100,000 generates annual net cash inflow of $20,000 for a period of 10 years. the project has a net present value of $10,000. What is the investment proposal's payback period?
5 years
Spicer Dentistry is considering the purchase of a new x-ray machine. The machine costs $2,400 and has a useful life of 10 years. The new machine is expected to reduce operating costs by $400 per year. The payback period for the X-ray machine is ______ years.
6
State Bank is implementing a new marketing campaign that requires an initial investment of $35,000. If the project profitability index is 0.2, the net present value of the campaign's future cash flow is $______.
7,000
The first step in decision making is to: A) Define the alternative B) Perform a differential analysis C) Identify relevant costs and benefits
A) Define the alternatve
When making decisions to either buy a movie ticket or rent a DVD, the cost of the movie ticket is a(n) _______ cost. A) Incremental B) Irrelevant C) Avoidable D) Sunk
A) Incremental C) Avoidance
When analyzing two alternatives which is NOT true? A) Isolating relevant cost gives a different answer than using all costs B) Isolating relevant costs is classed the differential cost approach C) Mining irrelevant costs may cause confusion and distract attention from the information that is critical
A) Isolating relevant costs gives a different answer than using all costs
Costs that have been incurred and cannot be eliminated regardless of the alternative chose are ______. A) Sunk Costs B) Unavoidable Costs C) Relevant Costs D) Irrelevant Costs
A) Sunk Costs
The simple rate of return is also referred to as the ______ or _______ rate of return.
Accounting, Unadjusted
Luddington, Inc., reported a $100,000 loss of the sale of equipment on its income statement. Which of the following is the correct treatment within the operating activities section of the stamen of cash flows using the indirect method?
Add back $100,000 to net income
When the in indirect method is used to adjust net income to net cash provided by operating activities, the first step is to ______.
Add depreciation charges to net income
Depreciation expense is ______ net income when preparing the operating activities section using the _______ method.
Added to, direct
What assumption underlies net present value analysis?
All cash flows generated by an investment project are immediately reinvested at a rate of return equal to the discount rate
The simple rate of return is also called all of the following except ______.
Annual Rate of Return
When a project with a negative NPV has significant intangible benefits, the:
Annual intangible benefit necessary to make the investments worthwhile should be calculated
A series of equal cash flows is a(n) ______.
Annuity
An investment that pays the investors $1,000 per year for the next 10 years is an example of a(n) ______.
Annuity
Beginning balance + debits - Credits = Ending balance is the basic equation for:
Asset Accounts
When preparing the operating activity section of the statement of cash flows using the indirect method increases in current ______ are subtracted from and increases in current ______ are added to net operating income.
Assets, liabilities
When computing the simple rate of return, the annual incremental net operating income in the numerator should ______ the investment's depreciation charges.
Be reduced by
When the cash flows associate with an investment project change demo year to year, the payback period must be calculated
By tracking the unrecovered investment year by year
Future cash flows expected from investment projects:
Can be difficult to estimate
How managers plan significant investments in projects that have long term implications such as purchasing new equipment or introducing new products is called:
Capital Budgeting
because they provide reference prices that influence the price elasticity of demand, ______ have an important effect on a company's pricing decision.
Competitors
The phenomenon of earning interest on both the interstate's and the amount invested is know as ______.
Compound Interest
An investor deposits $100.00 and earns $6.00 of interstate's the first year and $6.36 of interstate's in the second year. This means the investment is earning 6% ______ interest.
Compounded
If some products must be cut back because of a constraint, produce the products with the highest:
Contribution margin per i units of constrained resource
When a constraint exists, companies need to focus on maximizing
Contribution margin per unit of constraint
When reporting operating activities:
Debits and credits are netted against each other
When calculating net cash flows from operating actives, the change in accounts payable is subtracted from net income when accounts payable _______ during the period.
Decrease
Trouble for a company may be indicated when increases in inventory and accounts payable are accompanied by:
Decreasing sales
When computing the payback period for a new piece of equipment, the salvage value of the equipment being replaced is:
Deducted from the cost of the new equipment
When preparing the operating section using the indirect method, ______ is added back to net income.
Depreciation expense
Focusing on future costs and benefits that are not the same between alternatives is:
Differential Analysis
The income statement is reconstructed on a cash basis from top to bottom when the ______ method is used to prepare the operating activities section of the statement of cash flows.
Direct
Most companies use the indirect method to prepare the statements of cash flows for external reporting purposes because the ______.
Direct method required more work
The interest factor used to find the present value is called the ______ rate.
Discount
Because of the time value of money, projects that promise ______ returns are preferable to those that promise the opposite.
Earlier
Which of the following of the advantage of buying a part instead of making it?
Economies of scale can result in higher quality and lower cost for suppliers
Which of the following is an advantage of buying a part instead of making it?
Economies of scale can result in higher quality and lower costs from suppliers
On the statements of cash flows is defined as cash and cash ______.
Equivalents
The statement of cash flows:
Focuses on activities that affect the cash balance
To determine if a project is acceptable compare the internal rate of return to the company's:
Hurdle Rate
When making a decision, a company may focus on lost contribution margin and avoidance fixed costs or prepare comparative ______ ______.
Income Statements
The ______ method of computing operating activities reconciles net income to net cash flow.
Indirect
Net cash flows from operating activities will be identical under both the ______ and the _______ methods.
Indirect, Direct
When a product is past the slit-off point, but is not yet a finished product, it is called a(n) _______ product.
Intermediate
Investment required/Annual net cash inflow is the formula to find the factor that enables calculation of the
Internal Rate of Return
The ______ is defined as the discount rate at which the present value of a project's cash inflows will equal the present value of its cash outflows.
Internal Rate of Return
Purchases of equipment and the sale of land are transactions that would be classified as ______ activities.
Investing
What section of the statement of cash flows shows the cash paid for property, plant and equipment purchases?
Investing
In an equipment capital budgeting decision, recovering the original investment means that the:
Investment has generated enough cash inflows to completely cover the cost of the equipment
When the annual net cash flow is the same each year, the payback period equals the ______ required divided by the annual net cash ______.
Investments, Inflow
Costs and benefits that should be ignored when making decisions are called _______ costs and benefits.
Irrelevent
In deciding whether to drive to a location to take the train, the relaxation factor comes from not have to drive ______ relevant to the decision.
Is
To construct the statement of cash flows, the change in retained earnings:
Is broken down into net income and dividends paid to stockholders
It is important to know the present value of an investment because a dollar:
Is worth more today than it will be worth a year from today
When the outcomes of the net present value method and the internal rate of return method do not agree,:
It is best to rely on the net present value method
The costs incurred to the split-off in a process in which two or more products are produced from a common input are known as ______ costs.
Joint
The split-off point in the manufacturing process at which the ______ products can be recognized as separate products.
Joint
Two or more products that are produced from a common input are known as ______ products.
Joint
If, by dropping a product line, a company cannot avoid as mush in fixed costs as it loses in contribution margin, the company should ______ the product line
Keep
When a capital budgeting decision does not involve any revenues, the most desirable alternatives in the one with the:
Least total cost from a present value perspective
Which method involves selecting the cheapest alternative when revenue are not involved?
Least-Cost Approach
The present trend appears to be towards ______ vertical integration.
Less
The Eye Clinic of Dr. Christensen is investing in some equipment to perform corrective eye surgery. It is expected that the equipment purchase will generate an internal rate of return of 24%. This equipment was chosen over equipment to perform cataract eye surgery. Thus, the internal rate of return of the cataract eye surgery equipment must have been:
Less than the internal rate of return of the corrective eye surgery equipment
A negative net present value indicted that the project's return is ______.
Less than the minimum required rate of return
When preparing the statement of cash flows indirect method, a(n) ______ on the sale of investment asset is added back to net income.
Loss
Which of the following statements are true regarding gains and losses of fixed assets when preparing the operating activity section of the statement of cash flows using the indirect method?
Losses are added back to net income and gains are subtracted from income
In general, the more sensitive customers are to prices, the ______ the optical selling price will be.
Lower
Freemont Company's Account Payable decrease by $4,000 and its Income Taxes Payable increased by $3,000 during the year. Which of the following is the correct treatment within the operating activities section of the statement of cash flows using the indirect method?
The change in Accounts Payable is subtracted from net income; the change in Income Taxes Payable is added to net income
An investment requires committing funds today with:
The expectation of earning a return of those funds in the future
Which of the following statements is false?
The net present value method assumes that cash flow are not reinvested
Cash inflows related to revenue and expense transactions that affect net income are generated by _______ activities.
Operating
Changes in non cash balance sheet accounts the directly affect net income are classified as ______ activities.
Operating
Start-up companies often have negative net cash provided by ______.
Operating Activities
The three sections of cash flow reports results from ______ activities, ______ activities and ______ activities.
Operating, Investing, Financing
If a company has a resource that could be used for something else, the _______ cost is the profit that could be derived from the best alternative use fo the resource.
Opportunity
Stephan Photography has an 18% required rate of return and is analyzing comporting investments in new camera equipment. Option A has a project profitability index of 0.16, and Option B has a project profitability index of 0.13. The best choice of Stephan Photography would be:
Option A
When panning a trip and deciding whether to drive or fly, the ______ is a suck costs and should be ignored.
Original cost of the car
Actual cash outlays for operating expenses are:
Out-of-Pocket Costs
The basic premise of the ______ method is that the more quickly the cost of an investment can be recovered, the more desirable the more desirable the investment is
Payback
Investments required/Annual net cash inflow is the formula for the:
Payback Period
Which of the following ignores the time value of money?
Payback Period
The length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates is the ______ ______.
Payback period
Product markup is generally expressed as a(n) _______ of costs.
Percentage
One of the two broad categories of capital budgeting decisions, a ______ decision, relates to selecting from among several acceptable alternatives
Preference
The two broad categories into which capital budgeting decisions fall are ______ and ______ decisions.
Preference, Screening
You will receive $110 in 1 year if you invest $100 today. The $100 represents the ______ ______ of the $110.
Present value
Costs and benefits that always differ between alternatives are _______ costs and benefits.
Relevant
When making a decision only ______ costs and benefits should be included in the analysis.
Relevant
What is ROI
Return on investment
It is profitable to container procession a joint product after the split-off point, so long as the incremental ______ from such processing exceeds the incremental processing cost incurred after the split-off point
Revenue
It is profitable to continue processing a joint product after the split-off point, so ling as the incremental ______ from such processing exceeds the incremental processing cost incurred after the split-off point.
Revenue
One of the two broad categories of capital budgeting decisions, a ______ decision, relates to whether a proposed project is acceptable based on a preset criterion.
Screening
The cost of capital service as a ______ tool.
Screening
Which of the following is NOT another term used to describe preference decision making?
Screening Decisions
The two broad categories into which capital budgeting decisions fall are ______ decisions and ______ decisions.
Screening, Preference
Which of the following is NOT a category for capital budgeting decisions?
Selective Decisions
Deciding what to do a joint product at the split-off a(n) ______ or ______ ______ decision.
Sell or Process Further
When making a decision, quantitative differences between alternatives ______ be ignored.
Should not
A gain on the sales of a fixed asset will be ______ net income to arrive at the cash provided or (used) by operating activities prepared using the indirect method.
Subtract from
The market is instrumental in determining a product's price through the laws of ______ and ______.
Supply, Demand
Freemont Company's Account Receivable decrease by $4,000 and its Income Taxes Payable increased by $3,000 during the year. Which of the following is the correct treatment within the operating activities section of the statement of cash flows using the indirect method?
The change in Account Receivable is added to net income; the changes in Inventory is added to net income.
Which of the following statement is false?
The net present value method assumes that cash flows are not reinvested
The internal rate of return is:
The rate of return of an investment project over its useful life
A set of activities ranging from development to production to after-sales service is called:
The value chain
Investing Activity
These activities generate cash inflows and outflows related to acquiring or disposing of concurrent assets, long-term investments, and loans to another entity
Financing Activity
These activities generate cash inflows and outflows related to creditors and transactions with the company's owners
Operating Activities
These activity generate cash inflows and outflows related to revenue and expense transactions that affect net income
Mingling irrelevant and relevant costs may cause confusion and distract attention from critical information
True
True or False: When deciding whether to take a train or drive fir a weekend trip to visit an out-of-town friend, the monthly fee a student pays to park at school is not relevant to the decision.
True
Which of the following is a limitation of the simple rate of return?
Use accounting income
Which of the following is not true about a post-audit?
Uses estimated data
The potential benefit given up when selecting one alternative over another is a(n) ______. A) Sunk B) Irrelevant C) Opportunity D Avoidance
C) Opportunity
Which of the following is NOT correct? A) EVC = Reference Value + Differential Value B) Reference Value <= Value-Based Price <= EVC C) Reference Value >= Value-Based >= EVC D) Reference Value = The price of the best alternatives
C) Reference Value >= Value-Based >= EVC
Optimal selling prices can be calculated using Microsoft Excel ______.
Solver
A one-time order that is not considered part of the company's normal ongoing business is a _______ order.
Special
Anticipated selling price - Desired profit = ______ ______.
Target Cost
Working Capital:
Often increases when a company takes on a new project
Assume the Accumulated Depreciation account had beginning and ending balances of $600 and $1,000, respectively. Also, assume that the company sold equipment with accumulated depreciation of $100 during the period. What was the amount of depreciation charges during the period?
$500
Financing activities include:
-Borrowing money -Repurchasing common stock
Which of the following statements are true?
-Compound interest means that interest is paid on interest -The more frequent interest is compounded, the faster the balance grows
Operating activities include:
-Corporate income taxes payment -Wage payment to employees -Interest on notes receivable or notes payable
Which of the following techniques describe how a bottleneck should be managed?
-Find ways to increase the capacity of the bottleneck -Focus business process improvement effects on the bottleneck -Ensure there is minimal lost time at the bottleneck due to breakdowns and set-up
Conducting a post-audit:
-Flags any manager's attempts to inflate benefits or downplay costs in a project proposal -Provides an opportunity to reinforce and possibly expand successful projects -Provides an opportunity to cut losses on floundering projects
The required rate of return is the _______ rate of return a project must yield to be acceptable.
Minimum
A dollar today is worth ______ than a dollar earned a year from now.
More
When using the internal rate of return method to rank competing investment projects, an investment that has an internal rate of return of 20% is ______ than an investment that has an internal rate of return of 17%.
More Desirable
When a conflict between capital budgeting methods exists, the most reliable method to use for making preference decisions is:
Net Present Value
Two capital budgeting approaches that use discounted cash flow are the ______ _______ value method and the _______ _______ of return method
Net Present, Internal Rate
When making a preference decision, comparing the net present value of one project to the net present value of another project can:
Only be done if the initial investment are equal
Allocated common costs are:
Only relevant to decision if they are avoidable
During the year sales added $430 million to a company's accounts receivable. A total of $360 million of accounts were collected. On the statements of cash flows:
Only the net increase of $70 million will be reported
The total cost approach and the differential approach method of decision analysis ______ provide the same correct answer.
Will always
Current assets minus current liabilities is called ______ ______.
Working capital
Cash Inflow
Working capital is released for use elsewhere within the company
Cash Outflow
Working capital is tied up for project needs
Synonyms for differential costs include _______ cost.
Avoidance Incremental
Latitude and private information are two components of _______ influence that impact the determination of selling price. A) Customers' B) Competitors' C) Costs' D) Revenues"
A) Customers'
Irrelevant costs include: A) Sunk Costs B) Future costs that differ between alternatives C) All fixed costs D) Future costs that do not differ between alternatives
A) Sunk Costs D) Future costs that do not differ between alternatives
Customers and competitors play important role that in determining a company price
Ceiling
The potential benefit that is given up when one alternative is selected over another is called _______. A) Relevant Cost B) Avoidable Cost C) Differential Cost D) Opportunity Cost
D) Opportunity Cost
When considering decision alternatives, only relevant costs are included when using the ______ ______ approach.
Differential Cost
If price change significantly impact product sales, demand for the product is said to be ______. If the change in price does not gnarly impact sales demand is ______.
Elastic, Inelastic
Reasons to Isolate Relevant Cost
Enough information rarely available to prepare income statements
A product's markup is the difference between its selling _______ and its _______.
Price Cost