Question;1.To make a decision whether to accept or reject a special sales;order, managers need critical information about all the following except;(Points: 2);Relevant costs. Prior period operating costs. Any opportunity costs. The strategic, competitive;environment of the firm.;2.Which of the following statements regarding "opportunity;costs" is TRUE? (Points: 2);These costs are recorded;routinely by cost accounting systems. These costs relate to the benefit;lost or foregone when a chosen option (course of action) precludes the;benefits from an alternative option. These costs are generally;deductible for federal income tax purposes. In terms of most short-run;decisions, they are irrelevant.;3.In deciding between alternative choices for a given situation;managers usually employ a five-step process. Which of the following is not;a step in the decision-making process? (Points: 2);Evaluate performance. Specify the criteria and;identify the alternative actions. Select and implement the best;course of action. Perform relevant and strategic;cost analysis. Review the audit report.;4.A useful device for solving production problems involving;multiple products and limited resources is: (Points: 2);Gross profit per unit of;product. Contribution per unit of scarce;resource. Value-stream costing. Relevant cost pricing. The contribution income;statement.;5.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;(Points: 2);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.;6.A company's approach to a make-or-buy decision: (Points: 2);Depends on whether the company;is operating at or below the breakeven point. Depends on whether the company;is operating at or below normal volume. Involves an analysis of;avoidable costs. Should utilize absorption;(i.e., full) costing. Should consider an allocation;of corporate headquarter expenses to the unit in question.;7.Which one of the following is true for the internal rate of;return (IRR) method? (Points: 2);It assumes cash proceeds during;the life of a project can be reinvested to earn the same rate of return as;the weighted-average cost of capital. Unlike the NPV method, it;assumes only a single discount rate. IRRs of multiple projects are additive;(that is, can be added together). It can be used to make optimal;decisions regarding mutually exclusive investment projects. It makes it easy to incorporate;multiple costs of capital.;8.Which one of the following statements concerning capital;budgeting is not true? (Points: 2);A basic objective underlying;capital budgeting is to select assets that will earn a satisfactory return. Capital budgeting is the;process of identifying, evaluating, selecting, and controlling long-term;investment projects. Capital budgeting is based on;precise estimates of future events. Capital budgeting involves;estimating the revenues and costs of each proposed project, evaluating their;merits, and choosing those worthy of investment.;9.The tax impact of a capital investment project (such as the;replacement of a major piece of machinery) is present during: (Points: 2);The project initiation stage;and final disposal stage only. All stages: initiation;operation, and final disposal of the project. Only the project initiation;stage and the operation stage. The project operation stage;only. The project disposal stage;only.;10.If an existing asset is sold at a gain, and the gain is;taxable, then the after-tax proceeds from this transaction would be equal;to: (Points: 2);Net proceeds from the sale plus;the after-tax gain on the sale. Net proceeds from the sale less;the after-tax gain on the sale. Net proceeds from the sale plus;the taxes paid on the gain. Net proceeds from the sale less;the taxes paid on the gain.;11.Which of the following is not a characteristic of capital;budgeting post-audits? (Points: 2);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).;12.Which of the following is not an important advantage of the;net present value (NPV) method over the internal rate of return (IRR);method in evaluating capital investment proposals? (Points: 2);NPV facilitates comparisons of;mutually exclusive projects requiring different amounts of initial;investments. NPV facilitates comparisons;among mutually exclusive projects that have the same useful life but;different initial outlays. NPV can be used to determine an;optimum capital budget under conditions of capital rationing, while IRR;cannot. NPV is relatively intuitive. IRR relies on discounted;cash-flow analysis, while NPV does not.;13.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 payback period for the new machine (rounded to nearest;one-tenth of a year)? (Assume that the cash inflows occur evenly throughout;the year). (Points: 2);2.5 years. 2.7 years. 3.1 years. 3.6 years.;14.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. (Points: 2);($270,480). $63,936. $109,428. $154,920.;15.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: (Points: 2);$5,000. $20,000. $22,000. $25,000.
Paper#45188 | Written in 18-Jul-2015Price : $22