GLEIM S16 (BEC), GLEIM S18 (BEC), GLEIM S11 (BEC), GLEIM S15 (BEC), GLEIM 20 (BEC)

What is the primary disadvantage of using return on investment (ROI) rather than residual income (RI) to evaluate the performance of investment center managers?

ROI may lead to rejecting projects that yield positive cash flows.

Which one of the following statements pertaining to the return on investment (ROI) as a performance measurement is false?

ROI relies on financial measures that are capable of being independently verified, while other forms of performance measures are subject to manipulation.

The internal rate of return (IRR) is the

Rate of interest for which the net present value is equal to zero.

Nile Co. is a manufacturer whose cost assignment and product costing procedures follow activity-based costing principles. Activities have been identified and classified as being either value-adding or nonvalue-adding as to each product. Which of the following activities used in Nile's production process is nonvalue-adding?

Raw materials storage activity.

A company identified the increasing operating costs as the reason for the declined profit margin for the previous year. To achieve its targeted profit margin for the coming year, the company develops a plan to cut its operating costs by 20%. Which of the following correctly matches the actions of the company and the type of data analytics methods used?

Reason Identification/Plan Development Diagnostic Analysis/Prescriptive Analysis

A systems engineer is developing the input routines for a payroll system. Which of the following methods validates the proper entry of hours worked for each employee?

Reasonableness check.

An employee mistakenly enters April 31 in the date field. Which of the following programmed edit checks offers the best solution for detecting this error?

Reasonableness.

Depreciation is incorporated explicitly in the discounted cash flow analysis of an investment proposal because it

Reduces the cash outlay for income taxes.

Capital investment projects include proposals for all of the following except

Refinancing existing working capital agreements.

Pie charts are best used for displaying

Relative proportions at a specific period in time.

Which of the following attributes of a management report has the greatest impact on management's ability to make effective decisions?

Relevance.

All of the following are methods used to evaluate investments for capital budgeting decisions except

Required rate of return.

How are the following used in the calculation of the internal rate of return of a proposed project? Ignore income tax considerations.

Residual Sales Value of Project/Depreciation Expense Include/Exclude

REB Service Co. is a computer service center. For the month, REB had the following operating statistics: (use table) Based on the above information, which one of the following statements is true? REB has a

Residual income of $(5,000).

Charlie's Service Co. is an automobile service center. Charlie's had the following operating statistics for Year 6: (use chart) Charlie's has a

Residual income of $(6,000).

Which of the following statements presents an example of a general control for a computerized system?

Restricting access to the computer center by use of biometric devices.

Minon, Inc., purchased a long-term asset on the last day of the current year. What are the effects of this purchase on return on investment and residual income?

Return on Investment/Residual Income Decrease/Decrease

Which of the following ratios should be used to compare the profitability of two electronics companies that differ in size?

Return on assets.

In evaluating an investment center, top management should concentrate on

Return on investment.

Which of the following performance measures may lead a manager of an investment center to forgo investments that could benefit the company as a whole?

Return on investment.

The capital budgeting technique known as the accounting rate of return uses

Revenue over Life of Project/Depreciation Expense Yes/Yes

Return on investment (ROI) is a very popular measure employed to evaluate the performance of corporate segments because it incorporates all of the major ingredients of profitability (revenue, cost, investment) into a single measure. Under which one of the following combinations of actions regarding a segment's revenues, costs, and investment would a segment's ROI always increase?

Revenue/Costs/Investments Increase/Decrease/Decrease

Which of the following activities would most likely detect computer-related fraud?

Reviewing the systems-access log.

An example of an internal failure cost is

Rework.

When using the net present value method for capital budgeting analysis, the required rate of return is called all of the following except the

Risk-free rate.

When using activity-based costing techniques, which one of the following departmental activities would be expected to use machine hours as a cost driver to allocate overhead costs to production?

Robotics painting.

To ensure the completeness of update in an online system, separate totals are accumulated for all transactions processed throughout the day. The computer then agrees these totals to the total of items accepted for processing. This is an example of

Run-to-run totals.

Which of the following is a financial measure of success in a balanced scorecard?

Sales growth.

A process costing system was used for a department that began operations in January. Approximately the same number of physical units, at the same degree of completion, were in work-in-process at the end of both January and February. Monthly conversion costs are allocated between ending work-in-process and units completed. Compared with the FIFO method, would the weighted-average method use the same or a greater number of equivalent units to calculate the monthly allocations?

Same/Greater number

The following forecasted information is available for a manufacturing division for next year: (use table) Which scenario assumes the lowest maximum cost?

Scenario 1.

All of the following are correct statements regarding general controls except

Segregation of duties is less important because IT facilitates the separation of functions (authorization, recording, and access to assets).

Which of the following statements best characterizes the function of a physical access control?

Separates unauthorized individuals from computer resources.

Which one of the following input validation routines is not likely to be appropriate in a real-time operation?

Sequence check.

Which product line contributed the least amount of revenue in 2020? (use picture)

Shoes.

Champions, yellow belts, and master black belts are associated with which business process?

Six Sigma.

Which of the following methodologies would be most effective for a company that wants to reduce its rate of defective products?

Six Sigma.

Velocity of data refers to the

Speed at which big data are generated.

Which product line has shown continuous growth in revenue from 2018 to 2020? (use picture)

Sporting goods.

A manufacturer mass produces nuts and bolts on its assembly line. The line supervisors sample every nth unit for conformance with specifications. Once a nonconforming part is detected, the machinery is shut down and adjusted. The most appropriate tool for this process is a

Statistical quality control chart.

A table manufacturing company believes that the strength of its tables is reduced after being processed through the shaping machine. Which of the following is not a preventive measure to address the issue?

Statistically test the strength of the tables to be certain that they are weaker after processing.

The term that refers to costs incurred in the past that are not relevant to a future decision is

Sunk cost.

All of the following are adequate controls for protection against unauthorized access to sensitive information except

System access log.

As a result of technological developments facing businesses and CPAs,

System boundaries are becoming less distinct.

What should be examined to determine if an information system is operating according to prescribed procedures?

System control.

Authentication is the process by which the

System verifies the identity of the user.

Which statement best describes total quality management (TQM)?

TQM is the continuous pursuit of quality.

Which of the following visualization methods is most suitable for retaining data details?

Table.

After segregating the duties of system analysts and file librarians and imposing proper supervision, a company tests whether incidents deemed to be the result of incompatible job responsibilities continue to exist. Which COBIT governance system principle is this paired with?

Tailored to enterprise needs.

The imputed interest rate used in the residual income approach to performance evaluation can best be described as the

Target return on investment set by the company's management.

Relevant cash flows for a finance lease and a direct purchase of an asset without borrowing differ with respect to

Tax savings on interest expense, the purchase price of the asset, and lease payments.

One of the main reasons that implementation of a total quality management program works better through the use of teams is

Teams are a natural vehicle for sharing ideas, which leads to process improvement.

In which of the following organizational structures does total quality management (TQM) work best?

Teams of people from different specialities.

When ranking two mutually exclusive investments with different initial amounts, management should give first priority to the project

That has the greater profitability index.

SkyBound Airlines provided the following information about its two operating divisions: (use chart) Measuring performance using return on investment (ROI), which division performed better?

The Passenger division, with an ROI of 16%.

Fact Pattern: An organization has collected data on the complaints made by computer users and has categorized the complaints in the Pareto diagram below. (use chart) The chart displays

The absolute frequency of each computer complaint.

An equivalent unit of direct materials or conversion cost is equal to

The amount of direct materials or conversion cost necessary to complete one unit of production.

One of the data definition criteria identified by the Assurance Services Executive Committee (ASEC) is that the description identifies information that has not been included in the data set but is necessary for understanding the data. Which of the following is not an example of this criterion?

The analyst report from which the data are retrieved.

Which of the following statements regarding benchmarking is false?

The benchmarked organization against which a firm is comparing itself must be a direct competitor.

Which of the following is a characteristic of business process reengineering?

The bottom-up revision of the way the organization carries out a particular business process.

A CPA would recommend implementing an activity-based costing system under which of the following circumstances?

The client produced products that heterogeneously consume resources.

Which of the following changes would cause a company's breakeven point in sales to increase?

The company's total fixed cost increases.

Which of the following is a validity check?

The computer flags any transmission for which the control field value did not match that of an existing file record.

One of the main reasons total quality management (TQM) can be used as a strategic weapon is that

The cumulative improvement from a company's TQM efforts cannot readily be copied by competitors.

Using standard procedures developed by information center personnel, staff members download specific subsets of financial and operating data as they need it. The staff members analyze the data on their own personal computers and share results with each other. Over time, the staff members learn to modify the standard procedures to get subsets of financial and operating data that were not accessible through the original procedures. The greatest risk associated with this situation is that

The data obtained might be incomplete or lack currency.

Management is concerned that data uploaded from a personal computer to the company's server may be erroneous. Which of the following controls would best address this issue?

The data uploaded to the server should be subject to the same edits and validation routines that online data entry would require.

In determining cash flows from a proposed investment, the amount of the investment's depreciation tax savings (shield) in a given year is equal to

The depreciation times the tax rate.

Which of the following phrases defines the internal rate of return on a project?

The discount rate at which the net present value of the project equals zero.

Which of the following statements is correct if there is an increase in the resources available within an economy?

The economy will be capable of producing more goods and services.

Which of the following statements, if included as the description of a data attribute, describes the nature of the elements in the attribute?

"The size of the warehouse is the amount of type A inventory that may be stored."

An investment in a new product will require an initial outlay of $20,000. The cash inflow from the project will be $4,000 a year for the next 6 years. The payment will be received at the end of each year. What is the net present value of the investment at 8% using the correct factor from below? (use table)

$(1,508.48)

Fact Pattern: Stewart Industries has been producing two bearings, components B12 and B18, for use in production. (use table) The net benefit (loss) per machine hour that would result if Stewart accepts the supplier's offer of $13.50 per unit for Component B18 is

$(1.00)

Salem Co. is considering a project that yields annual net cash inflows of $420,000 for Years 1 through 5 and a net cash inflow of $100,000 in Year 6. The project will require an initial investment of $1,800,000. Salem's cost of capital is 10%. Present value information is presented below: Present value of $1 for 5 years at 10% is .62. Present value of $1 for 6 years at 10% is .56. Present value of an annuity of $1 for 5 years at 10% is 3.79. What was Salem's expected net present value for this project?

$(152,200)

Fresh Co. is purchasing new equipment at a price of $160,000. The new equipment is expected to save $30,000 in cash payments annually. The equipment's estimated useful life is 8 years, with no residual value, and it is depreciated using the straight-line method. Fresh's predetermined minimum desired rate of return is 11%. The present value of an annuity of $1 at 11% for 8 periods is 5.146. Present value of $1 due in 8 periods at 11% is .434. Assuming an effective tax rate of 40%, what is the net present value based on the information above?

$(26,204)

Oslo Co.'s industrial photo-finishing division, Rho, incurred the following costs and expenses during the year just ended: (use chart) Assume that net operating income was $60,000 and that average invested capital was $600,000. For the year ended December 31, Rho's residual income (loss) was

$(30,000)

Wexford Co. has a subunit that reported the following data for Year 1: (use chart) The imputed interest rate is 12%. What is the division residual income for Year 1?

$0

The following information pertains to Lap Co.'s Palo Division for the month just ended: (use table) All materials are added at the beginning of the process. Using the weighted-average method, the cost per equivalent unit for materials is

$0.43

Fact Pattern: Zeta Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information given in the next column: (use table) Under a costing system that allocates overhead on the basis of direct labor hours, Zeta Company's materials handling costs allocated to one unit of wall mirrors would be

$1,000

A company needs special gears. The machinery to make the gears can be rented for $100,000 for 1 year, but the company can buy the gears and avoid the rental cost. Because the demand for the gears may be high (0.6 probability) or low (0.4 probability) and contribution margins vary, the company prepared the following decision tree: (use picture) Which of the following statements is true?

The expected value of buying is $70,000.

Limitations of an activity-based costing system include which of the following?

The expense of obtaining cost data is relatively high.

A company has in place an authentication system that requires users to enter a logon name and password. In an effort to strengthen this method of authentication, the company's chief information officer (CIO) asked the technology steering committee to recommend a biometric control for the authentication process. Which of the following committee recommendations best meets the requirement of the CIO?

The installation of fingerprint scanners on all workstations.

Which of the following is not an element of the completeness and accuracy criterion the Assurance Services Executive Committee (ASEC) uses to define a set of data?

The intended use of the data.

Which of the following indicates that market-based transfer prices would be preferable to cost-based transfer prices?

The market is perfectly competitive for the intermediate product, and the selling division has no unused capacity.

All of the following are correct statements regarding velocity-based value except

The more data businesses have on the customers, both recent and historical, the greater the insights.

Which of the following is a correct statement regarding volume-based value?

The more data businesses have on the customers, both recent and historical, the greater the insights.

The Chocolate Baker specializes in chocolate baked goods. The firm has long assessed the profitability of a product line by comparing revenues to the cost of goods sold. However, Barry Love, the firm's new accountant, wants to use an activity-based costing system that takes into consideration the cost of the delivery person. Listed below are activity and cost information relating to two of Chocolate Baker's major products. (use table) Using activity-based costing, which one of the following statements is correct?

The muffins are $1,925 more profitable.

A company is considering two mutually exclusive projects with the following projected cash flows: (use table) If the company's objective is to maximize shareholder wealth, which one of the following is the most valid reason for selecting one of the projects?

The net present value of Project A is greater than the net present value of Project B; therefore, select Project A.

Which one of the following items is least likely to directly impact an equipment replacement capital expenditure decision?

The net present value of the equipment that is being replaced.

Fact Pattern: An organization has collected data on the complaints made by computer users and has categorized the complaints in the Pareto diagram below. (use chart) Using the information collected, the organization should focus on

The number of computer complaints associated with the lack of user knowledge and hardware problems.

Management of a company is attempting to build a reputation as a world-class manufacturer of quality products. Which of the following measures would not be used by the firm to measure quality?

The number of parts shipped per day.

Which of the following statements is not true regarding ISO 9000 standards?

The objective of ISO 9000 standards is to ensure high quality products and services.

The new purchasing director is analyzing purchase orders for the organization. Which of the following analyses would best be displayed on a histogram?

The organization purchased US $27 million worth of inventory in the past year. Distribute by value, using US $500 increments, the quantity of purchase orders that fall within each range.

The ABC Company is trying to decide between keeping an existing machine and replacing it with a new machine. The old machine was purchased just 2 years ago for $50,000 and had an expected life of 10 years. It now costs $1,000 a month for maintenance and repairs due to a mechanical problem. A new machine is being considered to replace it at a cost of $60,000. The new machine is more efficient, and it will only cost $200 a month for maintenance and repairs. The new machine has an expected life of 10 years. In deciding to replace the old machine, which of the following factors, ignoring income taxes, should ABC not consider?

The original cost of the old machine.

Which of the following statements is correct regarding the payback method as a capital budgeting technique?

The payback method provides the years needed to recoup the investment in a project.

An example of an internal nonfinancial benchmark is

The percentage of customer orders delivered on time at the company's most efficient plant.

When evaluating a cloud service provider's data security measures, a company would appropriately consider each of the following risk factors, except

The provider's vertical scalability.

A company's purchasing department creates purchase orders based on electronic requests sent by operations. These requests are approved by operations, and no further approvals are required to place a purchase order. Purchasing clerks key the order information, including vendor names and prices, into the purchasing system based on the electronic requests. Which of the following is the best control to ensure that orders are entered accurately?

The purchasing system compares vendor information and prices entered by the clerks to master vendor and pricing data and rejects variances.

Which of the following conclusions can be drawn from the visualization? (use picture)

The ratio of direct labor cost to total cost for Product C is higher than that for Product B.

After investing in a new project, a company discovered that its residual income remained unchanged. Which one of the following must be true about the new project?

The return on investment of the new project must have been equal to the firm's cost of capital.

Assuming no beginning work-in-process inventory, and that the ending work-in-process inventory is 100% complete as to materials costs, the number of equivalent units as to materials costs is

The same as the units places in process.

A small client recently put its cash disbursements system on a server. About which of the following internal control features would an auditor most likely be concerned?

The server is operated by employees who have cash custody responsibilities.

Bubble charts, while similar to scatter plots, add a third variable, which is

The size of data points.

A table manufacturing company has the following cost structure for producing table tops. (use table) Recently, the table manufacturer received an offer from a corporation to supply the table tops to the table manufacturer. The table manufacturer is considering buying the table tops instead of manufacturing them internally. Which one of the following statements is correct?

The table manufacturer should accept the offer if it is less than $47.00 and the table manufacturer has excess manufacturing capacity.

In capital budgeting, which of the following items is included in the payback model calculation?

The total amount of the initial outlay for the project.

Which of the following best represents the application of predictive analytics?

The website recommends pet toys and bedding after the customer purchases pet food.

Increasing the efficiency of all phases of a given process is specifically discouraged by which of the following models?

Theory of constraints.

Which of the following decision-making techniques is most useful to a manager who is attempting to increase the profitability of an area, but who has a problem with limited capacity for operation of a critical machine?

Theory of constraints.

Which limitation is common to the calculations of the payback period, discounted payback, internal rate of return (IRR), and net present value (NPV)?

They rely on forecasts of future data.

A company builds awareness of cyber risks at all levels of the organization and proactively communicates with its suppliers and customers regarding any incidents of cybersecurity breaches. Which cybersecurity framework management process tier does the company belong to?

Tier 4.

What is the primary objective of data security controls?

To ensure that storage media are subject to authorization prior to access, change, or destruction.

Breakeven analysis assumes over the relevant range that

Total costs are linear.

A company is offered a one-time special order for its product and has the capacity to take this order without losing current business. Variable costs per unit and fixed costs in total will be the same. The gross profit for the special order will be 10%, which is 15% less than the usual gross profit. What impact will this order have on total fixed costs and operating income?

Total fixed costs do not change, and operating income increases.

Which of the following techniques effectively measures improvements in product quality as a result of internal failure costs?

Tracking the number of products reworked.

Your firm has recently converted its purchasing cycle from a manual process to an online computer system. Which of the following is a probable result associated with conversion to the new automatic system?

Traditional duties are less segregated.

An accounts payable clerk is accused of making unauthorized changes to previous payments to a vendor. Proof could be uncovered in which of the following places?

Transaction logs.

Which of the following is a computer program that appears to be legitimate but performs some illicit activity when it is run?

Trojan horse.

A digital signature is used primarily to determine that a message is

Unaltered in transmission.

A network firewall is designed to provide adequate protection against which of the following?

Unauthenticated logins from outside users.

The description of a data attribute reads, "This forecast is prepared with the aid of a financial expert." To which of the following elements regarding the completeness and accuracy criterion provided by the Assurance Services Executive Committee (ASEC) to define a dataset does the above statement relate?

Uncertainty.

Mason Co. uses a job-order cost system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct-labor dollars. The rate for the current year is 200% of direct-labor dollars. This rate was calculated last year and will be used throughout the current year. Mason had one job, No. 150, in process at the beginning of the month with raw materials costs of $2,000 and direct-labor costs of $3,000. During the month, raw materials and direct labor added to jobs were as follows: (use table) Actual manufacturing overhead for the month was $20,000. During the month, Mason completed Job Nos. 150 and 151. For the month, manufacturing overhead was

Underapplied by $2,000.

Each of the following represents a characteristic of big data except

Uniformity.

Learning curves are most often used to predict

Unit direct labor costs.

Breakeven analysis assumes that over the relevant range,

Unit variable costs are unchanged.

Which of the following IT developments poses the least risk to organizational security?

Use of public-key encryption.

When a client's accounts payable computer system was relocated, the administrator provided support through a dial-up connection to a server. Subsequently, the administrator left the company. No changes were made to the accounts payable system at that time. Which of the following situations represents the greatest security risk?

User accounts are not removed upon termination of employees.

Which of the following is a password security problem?

Users are assigned passwords when accounts are created but do not change them.

When estimating cash flow for use in capital budgeting, depreciation is

Utilized in determining the tax costs or benefits.

A customer's order was never filled because an order entry clerk transposed the customer identification number while entering the sales transaction into the system. Which of the following controls would most likely have detected the transposition?

Validity check.

An accounts payable program posted a payable to a vendor not included in the online vendor master file. A control that would prevent this error is a

Validity check.

Which of the following input controls would prevent an incorrect state abbreviation from being accepted as legitimate data?

Validity check.

Under the COBIT 2019 framework, which of the following statements is true?

Variant components for a governance system are designed for a specific context within a focus area.

Company A needs data that are relevant and reliable. Which of the "4 Vs" best describes Company A's needs?

Veracity.

Each of the following should be considered in the selection of appropriate cost drivers for an activity-based costing system, except

Volume-based production.

For capital budgeting purposes, management would select a high hurdle rate of return for certain projects because management

Wants to factor risk into its consideration of projects.

A company would most benefit from using an activity-based costing (ABC) system as opposed to a traditional costing system under which of the following conditions?

When indirect costs are at a high percentage of total costs.

Which of the following is an advantage of a computer-based system for transaction processing over a manual system? A computer-based system

Will be more efficient at producing financial statements.

In a job-order cost system, direct labor costs usually are recorded initially as an increase in

Work-in-process control.

In a job-order cost system, the application of factory overhead is usually reflected in the general ledger as an increase in

Work-in-process control.

In a job-order cost system, the use of direct materials previously purchased usually is recorded as an increase in

Work-in-process control.

In a process cost system, the application of factory overhead usually is recorded as an increase in

Work-in-process inventory control.

A company is considering the implementation of an activity-based costing and management program. The company

Would normally gain added insights into causes of cost.

Assume that the interest rate is greater than zero. Which of the following cash-inflow streams should you prefer?

Year 1/Year 2/Year 3/Year 4 $400/$300/$200/$100

An auditor was examining a client's network and discovered that the users did not have any password protection. Which of the following would be the best example of the type of network password the users should have?

tR34ju78

A tailor estimates that 60,000 special zippers will be used in the manufacture of men's jackets during the next year. A zipper supplier has quoted a price of $.60 per zipper. The tailor would prefer to purchase 5,000 units per month, but the supplier is unable to guarantee this delivery schedule. To ensure availability of these zippers, the tailor is considering the purchase of all 60,000 units at the beginning of the year. Assuming the tailor can invest cash at 8%, the tailor's opportunity cost of purchasing the 60,000 units at the beginning of the year is

$1,320

In order to increase the profit margin for a certain product, a company is planning to purchase a custom-made machine for $5,000,000. It is anticipated that the introduction of the new machine will reduce the product's variable costs of labor and maintenance by $5.50 per unit and $.95 per unit, respectively. The product manager estimates that 500,000 units of the product will be manufactured and sold each year with a product life cycle of two years, at which time the machine will be discarded with no salvage value. What is the company's total cost savings over the product's life cycle?

$1,450,000

PB Company is evaluating an investment project based on its payback period. The policy is to reject the investment project if it has a payback period greater than 4 years. The project will generate cash flows as shown in the following table: (use table) The project is rejected because its payback period exceeds PB's standard by 0.625 years. What is the initial investment required for the project?

$1,600,000

A company produces three distinct products as follows: (use table) The contribution margin for the Quinoa Bars is 25% of sales. Millet Cookies and Amaranth Pops both have a 50% contribution margin. Calculate the breakeven point in sales dollars if fixed costs are $675,000.

$1,705,263

Listed below are selected line items from the cost of quality report for Watson Products for last month. (use table) What is Watson's total prevention and appraisal cost for last month?

$1,940

Jones Corp. had an opportunity to use its capacity to produce an extra 5,000 units with a contribution margin of $5 per unit, or to rent out the space for $10,000. What was the opportunity cost of using the capacity?

$10,000

Daniel Co. purchased a new truck with an estimated useful life of 8 years for $82,000 in Year 1. The estimated salvage value of the truck is $2,000. The depreciation schedule of Daniel Co. is as follows: (use table) Assuming a tax rate of 40%, what is the depreciation tax shield for the second year?

$10,496

Colter Corp. is conducting an analysis of a potential capital investment. The project is expected to increase sales by $100,000 and reduce costs by $50,000 annually. Depreciation expense is $30,000 per year. Colter's marginal tax rate is 40%. What is the annual operating cash flow for the project?

$102,000

Kern Co. is planning to invest in a 2-year project that is expected to yield cash flows from operations, net of income taxes, of $50,000 in the first year and $80,000 in the second year. Kern requires an internal rate of return of 15%. The present value of $1 for one period at 15% is 0.870 and for two periods at 15% is 0.756. The future value of $1 for one period at 15% is 1.150 and for two periods at 15% is 1.323. The maximum that Kern should invest immediately is

$103,980

Fact Pattern: Jorelle Company's financial staff has been requested to review a proposed investment in new capital equipment. Applicable financial data is presented below. There will be no salvage value at the end of the investment's life and, due to realistic depreciation practices, it is estimated that the salvage value and net book value are equal at the end of each year. All cash flows are assumed to take place at the end of each year. For investment proposals, Jorelle uses a 12% after-tax target rate of return. (look at table) The net present value for the investment proposal is

$106,160

Benjamin invests $10,000 in a treasury note that matures in 6 years. The treasury note yields 2% per annum. How much will the treasury bill repay at maturity? (use table)

$11,261

For the next 2 years, a lease is estimated to have an operating net cash inflow of $7,500 per annum, before adjusting for $5,000 per annum tax-basis lease amortization, and a 40% tax rate. The present value of an ordinary annuity of $1 per year at 10% for 2 years is 1.74. What is the lease's after-tax present value using a 10% discount factor?

$11,310

Beginning January 1, Year 1, Justin deposits 12 monthly payments of $1,000 in a savings account, with the last payment made on December 1, Year 1. If the monthly interest rate is 1%, what is the present value of the deposits? (use table)

$11,370

A company purchased property that it expects to sell for $14,000 next year. The net present value of the investment is $1,000. The company is guaranteed an interest rate of 12% by the bank. What amount did the company pay for the property?

$11,500

Whatney Co. is considering the acquisition of a new, more efficient press. The cost of the press is $360,000, and the press has an estimated 6-year life with zero salvage value. Whatney uses straight-line depreciation for both financial reporting and income tax reporting purposes and has a 40% corporate income tax rate. In evaluating equipment acquisitions of this type, Whatney uses a goal of a 4-year payback period. To meet Whatney's desired payback period, the press must produce a minimum annual before-tax operating cash savings of

$110,000

A company has the following financial information: (look at table) What amount is the company's free cash flow?

$12,000

Para Co. is reviewing the following data relating to an energy-saving investment proposal: (use table) Ignoring the tax effect, what would be the annual savings needed to make the investment realize a 12% yield?

$12,306

The expected selling price for a new product is $19.00. Management's goal is to obtain a 20% contribution margin on all sales. If the new product has variable selling and distribution costs of $3.00 per unit, what is the product's target variable manufacturing cost?

$12.20

A company uses process costing to assign product costs. Available inventory information for a period is as follows: (use table) The ending inventory was 25% complete as to the conversion cost. At the beginning of the process, 100% of direct material was added. What was the total cost transferred out?

$121,500

Fact Pattern: Tam Co. is negotiating to purchase equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipment's estimated useful life is 10 years, with no residual value, and would be depreciated by the straight-line method. Tam's predetermined minimum desired rate of return is 12%. Present value of an annuity of $1 at 12% for 10 periods is 5.65. Present value of $1 due in 10 periods at 12% is .322. Net present value to Tam Co. is

$13,000

During Year 1, Tharp Lab supplied hospitals with a comprehensive diagnostic kit for $120. At a volume of 80,000 kits, Tharp had fixed costs of $1 million and a profit before income taxes of $200,000. Because of an adverse legal decision, Tharp's Year 2 liability insurance increased by $1.2 million over Year 1. Assuming the volume and other costs are unchanged, what should the Year 2 price be if Tharp is to make the same $200,000 profit before income taxes?

$135.00

Rodder, Inc., manufactures a component in a router assembly. The selling price and unit cost data for the component are as follows: (use table) The company received a special one-time order for 1,000 components. Rodder has an alternative use for production capacity for the 1,000 components that would produce a contribution margin of $5,000. What amount is the lowest unit price Rodder should accept for the component?

$14

Chan Co. purchased equipment for $55,500 on January 1, Year 2, the first day of the fiscal year. The equipment has an estimated useful life of 3 years and an estimated residual value of $3,000. The average tax rate is 30%, and the discount rate is 10%. What is the total straight-line depreciation tax shield during the life of the equipment measured at December 31, Year 2? (use table)

$14,361

On January 1, Year 1, Linda decides to retire in 10 years. She wants to receive $30,000 annually for 5 years, with the first payment made on January 1, Year 10. For this purpose, she invests in a financial security that requires contributions of equal amounts annually, with the first payment due January 1, Year 1, and the last payment due January 1, Year 9. Assuming an interest rate of 2% per annum, what is the annual contribution to the security? (use table)

$14,503

A multiproduct company currently manufactures 30,000 units of Part 730 each month for use in production. The facilities now being used to produce Part 730 have fixed monthly overhead costs of $150,000 and a theoretical capacity to produce 60,000 units per month. If the company were to buy Part 730 from an outside supplier, the facilities would be idle and 40% of fixed costs would continue to be incurred. There are no alternative uses for the facilities. The variable production costs of Part 730 are $11 per unit. Fixed overhead is allocated based on planned production levels. If the company continues to use 30,000 units of Part 730 each month, it would realize a net benefit by purchasing Part 730 from an outside supplier only if the supplier's unit price is less than

$14.00

Felicity Corporation manufactures a specialty line of dresses using a job-order cost system. During January, the following costs were incurred in completing job J-1: (see chart) Overhead was applied at the rate of $50 per direct labor hour, and job J-1 required 400 direct labor hours. If job J-1 resulted in 4,000 good dresses, the cost of goods sold per unit is

$14.25

A company's target gross margin is 40% of the selling price of a product that costs $89 per unit. The product's selling price should be

$148.33

Crenshaw Manufacturing has decided to acquire new equipment for its manufacturing facilities and is currently deciding how to finance the acquisition. Crenshaw can either (1) buy the equipment without borrowing or (2) enter into an operating lease agreement. The price of the equipment is $750,000, with an estimated useful life of 10 years and no salvage value. The equipment is expected to increase sales by $2,000,000 per year by incurring $1,600,000 of cost of goods sold. Assuming an average tax rate of 20%, what is the relevant cash inflow each year of buying the equipment in comparison with the lease option?

$15,000

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore extraction operations. The following information pertains to work-in-process inventories and operations for the month of May: (use table) Using the weighted-average method, Albany Mining's total cost of work-in-process inventory at May 31 is

$156,960

A company invested in a new machine that will generate revenues of $35,000 annually for 7 years. The company will have annual operating expenses of $7,000 on the new machine. Depreciation expense, included in the operating expenses, is $4,000 per year. The expected payback period for the new machine is 5.2 years. What amount did the company pay for the new machine?

$166,400

The following information relates to Cinder Co.'s Northeast Division: (use table) Cinder's residual income was

$170,400

Merry Co. has two major categories of manufacturing overhead: material handling and quality control. The costs expected for these categories for the coming year are as follows: (use table) What is the estimated product cost on the proposed job?

$18,000

The following information is available on Crain Co.'s two product lines: (use table) Assuming the tables line is discontinued and the factory space previously used to make tables is rented for $24,000 per year, operating income will increase by what amount?

$18,000

Clark Co., which has a 14% cost of capital, invests in a project with an internal rate of return (IRR) of 16%. Over the 3-year life of the project, it is expected to generate net cash inflows of $20,000 at the end of the first year and $35,000 at the end of the second year. To recover the initial investment of $55,000, what is the minimum net cash inflow at the end of the last year of the project? (use table)

$18,339

A 20% target contribution margin is set for Duct, which is a new product with the following unit costs: (use table) What is Duct's target selling price?

$18.75

Yarrow Co. is considering the purchase of a new machine that costs $450,000. The new machine will generate net cash flow of $150,000 per year and net income of $100,000 per year for 5 years. Yarrow's desired rate of return is 6%. The present value factor for a 5-year annuity of $1, discounted at 6%, is 4.212. The present value factor of $1, at compound interest of 6% due in 5 years, is 0.7473. What is the new machine's net present value?

$181,800

Clifford's pension fund will pay $40,000 per year for the next 5 years at the end of each year, after which the pension fund balance will be zero. The annual interest rate for the first 3 years is 3%, and the rate for the remaining 2 years is 4%. What is the current pension fund balance? (use table)

$182,374

The Hopkins Company has estimated that a proposed project's 10-year annual net cash benefit, received each year end, will be $2,500 with an additional terminal benefit of $5,000 at the end of the 10th year. (look at table) Assuming that these cash inflows satisfy exactly Hopkins' required rate of return of 8%, what is the initial cash outlay?

$19,090

Match Co. manufactures a product with the following costs per unit, based on a maximum plant capacity of 400,000 units per year: (use table) Match has a ready market for all 400,000 units at a selling price of $200 each. Selling costs in this market consist of $10 per unit shipping and a fixed licensing fee of $50,000 per year. Reno Co. wishes to buy 5,000 of these units on a special order. There would be no shipping costs on this special order. What is the lowest price per unit at which Match should be willing to sell the 5,000 units to Reno?

$190

Fact Pattern: Regis Company manufactures plugs used in its manufacturing cycle at a cost of $36 per unit that includes $8 of fixed overhead. Regis needs 30,000 of these plugs annually, and Orlan Company has offered to sell these units to Regis at $33 per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead applied will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If the plugs are purchased and the facility rented, Regis Company wishes to realize $100,000 in savings annually. To achieve this goal, the minimum annual rent on the facility must be

$190,000

Jasper Company has a payback goal of 3 years on new equipment acquisitions. A new sorter is being evaluated that costs $450,000 and has a 5-year life. Straight-line depreciation will be used; no salvage is anticipated. Jasper is subject to a 40% income tax rate. To meet the company's payback goal, the sorter must generate reductions in annual cash operating costs of

$190,000

Fact Pattern: Hamilton Company uses job-order costing. Manufacturing overhead is applied to production at a predetermined rate of 150% of direct labor cost. Any over- or underapplied overhead is closed to the cost of goods sold account at the end of each month. Additional information is available as follows: (use table) Over- or underapplied manufacturing overhead should be closed to the cost of goods sold account at February 28 in the amount of

$2,000 underapplied.

Based on potential sales of 500 units per year, a new product has estimated traceable costs of $990,000. What is the target price to obtain a 15% profit margin on sales?

$2,329

Aaron Co. replaced old equipment at the beginning of Year 3. The new equipment costs $69,000, with an estimated useful life of 3 years and a salvage value of $6,000. The replaced equipment was purchased at the beginning of Year 1 at a cost of $42,000. It had an estimated useful life of 3 years and a salvage value of $3,000. If the average tax rate is 30%, what is the incremental tax benefit of straight-line depreciation in Year 3?

$2,400

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore extraction operations. The following information pertains to work-in-process inventories and operations for the month of May: (use table) Under the FIFO method, Albany Mining's cost per equivalent unit for materials is

$2.25

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore extraction operations. The following information pertains to work-in-process inventories and operations for the month of May: (use table) Using the weighted-average method, Albany Mining's equivalent-unit cost of materials for May is

$2.30

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore extraction operations. The following information pertains to work-in-process inventories and operations for the month of May: (use table) Using the FIFO method, Albany Mining's cost per equivalent unit for conversion costs is

$2.92

A company manufactures components for use in producing one of its finished products. When 12,000 units are produced, the full cost per unit is $35, separated as follows: (use table) A supplier has offered to sell 12,000 components to the company for $37 each. If the company accepts the offer, some of the facilities currently being used to manufacture the components can be rented as warehouse space for $40,000. However, $3 of the fixed overhead currently applied to each component would have to be covered by the company's other products. What is the differential cost to the company of purchasing the components from the supplier?

$20,000

In a lean accounting environment, a company accepts a special order to make 200 units of a product each month for the next 2 months for $130 per unit. The company normally sells the unit for $170 per unit with variable costs per unit at $80. The company plans to use excess capacity. By what amount would this special order increase profit?

$20,000

The following information is available on MCH Co.'s two product lines: (use table) Assume MCH could discontinue its orange line and rent a factory. At what amount of annual rental income is MCH indifferent between producing oranges and renting a factory space?

$20,000

Henry is saving for a new-model car to be delivered in 1 year. He signed an agreement with a car dealer to pay $1,500 monthly for 12 months at a monthly interest rate of 2%. The first payment is due in 1 month. What is the price of the car? (use table)

$20,115

A corporation is considering purchasing a machine that costs $100,000 and has a $20,000 salvage value. The machine will provide net annual cash inflows of $25,000 per year and has a 6-year life. The corporation uses a discount rate of 10%. The discount factor for the present value of a single sum 6 years in the future is 0.564. The discount factor for the present value of an annuity for 6 years is 4.355. What is the net present value of the machine?

$20,155

A company uses a process costing system to record inventory costs. Data at the end of the month are as follows: (use table) The company uses the weighted-average method to compute the costs. Its total costs for the month are $10,000 for direct materials and $19,600 for conversion costs. What is the total conversion cost per equivalent unit?

$20.00

The breakeven point in units sold for Tierson Corporation is 44,000. If fixed costs for Tierson are equal to $880,000 annually and variable costs are $10 per unit, what is the contribution margin per unit for Tierson Corporation?

$20.00

A company that produces a single product using a continuous process had no work in process on April 1. During the month of April, 10,000 units were started and 9,000 completed units were transferred. The ending work-in-process inventory was complete as to materials and 50% complete as to conversion. The cost of direct materials was $114,000, and the cost of direct labor amounted to $38,000. Manufacturing overhead is assigned at the rate of 50% of direct materials. For the purpose of determining the cost of goods manufactured in April, what is the cost per equivalent whole unit?

$21.40

Company management would like to calculate the breakeven point in sales dollars of its lone product, a farm combine-planter. The following cost information is available: (use table) What amount is the company's breakeven point in sales?

$220,000

Product Cott has sales of $200,000, a contribution margin of 20%, and a margin of safety of $80,000. What is Cott's fixed cost?

$24,000

During March, Bly Company's Department Y equivalent unit product costs, computed under the weighted-average method, were as follows: (use table) Materials are introduced at the end of the process in Department Y. There were 4,000 units (40% complete as to conversion costs) in WIP at March 31. The total costs assigned to the March 31 WIP inventory should be

$24,800

A corporation has its own cafeteria with the following annual costs: (use table) The overhead is 40% fixed. Of the fixed overhead, $25,000 is the salary of the cafeteria supervisor. The remainder of the fixed overhead has been allocated from total company overhead. Assuming the cafeteria supervisor will remain and the corporation will continue to pay his/her salary, the maximum cost the corporation will be willing to pay an outside firm to service the cafeteria is

$241,000

Spring Co. had two divisions: A and B. Division A created Product X, which could be sold on the outside market for $25 and used variable costs of $15. Division B could take Product X and apply additional variable costs of $40 to create Product Y, which could be sold for $100. Division B received a special order for a large amount of Product Y. If Division A was operating at full capacity, which of the following prices should Division A charge Division B for the Product X needed to fill the special order?

$25

Mili Co. plans to discontinue a division with a $20,000 contribution to overhead. Overhead allocated to the division is $50,000, of which $5,000 cannot be eliminated. The effect of this discontinuance on Mili's pretax income would be an increase of

$25,000

James Webb is the general manager of the Industrial Product Division, and his performance is measured using the residual income method. Webb is reviewing the following forecasted information for his division for next year: (use table) If the imputed interest charge is 15% and Webb wants to achieve a residual income target of $2,000,000, what will costs (cost of goods sold and other operating expenses) have to be in order to achieve the target?

$25,150,000

A company has two departments and allocates all overhead costs based on department revenues. The following information applies: (use table) What amount is the company's total overhead cost for Department 2?

$255,000

Conrad has leased an apartment. The interest rate stated in the lease is 1% per month, and rent is due at the first of each month. At the beginning of every year, the landlord estimates the price of the apartment a year from the date of assessment. Total rent payments for the year will have a future value equal to 10% of the assessment. At the beginning of the year, with the first rent payment of $2,000 due immediately, what is the estimated price of the apartment in 1 year? (use table)

$256,200

Pelder Products Company manufactures two types of engineering diagnostic equipment used in construction. The two products are based on different technologies, X-ray and ultrasound, but are manufactured in the same factory. Pelder has computed the manufacturing cost of the X-ray and ultrasound products by adding together direct materials, direct labor, and overhead cost applied based on the number of direct labor hours. The factory has three overhead departments that support the single production line that makes both products. Budgeted overhead spending for the departments is as follows: (use table) The budgeted cost to manufacture one ultrasound machine using the activity-based costing method is

$264

Aaron plans to save for the tuition cost of his son by investing a lump sum on January 1, Year 1. If he can invest at an interest rate of 2% per annum and the tuition of $33,000 is to be paid on January 1, Year 11, what investment is required? (use table)

$27,070

A company's target gross margin is 40% of the selling price of a product that costs $178 per unit. The product's selling price should be

$296.67

Trendy Co. produced and sold 30,000 backpacks during the last year at an average price of $25 per unit. Unit variable costs were the following: (use table) Total fixed costs were $250,000. There was no year-end work-in-process inventory. If Trendy had spent an additional $15,000 on advertising, then sales would have increased by $30,000. If Trendy had made this investment, what change would have occurred in Trendy's pretax profit?

$3,000 decrease.

Fact Pattern: Oradell Company sells its single product at a price of $60 per unit and incurs the following variable costs per unit of product: (use table) The annual sales revenue required by Oradell Company in order to achieve after-tax net income of $224,000 for the year is

$3,600,000

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore extraction operations. The following information pertains to work-in-process inventories and operations for the month of May: (use table) Under the weighted-average method, Albany Mining's equivalent-unit conversion cost for May is

$3.00

Nil Co. uses a predetermined factory overhead application rate based on direct labor cost. For the year ended December 31, Nil's budgeted factory overhead was $600,000, based on a budgeted volume of 50,000 direct labor hours, at a standard direct labor rate of $6 per hour. Actual factory overhead amounted to $620,000, with actual direct labor cost of $325,000. For the year, overapplied factory overhead was

$30,000

The following selected data pertain to the Darwin Division of Beagle Co. for the year just ended: (use chart) What was Darwin's residual income for the year?

$30,000

Milo Corp. sells washers for $350 per unit and incurs product costs of $300. Prime costs for the washers are $150 and the fixed portion of the overhead is $90. Milo receives a special order for 2,000 washers from Adobe. Additional variable manufacturing costs to meet Adobe specifications are $40 per unit. Milo has sufficient excess capacity and has determined that this sale will not interfere with regular business. What price must Milo charge Adobe to obtain a 20% markup on variable manufacturing costs?

$300

The following information pertains to Clove Co. for the month just ended: (use table) Clove's margin of safety is

$300,000

The following information pertains to Krel Co.'s computation of net present value relating to a contemplated project: (use table) Net present value is

$300,000

Aaron Co. needs a machine for a 5-year project. It can either (1) buy a machine without borrowing for $500,000 or (2) enter into a 5-year operating lease for an annual payment of $105,000. The machine has an estimated useful life of 5 years, after which it can be sold for $15,000. The average tax rate is 30%, and the discount rate for the project is 6%. (use table) What is the present value of the relevant net cash outflows of the operating lease?

$309,582

Regan Company operates its factory on a two-shift basis and pays a late-shift differential of 15%. Regan also pays a premium of 50% for overtime work. Because Regan manufactures only for stock, the cost system provides for uniform direct-labor hourly charges for production done without regard to shift worked or work done on an overtime basis. Overtime and late-shift differentials are included in Regan's factory overhead application rate. The May payroll for production workers is as follows: (use table) For the month of May, what amount of direct labor should Regan charge to work-in-process?

$325,000

Jodi purchases a financial security on January 1, Year 1. The security pays $3,000 monthly for a year, with the first payment due on February 1, Year 1. Assuming a monthly interest rate of 1%, what is the price of the security? (use table)

$33,780

Jackson Corporation uses net present value techniques in evaluating its capital investment projects. The company is considering a new equipment acquisition that will cost $100,000, fully installed, and have a zero salvage value at the end of its 5-year productive life. Jackson will depreciate the equipment on a straight-line basis for both financial and tax purposes. Jackson estimates $70,000 in annual recurring operating cash income and $20,000 in annual recurring operating cash expenses. Jackson's desired rate of return is 12% and its effective income tax rate is 40%. (look at table) What is the net present value of this investment on an after-tax basis?

$36,990

Black Co.'s breakeven point was $780,000. Variable expenses averaged 60% of sales, and the margin of safety was $130,000. What was Black's contribution margin?

$364,000

Black, Inc., employs a weighted-average method in its process costing system. Black's work-in-process inventory on June 30 consists of 40,000 units. These units are 100% complete with respect to materials and 60% complete with respect to conversion costs. The equivalent unit costs are $5.00 for materials and $7.00 for conversion costs. What is the total cost of the June 30 work-in-process inventory?

$368,000

Given a 10% discount rate with cash inflows of $3,000 at the end of each year for 5 years and an initial investment of $11,000, what is the net present value? (use table)

$370

Aaron Co. needs a machine for a 5-year project. It can either (1) buy a machine without borrowing for a cash outlay of $515,000 or (2) enter into a 5-year operating lease for an annual payment of $105,000. The machine has an estimated useful life of 5 years, after which it can be sold for $15,000. The average tax rate is 30%, the discount rate for the project is 6%, and the straight-line depreciation method is used. (use table) What is the present value of the relevant net cash outflows of the direct purchase option?

$377,435

New equipment purchased at the beginning of Year 1 has (1) a cost of $155,000, (2) an estimated useful life of 5 years, and (3) a salvage value of $5,000. Assuming a tax rate of 30% and a discount rate of 5%, what is the total straight-line depreciation tax shield during the life of the equipment measured at the beginning of Year 1? (use table)

$38,966

The Cutting Department is the first stage of Mark Company's production cycle. BWIP for this department was 80% complete as to conversion costs. EWIP was 50% complete. Conversion costs in the Cutting Department for the month just ended were as follows: (use table) Using the FIFO method, what was the conversion cost of ending WIP in the Cutting Department?

$39,000

Bell Co. is purchasing new equipment. The new equipment is expected to increase Bell's sales by $60,000 and costs by $10,000 annually. The expected depreciation expense of the new equipment is $10,000 annually. Bell's marginal tax rate is 40%. What is the annual depreciation tax shield for the purchase of equipment?

$4,000

Fact Pattern: Leland Manufacturing uses 10 units of Part Number KJ37 each month in the production of radar equipment. The unit cost to manufacture 1 unit of KJ37 is presented below. (use table) Assume that Leland Manufacturing does not wish to commit to a rental agreement but could use idle capacity to manufacture another product that would contribute $52,000 per month. If Leland elects to manufacture KJ37 in order to maintain quality control, Leland's opportunity cost is

$4,000

DJ Co. has a job-order cost system. The following debits (credits) appeared in the work-in-process account for the month of March: (use table) DJ Co. applies overhead at a predetermined rate of 90% of direct labor cost. Job No. 101, the only job still in process at the end of March, has been charged with manufacturing overhead of $2,250. What was the amount of direct materials charged to Job No. 101?

$4,250

Aaron Co. is purchasing new equipment at a price of $60,000. The new equipment is expected to increase Aaron's sales by $100,000 and reduce costs by $20,000 annually. The equipment's estimated useful life is 4 years, with a residual value of $10,000, and it is depreciated using the straight-line method. Aaron's marginal tax rate is 35%. What is the annual depreciation tax shield?

$4,375

Lin Co. is buying machinery it expects will increase average annual operating income by $40,000. The initial increase in the required investment is $60,000, and the average increase in required investment is $30,000. To compute the accrual accounting rate of return, what amount should be used as the numerator in the ratio?

$40,000

Pinecrest Co. had variable costs of 25% of sales and fixed costs of $30,000. Pinecrest's breakeven point in sales dollars was

$40,000

The following information pertains to a manufacturing company: Total sales $80,000 Total variable costs 20,000 Total fixed costs 30,000 What is the breakeven level in sales dollars?

$40,000

The following were among Gage Co.'s costs during the month just ended: (use table) Gage's actual manufacturing overhead was

$40,000

Clay Co. has considerable excess manufacturing capacity. A special job order's cost sheet includes the following applied manufacturing overhead costs: (use table) The fixed costs include a normal $3,700 allocation for in-house design costs, although no in-house design will be done. Instead, the job will require the use of external designers costing $7,750. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job?

$40,750

Dan Corporation's options for acquiring a new machine are a 5-year operating lease or a purchase. The machine will increase unit output for an after-tax incremental profit of $50,000 in Year 1, $70,000 in Year 2, $70,000 in Year 3, $100,000 in Year 4, and $100,000 in Year 5. The lease rent is $90,000 payable on the first day of each year. Dan uses straight-line depreciation, which is acceptable under both financial and tax accounting. The applicable tax rate is 40%, and the weighted average cost of capital is 11%. What is the net present value of leasing the new machine?

$42,091

Fact Pattern: A sporting goods manufacturer buys wood as a direct material for baseball bats. The Forming Department processes the baseball bats, and the bats are then transferred to the Finishing Department, where a sealant is applied. The Forming Department began manufacturing 10,000 "Casey Sluggers" during the month of May. There was no beginning inventory. Costs for the Forming Department for the month of May were as follows: (use table) A total of 8,000 bats were completed and transferred to the Finishing Department; the remaining 2,000 bats were still in the forming process at the end of the month. All of the Forming Department's direct materials were placed in process, but, on average, only 25% of the conversion cost was applied to the ending work-in-process inventory. The cost of the units transferred to the Finishing Department is

$42,400

Jane purchases a financial security on January 1, Year 1. The security will pay $3,000 monthly for 5 months, with the first payment due on February 1, Year 1. The security was originally priced at a monthly rate of 1%, but Jane agreed with the seller to price the security at a monthly rate of 2%. How much does Jane save? (use table)

$420

A company uses its fixed assets of $1,000,000 at 95% capacity to generate sales of $2,000,000. The company wishes to generate sales of $3,000,000. What amount of additional fixed assets must be acquired, assuming that all fixed assets will operate at maximum capacity?

$425,000

Echo Company uses a normalized job costing system and applies factory overhead on the basis of machine hours. Echo's yearly profit plan disclosed anticipated factory overhead of $4,800,000 if 200,000 machine hours are worked. By year end, actual factory overhead charges and machine hours worked amounted to $4,730,000 and 215,000, respectively. What amount correctly states the factory overhead applied to Echo's actual year-end overhead?

$430,000 overapplied.

Sonya is saving for the tuition of her daughter, who will enter college in 8 years. Each year, she will deposit $20,000 in a savings account. The first contribution will be made on December 31, Year 1, and the last payment on December 31, Year 8. At the beginning of Year 9, Sonya will withdraw 4 equal annual amounts, with the first received on January 1, Year 9. If the prevailing market interest rate is expected to remain at 2% for the next 10 years, what is the amount withdrawn each year? (use table)

$44,227

Oak Co. bought a machine that will depreciate on the straight-line basis over an estimated useful life of 7 years. The machine has no salvage value. Oak expects the machine to generate after-tax net cash inflows from operations of $110,000 in each of the 7 years. Oak's minimum rate of return is 12%. Information on present value factors is as follows: (use table) Assuming a positive net present value of $12,000, what was the cost of the machine?

$490,040

Birk Co. uses a job-order cost system. The following debits (credit) appeared in Birk's work-in-process account for the month just ended: (use table) Birk applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only job still in process at month end, has been charged with direct labor of $2,000. What was the amount of direct materials charged to Job No. 5?

$5,200

Jonathan Manufacturing adopted a job-costing system. For the current year, budgeted cost driver activity levels for direct labor hours and direct labor costs were 20,000 and $100,000, respectively. In addition, budgeted variable and fixed factory overhead costs were $50,000 and $25,000, respectively. Actual costs and hours for the year were as follows: (use table) For a particular job, 1,500 direct-labor hours were used. Using direct-labor hours as the cost driver, what amount of overhead should be applied to this job?

$5,625

Lucy Sportswear manufactures a specialty line of T-shirts using a job-order cost system. During March, the following costs were incurred in completing Job ICU2: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 resulted in 7,000 good shirts, the cost of goods sold per unit would be

$5.50

Del Co. has fixed costs of $100,000 and breakeven sales of $800,000. What is its projected profit at $1,200,000 sales?

$50,000

The accountant for Champion Brake, Inc., applies overhead based on machine hours. The budgeted overhead and machine hours for the year are $260,000 and 16,000, respectively. The actual overhead and machine hours incurred were $275,000 and 20,000. The cost of goods sold and inventory data compiled for the year is as follows: (use table) What is the amount of over/underapplied overhead for the year?

$50,000

The following information is taken from Wampler Co.'s current-year contribution income statement: (use table) What was Wampler's margin of safety?

$50,000

The following information pertains to Syl Co.: (use table) What is Syl's breakeven point in sales dollars?

$50,000

Galax, Inc., had operating income of $5,000,000 before interest and taxes. Galax's net book value of plant assets at January 1 and December 31 were $22,000,000 and $18,000,000, respectively. Galax achieved a 25% return on investment for the year, with an investment turnover of 2.5. What were Galax's sales for the year?

$50,000,000

On January 1, Maples had two jobs in process: #506 with assigned costs of $10,500 and #507 with assigned costs of $14,250. During January, three new jobs, #508 through #510, were started and three jobs, #506, #507, and #508, were completed. Materials and labor costs added during January were as follows: (use table) Manufacturing overhead is assigned at the rate of 200% of labor. What is the January cost of goods manufactured and transferred from work-in-process?

$50,050

Fact Pattern: Zeta Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be allocated to the individual product lines from the information given in the next column: (use table) Under activity-based costing (ABC), Zeta's materials handling costs allocated to one unit of wall mirrors would be

$500

Fact Pattern: The data below pertain to two types of products manufactured by Cobb Corp. Fixed costs total $300,000 annually. The expected mix in units is 60% for product Y and 40% for product Z. (use table) How much is Cobb's breakeven point in dollars?

$544,000

As part of a benchmarking process, a company's costs of quality for the current month have been identified as follows: (use table) What amount is the company's prevention cost for the current month?

$57,000

Listed below are a company's monthly unit costs to manufacture and market a particular product. (use table) The company must decide to continue making the product or buy it from an outside supplier. The supplier has offered to make the product at the same level of quality that the company can make it. Fixed marketing costs would be unaffected, but variable marketing costs would be reduced by 30% if the company were to accept the proposal. What is the maximum amount per unit that the company can pay the supplier without decreasing operating income?

$6.75

Fact Pattern: Refrigerator Company manufactures ice-makers for installation in refrigerators. The costs per unit, for 20,000 units of ice-makers, are as follows. (use table) If Refrigerator retools its existing plant, revenues from the sale of water filtration units are estimated at $80,000, with variable costs amounting to 60% of sales. In addition, $6 per unit of the fixed overhead associated with the manufacture of ice-makers could be eliminated. For Refrigerator Company to determine the most appropriate action to take in this situation, the total relevant costs of make vs. buy, respectively, are

$600,000 vs. $528,000.

Pole Co. is investing in a machine with a 3-year life. The machine is expected to reduce annual cash operating costs by $30,000 in each of the first 2 years and by $20,000 in year 3. Present values of an annuity of $1 at 14% are (use table) Using a 14% cost of capital, what is the present value of these future savings?

$62,900

A company has two divisions. Division A has operating income of $500 and total assets of $1,000. Division B has operating income of $400 and total assets of $1,600. The required rate of return for the company is 10%. The company's residual income would be which of the following amounts?

$640

A company is purchasing new equipment. The new equipment is expected to increase the company's sales by $110,000 and costs by $10,000 annually. The expected depreciation expense of the new equipment is $20,000 annually. The company's marginal tax rate is 35%. What is the annual depreciation tax shield?

$7,000

Wilkinson, Inc., which has a cost of capital of 12%, invested in a project with an internal rate of return (IRR) of 14%. The project is expected to have a useful life of 4 years, and it will produce net cash inflows as follows: (use chart) The initial cost of this project amounted to

$7,483

Fact Pattern: A sporting goods manufacturer buys wood as a direct material for baseball bats. The Forming Department processes the baseball bats, and the bats are then transferred to the Finishing Department, where a sealant is applied. The Forming Department began manufacturing 10,000 "Casey Sluggers" during the month of May. There was no beginning inventory. Costs for the Forming Department for the month of May were as follows: (use table) A total of 8,000 bats were completed and transferred to the Finishing Department; the remaining 2,000 bats were still in the forming process at the end of the month. All of the Forming Department's direct materials were placed in process, but, on average, only 25% of the conversion cost was applied to the ending work-in-process inventory. The cost of the work-in-process inventory in the Forming Department at the end of May is

$7,600

The following is a summarized income statement of Carr Co.'s profit center No. 43 for the month just ended: (use table) Which of the following amounts would most likely be subject to the control of the profit center's manager?

$70,000

Fact Pattern: Listed below are costs of quality that a manufacturing company has incurred throughout its operations. The company plans to prepare a report that classifies these costs into the following four categories: preventive costs, appraisal costs, internal failure costs, and external failure costs. (use table) The dollar amount of the costs of quality classified as preventive costs for the manufacturing firm would be

$701,000

Zig Corp. provides the following information: (use table) What of the following represents Zig's year-end economic value-added amount?

$72,000,000

The following information for a company is given: Fixed cost per month $2,500 Unit selling price $100 Variable cost as a percentage of sales 60% What amount of annual sales must the company achieve to break even?

$75,000

Worley Company has underapplied overhead of $45,000 for the year. Before disposition of the underapplied overhead, selected year-end balances from Worley's accounting records were (use table) Under Worley's cost accounting system, over- or underapplied overhead is assigned to appropriate inventories and COGS based on year-end balances. In its year-end income statement, Worley should report COGS of

$757,500

Fact Pattern: Hamilton Company uses job-order costing. Manufacturing overhead is applied to production at a predetermined rate of 150% of direct labor cost. Any over- or underapplied overhead is closed to the cost of goods sold account at the end of each month. Additional information is available as follows: (use table) The cost of goods manufactured for February was

$77,700

Fact Pattern: Richardson Motors uses 10 units of Part No. T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented as follows: (use table) Assume the rental opportunity does not exist and Richardson Motors could use the idle capacity to manufacture another product that would contribute $104,000 per month. If Richardson chooses to manufacture the ten T305 units in order to maintain quality control, Richardson's opportunity cost is

$8,000

A company borrows to buy a machine for $400,000 at a borrowing rate of 5% on January 1, Year 1. The average tax rate of the company is 30%. The loan is repaid with equal payments within 2 years, with the first payment made on December 31, Year 1. What is the present value of the cash inflow relating to the interest from the machine? (use table)

$8,498

Lucas Co. has a job-order cost system. For the month of April, the following debits (credits) appeared in the general ledger account, work-in-process: (use table) Lucas applies overhead to production at a predetermined rate of 90% based on direct labor cost. Job No. 100, the only job still in process at the end of April, has been charged with factory overhead of $4,500. The amount of direct materials charged to Job No. 100 was

$8,500

A new venture will require an initial investment in fixed assets of $20,000 and in working capital of $10,000. The fixed assets will have no salvage value at the end of the project's 4-year life, and the working capital will be completely recovered at the end of the project. The organization's cost of capital is 16%. At a time value of money of 16%, the present value of an ordinary annuity of $1/year for 4 years is 2.8, and the present value of $1 at the end of 4 years is 0.6. What is the annual net cash inflow required for the project to break even on a time-adjusted basis?

$8,571

Brewster Co. has the following financial information: (use table) What amount of sales is required for Brewster to achieve a 15% return on sales?

$80,000

A company invests $100,000 in property. The company has a contract to sell it for $120,000 in one year. The bank has a guaranteed interest rate of 10%. What is the net present value of the company's investment in the property?

$9,091

The New Wave Co. is considering a new method for allocating overhead to its two products, regular and premium coffee beans. Currently New Wave is using the traditional method to allocate overhead, in which the cost driver is direct labor costs. However, it is interested in using two different drivers: machine hours (MH) for separating and roasting beans, and pounds of coffee for packing and shipping. Machine hours for the current month are 700 hours, direct labor cost per pound of coffee is $1.25, and direct materials cost per pound of coffee is $1.50. There are 1,000 pounds of coffee packed and shipped for the current month. The following data are also available: (use table) What is the total cost per pound for the premium coffee using the new activity-based costing method?

$9.75

Charlie Co. purchased new equipment for $65,000. The equipment has a residual value of $5,000 and can be used for 4 years or 5 years, depending on usage. The entity's tax rate is 30%, and it uses the straight-line depreciation method. What is the difference in the annual depreciation tax shield resulting from the difference in the estimates of the estimated useful life?

$900

S Corp. produces premium office chairs. Due to a recent change in market share, S must decide whether to make or buy an order of 1,000 chairs. The materials cost of producing a chair is $20 per pound, the cost of direct labor is $40 per direct labor hour, and manufacturing overhead (100% variable) is allocated at a rate of $10 per chair. Fixed costs for the year are $5 per chair, of which 20% are avoidable. Each chair requires 2 pounds of materials and 1 hour of direct labor to complete. Assuming that S has excess capacity, the total cost per chair relevant to the make-or-buy decision is

$91

Fact Pattern: Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, unit sales of Product X were 40% of total unit sales. That ratio is not expected to change. What is Catfur's breakeven point in dollars?

$942,857

Avionics Industrials reported at year end that operating income before taxes for the year equaled $2,400,000. The firm's weighted-average cost of capital (WACC) is 7.24%. The carrying amount of debt is $1,300,000, and the carrying amount of equity capital is $8,800,000. The income tax rate for Avionics is 30%. What is the economic value added (EVA)?

$948,760

H Corp. produces premium office chairs. Due to a recent change in market share, H must decide whether to make or buy an order of 1,000 chairs. The materials cost of producing a chair is $20 per pound, the cost of direct labor is $40 per direct labor hour, and manufacturing overhead (100% variable) is allocated at a rate of $10 per chair. Fixed costs for the year are $5 per chair, of which 20% are avoidable. Each chair requires 2 pounds of materials and 1 hour of direct labor to complete. Assuming that H has no excess capacity, what are the relevant costs per chair?

$95

Charlton Co. has the following financing options for the purchase of equipment on January 1, Year 1: Option 1: Sell the old equipment for $50,000 and use the proceeds with a loan of $450,000 to buy new equipment. The interest rate of the loan is 5%, and it will be repaid by equal payments in 10 years. The first payment will be due on December 31, Year 1. The cost of the old equipment is $300,000, with accumulated straight-line depreciation of $240,000, a remaining useful life of 2 years, and no salvage value. The new equipment has an estimated useful life of 10 years and no salvage value. It will be depreciated for tax purposes using the straight-line method. Option 2: Enter into an operating lease of 10 years for an annual lease payment of $57,000. (use table) What is the present value of the total relevant cash inflows relating to depreciation?

$99,091

The following information pertains to Bala Co. for the year ended December 31: (use chart) Which of the following equations should be used to compute Bala's return on investment?

(6/4) x (1/6) = ROI

The following information pertains to Andrew Co. for the year ended December 31: Sales $720,000 Operating Income 120,000 Average capital investment 480,000 Which one of the following formulas generates Andrew's return on investment?

(720,000 / 480,000) x (120,000 / 720,000)

Which of the following formulas should be used to calculate the economic rate of return on common stock?

(Dividends + change in price) divided by beginning price.

Fact Pattern: The data presented below show actual figures for selected accounts of McKeon Company for the fiscal year ended May 31, Year 1, and selected budget figures for the Year 2 fiscal year. McKeon's controller is in the process of reviewing the Year 1 figures and calculating some key ratios based on the actual figures. (Round all calculations to three decimal places if necessary.) (use table) The Year 2 return on equity for McKeon Company is

0.221

A company sells DVD players for $200 per unit. The players have a unit variable cost of $160. The company estimates that it will sell one home entertainment system for every four DVD players sold. Home entertainment systems have a unit variable cost of $460 and sell for $600 per unit. The company's fixed costs are $90,000. Assuming that the sales mix estimate is correct, how many DVD players need to be sold for the company to break even?

1,200

Mesa Company is considering an investment to open a new banana processing division. The project involves an initial investment of $45,000, and cash inflows of $20,000 can be expected in each of the next 3 years. The hurdle rate is 10%. The present value of an ordinary annuity of 1 discounted at 10% for 3 periods is 2.487. The present value of 1 due in 3 periods discounted at 10% is .751. What is the profitability index for the project?

1.1053

Fact Pattern: Tam Co. is negotiating to purchase equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipment's estimated useful life is 10 years, with no residual value, and would be depreciated by the straight-line method. Tam's predetermined minimum desired rate of return is 12%. Present value of an annuity of $1 at 12% for 10 periods is 5.65. Present value of $1 due in 10 periods at 12% is .322. Accrual accounting rate of return based on initial investment to Tam Co. is

10%

Management would like to calculate return on investment (ROI) for the current year. The following information is available: (use table) What percentage amount is the ROI?

10%

What is the approximate IRR for a project that costs $50,000 and provides cash inflows of $20,000 for 3 years? (look at table)

10%

Wren Co. manufactures and sells two products with selling prices and variable costs as follows: (use table) Wren's total annual fixed costs are $38,400. Wren sells four units of A for every unit of B. If operating income last year was $28,800, what was the number of units Wren sold?

10,500

Oslo Co.'s industrial photo-finishing division, Rho, incurred the following costs and expenses during the year just ended: (use chart) For the year ended December 31, Rho's return on average investment was

10.0%

Fact Pattern: The information below pertains to Devlin Company. (use table) Assuming there are no preferred stock dividends in arrears, Devlin Company's return on common equity for the year ended May 31, Year 2, was

10.5%

Assuming that Lisa, Inc.'s net income for Year 2 was $35,000, and there were no preferred stock dividends in arrears, Lisa's return on common equity for Year 2 was (use table)

10.6%

Fact Pattern: The Statement of Financial Position for King Products Corporation for the fiscal years ended June 30, Year 2, and June 30, Year 1, is presented below. Net sales and cost of goods sold for the year ended June 30, Year 2, were $600,000 and $440,000, respectively. (use table) Assuming that King Products Corporation's net income for the year ended June 30, Year 2, was $70,000 and there are no preferred stock dividends in arrears, King Products Corporation's return on common equity was

10.6%

Spark Co. buys cordless phones for $125 each and sells them for $200 each. Spark pays a sales commission of $25 per phone sold and monthly fixed costs are $3,000. Assuming Spark desired a profit of 10% of sales, how many units must Spark sell?

100

Kew Co. had 3,000 units in work-in-process at April 1 that were 60% complete as to conversion cost. During April, 10,000 units were completed. At April 30, the 4,000 units in work-in-process were 40% complete as to conversion cost. Direct materials are added at the beginning of the process. How many units were started during April?

11,000

As part of the annual budgeting process, Fair Theatre Company compiled the following information for its next play production: (use table) How many tickets would Fair need to sell for the play's run to obtain a $24,000 profit?

12,000

A company's common stock has a market value of $45. The company's most recent annual earnings per share is $3.60 and the company pays an annual dividend of $1.50 per share. What is the company's price-earnings ratio?

12.50

During the current year, the following manufacturing activity took place for a company's products: (use table) What was the number of equivalent units produced using the first-in, first-out method (FIFO)?

138,000

Spear Corp. had sales of $2,000,000, a profit margin of 11%, and assets of $2,500,000. Spear decided to reduce its debt ratio to 0.40 from 0.50 by selling new common stock and using the proceeds to repay principal on some outstanding long-term debt. After the refinancing, what is Spear's return on equity (ROE)?

14.7%

Oliver Co. is considering investing in a project with a profitability index of 1.0 based on the present value of future net cash flows. The cost of capital of the project is 15%, the risk-free interest rate is 3%, and the market rate of return is 6%. What is the internal rate of return (IRR) of the project?

15%

Yarn Co.'s inventories in process were at the following states of completion at the end of the month: (use table) Equivalent units of production amounted to

150

Fact Pattern: MultiFrame Company has the following revenue and cost budgets for the two products it sells: (use table) The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at $975,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, MultiFrame rounds to the nearest cent and unit. The total number of units MultiFrame needs to produce and sell to break even is

150,000 units.

Listed below is selected financial information for the Western Division of the Hinzel Company for last year. (use table) If Hinzel treats the Western Division as an investment center for performance measurement purposes, what is the before-tax return on investment (ROI) for last year?

16.67%

The following data pertain to a company's cracking-department operations in December: (use chart) Materials are added at the beginning of the process, and conversion costs are incurred uniformly throughout the process. Assuming use of the FIFO method of process costing, the equivalent units of production (EUP) with respect to conversion performed during December were

175,000

A company is reviewing its financial forecast. The selling price of the company's product is $22.50, the per unit contribution margin is $12.50, and total fixed costs are $175,000. How many units of the product must be sold to generate $50,000 of profit?

18,000

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore extraction operations. The following information pertains to work-in-process inventories and operations for the month of May: (use table) Under the FIFO method, Albany Mining's equivalent units of production (EUP) with respect to conversion costs are

196,800 units.

Fact Pattern: The data below pertain to two types of products manufactured by Cobb Corp. Fixed costs total $300,000 annually. The expected mix in units is 60% for product Y and 40% for product Z. (use table) How much is Cobb's breakeven point in units?

2,000

Fact Pattern: Jorelle Company's financial staff has been requested to review a proposed investment in new capital equipment. Applicable financial data is presented below. There will be no salvage value at the end of the investment's life and, due to realistic depreciation practices, it is estimated that the salvage value and net book value are equal at the end of each year. All cash flows are assumed to take place at the end of each year. For investment proposals, Jorelle uses a 12% after-tax target rate of return. (use table) The traditional payback period for the investment proposal is

2.23 years.

Last year a segment of Dickson Company had the following sales, assets, and operating income: Sales $500,000 Assets 200,000 Operating income 50,000 What is the segment's asset turnover?

2.5 times.

Harvey Co. is evaluating a capital investment proposal for a new machine. The investment proposal shows the following information: (use table) If acquired, the machine will be depreciated using the straight-line method. The payback period for this investment is

2.5 years.

Gamma Co., a manufacturer of medical products, had a 10% return on assets and an asset turnover of 4:1. What was Gamma's profit margin on sales?

2.5%

Major Corp. is considering the purchase of a new machine for $5,000 that will have an estimated useful life of 5 years and no salvage value. The machine will increase Major's after-tax cash flow by $2,000 annually for 5 years. Major uses the straight-line method of depreciation and has an incremental borrowing rate of 10%. The present value factors for 10% are as follows: (use table) Using the payback method, how many years will it take to pay back Major's initial investment in the machine?

2.50

Managers of the Doggie Food Co. want to add a bonus component to their compensation plan. They are trying to decide between return on investment (ROI) and residual income (RI) as the performance measure they will use. If Doggie adopts the RI performance measure, the relevant required rate of return would be 18%. One segment of Doggie is the Good Treats division, where the manager has invested in new equipment. The operating results from this equipment are as follows: (use table) Assuming that there are no income taxes, what would be the ROI and RI, respectively, for this equipment, which has an average value of $100,000?

20%; $2,000

State College is using cost-volume-profit analysis to determine tuition rates for the upcoming school year. Projected costs for the year are as follows: (use table) Based on these estimates, what is the approximate breakeven point in number of students?

200

Fact Pattern: Albany Mining Corporation uses a process costing system for its ore extraction operations. The following information pertains to work-in-process inventories and operations for the month of May: (use table) Under the FIFO method, Albany Mining's equivalent units of production (EUP) with respect to materials are

208,000 units.

Fact Pattern: The financial statements for Dividendosaurus, Inc., for the current year are as follows: (use table) Using year-end assets as the average, Dividendosaurus has return on assets of

21.1%

Selected information for Dayan Company is as follows: (use table) Dayan's return on common equity, rounded to the nearest percentage point, for Year 6 is

22%

A ceramics manufacturer sold cups last year for $7.50 each. Variable costs of manufacturing were $2.25 per unit. The company needed to sell 20,000 cups to break even. Net income was $5,040. This year, the company expects the following changes: sales price per cup to be $9.00, variable manufacturing costs to increase 33.3%, fixed costs to increase 10%, and the income tax rate to remain at 40%. Sales in the coming year are expected to exceed last year's sales by 1,000 units. How many units does the company expect to sell this year?

22,600

Green Co. produces only Product Z. As part of the annual budgeting, Green is considering whether to produce a new product. Green's CFO obtained information from various departments within the company. The plant manager expected the following costs would be incurred in producing the new product: (use table) The marketing manager decided to spend $2 per unit for the first 5,000 items sold with no additional costs after that. The marketing manager confirmed that the current market price for the new product was $4,000 per 1,000 units. The plant manager told the CFO that the employees would be able to produce 500 units per hour. Approximately how many units would Green have to sell to break even?

23,215

Fact Pattern: Oradell Company sells its single product at a price of $60 per unit and incurs the following variable costs per unit of product: (use table) If prime costs increased by 20% and all other values remained the same, Oradell Company's contribution margin (to the nearest whole percent) would be

24%

Vested, Inc., made some changes in operations and provided the following information: (use chart) What percentage represents the return on investment for Year 3?

25%

Fact Pattern: Catfur Company has fixed costs of $300,000. It produces two products, X and Y. Product X has a variable cost percentage equal to 60% of its $10 per unit selling price. Product Y has a variable cost percentage equal to 70% of its $30 selling price. For the past several years, unit sales of Product X were 40% of total unit sales. That ratio is not expected to change. How many units of Product Y will Catfur sell at the breakeven point?

25,714 units.

The following information pertains to Quest Co.'s Gold Division for the year just ended: (use chart) Quest's return on investment was

27.50%

ISACA establishes a phased five-stage data management approach to guide the establishment or improvement of a data governance program. Arrange the following activities in the order defined by ISACA. 1. Establish and evolve data architecture 2. Define, execute, assure data quality, and clean polluted data 3. Establish a data governance foundation 4. Focus on data analytics 5. Realize data democratization

3, 1, 2, 5, 4

A company purchases an item for $43,000. The salvage value of the item is $3,000. The cost of capital is 8%. Pertinent information related to this purchase is as follows: (look at chart) What is the discounted payback period in years?

3.25

A project has an initial outlay of $1,000. The projected cash inflows are Year 1 $200 Year 2 200 Year 3 400 Year 4 400 What is the investment's payback period?

3.5 years.

Fitzgerald Company is planning to acquire a $250,000 machine that will provide increased efficiencies, thereby reducing annual operating costs by $80,000. The machine will be depreciated by the straight-line method over a 5-year life with no salvage value at the end of 5 years. Assuming a 40% income tax rate, the machine's payback period is

3.68 years

A company is investing in a machine costing $365,000. The following table shows selected financial data for the company for the next 5 years: (use chart) What is the payback period on this machine?

3.8 years.

A company manufactures a product that passes through two production departments: molding and assembly. Direct materials are added in the assembly department when conversion is 50% complete. Conversion costs are incurred uniformly. The activity in units for the assembly department during April is as follows: (use table) The number of equivalent units for direct materials in the assembly department for April calculated on the weighted-average basis is

31,000 units.

Fact Pattern: A company reports the following account balances at year end: (use table) For the year just ended, the company had a rate of return on common equity, rounded to two decimals, of

31.21%

What is the approximate ratio between direct materials costs and product costs for Product E? (use picture)

37%

At annual sales of $900,000, the Ebo product has the following unit sales price and costs: (use table) What is Ebo's breakeven point in units?

37,500

A company produces and sells two products. The first product accounts for 75% of sales, and the second product accounts for the remaining 25% of sales. The first product has a selling price of $10 per unit, variable costs of $6 per unit, and allocated fixed costs of $100,000. The second product has a selling price of $25 per unit, variable costs of $13 per unit, and allocated fixed costs of $212,000. At the breakeven point, what number of units of the first product will have been sold?

39,000

An entity has the following invoices in a batch: (use chart) Which of the following numbers represents the record count?

4

Fact Pattern: Oradell Company sells its single product at a price of $60 per unit and incurs the following variable costs per unit of product: (use table) The number of units of product that Oradell Company must sell annually to break even is

44,000 units.

An entity has the following sales orders in a batch: (use table) Which of the following numbers represents the record count?

5

The following information pertains to Sisk Co.: (use table) Sisk's breakeven point in number of units is

5,000

Fact Pattern: Tam Co. is negotiating to purchase equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in after-tax cash costs if the equipment were acquired. The equipment's estimated useful life is 10 years, with no residual value, and would be depreciated by the straight-line method. Tam's predetermined minimum desired rate of return is 12%. Present value of an annuity of $1 at 12% for 10 periods is 5.65. Present value of $1 due in 10 periods at 12% is .322. Payback period to Tam Co. is

5.0 years.

A department adds material at the beginning of a process and identifies defective units when the process is 40% complete. At the beginning of the period, there was no work in process. At the end of the period, the number of work-in-process units equaled the number of units transferred to finished goods. If all units in ending work in process were 66% complete, then ending work in process should be allocated

50% of all normal defective unit costs.

Kerner Manufacturing uses a process cost system to manufacture laptop computers. The following information summarizes operations relating to laptop computer model #KJK20 during the quarter ending March 31: (use table) Beginning work-in-process inventory was 50% complete for direct materials. Ending work-in-process inventory was 75% complete for direct materials. Using the FIFO method, what were the equivalent units of production with regard to materials for the quarter ended March 31?

500

The following data pertain to Canova, Inc., for the year ended December 31: (use table) What was Canova's rate of return on assets for the year?

6%

Clifford Co. calculates the net present value (NPV) of a potential project for different discount rates. Based on the following results, what is the approximate internal rate of return (IRR) of the project? (use chart)

6.1%

Ace Co. is evaluating a new novelty product that would sell for $30 per unit and have the following costs: (use table) The product is expected to have a market life of 1 year, at the end of which all production and sales would be discontinued. Ace has a target rate of return on sales of 0.10. How many units must Ace sell to earn the target rate of return?

60,000

Snyder Co. manufactures fans with direct material costs of $10 per unit and direct labor of $7 per unit. A local carrier charges Snyder $5 per unit to make deliveries. Sales commissions are paid at 10% of the selling price. Fans are sold for $100 each. Indirect factory costs and administrative costs are $6,800 and $37,200 per month, respectively. How many fans must Snyder produce to break even?

648

Fact Pattern: The information below pertains to Devlin Company. (use table) Devlin Company's rate of return on assets for the year ended May 31, Year 2, was

7.5%

A company employs a process cost system using the first-in, first-out (FIFO) method. The product passes through both Department 1 and Department 2 in order to be completed. Units enter Department 2 upon completion in Department 1. Additional direct materials are added in Department 2 when the units have reached the 25% stage of completion with respect to conversion costs. Conversion costs are added proportionally in Department 2. The production activity in Department 2 for the current month was as follows: (use chart) How many equivalent units for direct materials were added in Department 2 for the current month?

70,000 units.

What is the approximate percentage of Level III employees with a college degree or above? (use picture)

77%

A company uses weighted-average process costing for the product it manufactures. All direct materials are added at the beginning of production, and conversion costs are applied evenly during production. The following data apply to the past month: (use table) Assuming no spoilage, equivalent units of production (EUP) with respect to conversion costs total

8,780

An entity has the following invoices in a batch: (use chart) Which of the following most likely represents a hash total?

810

Pena Company is considering a project that calls for an initial cash outlay of $50,000. The expected net cash inflows from the project are $7,791 for each of 10 years. (use table) What is the IRR of the project?

9%

A manufacturer plans to produce two products, Product C and Product F, during the next year, with the following characteristics. (use table) Total projected fixed costs for the company are $30,000. Assume that the product mix would be the same at the breakeven point as at the expected level of sales of both products. What is the projected number of units (rounded) of Product C to be sold at the breakeven point (BEP)? In numerical calculations, the manufacturer rounds up to the nearest dollar.

9,231

Information related to the revenue and costs of a product are as follows: (use table) What number of units above the breakeven level must be sold to earn the desired level of net income per month?

96

Neu Co. is considering the purchase of an investment that has a positive net present value based on Neu's 12% hurdle rate. The internal rate of return would be

> 12%

Which of the following changes would result in the highest present value?

A $100 decrease in taxes each year for 4 years.

A company wants to protect its IT system from unauthorized users accessing the system. Which of the following controls would best serve to mitigate this risk?

A biometric device.

One of the major problems in a computer system is that incompatible functions may be performed by the same individual. One compensating control is the use of

A computer log.

A company's web server has been overwhelmed with a sudden surge of false requests that caused the server to crash. The company has most likely been the target of

A denial of service attack.

Which improvement in IT control specifically addresses the authentication issue?

A digital certificate.

A company's accounts payable clerk obtained the payroll supervisor's computer password. The clerk then used the password to obtain unauthorized access to the company's payroll files. Any of the following can be used to prevent such unauthorized access to the payroll files, except

A digital signature.

Attacks on computer networks may take many forms. Which of the following uses the computers of innocent parties infected with Trojan horse programs?

A distributed denial-of-service attack.

Which one of the following is not a core principle of total quality management (TQM)?

A focus on technological breakthroughs.

Which one of the following best identifies a profit center?

A new car sales division for a large local auto agency.

Which of the following statements is correct regarding information technology (IT) governance?

A primary goal of IT governance is to balance risk versus return over IT and its processes.

Which one of the following statements defines data mining?

A process of using statistical techniques to extract and analyze data from large databases to discern patterns and trends.

The firewall system that limits access to a computer by routing users to replicated Web pages is

A proxy server.

An online data entry program is used for original entry of vendor invoices. A batch check-writing program occasionally prepares a check for a vendor not yet included in the vendor file. Checks for such vendors contain nonsense characters in the payee field. The most effective programmed control to prevent this kind of error is to perform

A record lookup for vendors during data entry.

A depreciation tax shield is

A reduction in income taxes.

An entity has many employees that access a database. The database contains sensitive information concerning the customers of the entity and has numerous access points. Access controls prevent employees from entry to those areas of the database for which they have no authorization. All salespersons have certain access permission to customer information. Which statement is true regarding the nature of the controls and risks?

A salesperson's access to customer information should extend only to what is necessary to perform his or her duties.

A car insurance company is considering opening branches in a foreign country. The country's population has been growing rapidly for the last 5 years. The company wants to know whether the number of car accidents are correlated with the recent population growth. Which of the following charts prepared by an analyst would be most helpful to the company?

A scatter plot showing the number of car accidents on the y-axis and the population size on the x-axis.

Which of the following statements is true regarding internal control objectives of information systems?

A secure system may have inherent risks due to management's analysis of trade-offs identified by cost-benefit studies.

Which of the following spreadsheets most likely has the highest risk of data integrity errors?

A spreadsheet into which the controller enters summary daily sales data from a printed report of an automated accounting system.

What is an internal rate of return?

A time-adjusted rate of return from an investment.

Company A and company B are subsidiaries of company C, a multinational company. A has a fixed corporate tax rate of 15% and B pays a 25% fixed corporate tax rate. A sells a component to B at a price ranging from $100 to $200 per unit. Which of the following statements is correct regarding the transfer price from A to B?

A transfer price of $200 will maximize after-tax profits of A and C.

Which of the following errors most likely would be detected by batch financial totals?

A transportation error on one employee's paycheck on a weekly payroll run.

Which of the following statements that relate to capital budgeting is true?

Accelerated methods of depreciation provides tax shields that are advantageous from a present-value point of view.

When only differential manufacturing costs are taken into account for special-order pricing, an essential assumption is that

Acceptance of the order will not affect regular sales.

Controls in the information technology area are classified into the preventive, detective, and corrective categories. Which of the following is a preventive control?

Access control software.

Amster Corporation has not yet decided on its hurdle rate for use in the evaluation of capital budgeting projects. This lack of information will prohibit Amster from calculating a project's

Accounting Rate of Return/Net Present Value/Internal Rate of Return No/Yes/No

The method that divides a project's annual after-tax net income by the average investment cost to measure the estimated performance of a capital investment is the

Accounting rate of return method.

The technique that measures the estimated performance of a capital investment by dividing the project's annual after-tax net income by the average investment cost is called the

Accounting rate of return method.

Which one of the following capital investment evaluation methods does not take the time value of money into consideration?

Accounting rate of return.

Which one of the following methods for evaluating capital projects is the least useful from an investment analysis point of view?

Accounting rate of return.

Dora Jones, an auditor for Farmington Co., noted that the Acme employees were using computers connected to Acme's network by wireless technology. On her next visit to Acme, Jones brought one of Farmington's laptop computers with a wireless network card. When she started the laptop to begin work, Jones noticed that the laptop could view several computers on Acme's network and that she had access to Acme's network files. Which of the following statements is the most likely explanation?

Acme was not using security on the network.

Skytop Co., a nonprofit entity, is considering acquiring a machine for $80,000 that will produce uniform cash inflows of $25,000 for four years. Skytop evaluates capital projects using discounted cash flows at a cost of capital of 10% per year. Based upon the following table, what action should Skytop take regarding acquisition of the machine, and why? (use table)

Acquire/Reason No/Net present value is ($750)

Which of the following is not among the seven cybersecurity framework implementation steps?

Action plan review.

Which of the following statements about activity-based costing (ABC) is false?

Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.

Which of the following cost methods is least likely to result in cost shifting in a multiproduct manufacturing environment?

Activity-based costing.

A job-order cost system uses a predetermined factory overhead rate based on expected volume and expected fixed cost. At the end of the year, underapplied overhead might be explained by which of the following situations?

Actual Volume/Actual Fixed Costs Less than expected/Greater than expected

Of the following decisions, capital budgeting techniques would least likely be used in evaluating the

Adoption of a new method of allocating non traceable costs to product lines.

In an activity-based costing (ABC) system, cost reduction is accomplished by identifying and eliminating

All Cost Drivers/Nonvalue-Adding Activities No/Yes

Which of the following criteria would be most useful to a sales department manager in evaluating the performance of the manager's customer-service group?

All customer inquiries should be answered within 7 days of receipt.

Capital budgeting is used for the decision analysis of

All of the answers are correct.

Entities that can benefit from using data analytics include

All of the answers are correct.

In an insourcing vs. outsourcing decision, the decision process favors the use of total costs rather than unit costs. The reason is that

All of the answers are correct.

In an insourcing vs. outsourcing situation, which of the following qualitative factors is usually considered?

All of the answers are correct.

Which costing method is permitted by the SEC for financial reporting?

All of the answers are correct.

Which of the following is included in the Four Vs of big data?

All of the answers are correct.

The profitability index approach to investment analysis

Always yield the same accept/reject decisions for independent projects as the net present value method.

In a job cost system, manufacturing overhead is

An Indirect Cost of Jobs/A Necessary Element in Production Yes/Yes

All of the following are correct statements regarding a firewall except

An application firewall is an adequate substitute for a network firewall.

An enterprise sells three chemicals: petrol, septine, and tridol. Petrol is the company's most profitable product; tridol is the least profitable. Which one of the following events will definitely decrease the firm's overall breakeven point for the upcoming accounting period?

An increase in anticipated sales of petrol relative to sales of septine and tridol.

Last year a consulting company that solves computer network problems instituted a total quality management (TQM) program and produced the following summary cost-of-quality report: (use table) Which of the following statements regarding the report is most likely correct?

An increase in conformance costs resulted in a decrease in nonconformance costs.

Capital budgeting is concerned with

Analysis of long-range decisions.

All of the following are correct statements regarding businesses deciding to utilize cloud computing for big data projects except

Analysts are not required to have a detailed understanding of the available data and possess some sense of what answer(s) they're looking for.

Deviation from expected results can be identified by which application of data analytics?

Anomaly detection.

If a company is customer-centered, its customers are defined as

Anyone external to the company and those internal who rely on its product to get their job done.

Which of the following types of control plans is particular to a specific process or subsystem, rather than related to the timing of its occurrence?

Application.

Product-quality-related costs are part of a total quality control program. A product-quality-related cost incurred in detecting individual products that do not conform to specifications is an example of a(n)

Appraisal cost.

The cost of statistical quality control in a product quality cost system is categorized as a(n)

Appraisal cost.

The costs of quality that are incurred in detecting units of product that do not conform to product specifications are referred to as

Appraisal costs.

By observing the color density, the relative values of data or changes over time

Are more intuitive.

Data visualization

Assists with big data analytics to display data results in a visual context.

When a user enters a certain entity's system, a series of questions is asked of the user, including a name and mother's birth date. These questions are primarily intended to provide

Authentication of the user.

A segment of an organization is referred to as an investment center if it has

Authority to make decisions affecting the major determinants of profit including the power to choose its markets and sources of supply and significant control over the amount of invested capital.

A segment of an organization is referred to as a profit center if it has

Authority to make decisions affecting the major determinants of profit including the power to choose its markets and sources of supply.

The headquarters' computer of a certain entity maintains a matrix of user names and the files/programs the user can access as well as what the user can do to/with the file or program. This matrix is primarily intended to provide

Authorization for processing.

Which of the following security controls may prevent unauthorized access to sensitive data via an unattended workstation connected to a server?

Automatic log-off of inactive users.

A company permits employees to work from home using company-owned laptops. Which of the following competitive advantages does the company most likely obtain as a result of this decision?

Availability.

Costs relevant to an insourcing vs. outsourcing decision include variable manufacturing costs as well as

Avoidable fixed costs.

In a make-versus-buy decision, the relevant costs include variable manufacturing costs as well as

Avoidable fixed costs.

Which of the following types of performance measures integrates financial performance, internal operations, learning and growth, and customer satisfaction?

Balanced scorecard.

Certain payroll transactions were posted to the payroll file but were not uploaded correctly to the general ledger file on the main server. The best control to detect this type of error would be

Balancing totals of critical fields.

A hospital has observed an increase in the number of cases of a disease and has asked an analyst to collect data on the cases over the last 3 years. The analyst noted that the disease appeared 3 years ago during the second quarter of the year. Since then, the third and fourth quarters of each year showed significant spikes in the number of cases when compared to the first two quarters. What is the best way to present these findings?

Bar graph, showing the number of cases in each quarter for the last 3 years.

Which of the following computerized control procedures is most effective in ensuring that files of data uploaded from personal computers to a server are complete and that no additional data are added?

Batch control totals, including control totals and hash totals.

An entity doing business on the Internet most likely could use any of the following methods to prevent unauthorized intruders from accessing proprietary information except

Batch processing.

Total quality management (TQM) in a manufacturing environment follows a series of steps in its implementation. Which of the following is the correct order of the steps?

Begin with external customer requirements. identify customer-supplier relationships and requirements, and establish requirements for external suppliers.

The management of a company would do which of the following to compare and contrast its financial information to published information reflecting optimal amounts?

Benchmark.

A manufacturer that wants to improve its staging process compares its procedures against the check-in process for a major airline. Which of the following tools is the manufacturer using?

Benchmarking.

What is the process by which products and services of a business entity are measured and evaluated relative to the best possible levels of performance?

Benchmarking.

Which of the following methods involves comparing a company's internal processes that need to be improved to those of external companies identified as being best in class?

Benchmarking.

All of the following are correct statements regarding big data except

Big data includes information collected from social media, data from Internet-enabled devices, machine data, video, and voice recordings. The information collected is converted from high-density data into low-density data.

All of the following are correct statements regarding big data except

Big data is an evolving term that describes any voluminous amount of structured data that has the potential to be mined for information.

Which of the following is a correct statement regarding big data?

Big data is only as valuable as the business outcomes it makes possible.

A company uses big data analytics in marketing. Which of the following is a limitation of using big data?

Big data often cannot explain why customers behave in certain ways.

Which of the following IT controls would a company appropriately use to mitigate the risk of unauthorized access to its payroll data?

Biometric devices.

Which one of the following statements concerning cash flow determination for capital budgeting purposes is notcorrect?

Book depreciation is relevant because it affects net income.

The following information is available on Tree Co.'s two product lines: (use table) Assume that Tree Co. has the ability to discontinue both product lines and rent the factory space previously used for the production of Leaves and Bark. The factory space for Leaves can be rented out for $25,000 a year, and the factory space for Bark can be rented for $27,000 a year. Which product lines should Tree Co. discontinue and rent out instead?

Both Leaves and Bark should be discontinued and rented out.

For tax purposes, which of the following is a true statement comparing an operating lease and a finance lease?

Both leases ignore the purchase price of the leased asset.

What is a major disadvantage to using a private key to encrypt data?

Both sender and receiver must have the private key before this encryption method will work.

Lake Co. has just increased its direct labor wage rates. All other budgeted costs and revenues were unchanged. How did this increase affect Lake's budgeted breakeven point and budgeted margin of safety?

Budgeted Breakeven Point/Budgeted Margin of Safety Increase/Decrease

The internal rate of return for a project can be determined

By finding the discount rate that yields a net present value of zero for the project.

The following data pertains to Blue Co.: (use table) A customer of Blue is going to spend a total of $40,000 on one product only. Which of the following products would Blue prefer to sell to the customer?

C.

If the fixed costs attendant to a product increase while variable costs and sales price remain constant, what will happen to contribution margin (CM) and breakeven point (BEP)?

CM/BEP Unchanged/Increase

Which of the following statements is correct regarding financial decision making?

Capital budgeting is based on the predictions of an uncertain future.

What is a challenge that the long-term aspect of capital budgeting presents to an accountant?

Capital projects affect multiple accounting periods.

Fact Pattern: Edith Carolina, president of the Deed Corporation, requires a minimum return on investment of 8% for any project to be undertaken by her company. The company is decentralized, and leaves investment decisions up to the discretion of the division managers as long as the 8% return is expected to be realized. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past 3 years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics that is expected to have a return on investment of 12%. If the Deed Corporation evaluates managerial performance using residual income based on the corporate minimum required rate of return, what will be the preference for taking on the proposed cosmetics line by Edith Carolina and Michael Sanders?

Carolina/Sanders Accept/Accept

Fact Pattern: Edith Carolina, president of the Deed Corporation, requires a minimum return on investment of 8% for any project to be undertaken by her company. The company is decentralized, and leaves investment decisions up to the discretion of the division managers as long as the 8% return is expected to be realized. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past 3 years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics that is expected to have a return on investment of 12%. If the Deed Corporation evaluates managerial performance using return on investment, what will be the preference for taking on the proposed cosmetics line by Edith Carolina and Michael Sanders?

Carolina/Sanders Accept/Reject

Buff Co. is considering replacing an old machine with a new machine. Which of the following items is economically relevant to Buff's decision? (Ignore income tax considerations.)

Carrying Amount of Old Machine/Disposal Value of New Machine No/Yes

The capital budgeting technique known as internal rate of return uses

Cash Flow over Entire Life of Project/Time Value of Money Yes/Yes

The capital budgeting technique known as net present value uses

Cash Flow over Life of Project/Time Value of Money Yes/Yes

Net present value as used in investment decision-making is stated in terms of which of the following options?

Cash flow.

A limitation of using the discounted payback method to evaluate a project is that it ignores which of the following?

Cash flows after the payback period.

Managers are most likely to accept allocations of common costs based on

Cause and effect.

A customer intended to order 100 units of product Z96014 but incorrectly ordered nonexistent product Z96015. Which of the following controls most likely would detect this error?

Check digital verification.

A customer notified a company that the customer's account did not reflect the most recent monthly payment. The company investigated the issue and determined that a clerk had mistakenly applied the customer's payments to a different customer's account. Which of the following controls would help to prevent such an error?

Closed-loop verification.

Which product line contributed the greatest percentage of revenue in 2019? (use picture)

Clothing.

The balanced scorecard provides an action plan for achieving competitive success by focusing management attention on critical success factors. Which one of the following is not one of the perspectives on the business into which critical success factors are commonly grouped in the balanced scorecard?

Competitor business strategies.

Under a job-order system of cost accounting, the dollar amount of the general ledger entry involved in the transfer of inventory from work-in-process to finished goods is the sum of the costs charged to all jobs

Completed during the period.

An employee in the receiving department keyed in a shipment from a remote terminal and inadvertently omitted the purchase order number. The best systems control to detect this error is a

Completeness check.

Which of the following characteristics distinguishes computer processing from manual processing?

Computer processing virtually eliminates the occurrence of computational error normally associated with manual processing.

Which of the following is typical for a firm implementing a system of total quality management (TQM)?

Conducting a quality audit.

Which of the following is not required when ISO 9000 standards are adopted?

Consistent high quality products.

Which of the following is not a criterion the Assurance Services Executive Committee (ASEC) identifies for defining a set of data and evaluating its integrity?

Consistent over time.

Which of the following is a core principle of total quality management (TQM)?

Continuous improvement as a never-ending process.

Some data processing controls relate to all computer processing activities (general controls) and some relate to specific tasks (application controls). General controls include

Controls for documenting and approving programs and changes to the programs.

Which of the following statements most accurately describes the impact that automation has on the controls normally present in a manual system?

Controls must be more explicit in a computer-based system because many processing points that present opportunities for human judgement in a manual system are eliminated.

Which of the following is a true statement regarding security over an entity's IT?

Controls should exist to ensure that users have access to and can update only the data elements that they have been authorized to access.

A company began issuing handheld devices to key executives. Each of the following factors is a reason for requiring changes to the security policy except

Convenience of the device.

In process 2, material G is added when a batch is 60% complete. Ending work-in-process units, which are 50% complete, would be included in the computation of equivalent units for

Conversion Costs/Material G Yes/No

Useless information, or noise, is a limitation of big data that

Corrupts the results.

Which of the following types of responsibility centers include controllable revenues in their performance reports?

Cost Centers/Investment Centers/Profit Centers No/Yes/Yes

What is the normal effect on the numbers of cost pools and cost assignment bases when an activity-based cost (ABC) system replaces a traditional cost system?

Cost Pools/Cost Assignment Bases Increase/Increase

The least complex segment or area of responsibility for which costs are allocated is a(n)

Cost center.

In a highly decentralized organization, the best option for measuring the performance of manufacturing subunits is the establishment of

Cost centers.

All of the following are likely to be used as a cost allocation base in activity-based costing except the

Cost of materials used to manufacture the product.

A company discovered incidents of unauthorized access to its internal system. Which of the following actions or practices is involved in implementation phase 5 of COBIT 2019?

Creating a list of authorized employees who should be assigned usernames and passwords.

In the computation of manufacturing cost per equivalent unit, the weighted-average method of process costing considers

Current costs plus cost of beginning work-in-process inventory.

Benchmarking compares the current performance of operations to which of the following factors related to competing organizations?

Current performance measures.

A direct labor overtime premium should be charged to a specific job when the overtime is caused by the

Customer's requirement for early completion of the job.

Which of the following balanced scorecard perspectives examines a company's success in targeted market segments?

Customer.

Which of the following cybersecurity framework implementation steps and COBIT 2019 implementation phases are paired correctly?

Cybersecurity framework steps/COBIT 2019 phases Conduct a Risk Assessment;Create a Target Profile/ Where do we want to be?

On a balanced scorecard, which is more of an internal process measure than an external-based measure?

Cycle time.

Rank the products in ascending order of direct labor costs. (use picture)

D, E, B, C, A.

Generally, greater values are represented by (use picture)

Darker colors.

Which of the following provides a valid example of data categorization under data taxonomy and data classification?

Data Taxonomy/Data Classification Financial/Internal

Qualitative and quantitative methodologies and procedures used to retrieve data from data sources is the definition of

Data analytics.

Flushing out useless information is a step in

Data cleaning.

Which of the following is a true statement about data democratization?

Data democratization aims at building a single source of reference for data searching.

The Department of Transportation collects and combines acoustic, image, and other sensor data to better monitor the real-time traffic of a city. This is an example of

Data fusion.

Data normalization focuses on conserving

Data integrity.

Which of the following issues would be of most concern to an auditor relating to an organization's information security policy?

Data integrity.

To ensure data quality, the IT department of a company establishes a master program to build standards for data quality. These standards are maintained and improved iteratively with inputs from personnel from different levels within the company. This process is an example of

Data management.

A study finds a strong correlation between sales of beer and diapers. This is an example of

Data mining.

Which of the following best describes a characteristic of big data?

Data of untapped markets is often not collected.

Which of the following is a true statement regarding data owners and data stewards?

Data owners make decisions about the data, and data stewards ensure the data are used and adopted property.

To manage its transactional data, Fort Company established the data stewardship structure in its data management program. Which of the following roles is responsible for authorizing access to transactional data?

Data steward.

Which of the following best describes semi-structured data?

Data that are not highly organized but still have some identifying information.

Which of the following is a true statement regarding data visualization?

Data visualization can take various forms.

The following information is available on Tackler Co.'s two product lines: (use table) Assuming Tackler discontinues the tables line and does not replace it, the company's operating income will

Decrease by $6,000.

Which of the following events would decrease the internal rate of return of a proposed asset purchase?

Decrease tax credits on the asset.

The most likely strategy to reduce the breakeven point would be to

Decrease the fixed costs and increase the contribution margin.

If a firm is considering the use of learning curve analysis in the determination of labor cost standards for a new product, it should be advised that this technique ordinarily is most relevant to situations in which the production time per unit decreases as additional units are produced and the unit cost

Decreases.

If a control total were to be computed on each of the following data items, which would best be identified as a hash total for a payroll computer application?

Department numbers.

The calculation of depreciation is used in the determination of the net present value of an investment for which of the following reasons?

Depreciation increases cash flow by reducing income taxes.

Rockford Manufacturing Corporation uses a responsibility accounting system in its operations. Which one of the following items is least likely to appear in a performance report for a manager of one of Rockford's assembly lines?

Depreciation on the manufacturing facility.

When considering a special order that will enable a company to make use of currently idle capacity, which of the following costs is irrelevant?

Depreciation.

Under which category of data analysis should "anomaly detection" be classified?

Descriptive analysis.

Which of the following data analytics methods should an auditor use to report on actual results?

Descriptive analysis.

Total quality management (TQM) in a manufacturing environment is best exemplified by

Designing the product to minimize defects.

Residual income is a better measure for performance evaluation of an investment center manager than return on investment because

Desirable investment decisions will not be neglected by high return divisions.

The purpose of check digit verification of an account number on an update transaction is to

Detect a transposition of an account number entered into the system.

A retail store uses batch processing to process sales transactions. The store has batch control total and other control checks embedded in the information processing system of the sales subsystem. While comparing reports, an employee notices that information sent to the subsystem was not fully processed. Which of the following types of controls is being exercised by the employee?

Detective.

Review of the audit log is an example of which type of security control?

Detective.

What is gap analysis in TQM?

Determining what is necessary to bring the practices of the organization closer to the quality leaders in its industry.

The essence of responsibility accounting is

Developing performance reports emphasizing costs and revenues that managers can control.

Fishbone diagrams are most often used in

Diagnostic analysis.

Under what data analytics method would dashboards and score cards be used?

Diagnostic.

Which of the following is an encryption feature that can be used to authenticate the originator of a document and ensure that the message is intact and has not been tampered with?

Digital signatures.

Which criterion for allocation of common costs most likely promotes acceptance of the allocation?

Direct cause-and-effect relationship.

One approach to measuring divisional performance is return on investment. Return on investment is expressed as operating income

Divide by average total assets.

What is the formula for calculating the profitability index of a project?

Divide the present value of the annual after-tax cash flows by the original cash invested in the project.

Performance results for four geographic divisions of a manufacturing company are shown below. (use table) The division with the best performance is

Division B.

Which one of the following statements about the payback method of investment analysis is correct? The payback method

Does not consider the time value of money.

Which statement best describes the emphasis of total quality management (TQM)?

Doing each job right the first time.

On a balanced scorecard, which of the following is not a customer satisfaction measure?

Economic value added.

Which of the following terms refers to a performance measurement that is calculated as an investment center's after-tax operating income minus the product of its total assets multiplied by the company's weighted-average cost of capital (WACC)?

Economic value added.

Which of the following methods is best suited for evaluating the performance of a firm's capital in any given year?

Economic value-added.

Which of the following terms represents the residual income that remains after the cost of all capital, including equity capital, has been deducted?

Economic value-added.

Which of the following is considered an application input control?

Edit check.

Which of the following is a characteristic of total quality management (TQM)?

Education and self-improvement.

A manufacturing company has several product lines. Traditionally, it has allocated manufacturing overhead costs between product lines based on total machine hours for each product line. Under a new activity-based costing system, which of the following overhead costs would be most likely to have a new cost driver assigned to it?

Employee benefits expense.

A client who recently installed a new accounts payable system assigned employees a user identification code (UIC) and a separate password. Each UIC is a person's name, and the individual's password is the same as the UIC. Users are not required to change their passwords at initial log-in, nor do passwords ever expire. Which of the following statements does not reflect a limitation of the client's computer-access control?

Employees are not required to take regular vacations.

Which of the following is the most effective user account management control in preventing the unauthorized use of a computer system?

Employees are required to renew their accounts semiannually.

Which of the following is a true conclusion based on the visualization? (use picture)

Employees with a college degree account for the majority of Level II employees.

Which of the following statements is true concerning the security of messages in an electronic data interchange (EDI) system?

Encryption performed by physically secure hardware devices is more secure than encryption performed by software.

A client communicates sensitive data across the Internet. Which of the following controls will be most effective to prevent the use of the information if it were intercepted by an unauthorized party?

Encryption.

During the process of electronically transmitting data, which of the following IT controls would provide the most assurance that unauthorized disclosure of sensitive information would be prevented?

Encryption.

The significance of hardware controls is that they

Ensure the proper execution of machine instructions.

Which of the following statements is inconsistent with the key principles of the COBIT 5 framework?

Enterprise governance and management are treated as the same activity.

Which of the following quality costs are nonconformance costs?

Environmental costs.

If a manufacturing company uses responsibility centers, which one of the following items is least likely to appear in a performance report for a manager of an assembly line?

Equipment depreciation.

Each of the following would help prevent incorrect postings to the general ledger in a computerized accounting system, except

Establishing a unique transaction number for each general ledger posting.

Business analytics can be used by management to

Evaluate opportunities for enhancement or advancement.

Which of the following is a key area in the governance objectives under COBIT?

Evaluate, direct, and monitor.

The net present value of an investment project represents the

Excess of the discounted cash inflows over the discounted cash outflows.

Which cost of quality is the most expensive?

External failure cost.

The four categories of costs associated with product quality costs are

External failure, internal failure, prevention, and appraisal.

The units transferred in from the first department to the second department should be included in the computation of the equivalent units for the second department under which of the following methods of process costing?

FIFO/Weighted-Average Yes/Yes

In a traditional job-order cost system, the issuance of indirect materials to a production department increases

Factory overhead control.

Able Co. uses an online sales order processing system to process its sales transactions. Able's sales data are electronically sorted and subjected to edit checks. A direct output of the edit checks most likely would be a

File of all rejected sales transactions.

Financial statements and their notes are examples of

Financial Statements/Notes to Financial Statements Structured data/Unstructured data

Which of the following risks can be minimized by requiring all employees accessing the information system to use passwords?

Firewall vulnerability.

Which of the following is a network security system that is used to control network traffic and to set up a boundary that prevents traffic from one segment from crossing over to another?

Firewall.

Which of the following is an electronic device that separates or isolates a network segment from the main network while maintaining the connection between networks?

Firewall.

An automobile parts manufacturer has received complaints about declining quality from customers. After a quick review, management realizes the problem has no single source. To perform a thorough process of problem identification, the most appropriate tool is a(n)

Fishbone diagram.

At the breakeven point, the contribution margin equals total

Fixed costs.

The accounting rate of return

Focuses on income as opposed to cash flows.

Which of the following is a key to successful total quality management (TQM)?

Focusing intensely on the customer.

The two broad groupings of information systems control activities are general controls and application controls. General controls include controls

For developing, modifying, and maintaining computer programs.

Managerial performance can be measured in many different ways, including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is that

Goal congruence is more likely to be promoted by using residual income.

Information for the month of January concerning Department A, the first stage of Ogden Corporation's production cycle, is as follows: (use table) Materials are added at the beginning of the process. The ending work-in-process is 50% complete as to conversion costs. How would the total costs accounted for be distributed, using the weighted-average method?

Goods Completed/Ending Work-In-Process $79,200/$6,800

Which of the following is a false statement about the COBIT 2019 framework?

Governance and management activities and structures can be combined to support a holistic approach.

Jago Co. has two products that use the same manufacturing facilities and cannot be subcontracted. Each product has sufficient orders to utilize the entire manufacturing capacity. For short-run profit maximization, Jago should manufacture the product with the

Greater contribution margin per hour of manufacturing capacity.

Fact Pattern: The management and employees of We Move You, a large household goods moving company, decided to adopt total quality management (TQM) and continuous improvement (CI). They believed that, if their company became nationally known as adhering to TQM and CI, one result would be an increase in the company's profits and market share. The primary reason that We Move You adopted TQM was to achieve

Greater customer satisfaction.

A project should be accepted if the present value of cash flows from the project is

Greater than the initial investment.

The net present value of a proposed investment is negative; therefore, the discount rate used must be

Greater than the project's internal rate of return.

Which of the following ratios would be used to evaluate a company's profitability?

Gross margin ratio.

Parity checks and echo checks are examples of

Hardware controls.

To identify costs that relate to a specific product, an allocation base should be chosen that

Has a cause-and-effect relationship.

In an automated payroll processing environment, a department manager substituted the time card for a terminated employee with a time card for a fictitious employee. The fictitious employee had the same pay rate and hours worked as the terminated employee. The best control to detect this action using employee identification numbers is a

Hash total.

Cost allocation is the process of assigning indirect costs to a cost object. The indirect costs are grouped in cost pools and then allocated by a common allocation base to the cost object. The base that is employed to allocate a homogeneous cost pool should

Have a cause-and-effect relationship with the cost items in the cost pool.

The type of visualization displayed is a (use picture)

Heat map.

Match the following purposes with the elements of data visualization.

Help convey how data are measured and presented/Provide additional information for understanding the visualization Axes/Legend(s)

A company, which has many branch stores, has decided to benchmark one of its stores for the purpose of analyzing the accuracy and reliability of branch store financial reporting. Which one of the following is the most likely measure to be included in a financial benchmark?

High amount of credit loss write-offs.

A company uses its company-wide cost of capital to evaluate new capital investments. What is the implication of this policy when the company has multiple operating divisions, each having unique risk attributes and capital costs?

High-risk deviations will over-invest in new projects and low risk divisions will under-invest in new projects.

Which of the following is irrelevant in projecting the cash flows of the final year of a capital project?

Historical cost of equipment disposed of in the project's first year.

Nonfinancial performance measures are important to engineering and operations managers in assessing the quality levels of their products. Which of the following indicators can be used to measure product quality? I. Returns and allowances II. Number and types of customer complaints III. Production cycle time

I and II only.

Given demand in excess of capacity, no spoilage or waste, and full use of a constant number of assembly hours, the number of components needed for an assembly operation with an 80% learning curve should I. Increase for successive periods. II. Decrease per unit of output.

I only.

In a quality control program, which of the following is(are) categorized as internal failure costs? I. Rework II. Responding to customer complaints III. Statistical quality control procedures

I only.

To ensure privacy in a public-key encryption system, knowledge of which of the following keys is required to decode the received message? I. Private II. Public

I only.

General controls include I. Physical controls. II. Access controls. III. Hardware controls. IV. Environmental controls. V. Logical controls.

I, II, III, IV, and V.

In calculating the breakeven point for a multiproduct company, which of the following assumptions are commonly made when variable costing is used? I. Sales volume equals production volume. II. Variable costs are constant per unit. III. A given sales mix is maintained for all volume changes.

I, II, and III.

Which measures would be useful in evaluating the performance of a manufacturing system? I. Throughput time II. Total setup time for machines/total production time III. Number of rework units/total number of units completed

I, II, and III.

Which of the following are key technologies of big data? I. In-memory analytics II. Data mining III. Text mining

I, II, and III.

Which of the following risks are greater in computerized systems than in manual systems? I. Erroneous data conversion II. Erroneous source document preparation III. Repetition of errors IV. Concentration of data

I, III, and IV.

Which of the following characteristics represent an advantage of the internal rate of return technique over the accounting rate of return technique in evaluating a project? I. Recognition of the project's salvage value II. Emphasis on cash flows III. Recognition of the time value of money

II and III.

Rework costs should be regarded as a cost of quality in a manufacturing company's quality control program when they are I. Caused by the customer II. Caused by internal failure

II only.

Which of the following is not a shortcoming of the internal rate of return (IRR) method?

IRR is easier to visualize and interpret than net present value (NPV).

Spoofing is one type of malicious online activity. Spoofing is

Identity misrepresentation in cyberspace.

A company that produces 10,000 units has fixed costs of $300,000, variable costs of $50 per unit, and a sales price of $85 per unit. After learning that its variable costs will increase by 20%, the company is considering an increase in production to 12,000 units. Which of the following statements is correct regarding the company's next steps?

If production remains at 10,000 units, profits will decrease by $100,000.

The rankings of two mutually exclusive investments determined using the internal rate of return (IRR) method and the net present value (NPV) method may be different in which of the following situations?

If the two projects have unequal lives and the size of the investment for each project is different.

A weakness of the internal rate of return (IRR) approach for determining the acceptability of investments is that it

Implicitly assumes that the firm is able to reinvest project cash flows at the project's internal rate of return.

The basic objective of the residual income approach to performance measurement and evaluation is to have a division maximize its

Income in excess of a desired minimum return.

Fact Pattern: Leland Manufacturing uses 10 units of Part Number KJ37 each month in the production of radar equipment. The unit cost to manufacture 1 unit of KJ37 is presented below. (use table) Assume Leland Manufacturing is able to rent all idle capacity for $25,000 per month. If Leland decides to purchase the 10 units from Scott Supply, Leland's monthly cost for KJ37 would

Increase $23,000.

Fact Pattern: Richardson Motors uses 10 units of Part No. T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented as follows: (use table) Assume Richardson Motors is able to rent all idle capacity for $50,000 per month. If Richardson decides to purchase the 10 units from Simpson Castings, Richardson's monthly cost for T305 would

Increase $46,000.

A company is considering outsourcing one of the component parts for its product. The company currently makes 10,000 parts per month. Current costs are as follows: (use table) The company decides to purchase the part for $8 per unit from another supplier and rents its idle capacity for $5,000/month. How will the company's monthly costs change?

Increase $5,000.

Fact Pattern: Richardson Motors uses 10 units of Part No. T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented as follows: (use table) If Richardson Motors purchases the ten T305 units from Simpson Castings, the capacity Richardson used to manufacture these parts would be idle. Should Richardson decide to purchase the parts from Simpson, the out-of-pocket cost per unit of T305 would

Increase $9,600.

The breakeven point in units increases when unit costs

Increase and sales price remains unchanged.

Fact Pattern: Leland Manufacturing uses 10 units of Part Number KJ37 each month in the production of radar equipment. The unit cost to manufacture 1 unit of KJ37 is presented below. (use table) If Leland purchases the KJ37 units from Scott, the capacity Leland used to manufacture these parts would be idle. Should Leland decide to purchase the parts from Scott, the unit cost of KJ37 would

Increase by $4,800.

The NPV of a project has been calculated to be $215,000. Which one of the following changes in assumptions would decrease the NPV?

Increase the discount rate.

A company currently manufactures all component parts used in the manufacture of various hand tools. A handle is used in three different tools. The unit cost budget for 20,000 handles is (use table) A parts manufacturer has offered to supply 20,000 handles to the company for $1.25 each, delivered. If the company currently has idle capacity that cannot be used, accepting the offer will

Increase the handle unit cost by $.15.

Purchased direct materials are added in the second department of a three-department process. This addition does not increase the number of units produced in the second department and will

Increase total unit cost.

The use of message encryption software

Increases system overhead.

A firm earning a profit can increase its return on investment by

Increasing sales revenues and operating expenses by the same percentage.

The use of an accelerated method instead of the straight-line method of depreciation in computing the net present value of a project has the effect of

Increasing the present value of the depreciation tax shield.

What approach is used to implement the cybersecurity framework in the context of COBIT 2019?

Incremental approach.

Which of the following control activities should be taken to reduce the risk of incorrect processing in a newly installed computerized accounting system?

Independently verify the transactions.

Common costs are

Indirect costs.

Which of the following statements is true concerning the COBIT 5 framework?

Information and organizational structures are among the enablers identified in COBIT 5

Innovations in IT increase the importance of risk management because

Information system security is continually subject to new threats.

Which of the following best describes unstructured data?

Information that is not organized in pre-defined manner (e.g., text heavy facts, dates, numbers, and images).

Which of the following categories of enablers (or components) is classified as resources under COBIT?

Information.

Which of the following is one of the four perspectives of a balanced scorecard?

Innovation.

If income tax considerations are ignored, how is depreciation handled by the following capital budgeting techniques?

Internal Rate of Return/Accounting Rate of Return/Payback Excluded/Included/Excluded

Polo Co. requires higher rates of return for projects with a life span greater than 5 years. Projects extending beyond 5 years must earn a higher specified rate of return. Which of the following capital budgeting techniques can readily accommodate this requirement?

Internal Rate of Return/Net Present Value Yes/Yes

The cost of scrap, rework, and tooling changes in a product quality cost system are categorized as a(n)

Internal failure cost.

The technique that incorporates the time value of money by determining the compound interest rate of an investment such that the present value of the after-tax cash inflows over the life of the investment is equal to the initial investment is called the

Internal rate of return method.

If the present value of expected cash inflows from a project equals the present value of expected cash outflows, the discount rate is the

Internal rate of return.

Which of the following decision-making models equates the initial investment with the present value of the future cash inflows?

Internal rate of return.

Which of the following metrics equates the present value of a project's expected cash inflows to the present value of the project's expected costs?

Internal rate of return.

The following methods are used to evaluate capital investment projects: Internal rate of return Average rate of return Payback Net present value Which one of the following correctly identifies the methods that utilize discounted cash-flow (DCF) techniques?

Internal rate of return/Average rate of return/Payback/Net present value Yes/No/No/Yes

Decentralized firms can delegate authority and yet retain control and monitor managers' performance by structuring the organization into responsibility centers. Which one of the following organizational segments is most like an independent business?

Investment center.

The total quality management process identifies each of the following as a cost of quality, except

Investment costs.

A company's approach to an insourcing vs. outsourcing decision

Involves an analysis of avoidable costs.

The profitability index (present value index)

Is the ratio of the discounted net cash flows to initial investment.

Which of the following is an advantage of net present value modeling?

It accounts for compounding of returns.

Which of the following is a correct statement regarding in-memory analytics?

It analyzes data from system memory instead of hard drives.

Which of the following is true about activity-based costing?

It can be used with either process or job costing.

Which of the following statements is true regarding the payback method?

It does not consider the time value of money.

To evaluate its performance, the Blankie Co. is comparing its costs of quality from one year to the next. The relevant costs are as follows: (use table) Which of the following conclusions can Blankie draw about its quality program?

It has been a success, because conformance costs increased by $25,000 while nonconformance costs decreased by $40,000.

Which of the following is a disadvantage of using a process costing system versus job-order costing?

It involves the calculation of stage of completion of goods-in-process and the use of equivalent units.

Which of the following is a correct statement regarding Hadoop?

It is open source software framework that stores large amounts of data and runs applications on clusters of commodity hardware.

Which of the following is most likely a disadvantage for an entity that keeps data files prepared by personal computers rather than manually prepared files?

It is usually easier for unauthorized persons to access and alter the files.

Which of the following is a limitation of the profitability index?

It requires detailed long-term forecasts of the project's cash flows.

Costs are accumulated by a responsibility center for control purposes when using

Job-Order Costing/Process Costing Yes/Yes

The completion of goods is recorded as a decrease in work-in-process control when using

Job-Order Costing/Process Costing Yes/Yes

Activity-based costing (ABC) is a term used to describe allocation methods that are based on cause and effect (i.e., charging costs to whatever causes them). Why is this more important to project managers using job-order costing than those using process costing?

Job-order costing is used if the products or services sold are different enough to justify the additional cost involved in tracing costs to their cause. Charging all products or services a flat amount per unit shifts costs from those that cause them to those that do not.

Which costing method is a custom home builder most likely to use?

Job-order costing.

System flexibility, elimination of waste, and elimination of disruptions are characteristic goals of which business process?

Lean operation.

Under the balanced scorecard concept, employee satisfaction and retention are measures used under which of the following perspectives?

Learning and growth.

A multiperiod project has a positive net present value. Which of the following statements is correct regarding its required rate of return?

Less than the project's internal rate of return.

Assuming no beginning work-in-process (BWIP) inventory, and that the ending work-in-process (EWIP) inventory is 50% complete as to conversion costs, the number of equivalent units as to conversion costs would be

Less than the units placed in process.

Which of the following controls is a processing control designed to ensure the reliability and accuracy of data processing?

Limit Test/Validity Check Test Yes/Yes

An increase in the periodic depreciation tax shield is the result of a(n) <List A> in the estimated useful life of a fixed asset and a(n) <List B> in the tax rate. (Assume straight-line depreciation of the fixed asset.)

List A/List B Decrease/Increase

A(n) <List A> lease transfers ownership of the leased asset to the lessee. A(n) <List B> lease does not.

List A/List B Finance/Operating

Which of the following is not an example of text mining?

Loading stock prices of a company into a database.

General controls in an information system include each of the following except

Logic tests.

Fact Pattern: Regis Company manufactures plugs used in its manufacturing cycle at a cost of $36 per unit that includes $8 of fixed overhead. Regis needs 30,000 of these plugs annually, and Orlan Company has offered to sell these units to Regis at $33 per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead applied will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If Regis Company purchases the plugs but does not rent the unused facility, the company would

Lose $3.00 per unit.

Which of the following qualitative factors favors the buy choice in an insourcing vs. outsourcing decision?

Maintaining a long-run relationship with suppliers is desirable.

Each of the following will affect a company's return on investment, except

Maintaining the company's cost of capital at current levels.

A manufacturer produces hacksaw blades. Recently, the manufacturer has decided to enhance its product line and offer band blades. Two alternatives are being analyzed: purchase band blades overseas or produce them in-house. If the band blades are made in-house, the manufacturer will not be able to produce hacksaw blades, forgoing a $30,000 profit contribution. (use table) Calculate the incremental cost of making and purchasing band blades, respectively.

Making/Purchasing $190,000/$170,000

A company has received an offer from a supplier to produce units that the company currently produces and sells. The unit price quoted by the supplier is higher than the company's variable production cost per unit but lower than the price at which the company can market the units. Under which circumstance would the company's profits increase by purchasing units from the supplier?

Market demand for the product exceeds the company's capacity.

Under a total quality management (TQM) approach,

Measurement occurs throughout the process, and errors are caught and corrected at the source.

In analyzing its current-year operating performance, Merle Co. determined that its return on assets improved significantly from the prior year. Total assets and operating expenses were stable and overall debt decreased, while net earnings increased due to greater sales volume. An additional 50,000 shares of common stock were authorized during the year. Which of the following statements best explains Merle's improved return on assets in the current year?

Merle made more efficient use of its assets.

Which of the following is a key difference in controls when changing from a manual system to a computer system?

Methodologies for implementing controls change.

In an activity-based costing system, what should be used to assign a department's manufacturing overhead costs to products produced in varying lot sizes?

Multiple cause-and-effect relationships.

Using the balanced scorecard approach, an organization evaluates managerial performance based on

Multiple financial and nonfinancial measures.

A characteristic of the payback method (before taxes) is that it

Neglects total project profitability.

Which of the following capital budgeting techniques implicitly assumes that the cash flows are reinvested at the company's minimum required rate of return?

Net Present Value/Internal Rate of Return Yes/No

A company has unlimited capital funds to invest. The decision rule for the company to follow in order to maximize shareholders' wealth is to invest in all projects having a(n)

Net present value greater than zero.

Future, Inc., is in the enviable situation of having unlimited capital funds. The best decision rule, in an economic sense, for it to follow would be to invest in all projects in which the

Net present value is greater than zero.

If the internal rate of return (IRR) of an investment is greater than its cost of capital, the

Net present value is greater than zero.

The discount rate (hurdle rate of return) must be determined in advance for the

Net present value method.

The method that recognizes the time value of money by discounting the after-tax cash flows over the life of a project, using the company's minimum desired rate of return, is the

Net present value method.

If an investment project has a profitability index of 1.15, the

Net present value of the project is positive.

The discount rate is determined in advance for which of the following capital budgeting techniques?

Net present value.

The profitability index is a variation on which of the following capital budgeting models?

Net present value.

Weighted-average and first-in, first-out (FIFO) equivalent units would be the same in a period when which of the following occurs?

No beginning inventory exists.

One of the items served at a restaurant is pizza that is prepared and baked in the restaurant's kitchen. Each pizza requires $3 of ingredients, $2 of labor to prepare the ingredients, $1 of labor to bake the pizza, and $4 of allocated occupancy costs. The restaurant's supplier has offered to sell the restaurant pre-made pizzas, ready for baking, for $8 each. If the restaurant accepts the supplier's offer, the existing pizza preparation space will be converted into two additional dining tables that will increase profits by $42,000 per year by selling drinks, side dishes, and desserts. The restaurant expects to sell 15,000 pizzas annually with or without the additional dining tables. Should the restaurant accept the supplier's offer?

No, because the restaurant's profits will decrease by $3,000.

A student aircraft mechanic scored 90% on her midterm exam on electronic systems, but her employer wanted a perfect score on every exam, stating, "Nothing less than perfection works in aviation." Because the mechanic is required to make a test flight in every airplane she repairs, how would the 10% error rate be classified in a cost of quality analysis?

Nonconformance - internal.

A company with three products classifies its costs as belonging to five functions: design, production, marketing, distribution, and customer services. For pricing purposes, all company costs are assigned to the three products. The direct costs of each of the five functions are traced directly to the three products. The indirect costs of each of the five business functions are collected into five separate cost pools and then assigned to the three products using appropriate allocation bases. The allocation base that will most likely be the best for allocating the indirect costs of the distribution function is

Number of shipments.

In developing a predetermined factory overhead application rate for use in a process costing system, which of the following could be used in the numerator and denominator?

Numerator/Denominator Estimated factory overhead/Estimated machine hours

Which of the following passwords would be most difficult to crack?

O?Ca!FISi

Information discovery is included in what stage of data analytics application?

Obtain relevant data.

In responsibility accounting, a center's performance is measured by controllable costs. Controllable costs are best described as including

Only those costs that the manager can influence in the current time period.

In computing the current period's manufacturing cost per equivalent unit of production (EUP), the FIFO method of process costing considers current period costs

Only.

Egan Co. owns land that could be developed in the future. Egan estimates it can sell the land for $1,200,000, net of all selling costs. If it is not sold, Egan will continue with its plans to develop the land. As Egan evaluates its options for development or sale of the property, what type of cost would the potential selling price represent in Egan's decision?

Opportunity.

An individual received an inheritance from a grandparent's estate. The money can be invested, and the individual can either (a) receive a $20,000 lump-sum amount at the end of 10 years or (b) receive $1,400 at the end of each year for the next 10 years. The individual wants a rate of return of 12% and uses the following information: (use table) What is the preferred investment option and what is its net present value?

Option b; $7,910

In equipment replacement decisions, which one of the following does not affect the decision-making process?

Original fair value of the old equipment.

An investor is comparing the options to lease or directly purchase an asset (without borrowing). Using the symbols below, which expression indicates that an investor is indifferent between the two options?P=purchase price L=present value of the lease payments T=tax rate D=depreciation tax shield S=salvage value I=present value of interest

P = L + (I x T)

The director of sales asks for a count of customers grouped in descending numerical rank by (1) the number of orders they place during a single year and (2) the dollar amounts of the average order. The visual format of these two pieces of information is most likely to be a

Pareto diagram.

Matthews Corp. has changed from a system of recording time worked on clock cards to a computerized payroll system in which employees record time in and out with magnetic cards. The computer system automatically updates all payroll records. Because of this change,

Part of the audit trail is altered.

A client installed the sophisticated controls using the biometric attributes of employees to authenticate user access to the computer system. This technology most likely replaced which of the following controls?

Passwords.

Which of the following is a critical success factor in data mining a large data store?

Pattern recognition.

The length of time required to recover the initial cash outlay of a capital project is determined by using the

Payback method.

The technique that measures the number of years required for the after-tax cash flows to recover the initial investment in a project is called the

Payback method.

A client wants to know how many years it will take before the accumulated cash flows from an investment exceed the initial investment, without taking the time value of money into account. Which of the following financial models should be used?

Payback period.

Which of the following performance measures is nonfinancial?

Percentage of defective products.

Which of the following is a false conclusion regarding Product A? (use picture)

Period costs for Product A are the highest among the products.

Which of the following classifications of security controls includes smoke detectors, generators, security guards, and ID badges?

Physical.

The relevance of a particular cost to a decision is determined by

Potential effect on the decision.

In using cost-volume-profit analysis to calculate expected unit sales, which of the following should be added to fixed costs in the numerator?

Predicted operating income.

An organization's primary focus is on what it needs to do in order to accomplish its predicted future. Which of the following data analytics methods would best address this concern?

Prescriptive analysis.

The type of data analytics that is most likely to yield the most impact for an organization but is also the most complex is called

Prescriptive analysis.

Which element of visualization determines how to look for information?

Presentation.

Fact Pattern: The management and employees of We Move You, a large household goods moving company, decided to adopt total quality management (TQM) and continuous improvement (CI). They believed that, if their company became nationally known as adhering to TQM and CI, one result would be an increase in the company's profits and market share. Quality is achieved more economically if We Move You focuses on

Prevention costs.

An organization relied heavily on e-commerce for its transactions. Evidence of the organization's security awareness manual would be an example of which of the following types of controls?

Preventive.

Which of the following can be discovered using a data-mining process?

Previously unknown information.

A project's net present value, ignoring income tax considerations, is normally affected by the

Proceeds from the sale of the asset to be replaced.

The internal audit activity has undertaken an audit of the shipping and receiving department of a department store chain. The best engagement tool for this purpose most likely is

Process benchmarking.

Which costing method is an automobile manufacturer most likely to use?

Process costing to a split-off point and job-order costing afterwards.

Which costing method is a gravel pit operation most likely to use?

Process costing.

Which costing method is most likely to distort costs?

Process costing.

Data fusion is best described as the

Process of integrating data and knowledge.

A company plans to sell 12,000 units of product XT and 8,000 units of product RP. The company has a capacity of 12,000 productive machine hours. The unit cost structure and machine hours required for each product are as follows: (use table) The company can purchase 12,000 units of XT at $60 and/or 8,000 units of RP at $45. Based on the above, which one of the following actions should be recommended to the company's management?

Produce XT internally and purchase RP.

Boyle, Inc., makes two products, X and Y, that require allocation of indirect manufacturing costs. The following data was compiled by the accountant before making any allocations: (use table) The total cost of setting up manufacturing processes and equipment is $400,000. The company uses a job-costing system with a single indirect cost rate. Under this system, allocated costs were $300,000 and $100,000 for X and Y, respectively. If an activity-based system is used, what would be the allocated costs for each product?

Product X/Product Y $100,000/$300,000

A basic assumption of activity-based costing (ABC) is that

Products or services require the performance of activities, and activities consume resources.

Controllable revenue would be included in a performance report for a

Profit Center/Cost Center Yes/No

The technique that reflects the time value of money and is calculated by dividing the present value of the future net after-tax cash inflows that have been discounted at the desired cost of capital by the initial cash outlay for the investment is called the

Profitability index method.

The technique used to evaluate all possible capital projects of different dollar amounts and then rank them according to their desirability is the

Profitability index method.

Capital budgeting methods are often divided into two classifications: project screening and project ranking. Which one of the following is considered a ranking method rather than a screening method?

Profitability index.

The recommended technique for evaluating projects when capital is rationed and there are no mutually exclusive projects from which to choose is to rank the projects by

Profitability index.

Which of the following should be used if capital rationing needs to be considered when comparing capital projects?

Profitability index.

Fact Pattern: Maloney Company uses a 12% hurdle rate for all capital expenditures and has done the following analysis for four projects for the upcoming year: (use chart) Which project(s) should Maloney undertake during the upcoming year if it has only $6,000,000 of funds available?

Project 1.

A company is considering two projects, which have the following details: (look at table) Which project would provide the larger after-tax cash inflow?

Project B because after-tax cash inflow equals $635.

Bennet, Inc., uses the net present value method to evaluate capital projects. Bennet's required rate of return is 10%. Bennet is considering two mutually exclusive projects for its manufacturing business. Both projects require an initial outlay of $120,000 and are expected to have a useful life of four years. The projected after-tax cash flows associated with these projects are as follows: (use table) Assuming adequate funds are available, which of the following project options would you recommend that Bennet's management undertake?

Project X only.

Fact Pattern: Maloney Company uses a 12% hurdle rate for all capital expenditures and has done the following analysis for four projects for the upcoming year: (use chart) Which projects should Maloney undertake during the upcoming year if it has only $12,000,000 of investment funds available?

Projects 1 and 2.

A company requires a rate of return of at least 15% for four potential projects. The company has a maximum of $1,000,000 each year for investment. Uninvested amounts can be rolled forward indefinitely, and no other capital is available. The company's policy is not to invest in projects with a net present value (NPV) lower than $40,000. The following are details about the four projects: (use chart) If the uninvested amount at the beginning of the current year is $200,000, which projects are acceptable?

Projects 1, 2, and 3 only.

Fact Pattern: Maloney Company uses a 12% hurdle rate for all capital expenditures and has done the following analysis for four projects for the upcoming year: (use chart) Which project(s) should Maloney undertake during the upcoming year assuming it has no budget restrictions?

Projects 1, 2, and 4.

A company requires a rate of return of 15% for four potential projects. The company has a maximum of $1,000,000 each year for investment. No other capital is available. The following are details about the four projects: (use chart) Which projects should be accepted?

Projects 2, 3, and 4.

A company has a required rate of return of 15% for five potential projects. The company has a maximum of $500,000 available for investment and cannot raise any capital. Details about the five projects are as follows: (use chart) The company should choose which of the following projects?

Projects 2, 4, and 5 only.

In considering the payback period for three projects, Fly Corp. gathered the following data about cash flows: (use chart) Which of the projects will achieve payback within 3 years?

Projects B and C.

Wood, Inc., is considering four independent investment proposals. Wood has $3 million available for investment during the present period. The investment outlay for each project and its projected net present value (NPV) is presented below. (use table) Which of the following project options should be recommended to Wood's management?

Projects I, II, and III only.

Brown and Company uses the internal rate of return (IRR) method to evaluate capital projects. Brown is considering four independent projects with the following IRRs: (use table) Brown's cost of capital is 13%. Which one of the following project options should Brown accept based on IRR?

Projects III and IV only.

Which of the following is the best policy for the protection of a company's vital information resources from computer viruses?

Prudent management procedures instituted in conjunction with technological safeguards.

Management at MDK Corp. is deciding whether to replace a delivery van. A new delivery van costing $40,000 can be purchased to replace the existing delivery van, which cost the company $30,000 and has accumulated depreciation of $20,000. An employee of MDK has offered $12,000 for the old delivery van. Ignoring income taxes, which of the following correctly states relevant costs when making the decision on whether to replace the delivery vehicle?

Purchase price of new van, disposal price of old van.

Depreciation tax shields are considered by the lessee (buyer) in capital budgeting applications involving

Purchases with or without borrowing and finance leases.

Fact Pattern: Stewart Industries has been producing two bearings, components B12 and B18, for use in production. (use table) Stewart will maximize its net benefits by

Purchasing 4,000 units of B18 and manufacturing the remaining bearings.