FINAL EXAM - MANAGERIAL ACCT.
Dixon Construction Materials has collected this information: Net operating profit before tax - $300,000 Tax rate - 30% Invested capital - $2,500,000 Weighted average cost of capital - 8%Based on this information, what is the EVA for the project?
$10,000
Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries (the manufacturer) has agreed to accept $23,500 at the end of each of the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan?
$14,000
Mallory's Video Supply has changed its focus tremendously and as a result has dropped the selling price of DVD players from $45 to $38. Some units in the work-in-process inventory have costs of $30 per unit associated with them, but Mallory can only sell these units in their current state for $22 each. Otherwise, it will cost Mallory $11 per unit to rework these units so that they can be sold for $38 each. How much is the financial impact if the units are processed further?
$5 per unit profit
The 2015 Paris Agreement on Climate Change aimed to limit the increase of global temperatures to ________.
1.5 °C
The capital structure of Ridley Enterprises is: Debt 40%, Equity 60%. The cost of debt is 13%, and the cost of equity is 16.5%. What is the weighted average cost of capital for Ridley Enterprises?
15.1%
How many broad categories of capital are identified by the Integrated Reporting Framework?
6
Calculate the ROI for Gardner Chemical given the following information: Income - $6,000 Revenue - $24,000 Average assets - $10,000
60%
Which of the following statements is false?
A balanced scorecard is the compatibility between personal goals and the goals of the organization.
Using the information provided, what transaction represents the best application of the present value of an annuity due of $1?
Falcon Products leases an office building for 8 years with annual lease payments of $100,000 to be made at the beginning of each year.
According to the World Commission on Environment and Development, how is sustainable development defined?
It meets the needs of the present without compromising the ability of future generations to meet their own needs.
What should an organization do if performance measures change?
Make sure that the manager being evaluated is aware of the measurement change, as this may affect his or her decision-making.
_______________ are the costs associated with not choosing the other alternative.
Opportunity costs
________ is the act of using another company to provide goods or services that your company requires.
Outsourcing
Which agreement did 196 nations adopt in December 2015?
Paris Climate Agreement
The managerial decision-making process has which of the following as its third step?
Perform a comprehensive differential (differential) analysis of potential solutions.
Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shelf. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320,000. However, the $1.50 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order?
Profits will increase by $600.
Which of the following is sometimes referred to as the "Anti Chain Store Act"?
Robinson-Patman Act
Which of the following statements is most often the case?
Socially responsible businesses tend to post higher profits than those not focused on social responsibility.
You are explaining time value of money factors to your friend. Which factor would you explain as being larger?
The future value of $1 for 12 periods at 6% is larger.
What caused Union Carbide's deadly gas leak in Bhopal, India, which killed 3,000 and injured 42,000?
a combination of low staff levels, numerous safety issues, and a lack of immediate employee attention to the problem as pressure built up inside the tank
When managerial accountants design an evaluation system that is based on criteria for which a manager is responsible, and it is structured to encourage managers to make decisions that will meet the goals of the company as well as their own personal job goals, the framework used is ________.
a responsibility accounting framework
Which of the following does not describe a management control system?
a system that only measures profitability
Sustainability reporting can incorporate which of the following?
all of the above
Internal costs that are charged to the segments of a business are called ________.
allocated costs
In centralized organizations, primary decisions are made by ________.
an individual at the top of the organization
Which of the following best defines stakeholders?
anyone directly or indirectly affected by the organization
The NPV method assumes that cash inflows associated with a particular investment occur when?
at any of these times
In a centralized organization, where are goals established?
at the highest level of the organization and promoted downward
Which of the following is not a characteristic of a good performance measurement system?
based on activities over which managers have no control or influence
Which of the following is not a common goal of an organization?
being acquired by another business
Which of the following is one of the two approaches used to analyze data in the decision to keep or discontinue a segment?
comparing contribution margins and fixed costs
The process of reinvesting interest earned to generate additional earnings over time is ________.
compounding
Which of the following is not a type of responsibility center?
concentrated cost center
Which of the following is not one of the five steps in the decision-making process?
consult with CFO concerning variable costs
Costs that a company or manager can influence are called ________.
controllable costs
Youngstown Construction plans to discontinue its roofing segment. Last year, this segment generated a contribution margin of $65,000 and incurred $70,000 in fixed costs. Discontinuing the segment will allow the company to avoid half of the fixed costs. What effect is expected to occur to the company's overall profit?
decrease of $30,000
The process that determines the present value of a single payment or stream of payments to be received is ________.
discounting
Goal congruence in well-designed performance measurement systems best explains a congruence between ________.
employees and the company
The fundamental tenets of SASB's Approach are considered ________.
evidence-based, industry-specific, and market-informed
Which standards are considered universal under the GRI?
foundation, general disclosures, management approach
If you are saving the same amount each month in order to buy a new sports car when the new models are released, which of the following will help you determine the savings needed?
future value of an ordinary annuity
You want to invest $8,000 at an annual interest rate of 8% that compounds annually for 12 years. Which table will help you determine the value of your account at the end of 12 years?
future value of one dollar ($1)
An example of an uncontrollable cost would include all of the following except ________.
hourly rate of pay for the company's purchasing manager
Strategic decisions occur ________.
infrequently and involve long-term decisions
This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zero.
internal rate of return (IRR) method
The third step for making a capital investment decision is to establish baseline criteria for alternatives. Which of the following would not be an acceptable baseline criterion?
inventory turnover
Which of the following is a disadvantage of outsourcing?
limiting ability to upsize or downsize production
Without proper performance measures, goal congruence is almost impossible to achieve and will likely lead to ________.
lost profits
Good corporate citizenship ________.
makes good business sense
Which of the following types of reporting does the Triple Bottom Line not incorporate?
management
A transfer pricing arrangement that uses the price that would be charged to an external customer is a ________.
market-based approach
Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the initial investment?
net present value (NPV)
Segments are uniquely identifiable components of the business and can be categorized by all of the following except ________.
number of employees
Responsibility accounting holds managers responsible for ________.
only the costs that they can control
When should a segment be dropped?
only when the decrease in total contribution margin is less than the decrease in fixed cost
Which of the following does not assign a value to a business opportunity using time-value measurement tools?
payback period method
Preference decisions compare potential projects that meet screening decision criteria and will be ranked in their preference order to differentiate between alternatives with respect to all of the following characteristics except ________.
political prominence
When operating in a constrained environment, which products should be produced?
products with the highest contribution margin per unit of the constrained process
A responsibility center in which managers are held accountable for both revenues and expenses is called a ________.
profit center
Nestlé's reputation was damaged when the company was accused of which of the following?
promoting inadequate nutrition in developing countries
The metrics based on nonfinancial information are known as ________.
qualitative factors
The metrics based on financial numbers produced by the accounting system are ________.
quantitative factors
A key advantage of a decentralized organization is ________.
quicker decisions and response time
Which of the following is not a qualitative decision that should be considered in an outsourcing decision?
relevant costs
A responsibility center structure that considers investments made by the operating segments by using a common cost of capital percentage is called ________.
residual income
A system that establishes financial accountability for operating segments within an organization is called ________.
responsibility accounting
Which of the following measures the profitability of a division relative to the size of its investment in capital assets?
return on investment (ROI)
An important goal of a responsibility accounting framework is to help ensure which of the following?
segment and company financial goals are congruent.
Capital investment decisions often involve all of the following except ________.
short periods of time
A good performance measurement system will include which of the following?
short-term and long-term goals
Organizational charts ________.
show the structure of an organization
Which form of energy is renewable?
solar
People affected by decisions made by a company, including investors, creditors, employees, managers, regulators, customers, suppliers, and laypeople, are known as ________.
stakeholders
The owners of company stock are ________.
stockholders
Which type of incurred costs are not relevant in decision-making (i.e., they have no bearing on future events) and should be excluded in decision-making?
sunk costs
The SASB view on materiality has been adapted from which of the following?
the U.S. Supreme Court
Managers in decentralized organizations make decisions relating to all of the following except ________.
the company's stock price
A transfer pricing structure that considers the opportunity costs of selling to internal rather than external customers uses ________.
the general transfer pricing approach
A good performance measurement system will align the goals of management with ________.
the goals of the corporation, and both parties will benefit
The IRR method assumes that cash flows are reinvested at ________.
the internal rate of return
When using the NPV method for a particular investsment decision, if the present value of all cash inflows is greater than the present value of all cash outflows, then ________.
the investment provides an actual rate of return greater than the discount rate
The cost of equity is ________.
the rate of return required by investors to incentivize them to invest in a company
Performance measures are only useful if ________. [Please note that the textbook answer key shows the incorrect answer for this question.]
there is a baseline against which to compare the measured results
Components of the organization that are demotivating for purposes of performance management are known as ________.
uncontrollable factors