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saint leo university MBA 566 quiz 8




Question;1.Volume variances are computed for which of the following costs? (Points: 2) Variable manufacturing costs onlyFixed manufacturing costs onlyVariable selling and administrative costs onlyVariable manufacturing and selling and administrative costs2.Summer Company's static budget is based on a planned activity level of 25,000 units. Later, the company?s management accountant prepared a budget based on 30,000 units. The company actually produced and sold 29,000 units. In evaluating its performance, management should compare the company's actual revenues and costs to which of the following budgets? (Points: 2) A budget based on 29,000 units.A budget based on 30,000 units.A budget based on 25,000 units.Either A or C.3.A budget prepared at a single volume of activity is referred to as a: (Points: 2) strategic budget.static budget.standard budget.flexible budget.4.When would a variance be labeled as favorable? (Points: 2) When standard costs are equal to actual costsWhen standard costs are less than actual costsWhen expected sales are greater than actual salesWhen actual costs are less than standard costs5.The research and development department of a large manufacturing company would likely be organized as a(n): (Points: 2) cost center.profit center.revenue center.investment center.6.The practice of delegating authority and responsibility is referred to as: (Points: 2) decentralization.standard by exception.centralization of authority.7.Butler Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 4,000 units:Per unitRevenue$4.00Variable costs1.50Contribution margin$2.50Fixed costs2.00Net income$0.50If actual production totals 5,000 units, the flexible budget would show fixed costs of: (Points: 2) $10,000$2 per unit$8,000none of the above8.Assuming actual volume is 11,000 units and planned volume is 10,000 units, the sales volume variance: (Points: 2) is 1,000 units 1,000 units unfavorable.cannot be determined without additional information.none of the above.9.Which of the following statements about ROI is false? (Points: 2) ROI is used to measure the performance of investment centers.ROI = margin divided by investment turnover.Trying to maximize ROI can result in a conflict between the interest of a particular manager and the interest of the business as a whole.The book value of operating assets is frequently used as the investment base for calculating return on investment.10.Bilbo Company evaluates its managers on the basis of return on investment (ROI). Division Three has an ROI of 15% while the company as a whole has an ROI of only 10%. Which of the following performance measures will motivate the managers of Division Three to accept a project earning a 12% return? (Points: 2) Return on investment (ROI)Residual income (RI)Both ROI and RI will motivate the manager to accept the projectNeither ROI nor RI will motivate the manager to accept the project11.Hansen Company reported the following information for 2010:Sales$787,000Average Operating Assets$375,000Desired ROI9%Residual Income$ 11,250The company's operating income for 2010 was: (Points: 2) $37,080$33,750$45,000$363,75012.An even stream of payments over equal time periods where the cash flows are assumed to occur at the end of each period is referred to as a(n): (Points: 2) annuity due.ordinary amount of cash would result at the end of one year, if $17,000 is invested today and the rate of return is 10%? (Points: 2) $17,000$18,530$18,700None of the above14.Which capital budgeting technique defines returns in terms of income instead of cash flows? (Points: 2) The unadjusted rate of return methodThe internal rate of return techniqueThe net present value techniqueThe payback period15.Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar? (Points: 2) InflationInterestHistorical costRisk of failure to receive expected cash inflows16.Which of the following would be considered a cash inflow in determining the value of a capital investment? (Points: 2) Incremental revenues from increased productivityCost savings from a reduction in labor hoursA reduction in working capital commitmentsAll of the above are considered cash inflows17.Austin Company is considering a capital project that will return $100,000 each year for five years. At the company's hurdle rate of 10%, the present value of the annuity is $379,100. What will be the company's return on investment in Year 1? (Points: 2) $37,910$62,090$100,000None of the above18.Which of the following statements concerning payback analysis is true? (Points: 2) An investment with a longer payback is preferable to an investment with a shorter payback.The payback method ignores the time value of money concept.The payback method and the unadjusted rate of return are different approaches that will consistently lead to the same conclusion.All of the above are true.19.Mountain Brook Company is considering two investment opportunities whose cash flows are provided below:YearInvestment AInvestment B0($15,000)($9,000)15,0005,00025,0004,00035,0003,00044,0001,000The company's hurdle rate is 12%. What is the present value index of Investment A? (Points: 2) of the above20.An investment that costs $25,000 will produce annual cash flows of $5,000 for a period of 6 years. Further, the investment has an expected salvage value of $3,000. Given a desired rate of return of 12%, the investment will generate a: (Points: 2) negative net present value of $25,000.negative net present value of $2,923.positive net present value of $20,557.negative net present value of $1,520.


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