Act Final Exam
Moates Corporation has provided the following data concerning an investment project that it is considering: Initial investment$ 410,000 Annual cash flow $ 117,000per yearExpected life of the project4yearsDiscount rate9% Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. The net present value of the project is closest to:
$(31,037)
Sedita Incorporated is working on its cash budget for July. The budgeted beginning cash balance is $14,000. Budgeted cash receipts total $179,000 and budgeted cash disbursements total $178,000. The desired ending cash balance is $41,000. The excess (deficiency) of cash available over disbursements for July will be:
$15,000
Schuepfer Incorporated bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 1,700 units are planned to be sold in March. The variable selling and administrative expense is $4.40 per unit. The budgeted fixed selling and administrative expense is $35,630 per month, which includes depreciation of $2,800 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget should be:
$40,310
Wallen Corporation is considering eliminating a department that has an annual contribution margin of $80,000 and $160,000 in annual fixed costs. Of the fixed costs, $90,000 cannot be avoided. The annual financial advantage (disadvantage) for the company of eliminating this department would be:
($10,000)
Bungert Incorporated reported the following results from last year's operations: Sales$ 15,200,000Variable expenses9,470,000Contribution margin5,730,000Fixed expenses4,818,000Net operating income$ 912,000 The company's minimum required rate of return is 12% and its average operating assets were $8,000,000. Last year's residual income was closest to:
($48,000)
Youns Incorporated reported the following results from last year's operations: Sales$ 10,500,000Variable expenses6,610,000Contribution margin3,890,000Fixed expenses3,260,000Net operating income$ 630,000 The company's average operating assets were $5,000,000. At the beginning of this year, the company has a $1,400,000 investment opportunity that involves sales of $2,800,000, fixed expenses of $616,000, and a contribution margin ratio of 30% of sales. If the company pursues the investment opportunity and otherwise performs the same as last year, the combined turnover for the entire company will be closest to:
2.08
Runyon Incorporated reported the following results from last year's operations: Sales$ 16,800,000Variable expenses12,230,000Contribution margin4,570,000Fixed expenses3,394,000Net operating income$ 1,176,000 The company's average operating assets were $7,000,000. Last year's turnover was closest to:
2.40
Assume a company's estimated sales is 28,000 units. Its desired ending finished goods inventory is 5,500 units, and its beginning finished goods inventory is 3,500 units. What is the required production in units?
30,000 units
The SP Corporation makes 38,000 motors to be used in the production of its sewing machines. The average cost per motor at this level of activity is: Direct materials$ 9.70Direct labor$ 8.70Variable manufacturing overhead$ 3.55Fixed manufacturing overhead$ 4.50 An outside supplier recently began producing a comparable motor that could be used in the sewing machine. The price offered to SP Corporation for this motor is $24.55. If SP Corporation decides not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. Direct labor is a variable cost in this company. The annual financial advantage (disadvantage) for the company as a result of making the motors rather than buying them from the outside supplier would be:
98,800
Which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same?
An increase in operating assets.
The higher the discount rate, the higher the present value of a given future cash flow.
F
Which of the following statements is false? Multiple ChoiceBudgets force managers to think about and plan for the future. Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance. Budgets enable each department to function independently from other departments. Budgets communicate management's plans throughout the organization.
Budgets enable each department to function independently from other departments.
Which of the following would be relevant in the decision to sell or throw out obsolete inventory? Direct material cost assigned to the inventoryFixed overhead cost assigned to the inventoryA)YesYesB)YesNoC)NoYesD)NoNo
Choice D
Which of the following statements is true? Multiple Choice Control involves developing goals and preparing various budgets to achieve those goals. Control involves gathering feedback that enables organizations to make modifications as circumstances change. CorrectThe definition of planning states that managers should be held responsible for those items—and only those items—that the manager can actually control. Control is usually is maintained independent from the budgeting process.
Control involves gathering feedback that enables organizations to make modifications as circumstances change.
A shorter payback period does not necessarily mean that one investment is more desirable than another.
T
Which of the following estimates is not used in preparing a sales budget including a schedule of expected cash collections?
The percent of next quarter's unit sales in ending inventory
Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of:
return on investment.
Accepting a special order will improve overall net operating income if the revenue from the special order exceeds:
the incremental costs associated with the order.