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GB519: Unit 4 Quiz




Question;1. Question;Done on a regular basis;relevant cost pricing in special order decisions can erode normal pricing;policies and lead to;Overconfidence in decision-making.;A decrease in the firm's long-term;profitability.;Goal congruence between management and sales;personnel.;A cost leadership strategy.;Maximization of the value stream.;Question 2. Question;In a sell-or-process-further;decision, joint production costs;Are irrelevant to the decision.;Should be allocated to outputs on the basis;of relative sales dollars.;Should be allocated to outputs on the basis;of relative physical units.;Cannot be allocated to products for financial;reporting purposes.;Question 3. Question;Joint (common) costs in a;joint production process are relevant for determining;Whether to produce at all.;Which products should be produced up to the;split-off point in the production process.;Which products should be produced internally;and which products should be outsourced.;The set of products that should be subjected;to additional processing.;The selling price of individual products;produced as part of the joint production process.;Question 4. Question;In deciding whether to;manufacture a part or buy it from an outside vendor, a cost that is irrelevant;to this short-run decision is;Direct labor.;Variable overhead.;Fixed overhead that will be avoided if the;part is bought from an outside vendor.;Fixed overhead that will continue even if the;part is bought from an outside vendor.;Question 5. Question;Value streams are useful in;decision-making because;They identify all value-added products and;services.;They help to highlight the improved;efficiency in the plant.;Special orders can be evaluated within the;context of the value stream.;Irrelevant costs are identified.;Lean thinking produces better decision;making.;Question 6. Question;When deciding whether to;discontinue a segment of a business, managers should focus on;The amount of operating income per unit;produced by the segment.;The amount of contribution margin per direct;labor hour in the segment.;How corporate-level administrative costs;would be redistributed if the segment were eliminated.;Equipment from the segment that could go idle;if the segment were discontinued.;The total contribution margin generated by;the segment relative to any traceable (avoidable) fixed costs associated with;the segment.;Question 7. Question;Which one of the following is;an advantage of the book (accounting) rate of return method for analyzing;capital investment proposals?;It is not affected by different accounting;methods.;It is precise and objective.;Data for calculating the return are typically;readily available.;The method explicitly adjusts for the time;value of money.;The accounting rate of return is generally;approximately equal to a project's internal rate of return (IRR).;Question 8. Question;Which of the following;characteristics is not true of the modified internal rate of return (MIRR)?;Unlike IRR, MIRR does not consider the time;value of money.;It focuses on after-tax cash flows, rather;than accounting income amounts.;It cannot be used reliably to choose between;mutually exclusive projects.;Its use may not lead to an optimum capital;budget.;Question 9. Question;Research has shown that in;framing capital investment decisions, sunk costs tend to;Have no discernible impact on decisions by;managers.;Have a slight impact on the decision-making;process.;Have an impact only when capital funds are;limited.;Escalate commitment in making capital;budgeting decisions.;Question 10. Question;Which of the following;statements regarding capital investment analysis is false?;A long-term planning horizon is assumed.;Benefits of potential investment projects are;conceptually expressed in terms of accounting income (or reduction in costs).;Project acceptance decisions are based on;models that explicitly incorporate the time value of money.;Need to incorporate income-tax effects in the;analysis, for both revenues (gains) as well as expenses (losses).;Discounted cash flow (DCF) decision models;are used by a majority of large organizations.;Question 11. Question;Which of the following is not;a characteristic of capital budgeting post-audits?;They provide feedback to managers regarding;the soundness of their decision-making.;They encourage managers to build slack into;capital investment proposals.;They are sometimes difficult to implement in;practice.;They may be cost-prohibitive to accomplish.;They help keep actual projects on target;(e.g., by limiting project managers from diverting project funds, without;authorization, to other uses).;Question 12. Question;Which of the following is NOT;one of the more common strategic benefits provided by capital investment;projects?;Being able to deliver a product that;competitors cannot (i.e., product differentiation).;Improving product quality.;Reducing manufacturing cycle time.;Reducing the number of short-term (i.e.;operational) decisions that management must make.;Providing significant cost reductions, in;terms of production and/or marketing costs.;Question 13. Question;A truck, costing $25,000 and;uninsured, was wrecked the very first day it was used. It can either be;disposed of for $5,000 cash and be replaced with a similar truck costing;$27,000, or rebuilt for $20,000 and be brand new as far as operating;characteristics and looks are concerned. The net relevant cost of the replacing;option is;$5,000.;$20,000.;$22,000.;$25,000.;Question 14. Question;You just bought a new car for;$125,000. Before you had time to get insurance, the car was wrecked. Weird;Wally offers to take it off your hands for $10,000. You can then purchase a;similar model for $128,000. A body-shop with an excellent reputation offers to rebuild;it for $90,000 and loan you a similar model while the vehicle is being rebuilt.;Once rebuilt, the body-shop claims, it will run like a new car and nobody will;be able to tell the difference. What would you do from a financial point of;view?;Rebuild to save $13,000.;Rebuild to save $28,000.;Rebuild to save $38,000.;Sell to Weird Wally and save $7,000.;Question 15. Question;Pique Corporation wants to;purchase a new machine for $300,000. Management predicts that the machine can;produce sales of $200,000 each year for the next 5 years. Expenses are expected;to include direct materials, direct labor, and factory overhead (excluding;depreciation) totaling $80,000 per year. The firm uses straight-line;depreciation with no residual value for all depreciable assets. Pique's;combined income tax rate is 40%. Management requires a minimum after-tax rate;of return of 10% on all investments.;What is the net present value (NPV) of the investment? (The;PV annuity factor for 5 years, 10% is 3.791.) Assume that the cash inflows;occur at year-end.;($270,480).;$63,936.;$109,428.;$154,920.


Paper#44580 | Written in 18-Jul-2015

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