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DeVry Chicago ACCT 434 Week 6 Customer Profitability Capital Budgeting




Question;Grading SummaryThese are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. Date Taken: Time Spent: Points Received: 30 / 30 (100%)Question Type: # Of Questions: # Correct:Multiple Choice 10 10Grade Details 1. Question: (TCO 9) To guide cost allocation decisions, the benefits-received criterion Student Answer: may use an allocation base of division revenues to allocate advertising costs. is the primarily used criterion in activity-based costing. results in subsidizing products that are not profitable. generally uses the cost driver as the cost allocation base. 2. Question: (TCO 9) A challenge to using cost-benefit criteria for allocating costs is that Student Answer: the costs of designing and implementing complex cost allocations are not readily apparent. the benefits of making better-informed pricing decisions are difficult to measure. cost systems are being simplified and fewer multiple cost-allocation bases are being used. the costs of collecting and processing information keep spiraling upward. 3. Question: (TCO 9) The MOST likely reason for NOT allocating corporate costs to divisions include that Student Answer: divisions receive no benefits from corporate costs. these costs are not controllable by division managers. these costs are incurred to support division activities, not corporate activities. division resources are already used to attain corporate goals. 4. Question: (TCO 9) Identifying homogeneous cost pools Student Answer: requires judgment and should be reevaluated on a regular basis. should include the input of management. should include a cost-benefit analysis. All of the above 5. Question: (TCO 9) The Hassan Corporation has an electric mixer division and an electric lamp division. Of a $20,000,000 bond issuance, the electric mixer division used $14,000,000 and the electric lamp division used $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. What amount of interest costs should be allocated to the electric lamp division? Student Answer: $450,000 $6,000,000 $4,200,000 $1,050,000 6. Question: (TCO 10) All of the following are methods that aid management in analyzing the expected results of capital budgeting decisions EXCEPT the Student Answer: payback method. future-value cash-flow method. discounted cash-flow method. accrual accounting rate-of-return method. 7. Question: (TCO 10) Assume your goal in life is to retire with $1.5 million. How much would you need to save at the end of each year if interest rates average 5% and you have a 25-year work life? Student Answer: $33,754 $24,555 $27,798 $31,429 8. Question: (TCO 10) The definition of an annuity is Student Answer: similar to the definition of a life insurance policy. a series of equal cash flows at intervals. an investment product whose funds are invested in the stock market. Both 1 and 2 are correct. 9. Question: (TCO 10) A "what-if" technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes is called Student Answer: adjusted rate-of-return analysis. internal rate-of-return analysis. sensitivity analysis. net-present-value analysis. 10. Question: (TCO 10) Shirt Company wants to purchase a new cutting machine for its sewing plant. The investment is expected to generate annual cash inflows of $300,000. The required rate of return is 12% and the current machine is expected to last for four years. What is the maximum dollar amount Shirt Company would be willing to spend for the machine, assuming its life is also four years? Income taxes are not considered. Student Answer: $507,000 $911,100 $791,740 $720,600


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