Question 1. Jasmine Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Jasmine Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in March? A. 10,000 B. 9,900 C. 13,000 D. 10,100
2. Jasmine Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Jasmine Company's ending finished goods inventory policy is 10% of the following month's sales. Jasmine plans to sell 16,000 units in May. What is budgeted ending inventory for March? A. 1,030 B. 1,300 C. 1,330 D. 1,650
3. Albertville Inc produces leather handbags. The production budget for the next four months is:
July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Albertville Inc's leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in July? A. 2,300 square meters B. 2,550 square meters C. 2,700 square meters D. 3,575 square meters
4. The purpose of the cash budget is to A. be used as a basis for the operating budgets. B. provide external users with an estimate of future cash flows. C. help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs. D. summarize the cash flowing into and out of the business during the past period.
5. Brimson has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Brimson's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $5 per unit produced. What is budgeted manufacturing overhead for August? A. $50,000 B. $47,000 C. $33,000 D. $32,000
6. The difference between the actual cost driver amount and the standard cost driver amount, multiplied by the standard variable overhead rate is the A. variable overhead rate variance. B. variable overhead efficiency variance. C. variable overhead volume variance. D. over - or underapplied variance.
7. Albertville applies overhead based on direct labor hours. The variable overhead standard is 2 hours at $12 per hour. During July, Albertville spent $116,700 for variable overhead. 8,890 labor hours were used to produce 4,700 units. How much is variable overhead on the flexible budget? A. $56,400 B. $106,680 C. $112,800 D. $116,700
8. The fixed overhead volume variance is the difference between A. Actual fixed overhead and budgeted fixed overhead. B. Actual fixed overhead and applied fixed overhead. C. Applied fixed overhead and budgeted fixed overhead. D. Actual fixed overhead and the standard fixed overhead rate times actual cost driver.
9. The difference between the actual volume and the budgeted volume, multiplied by the fixed overhead rate based on budgeted volume, is the A. fixed overhead spending variance. B. fixed overhead price variance. C. fixed overhead efficiency variance. D. fixed overhead volume variance.
10. Albertville has budgeted fixed overhead of $67,500 based on budgeted production of 4,500 units. During July, 4,700 units were produced and $71,400 was spent on fixed overhead. What is the budgeted fixed overhead rate? A. $14.36 B. $15.00 C. $15.19 D. $15.89
11. In a standard cost system, the initial debit to an inventory account is based on A. standard cost rather than actual cost. B. actual cost rather than standard cost. C. actual cost less the standard cost. D. standard cost less the actual cost.
12. In what type of organization is decision-making authority spread throughout the organization? A. Centralized organization B. Decentralized organization C. Participative organization D. Top-down organization
13. Which of the following is NOT an advantage of decentralization? A. Allows top managers to focus on strategic issues B. Potential duplication of resources C. Allows for development of managerial expertise D. Managers can react quickly to local information
14. The responsibility center in which the manager has responsibility and authority over revenues, costs and assets is A. a cost center. B. an investment center.C. a profit center. D. a revenue center.
15. Return on investment can be calculated as A. ROI = sales revenue/average invested assets B. ROI = operating income/sales revenue C. ROI = operating income/average invested assets D. ROI = average invested assets/sales revenue
16. Which of the following balanced scorecard perspectives measures how an organization satisfies its stakeholders? A. Customer B. Internal business processes C. Learning and growth D. Financial
17. Which of the following is not something that should be compiled for each dimension of the balanced scorecard? A. Performance measures B. Targets C. Strategic vision D. Specific objectives
18. Dickinson, Inc uses a balanced scorecard. One of the measures on the scorecard is the percentage of revenue from repeat sales. Which balanced scorecard perspective would this measure most likely fit into? A. Customer perspective B. Learning and growth perspective C. Internal business perspective D. Financial perspective
19. Which of the following is not a method used to determine transfer prices? A. Market price method B. Cost-based method C. Negotiation D. Balanced scorecard method
20. The transfer pricing method that uses either the variable cost or the full cost as the basis for setting the transfer price is the A. market price method. B. cost-based method. C. negotiation. D. balanced scorecard method
21. A company's ability to generate income is referred to as: A. Liquidity. B. Solvency. C. Effectiveness. D. Profitability.
22. A company's ability to use current assets to repay liabilities as they come due is referred to as: A. Liquidity. B. Solvency. C. Effectiveness. D. Profitability.
23. Which of the following is not a profitability ratio? A. Times interest earned. B. Net profit margin. C. Return on assets. D. Earnings per share.
24. Morgan Company has the following account balances What is Morgan's debt to assets? A. 1.56 B. 0.64 C. 1.2 D. 0.36
25. All of the following are common benchmarks used for comparison when interpreting a company's ratios except: A. Prior-year results. B. Results from other industries. C. Competitor results. D. Industry average information.
26. Company A and B are competitors in the same industry. Company A has cost of sales of $405,000 and average inventory of $37,000, while Company B has cost of sales of $233,000 and average inventory of $39,000. Which of the following is true? A. Company B appears to be to be managing inventory better than Company A. B. Company A appears to be managing inventory better than Company B. C. Company B has a higher inventory turnover ratio. D. These two companies both appear to managing inventory equally well.
27. Persius Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $100,000. The equipment will have an initial cost of $400,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $75,000, what is the annual net cash flow? A. $25,000 B. $35,000 C. $165,000 D. $175,000
28. Which of the following methods is calculated as annual net income as a percentage of the original investment in assets? A. Accounting rate of return B. Payback period C. Net present value D. Internal rate of return
29. Summit Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net income after tax of $100,000. The equipment will have an initial cost of $400,000 and have a 7 year life. If the salvage value of the equipment is estimated to be $75,000, what is the accounting rate of return? A. 14.28% B. 25.00%C. 42.11% D. 147.37%
30. If cash flows are not equal each year, the payback period A. cannot be calculated. B. is calculated by dividing the initial investment by the average cash flows. C. is calculated by subtracting each year's cash flows from the initial investment until zero is reached. D. is calculated by dividing the total years in the project by two.
31. Peet's Corp is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in cash flow of $100,000. The equipment will have an initial cost of $400,000 and have a 5 year life. If the salvage value of the equipment is estimated to be $75,000, what is the payback period? Ignore income taxes. A. 3.25 years B. 4.00 years C. 4.75 years D. 7.00 years
32. The discount rate that would return a net present value equal to zero is the A. Annual rate of return B. Accounting rate of return C. Hurdle rate D. Internal rate of return
33. Minne Corp is considering the purchase of a new piece of equipment. When discounted at a hurdle rate of 8%, the project has a net present value of $24,580. When discounted at a hurdle rate of 10%, the project has a net present value of ($28,940). The internal rate of return of the project is A. zero. B. between zero and 8%. C. between 8% and 10%. D. greater than 10%.
34. Jonas Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $120,000 over its estimated life, while the total cost to buy the equipment will be $75,000 over its estimated life. At Jonas's required rate of return, the net present value of the cost of leasing the equipment is $73,700 and the net present value of the cost of buying the equipment is $68,000. Based on financial factors, Jonas should A. lease the equipment, saving $45,000 over buying. B. buy the equipment, saving $45,000 over leasing. C. lease the equipment, saving $5,700 over buying. D. buy the equipment, saving $5,700 over leasing.
35. Carchill Corp is trying to decide whether to lease or purchase a piece of equipment. The total cost lease the equipment will be $150,000 over its estimated life, while the total cost to buy the equipment will be $120,000 over its estimated life. At Carchill's required rate of return, the net present value of the cost of leasing the equipment is $108,000 and the net present value of the cost of buying the equipment is $119,000. Based on financial factors, Carchill should A. lease the equipment, saving $30,000 over buying. B. buy the equipment, saving $30,000 over leasing. C. lease the equipment, saving $11,000 over buying. D. buy the equipment, saving $11,000 over leasing.