1. Question: (TCO 9) Which one of the following stages of the management decision-making process is properly sequenced?;Student Answer: Evaluate possible courses of action, make decision;Review the actual impact of the decision, determine possible courses of action;Assign responsibility for the decision, identify the problem;Make a decision, assign responsibility;2. Question: (TCO 9) When is incremental analysis most useful?;Student Answer: After a decision has been made to determine its effectiveness;In choosing between capital budgeting methods;In evaluating the profitability of a company;In developing relevant information for management decisions;3. Question: (TCO 9) Which of the following will never be a relevant cost?;Student Answer: Opportunity cost;Sunk cost;Variable cost;Fixed cost;4. Question: (TCO 9) A company is deciding whether or not to replace some old equipment with new equipment. Which of the following is not considered in the incremental analysis?;Student Answer: Annual operating cost of the new equipment;Annual operating cost of the old equipment;Net cost of the new equipment;Book value of the old equipment;5. Question: (TCO 9) It costs Lannon Fields $14 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30. A buyer in Mexico offers to purchase 2,000 units at $18 each. Lannon has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income?;Student Answer: decrease $4,000;increase $4,000;increase $36,000;increase $8,000;6. Question: (TCO 9) Wishnell Toys can make 1,000 toy robots with the following costs;Direct Materials $70,000;Direct Labor 26,000;Variable Overhead 15,000;Fixed Overhead 15,000;The company can purchase the 1,000 robots externally for $120,000. The avoidable fixed costs are $5,000 if the units are purchased externally. What is the cost savings if the company makes the robots?;Student Answer: $1,000;$5,000;$10,000;$4,000;7. Question: (TCO 9) All of the following are relevant to the sell or process-further decision, except for;Student Answer: costs incurred beyond the split-off point.;revenues at the split-off point.;costs incurred before the split-off point.;revenues beyond the split-off point.;8. Question: (TCO 8) Most of the capital budgeting methods use;Student Answer: accrual accounting numbers.;cash flow numbers.;net income.;accrual accounting revenues.;9. Question: (TCO 8) The capital budgeting decision depends in part on the;Student Answer: availability of funds.;relationships among proposed projects.;risk associated with a particular project.;all of the above;10. Question: (TCO 8) The cash-payback technique;Student Answer: should be used as a final screening tool.;can be the only basis for the capital-budgeting decision.;is relatively easy to compute and understand.;considers the expected profitability of a project.;11. Question: (TCO 8) All of the following statements about intangible benefits in capital budgeting are correct, except that they;Student Answer: include increased quality and employee loyalty.;are difficult to quantify.;are often ignored in capital-budgeting decisions.;cannot be incorporated into the NPV calculation.;12. Question: (TCO 8) The profitability index __________.;Student Answer: does not take into account the discounted cash flows.;is calculated by dividing total cash flows by the initial investment.;allows comparison of the relative desirability of projects that require differing initial investments.;will never be greater than 1.;13. Question: (TCO 8) Post audits of capital projects;Student Answer: are usually foolproof.;are done using different evaluation techniques than were used in making the original capital budgeting decision.;provide a formal mechanism by which the company can determine whether existing projects should be supported or terminated.;all of the above;14. Question: (TCO 8) A company has a minimum required rate of return of 9% and is considering investing in a project that costs $50,000 and is expected to generate cash inflows of $20,000 at the end of each year for 3 years. The profitability index for this project is;Student Answer: 0.99.;1.00.;1.01.;1.20.;15. Question: (TCO 8) Disadvantages of the annual rate of return method include all of the following, except that;Student Answer: it relies on accrual accounting numbers instead of actual cash flows.;it does not consider the time value of money.;no consideration is given as to when the cash inflows occur.;management is unfamiliar with the information used in the computation.
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