2009 05 05 002724 HWgal

Document Sample
2009 05 05 002724 HWgal Powered By Docstoc
					1.   Operating budgets and financial budgets: (Points: 2)
     combined form the master budget
     are prepared before the master budget
     are prepared after the master budget
     have nothing to do with the master budget


     2. A budget should/can do all of the following EXCEPT that it: (Points: 2)
     should be prepared by managers from different functional areas working
     independently of each other
     should be adjusted if new opportunities become available during the year
     can help management allocate limited resources
     can become the performance standard against which firms can compare the actual
     results


     3.Use the information below to answer the following question(s).
     For the next six months, Brett Company projects the following information (in
     units).

     Demand drives production for that month and cannot be carried over from one
     month to another. Retail customers are satisfied first.
     Painting capacity appears to be: (Points: 2)
     short-term capacity
     intermediate-term capacity
     long-term capacity
     total demand


     4.Use the information below to answer the following question(s).
     For the next six months, Brett Company projects the following information (in
     units).

     Demand drives production for that month and cannot be carried over from one
     month to another. Retail customers are satisfied first.
     In May, production appears to be limited by: (Points: 2)
     short-term capacity
     intermediate-term capacity
     long-term capacity
     total demand


     5.Use the information below to answer the following question(s).
     The following information pertains to the January operating budget for Casey
     Corporation.
For January, budgeted cost of goods sold is: (Points: 2)
$20,000
$30,000
$40,000
None of these is correct.


6.________ bases a period's expenditure level for a discretionary item on the
amount spent on that item during the previous period. (Points: 2)
Zero-based budgeting
Periodic budgeting
Incremental budgeting
Continuous budgeting


7. ________ is the process of varying key estimates to identify those estimates
that are the most critical to a decision. (Points: 2)
A demand forecast
A sensitivity analysis
A pro forma income statement
The cash flow statement


8. Assume that only the specified parameters change in a sensitivity analysis. The
contribution margin ratio increases when: (Points: 2)
total capacity-related (fixed) costs increase
total capacity-related (fixed) costs decrease
flexible (variable) costs per unit increase
flexible (variable) costs per unit decrease


9. (CPA adapted, November 1992) The strategy MOST LIKELY to reduce the
break-even point would be to: (Points: 2)
increase both the capacity-related (fixed) costs and the contribution margin
decrease both the capacity-related (fixed) costs and the contribution margin
decrease the capacity-related (fixed) costs and increase the contribution
margin
increase the capacity-related (fixed) costs and decrease the contribution margin


10. The PRIMARY reason for using cost variances is: (Points: 2)
that they diagnose the cause of a problem and what should be done to correct it
for superiors to communicate expectations to lower level employees
to administer appropriate disciplinary action
for financial control of operating activities
      11. A favorable efficiency variance for direct labor indicates that: (Points: 2)
      a lower wage rate than expected was paid for direct labor
      a higher wage rate than expected was paid for direct labor
      less direct labor hours were used during production than expected for actual
      output
      more direct labor hours were used during production than expected for actual
      output


      12. Use the information below to answer the following question(s).
      Triglobal Industries, Inc., (TII) developed the following standard costs for direct
      material and direct labor for one of their major products, the 10-gallon plastic
      container.

      During June, TII produced and sold 5,000 containers using 490 pounds of direct
      materials at an average cost per pound of $32 and 250 direct labor hours at an
      average wage of $15.25 per hour.
      June's direct material quantity variance was: (Points: 2)
      $980 unfavorable
      $300 favorable
      $680 favorable
      None of these is correct.

(AQ – SQ) x SP = [490# - (5,000 x 0.10#)] x $30 = $300 F

13. ________ occur(s) when managers ask subordinates to discuss their ideas about
the budget, but no joint decision-making occurs. (Points: 2)
Authoritative budgeting
Stretch targets
Consultative budgeting
Budget slack


14. The BEST description of participative budgeting is that: (Points: 2)
lower-level managers and employees initially prepare the budget
managers and employees at many levels are involved with the budgeting process
the budget is prepared by the top managers
top management sets figures for all operating activities and these amounts are not
negotiable


15. Investments A and B both have a future value of $5,000 and are exactly the same
except that Investment A has a 5% rate of return while Investment B has an 8% rate
of return. The present value of Investment A will be ________ the present value of
Investment B. (Points: 2)
less than
the same as
greater than
can't tell


16. Use the information below to answer the following question(s).
A bond with a face value of $10,000 pays $600 in interest every six months for 10
years and a lump sum of $10,000 at the end of the tenth year. The current market
requires 10% interest compounded semiannually.
The $600 semiannual interest payments: (Points: 2)
are an example of an annuity
have a present value of $12,000
reflect the actual rate of interest received by the investor
are all paid at time zero


17. Hitz Corporation is financed 60% by debt with a pretax cost of 10%, and 40% by
common equity with a pretax cost of 15%. Hitz Corporation's marginal tax rate is
50%. Hitz's weighted average cost of capital is: (Points: 2)
9.0%
10.0%
12.0%
12.5%

                 Pretax cost        After tax cost             Weight     Weighted average
 Debt                   10%       (1-tax rate) 5%               60%                  3.0%
 Common equity          15%                  15%                40%                  6.0%
  Weighted average cost of capital                                                   9.0%



18.  Use the information below to answer the following question(s).
Consider the following two mutually exclusive projects, each of which requires an
initial investment of $30,000 and both provide cash inflows of $60,000 as shown
below. This organization has a 15% cost of capital.

Using the net present value criterion, which is the most desirable project? (Points: 2)
Project A
Project B
Both projects A and B are equally acceptable.
The desirability cannot be determined using the current information.


       Because Project A receives more cash sooner, the net present value will
       be greater.
    19.Use the information below to answer the following question(s).
    During 2005, a franchise-owned restaurant averaged:

    The expected cash investment per franchise-owned restaurant opening in the year
    2005 was $250,000. Assume the value of the investment decreases to zero over a ten-
    year period of time.
    Does this franchise-owned restaurant appear to be a good investment? (Points: 2)
    No, because the payback period is too long.
    No, because the expected net annual cash inflows are inadequate.
    Yes, because the investment delivers more than the 10% required rate of return.
    Yes, because the accounting rate of return is greater than 10%.


    20.Use the information below to answer the following question(s).
    During 2005, a franchise-owned restaurant averaged:

    The expected cash investment per franchise-owned restaurant opening in the year
    2005 was $500,000. Assume the value of the investment decreases to zero over a ten-
    year period of time.
    The profitability index for one franchise-owned restaurant is: (Points: 2)
    2.304
    0.434
    0.922
    1.085

PV of annuity (10-year, 10%) $50,000 x 6.1446 = .................$307,230
        Investment ....................................................................... (250,000)
        Net present value .............................................................$ 57,230

$307,230 / $250,000 = 1.229

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:14
posted:6/12/2012
language:
pages:5