BEC Gleim
A supply curve illustrates the relationship between Price and quantity supplied. Price and consumer tastes. Price and quantity demanded. Supply and demand.
A
Bander Co. is determining how to finance some long-term projects. Bander has decided it prefers the benefits of no fixed charges, no fixed maturity date and an increase in the credit-worthiness of the company. Which of the following would best meet Bander's financing requirements? a. Bonds. b. Common stock. c. Long-term debt. d. Short-term debt.
B
Under the two-variance method for analyzing overhead, which of the following variances consists of both variable and fixed overhead elements? Controllable Volume Variance (Budget) Variance A. Yes Yes B. Yes No C. No No D. No Yes
B
The Sarbanes-Oxley Act of 2002 imposes which of the following requirements? The board of directors must be composed entirely of independent shareholders. At least one member of the audit committee must be a former partner of the independent public accounting firm. The audit committee must be composed entirely of independent members of the board. Once the audit committee has selected the independent public accounting firm, the committee must not interfere with the firm's conduct of the financial statement audit.
C
The discount rate of the Federal Reserve System is The specified percentage of a commercial bank's deposit liabilities that must be deposited in the central bank. The rate that the central bank charges for loans granted to commercial banks. The rate that commercial banks charge for loans granted to the public. The ratio of excess reserves to legal reserves that are deposited in the central bank.
B
A company has an outstanding one-year bank loan of $500,000 at a stated interest rate of 8%. The company is required to maintain a 20% compensating balance in its checking account. The company would maintain a zero balance in this account if the requirement did not exist. What is the effective interest rate of the loan? A. 20% B. 28% C. 8% D. 10%
D
Tennis rackets and tennis balls are Substitute goods. Independent goods. Inferior goods. Complementary goods.
D
The relevance of a particular cost to a decision is determined by Riskiness of the decision. Number of decision variables. Amount of the cost. Potential effect on the decision.
D
Which of the following is necessary to be an audit committee financial expert according to the criteria specified in the Sarbanes-Oxley Act of 2002? A limited understanding of generally accepted auditing standards. Education and experience as a certified financial planner. Experience with internal accounting controls. Experience in the preparation of tax returns.
A
Which changes in costs are most conducive to switching from a traditional inventory ordering system to a just-in-time ordering system? Cost per Inventory Unit Purchase Order Carrying Costs ? A. Increasing Increasing B. Decreasing Decreasing C. Decreasing Increasing D. Increasing Decreasing
B
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 3.13 years. 8.33 years. 3.68 years. 5.21 years.
C
For purposes of allocating joint costs to joint products, the sales price at point of sale, reduced by cost to complete after split-off, is assumed to be equal to the Joint costs. Total costs. Net sales value at split-off. Sales price less a normal profit margin at point of sale.
C
Dahl Co. uses a standard costing system in connection with the manufacture of a "one size fits all" article of clothing. Each unit of finished product contains 2 yards of direct materials. However, a 20% direct materials spoilage calculated on input quantities occurs during the manufacturing process. The cost of the direct materials is $3 per yard. The standard direct materials cost per unit of finished product is $4.80 $6.00 $7.20 $7.50
D
Which of the following variances would be useful in calling attention to possible problems in the control of spending on overhead items? Variable overhead spending variance/ Fixed overhead volume variance A) No/ No B) No/Yes C) Yes/No D) Yes/Yes
D
Selected data from Sheridan Corporation's year-end financial statements are presented below. The difference between average and ending inventory is immaterial. ...... Assuming no prepaid expenses are included in current assets, Sheridan's net sales for the year were $800,000 $480,000 $1,200,000 $240,000
A
ABC Co. had debt with a market value of $1 million and an after-tax cost of financing of 8%. ABC also had equity with a market value of $2 million and a cost of equity capital of 9%. ABC's weighted-average cost of capital would be 8.0% 8.5% 8.7% 9.0%
C
When production levels are expected to increase within a relevant range, and a flexible budget is used, what effect would be anticipated with respect to each of the following costs? Fixed costs Variable costs per unit per unit a.No change Decrease b.No change No change c.Decrease No change d.Decrease Decrease
C
A company currently has 1,000 shares of common stock outstanding with zero debt. It has the choice of raising an additional $100,000 by issuing 9% long-term debt or issuing 500 shares of common stock. The company has a 40% tax rate. What level of earnings before interest and taxes (EBIT) would result in the same earnings per share (EPS) for the two financing options? An EBIT of $27,000 would result in EPS of $10.80 for both. An EBIT of $27,000 would result in EPS of $7.20 for both. An EBIT of $(18,000) would result in EPS of $(7.20) for both. An EBIT of $(10,800) would result in EPS of $(7.92) for both.
A
A company has a policy of frequently cutting prices to increase sales.Product demand is significantly elastic. What impact would this have onthe company's situation? a.Quantity increases proportionally more than the price declines. b.Quantity increases proportionally lessthan the price declines. c.Price increases proportionally lessthan the quantity increases. d.Price increases proportionally more than the quantity declines.
A
A company wants to make a change from a conventional inventory system to a just-in-time (JIT) inventory system. What are the expected effects of this change on the company's inventory carrying cost and days' sales in inventory? Inventory Days' Sales Carrying Cost in Inventory A. Increase Decrease B. Decrease Decrease C. Increase Increase D. Decrease Unaffected
A
A corporation's net income as presented on its income statement is usually More than its economic profits because opportunity costs are not considered in calculating net income. More than its economic profits because economists do not consider interest payments to be costs. Equal to its economic profits. Less than its economic profits because accountants include labor costs, while economists exclude labor costs.
A
After performing a thorough study of Michigan Company's operations, an independent consultant determined that the firm's labor standards were probably too tight. Which one of the following facts would be inconsistent with the consultant's conclusion? A. Michigan's budgeting process was well-defined and based on a bottom-up philosophy. B. Production supervisors found several significant fluctuations in manufacturing volume, with short-term increases in output being followed by rapid, sustained declines. C. Management noted that minimal incentive bonuses have been paid in recent periods. D. A review of performance reports revealed the presence of many unfavorable efficiency variances.
A
Fact Pattern: Calculation of ratios and the determination of other factors are considered important in analysis of financial statements. Prior to the independent events described below, the corporation concerned had current and quick ratios in excess of one to one and reported a net income (as opposed to a loss) for the period just ended. Income tax effects are to be ignored. The corporation had only one class of shares outstanding. The effect of recording a 2-for-1 stock split is to A Leave working capital unaffected, decrease earnings per share, and decrease book value per share. B Leave inventory turnover unaffected, decrease working capital, and decrease book value per share. C Decrease the current ratio, decrease working capital, and decrease book value per share. D Leave working capital unaffected, decrease earnings per share, and decrease the debt-to-equity ratio.
A
Given an acid test ratio of 2.0, current assets of $5,000, and inventory of $2,000, the value of current liabilities is A. $1,500 B. $2,500 C. $3,500 D. $6,000
A
Gram Co. develops computer programs to meet customers' special requirements. How should Gram categorize payments to employees who develop these programs? Direct Costs... Value-Adding Costs A. Yes Yes B. Yes No C. No No D. No Yes
A
If the coefficient of elasticity is zero, then the consumer demand for the product is said to be Perfectly inelastic. Perfectly elastic. Unit inelastic. Unit elastic.
A
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. Plus cost of beginning work-in-process (BWIP) inventory. Less cost of beginning work-in-process (BWIP) inventory. Plus cost of ending work-in-process (EWIP) inventory.
A
Mason Company's board of directors has determined 4 options to increase working capital next year. Option 1 is to increase current assets by $120 and decrease current liabilities by $50 Option 2 is to increase current assets by $180 and increase current liabilities by $30 Option 3 is to decrease current assets by $140 and increase current liabilities by $20 Option 4 is to decrease current assets by $100 and decrease current liabilities by $75 Which option should Mason choose to maximize net working capital? A. Option 1. B. Option 2. C. Option 3. D. Option 4.
A
North Bank is analyzing Belle Corp.'s financial statements for a possible extension of credit. Belle's quick ratio is significantly better than the industry average. Which one of the following factors should North consider as a possible limitation of using this ratio when evaluating Belle's creditworthiness? A. Fluctuating market prices of short-term investments may adversely affect the ratio. B. Increasing market prices for Belle's inventory may adversely affect the ratio. C. Belle may need to sell its available-for-sale investments to meet its current obligations. D. Belle may need to liquidate its inventory to meet its long-term obligations.
A
Of the following decisions, capital budgeting techniques would least likely be used in evaluating the A. Adoption of a new method of allocating nontraceable costs to product lines. B. Trade for a star quarterback by a football team. C. Acquisition of new aircraft by a cargo company. D. Design and implementation of a major advertising program.
A
The controller of Nottingham Stores has asked a staff accountant to prepare detailed reports that summarize the firm's cash flows for the upcoming accounting period and cash position at the end of the period. Accordingly, the controller has requested preparation of a cash budget, a pro-forma statement of cash flows, a detailed listing of cash collections from customers, and a detailed listing of cash payments for merchandise purchases. Which one of the following correctly identifies the first and last document to be prepared by the accountant? First Document Last Document A. Listing of cash, Pro-forma statement of cash flows collections B. Listing of cash, Cash budget collections C. Cash budget, Either the listing of cash collections or listing of cash payments, the order of which is unimportant D. Listing of cash payments, Either the pro-forma statement of payments cash flows or the cash budget, the order of which is unimportant
A
The following amounts pertain to Arp Co.'s manufacturing operations for March: ..... For the month of March, Arp's cost of goods manufactured was A $118,000 B $115,000 C $112,000 D $109,000
A
The most likely strategy to reduce the breakeven point would be to: a. Decrease the fixed costs and increase the contribution margin. b. Increase the fixed costs and decrease the contribution margin. c. Increase both the fixed costs and the contribution margin. d. Decrease both the fixed costs and the contribution margin.
A
The sale of scrap from a manufacturing process usually is recorded as a(n) Decrease in factory overhead control. Increase in factory overhead control. Decrease in finished goods control. Increase in finished goods control.
A
The standard direct material cost to produce a unit of Lem is 4 meters of material at $2.50 per meter. During May of the current year, 4,200 meters of material costing $10,080 were purchased and used to produce 1,000 units of Lem. What was the material price variance for May? a. $420 favorable. b. $480 unfavorable. c. $80 unfavorable. d. $400 favorable.
A
To determine the best cost driver of warranty costs relating to glass breakage during shipments, Wymer Co. used simple linear regression analysis to study the relationship between warranty costs and each of the following variables: type of packaging, quantity shipped, type of carrier, and distance shipped. The analysis yielded the following statistics: Independent Coefficient of Standard Error Variable Determination of Regression Type of packaging 0.60 1,524 Quantity shipped 0.48 1,875 Type of carrier 0.45 2,149 Distance shipped 0.20 4,876 Based on these analyses, the best driver of warranty costs for glass breakage is: Type of packaging. Quantity shipped. Type of carrier. Distance shipped.
A
When purchasing temporary investments, which one of the following best describes the risk associated with the ability to sell the investment in a short period of time without significant price concessions? a.Liquidity risk. b.Purchasing power risk. c.Interest rate risk. d.Financial risk.
A
Which criterion for allocation of common costs most likely promotes acceptance of the allocation? Direct cause-and-effect relationship. Benefit-received relationship. Ability-to-bear relationship. Arbitrary allocation.
A
Which of the following corporate characteristics would favor debt financing versus equity financing? A high tax rate. A high debt-to-equity ratio. Low aversion to risk. Below average stock issuing costs.
A
Which of the following costs is deducted from revenues of a manufacturing company in order to determine gross margin, but notdeducted from revenues to determine contribution margin? a. Fixed manufacturing. b. Variable manufacturing. c. Fixed selling and administrative. d. Variable selling and administrative
A
Which of the following is included in the economic order quantity formula? Inventory Carrying Cost Stockout Cost Yes No Yes Yes No Yes No No
A
Which one of the following factors might cause a firm to increase the portion of debt in its financial structure? An increase in the corporate income tax rate. Increased economic uncertainty. An increase in the federal funds rate. A decrease in the firm's cost of equity.
A
A company is evaluating its experience with five recent investments. The following data are available: Investment/Cost/Amt A/8500/8390 B/4200/4610 C/12100/12400 D/7900/8220 E/11000/11400 Rank the investments in order from highest rate of return to lowest: C, E, A, D, B. B, D, E, C, A. B, E, D, C, A. A, C, E, D, B.
B
A corporation has $50,000 in equity and a debt-to-total-assets ratio of 0.5. The firm wants to reduce this ratio to 0.2 by selling new common stock and using the proceeds to repay principal on outstanding long-term debt. What amount of additional equity financing must the corporation obtain to accomplish this objective? $20,000 $30,000 $80,000 $100,000
B
A plan that is created using budgeted revenue and costs but is based on the actual units of output is known as a Continuous budget. Flexible budget. Strategic plan. Static budget.
B
A service company's working capital at the beginning of January of the current year was $70,000. The following transactions occurred during January: Performed services on account $30,000 Purchased supplies on account 5,000 Consumed supplies 4,000 Paid utilities bill with cash 2,000 Paid short-term bank loan 6,500 Paid salaries 10,000 Accrued salaries 3,500 What is the amount of working capital at the end of January? A. $90,000 B. $80,500 C. $50,500 D. $47,500
B
According to COSO, which of the following is a compliance objective? A. To maintain adequate staffing to keep overtime expense within budget. B. To maintain a safe level of carbon dioxide emissions during production. C. To maintain material price variances within published guidelines. D. To maintain accounting principles that conform to GAAP.
B
All of the following may allow a firm to set a lower coupon rate on a bond issued at par except a Sinking fund. Call provision. Higher rating from a bond rating agency. Conversion option.
B
Based on the following data, what is the gross profit for the company? Sales $1,000,000 Net purchases of raw materials 600,000 Cost of goods manufactured 800,000 Marketing and administrative expenses 250,000 Indirect manufacturing costs 500,000 Beginning Ending Inventory Inventory Work-in-process $500,000 $400,000 Finished goods 100,000 500,000 A$200,000 B $400,000 C $600,000 D $900,000
B
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 a. Yes No b. No Yes c. No No d. Yes Yes
B
Charlie's Service Co. is an automobile service center. Charlie's had the following operating statistics for Year 6: ...... Charlie's has a Return on investment of 6.67%. Residual income of $(6,000). Return on investment of 8%. Residual income of $(10,000).
B
Clay Co. has considerable excess manufacturing capacity. A special job order's cost sheet includes the following applied manufacturing overhead costs: Fixed costs $21,000 Variable costs 33,000 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? A. $36,700 B. $40,750 C. $54,000 D. $58,050
B
Galad Corp. has current assets of $180,000 and current liabilities of $360,000. Which of the following transactions would improve Galad's current ratio? Refinancing a $60,000 long-term mortgage with a short-term note. Purchasing $100,000 of merchandise inventory with a short-term account payable. Paying $40,000 of short-term accounts payable. Collecting $20,000 of short-term accounts receivable.
B
If the present value of expected cash inflows from a project equals the present value of expected cash outflows, the discount rate is the Payback rate. Internal rate of return. Accounting rate of return. Net present value rate.
B
In Year 1, a company's cash is 15 percent of sales, accounts receivable is 10 percent of sales, inventory is 20 percent of sales, accounts payable is 30 percent of sales, and long-term debt is 5 percent of sales. The company is preparing its forecasts and anticipates that sales will increase from $50,000 in Year 1 to $55,000 in Year 2. The company uses the percentage-of-sales method. What amount would be the required net working capital in Year 2? a. $5,500 b. $8,250 c. ($2,750) d. $7,500
B
In connection with a standard cost system being developed by Flint Co., the following information is being considered with regard to standard hours allowed for output of one unit of product: Average historical performance for the past three years: 1.85 Production level to satisfy average customer demand over a seasonal time span: 1.60 Engineering estimates based on attainable performance: 1.50 Engineering estimates based on ideal performance: 1.25 To measure controllable production inefficiencies, what is the BEST basis for Flint to use in establishing standard hours allowed? a. 1.25 b. 1.50 c. 1.60 d. 1.85
B
Mat Co. estimated its materials handling costs at two activity levels as follows: Kilos Handled Cost 80,000 $160,000 60,000 132,000 What is Mat's estimated cost for handling 75,000 kilos? $150,000 $153,000 $157,500 $165,000
B
Sharif Co. has total debt of $420,000 and equity of $700,000. Sharif is seeking capital to fund an expansion. Sharif is planning to issue an additional $300,000 in common stock and is negotiating with a bank to borrow additional funds. The bank requires a debt-to-equity ratio of .75. What is the maximum additional amount Sharif will be able to borrow? $225,000 $330,000 $525,000 $750,000
B
Smart Co. uses a static budget. When actual sales are less than budget, Smart would report favorable variances on which of the following expense categories?Sales commissions Building rent A. yes yes B. yes no C. no yes D. no no
B
Three suppliers offer Ruby Co. different credit terms. Bandy Co. offers terms of 1.5/15, net 30. Carryl Co. offers terms of 1/10, net 30. Platt Co. offers terms of 2/10, net 60. Ruby Co. would have to borrow from a bank at an annual rate of 10% to take any cash discounts. Based on a 360-day year, which of the following options would be most attractive for Ruby Co.? Purchase from Platt Co., pay in 60 days, and do not borrow from the bank. Purchase from Bandy Co., pay in 15 days, and borrow from the bank. Purchase from Carryl Co., pay in 10 days, and borrow from the bank. Purchase from Bandy Co., pay in 30 days, and do not borrow from the bank.
B
Which of the following is an advantage of net present value modeling? a. It uses the accounting rate of return. b. It accounts for compounding of returns. c. It uses accrual basis, not cash basis accounting for a project. d. It is measured in time, not dollars.
B
Which of the following listings correctly describes the order in which the four types of budgets must be prepared? a. Sales, direct materials purchases, production, cash disbursements. b. Sales, production, direct materials purchases, cash disbursements. c. Cash disbursements, direct materials purchases, production, sales. d. Production, direct materials purchases, sales, cash disbursements.
B
A company produces widgets with budgeted standard direct materials of 2 pounds per widget at $5 per pound. Standard direct labor was budgeted at 0.5 hour per widget at $15 per hour. The actual usage in the current year was 25,000 pounds and 3,000 hours to produce 10,000 widgets. What was the direct labor efficiency variance? $25,000 favorable. $25,000 unfavorable. $30,000 favorable. $30,000 unfavorable.
C
A consultant recommends that a company hold funds for the following two reasons: Reason #1: Cash needs can fluctuate substantially throughout the year. Reason #2: Opportunities for buying at a discount may appear during the year. The cash balances used to address the reasons given above are correctly classified as Reason #1 Reason #2 Speculative Speculative balances balances Speculative Precautionary balances balances Precautionary Speculative balances balances Precautionary Precautionary balances balances
C
A processing department produces joint products Ajac and Bjac, each of which incurs separable production costs after split-off. Information concerning a batch produced at a $60,000 joint cost before split-off follows: Ajac $ 8,000 $ 80,000 Bjac 22,000 40,000 $30,000 $120,000 What is the joint cost assigned to Ajac if costs are assigned using the relative net realizable value? $16,000 $40,000 $48,000 $52,000
C
An economy is at the peak of the business cycle. Which of the following policy packages is the most effective way to dampen the economy and prevent inflation? Increase government spending, reduce taxes, increase money supply, and reduce interest rates. Reduce government spending, increase taxes, increase money supply, and increase interest rates. Reduce government spending, increase taxes, reduce money supply, and increase interest rates. Reduce government spending, reduce taxes, reduce money supply, and reduce interest rates.
C
As required by GAAP, the fixed portion of the semivariable cost of electricity for a manufacturing plant is a Period Cost Product Cost A. Yes No B. Yes Yes C. No Yes D. No No
C
Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales. There are 150,000 finished units in inventory on June 30. Each unit of finished product requires 4 pounds of direct materials at a cost of $1.20 per pound. There are 800,000 pounds of direct materials in inventory on June 30. Assume Berol Company plans to produce 600,000 units of finished product in the 3-month period ending September 30 and to have direct materials inventory on hand at the end of the 3-month period equal to 25% of the use in that period. The estimated cost of direct materials purchases for the 3-month period ending September 30 is: $2,200,000 $2,400,000 $2,640,000 $2,880,000
C
By-products may have which of the following characteristics? Zero Costs Additional Costs Beyond Split-off Beyond Split-off A. No No B. No Yes C. Yes Yes D. Yes No
C
DJ Co. has a job-order cost system. The following debits (credits) appeared in the work-in-process account for the month of March: March 1, balance $ 12,000 March 31, direct materials 40,000 March 31, direct labor 30,000 March 31, manufacturing overhead applied 27,000 March 31, to finished goods (100,000) 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? $2,250 $2,500 $4,250 $4,725
C
Determining the appropriate level of working capital for a firm requires A. Changing the capital structure and dividend policy of the firm. B. Maintaining short-term debt at the lowest possible level because it is generally more expensive than long-term debt. C. Offsetting the benefit of current assets and current liabilities against the probability of technical insolvency. D. Maintaining a high proportion of liquid assets to total assets in order to maximize the return on total investments.
C
If an investment project has a profitability index of 1.15, the: A. Project's internal rate of return exceeds its net present value. B. Project's cost of capital is greater than its internal rate of return. C. Net present value of the project is positive. D. Project's internal rate of return is 15%.
C
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. a. III only. b. I, II, and III. c. I only. d. II only.
C
In inventory management, the safety stock will tend to increase if the A. Carrying cost increases. B. Cost of running out of stock decreases. C. Variability of the lead time increases. D. Variability of the usage rate decreases.
C
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: ...... 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? $3,214 $5,357 $5,625 $7,500
C
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? $20,000 $30,000 $40,000 $60,000
C
On June 30, 2012, a company is preparing the cash budget for the third quarter. The collection pattern for credit sales has been 60% in the month of sale, 30% in the first month after sale, and the rest in the second month after sale. Uncollectible accounts are negligible. There are cash sales each month equal to 25% of total sales. The total sales for the quarter are estimated as follows: July, $30,000; August, $15,000; September, $35,000. Accounts receivable on June 30, 2012, were $10,000. What amount wouldbe the projected cash collections for September? $21,375 $28,500 $30,125 $37,250
C
One hundred pounds of raw material W is processed into 60 pounds of X and 40 pounds of Y. Joint costs are $135. X is sold for $2.50 per pound, and Y can be sold for $3.00 per pound or processed further into 30 pounds of Z (10 pounds are lost in the second process) at an additional cost of $60. Each pound of Z can then be sold for $6.00. What is the effect on profits of further processing product Y into product Z? A. $60 increase. B. $30 increase. C. No change. D. $60 decrease.
C
Para Co. is reviewing the following data relating to an energy saving investment proposal: Cost $50,000 Residual value at the end of 5 years 10,000 Present value of an annuity of 1 at 12% for 5 years 3.60 Present value of 1 due in 5 years at 12% 0.57 What would be the annual savings needed to make the investment realize a 12% yield? a. $8,189 b. $11,111 c. $12,306 d. $13,889
C
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: Contribution margin per student $ 1,800 Variable expenses per student 1,000 Total fixed expenses 360,000 Based on these estimates, what is the approximate breakeven point in number of students? a. 129 b. 450 c. 200 d. 360
C
The optimal capitalization for an organization usually can be determined by the Maximum degree of financial leverage (DFL). Maximum degree of total leverage (DTL). Lowest total weighted-average cost of capital (WACC). Intersection of the marginal cost of capital and the marginal efficiency of investment.
C
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 A. Raising the hurdle rate necessary to justify the project. B. Lowering the net present value of the project. C. Increasing the present value of the depreciation tax shield. D. Increasing the cash outflows at the initial point of the project.
C
This year, Nelson Industries increased earnings before interest and taxes (EBIT) by 17%. During the same period, earnings per share increased by 42%. The degree of financial leverage that existed during the year is 1.70 4.20 2.47 5.90
C
Using a 360-day year, what is the opportunity cost to a buyer of not accepting terms of 3/10, net 45? A. 55.67% B. 22.27% C. 31.81% D. 101.73%
C
Which of the following is a disadvantage of using a process costing system versus job-order costing? It is difficult to determine cost of goods sold when partial shipments are made before completion. It is difficult to ensure that materials and labor are accurately charged to each specific job. It involves the calculation of stage of completion of goods-in-process and the use of equivalent units. It is expensive to use as a good deal of clerical work is required.
C
Which one of the following statements is correct regarding the effect preferred stock has on a company? A. The firm's after-tax profits are shared equally by common and preferred shareholders. B. Control of the firm is now shared by the common and preferred shareholders, with preferred shareholders having greater control. C. Preferred shareholders' claims take precedence over the claims of common shareholders in the event of liquidation. D. Nonpayment of preferred dividends places the firm in default, as does nonpayment of interest on debt.
C
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? A.21,000 B. 21,600 C. 21,960 D. 22,600
D
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? Equivalent Units for Weighted Average Compared with FIFO January February A. Same Same B. Greater number Greater number C. Greater number Same D. Same Greater number
D
A typical firm doing business nationally cannot expect to accelerate its cash inflow by A. Establishing multiple collection centers throughout the country. B. Employing a lockbox arrangement. C. Initiating controls to accelerate the deposit and collection of large checks. D. Maintaining compensating balances rather than paying cash for bank services.
D
All of the following are considered operating budgets except the Sales budget. Materials budget. Production budget. Capital budget.
D
As a consequence of finding a more dependable supplier, Dee Co. reduced its safety stock of raw materials by 80%. What is the effect of this safety stock reduction on Dee's economic order quantity? 80% decrease. 64% decrease. 20% increase. No effect.
D
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? a. $910,000 b. $1,300,000 c. $546,000 d. $364,000
D
Determining the appropriate level of working capital for a firm requires Evaluating the risks associated with various levels of fixed assets and the types of debt used to finance these assets. Changing the capital structure and dividend policy for the firm. Maintaining short-term debt at the lowest possible level because it is ordinarily more expensive than long-term debt. Offsetting the profitability of current assets and current liabilities against the probability of technical insolvency.
D
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: ..... Over- or underapplied manufacturing overhead should be closed to the cost of goods sold account at February 28 in the amount of $700 overapplied. $1,000 overapplied. $1,700 underapplied. $2,000 underapplied.
D
Farrow Co. is applying for a loan in which the bank requires a quick ratio of at least 1. Farrow's quick ratio is 0.8. Which of the following actions would increase Farrow's quick ratio? a. Purchasing inventory through the issuance of a long-term note. b. Implementing stronger procedures to collect accounts receivable at a faster rate. c. Paying an existing account payable. d. Selling obsolete inventory at a loss.
D
Financial information about a company is as follows: Receivables $ 4,000,000 Inventory 2,600,000 Payables 3,700,000 Sales 50,000,000 Cogs 45,000,000 Assuming a 365-day year, what is the number of days in the company's cash conversion cycle? a. 21.2 days. b. 18.2 days. c. 23.5 days. d. 20.3 days.
D
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 a. Exclude Include b. Include Include c. Exclude Exclude d. Include Exclude
D
How are the following used in the calculation of the internal rate of return of a proposed project? Ignore income tax considerations. Residual Sales Depreciation Value of Project Expense A. Exclude Include B. Include Include C. Exclude Exclude D. Include Exclude
D
If a $1,000 bond sells for $1,125, which of the followingstatements are correct? I.The market rate of interest is greater than the couponrate on the bond. II.The coupon rate on the bond is greater than themarket rate of interest. III. The coupon rate and the market rate are equal. IV.The bond sells at a premium.V.The bond sells at a discount. I and III. I and IV. II and III. II and IV.
D
If the average household income increases and there is relatively little change in the price of a normal good, then the A. Supply curve will shift to the left. B. Quantity demanded will move farther down the demand curve. C. Demand will shift to the left. D. Demand curve will shift to the right.
D
In a comparison of Year 2 with Year 1, Baliol Co.'s inventory turnover ratio increased substantially although sales and inventory amounts were essentially unchanged. Which of the following statements explains the increased inventory turnover ratio? Cost of goods sold decreased. Accounts receivable turnover increased. Total asset turnover increased. Gross profit percentage decreased.
D
In order to analyze sales as a function of advertising expenses, the sales manager of Smith Company developed a simple regression model. The model included the following equation, which was based on 32 monthly observations of sales and advertising expenses with a related coefficient of determination of .90. Sales = $10,000 + (2.5 × Advertising expenses) If Smith Company's advertising expenses in 1 month amounted to $1,000, the related point estimate of sales would be $2,500 $11,250 $12,250 $12,500
D
In the past, four direct labor hours were required to produce each unit of product Y. Material costs were $200 per unit, the direct labor rate was $20 per hour, and factory overhead was 3 times direct labor cost. In budgeting for next year, management is planning to outsource some manufacturing activities and to further automate others. Management estimates these plans will reduce labor hours by 25%, increase the factory overhead rate to 3.6 times direct labor costs, and increase material costs by $30 per unit. Management plans to manufacture 10,000 units. What amount should management budget for cost of goods manufactured? A. $5,200,000 B. $4,820,000 C. $6,500,000 D. $5,060,000
D
Inventoriable costs A. Include only the prime costs of manufacturing a product. B. Include only the conversion costs of manufacturing a product. C. Are expensed when products become part of finished goods inventory. D. Are regarded as assets before the products are sold.
D
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? a. $25,000 b. $35,000 c. $15,000 d. $10,000
D
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: Material handling $120,000 Quality inspection 200,000 The plant currently applies overhead based on direct labor hours. The estimated direct labor hours are 80,000 per year. The plant manager is asked to submit a bid and assembles the following data on a proposed job: Direct materials $4,000 Direct labor (2,000 hours) 6,000 What is the estimated product cost on the proposed job? $8,000 $10,000 $14,000 $18,000
D
The calculation of depreciation is used in the determination of the net present value of an investment for which of the following reasons? The decline in the value of the investment should be reflected in the determination of net present value. Depreciation adjusts the book value of the investment. Depreciation represents cash outflow that must be added back to net income. Depreciation increases cash flow by reducing income taxes.
D
The following computations were made from Bruckner Co.'s current-year books: Number of days' sales in inventory 55 Number of days' sales in trade accounts receivable 26 What was the number of days in Bruckner's current-year operating cycle? 26 40.5 55 81
D
The profitability index (present value index) Represents the ratio of the discounted net cash outflows to cash inflows. Is the relationship between the net discounted cash inflows less the discounted cash outflows divided by the discounted cash outflows. Is calculated by dividing the discounted profits by the cash outflows. Is the ratio of the discounted net cash flows to initial investment.
D
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 A. Accounting rate of return. B. Payback. C. Internal rate of return. D. Profitability index.
D
The regression analysis results for ABC Co. is shown as y = 90x + 45. The standard error (Sb) is 30 and coefficient of determination (r2) is 0.81. The budget calls for production of 100 units. What is ABC's estimate of total costs? $3,090 $4,590 $9,030 $9,045
D
There are various budgets within the master budget cycle. One of these budgets is the production budget. Which one of the following best describes the production budget? A. It summarizes all discretionary costs. B. It includes required direct labor hours. C. It includes required material purchases. D. It is calculated from the desired ending inventory and the sales forecast.
D
What costs are treated as product costs under variable costing? A. Only direct costs. B. Only variable production costs. C. All variable costs. D. All variable and fixed manufacturing costs.
D
What is the required unit production level given the following factors? Projected sales 1,000 Beginning inventory 85 Desired ending inventory 100 Prior year beginning inventory 200 A. 1,215 B. 1,100 C. 915 D. 1,015
D
Which of the following is one of the four perspectives of a balanced scorecard? a. Just in time. b. Benchmarking. c. Activity-based costing. d. Innovation.
D
Which of the following may provide a leading indicator of a future increase in gross domestic product? a. A reduction in the money supply b. A decrease in the issuance of building permits c. An increase in the timeliness of delivery by vendors. d. An increase in the average hours worked per week of production workers
D
Which one of the following best identifies a profit center? A. The Information Technology Department of a large consumer products company. B. A large toy company. C. The Production Operations Department of a small job-order machine shop company. D. A new car sales division for a large local auto agency.
D
Which one of the following is a spontaneous source of financing? Notes payable. Long-term debt. Prepaid interest. Trade credit.
D