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Cannon Cannery, Inc. estimated its factory overhead at $510,000 for 2007, based on a normal capacity of 100,000

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Question;1.;Cannon Cannery, Inc. estimated its factory overhead at;$510,000 for 2007, based on a normal capacity of 100,000 direct manufacturing;labor hours. Standard direct manufacturing labor hours for the year totaled;105,000, while the factory overhead control account at the end of the year;showed a balance of $540,000. How much was the underapplied factory overhead;for 2007?;a. $0;b. $ 4,500;c. $27,000;d. $30,000;2.;Unlike the traditional full-absorption cost system;activity-based costing (ABC) assigns;a. Costs to;individual products based only on nonfinancial variables.;b. Costs to;individual products based on various activities involved.;c. Overhead;to individual products based on some common measure of production volume.;d. Only;costs which can be directly traced to individual products;3.;Newman Products has received proposals from several banks to;establish a lockbox system to speed up receipts. Newman receives an average of;700 checks per day averaging $1,800 each, and its cost of short-term funds is;7% per year. Assuming that all proposals will produce equivalent processing;results and using a 360-day year, which one of the following proposals is;optimal for Newman?;a. A $0.50;fee per check.;b. A flat;fee of $125,000 per year.;c. A fee of;0.03% of the amount collected.;d. A;compensating balance of $1,750,000;4.;The theory underlying the cost of capital is primarily;concerned with the cost of;a. Long-term;funds and old funds.;b. Short-term;funds and new funds.;c. Long-term;funds and new funds.;d. Any;combination of old or new, short-term or long-term funds;5.;10: DQZ Telecom is considering a project for the coming year;that will cost $50,000,000. DQZ plans to use the following combination of debt;and equity to finance the investment: Issue $15,000,000 of 20-year bonds at a;price of 101, with a coupon rate of 8%, and flotation costs of 1.5% of par. The;after flotation cost yield is 8.08%. Use $35,000,000 of funds generated from;earnings. The equity market is expected to earn 12%. US Treasury bonds are;currently yielding 5%. The beta coefficient for DQZ is estimated to be.60. DQZ;is subject to an effective corporate income tax rate of 40%. Assume that the;after-tax cost of debt is 7% and the cost of equity is 12%. Determine the;weighted-average cost of capital.;a. 10.50%;b. 8.50%;c. 9.50%;d. 6.30%;6. Zero-coupon bonds;a. Sell for;a small fraction of their face value because their yield is much lower than the;market rate.;b. Increase;in value each year as they approach maturity, providing the owner with the;total payoff at maturity.;c. Are;redeemable in measures of a commodity such as barrels of oil, tons of coal, or;ounces of rare metal (e.g., silver).;d. Are;high-interest-rate, high-risk, unsecured bonds which have been used extensively;to finance leveraged buyouts.;7.;Which of the following is not a limitation on the use of ROI;as a performance measure?;a. It could;cause managers to postpone critical expenditures.;b. It could;cause managers to not accept projects that would be advantageous to the firm.;c. It could;be affected arbitrarily by allocation of indirect costs.;d. It is;unrelated to shareholder value.;8. A company has two divisions. Division A has operat?ing;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?;a. $0;b. $260;c. $640;d. $900;9. A company reports the following account balances at;year-end: Account Balance Long-term debt $200,000 Cash 50,000 Net sales 600,000;Fixed assets (net) 320,000 Tax expense 67,500 Inventory 25,000 Common Stock;100,000 Interest expense 20,000 Administrative expense 35,000 Retained earnings;150,000 Accounts payable 65,000 Accounts receivable 120,000 Cost of goods sold;400,000 Depreciation expense 10,000 Additional Information: The opening balance;of common stock was $100,000 The opening balance of retained earnings was;$82,500 The company had 10,000 common shares outstanding all year No dividends;were paid during the year At year-end, the company has a book value per share;to the nearest cent, of;a. $10.00;b. $15.00;c. $21.63;d. $25.00;10.;A company has $450,000 per year of fixed production costs;of which $150,000 are noncash outlays. The variable cost per unit is $15, and;the unit selling price is $25. The breakeven volume in sales units for this;company would be;a. 18,000;units.;b. 30,000;units.;c. 45,000;units.;d. 60,000;units.;11.;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. $4,820,000;b. $5,060,000;c. $5,200,000;d. $6,500,000;1 points;12.;Light Company has 2,000 obsolete light fixtures that are;carried in inventory at a manufacturing cost of $30,000. If the fixtures are;reworked for $10,000, they could be sold for $18,000. Alternately, the light;fixtures could be sold for $3,000 to a jobber located in a distant city. In a;decision model analyzing these alternatives, the opportunity cost would be;a. $ 3,000;b. $10,000;c. $13,000;d. $30,000;13.;Koby Co. has sales of $200,000 with variable expenses of;$150,000, fixed expenses of $60,000, and an operating loss of $10,000. By how;much would Koby have to increase its sales in order to achieve an operating;income of 10% of sales?;a. $400,000;b. $251,000;c. $231,000;d. $200,000;14.;A multiperiod project has a positive net present value.;Which of the following statements is correct regarding its required rate of;return?;a. Less than;the company's weighted-average cost of capital.;b. Less than;the project's internal rate of return.;c. Greater;than the company's weighted-average cost of capital.;d. Greater;than the project's internal rate of return.;15;If management has a variable rate short-term loan and is;concerned about the volatility of short-term interest rates, which of the following;would not be an effective hedging strategy?;a. Purchase;a short position in the Treasury bill futures market.;b. Enter;into an interest rate swap.;c. Enter;into a forward contract to sell Treasury bonds in the future.;d. Enter;into a forward contract to purchase Treasury bills in the future.;16. Which of the following describes a normal yield curve?;a. Upward;sloping.;b. Downward;sloping.;c. Flat.;d. Humped.;17.An efficient portfolio is one that;a. Has no;risk.;b. Has;measurable risk.;c. Has the;highest return.;d. One that;meets the investor's tradeoff between risk and return.;18.;In statistical analysis, a weighted-average using;probabilities as weights is the;a. Standard;deviation.;b. Expected;value.;c. Coefficient;of variation.;d. Objective;function.;19. Normal Company produced 600 units of one of its products;last year. The standard for labor hours allowed was 2 hours per unit at a;standard rate of $6 per hour. Actual hours worked amounted to 1,230 hours. The;labor rate variance was $246 unfavorable, and the labor efficiency variance was;$180 unfavorable. What was the actual labor cost for the period?;a. $7,200;b. $7,626;c. $7,380;d. $7,134;20.;Normal Company produced 600 units of one of its products;last year. The standard for labor hours allowed was 2 hours per unit at a;standard rate of $6 per hour. Actual hours worked amounted to 1,230 hours. The;labor rate variance was $246 unfavorable, and the labor efficiency variance was;$180 unfavorable. What was the actual labor cost for the period?;a. $7,200;b. $7,626;c. $7,380;d. $7,134;1 points;20.;An organization s managerial decision-making model for;capital budgeting is based on the net present value of discounted cash flows.;The same organization s managerial performance evaluation model is based on;annual divisional return on investment. Which of the following is true?;a. Divisional;managers are likely to maximize the measures in the decision-making model.;b. Divisional;managers are likely to maximize the measures in the performance evaluation;model.;c. The;manager has an incentive to accept a project with a positive net present value;that initially has a negative effect on net income.;d. The use;of models with different criteria promotes goal congruence.;1 points;21.;Which of the following items represents a business risk in;capital structure decisions?;a. Management;preferences.;b. Cash;flow.;c. Timing;of information.;d. Contractual;obligations;22.;Division Z of a company produces a component that it;currently sells to outside customers for $20 per unit. At its current level of;production, which is 60% of capacity, Division Z s fixed cost of producing this;component is $5 per unit and its variable cost is $12 per unit. Division Y of;the same company would like to purchase this component from Division Z for $10.;Division Z has enough excess capacity to fill Division Y s requirements. The;managers of both divisions are compensated based upon reported profits. Which;of the following transfer prices will maximize total company profits and be;most equitable to the managers of Division Y and Division Z?;a. $18 per;unit.;b. $12 per;unit.;c. $20 per;unit.;d. $22 per;unit.;23.;A forward contract involves;a. A;commitment today to purchase a product on a specific future date at a price;determined today.;b. A;commitment today to purchase a product only when its price increases above its;current exercise price.;c. A;commitment today to purchase a product some time during the current day at its;present price.;d. A;commitment today to purchase a product on a specific future date at a price to;be determined some time in the future.;24.;Net present value as used in investment decision-making is;stated in terms of which of the following options?;Cash;flow;Earnings;before interest, taxes, and depreciation;Earnings;before interest and taxes;Net;income;25.;The prime rate is the;Size of;the commitment fee on a commercial bank loan;Effective;cost of commercial paper;Effective;cost of a commercial bank loan;Rate;charged on business loans to borrowers with high credit ratings;26.;When compared with a debt-to-assets ratio, a debt-to-equity;ratio is;Unrelated;to the debt-to-assets ratio;About;the same as the debt-to-assets ratio;Lower;than the debt-to-assets ratio;Higher;than the debt-to-assets ratio;27.;The type of option that does not have the backing of stock;is called a(n);Unsecured;option;Naked;option;Covered;option;Does;not exist.;28.;Compared to another bond with the same risk and maturity but;without a conversion feature, a convertible bond is likely to have a;Higher;face amount;Lower;face amount;Higher;coupon rate;Lower;coupon rate;29.;Which of the following formulas should be used to calculate;the economic rate of return on common stock?;Dividends;per share divided by market price per share;Market;price per share divided by earnings per share;(Dividends;+ change in price) divided by beginning price;(Net;income ? preferred dividend) divided by common shares outstanding;30.;In practice, dividends;Fluctuate;more widely than earnings;Tend to;be a lower percentage of earnings for mature firms;Usually;exhibit greater stability than earnings;Are;usually set as a fixed percentage of earnings

 

Paper#37707 | Written in 18-Jul-2015

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