Question

QUESTION 1

1. Cash outlays for capital assets include all the following EXCEPT:

   		The original purchase price
   		The annual operating costs
   		The salvage value
   		All of the above

1 points   

QUESTION 2

1. Which of the following capital budgeting methods ignores the time value of money?

   		Internal rate of return
   		Net present value method
   		Payback method
   		All of the above consider the time value of money

1 points   

QUESTION 3

1. SkiTime Photos plans to spend $74,400 for a new machine, which is expected to generate cash inflows of $18,600 per year over its useful life of 10 years. The new machine will be depreciated on a straight-line basis over 10 years with no salvage value. What is the payback period?

   		4 years
   		5 years
   		8 years
   		10 years

1 points   

QUESTION 4

1. When would a project be rejected under the NPV method?

   		If its net present value is less than zero
   		If its net present value is equal to zero
   		If its net present value is greater than zero
   		Not enough information is available

1 points   

QUESTION 5

1. Clarke Company purchased equipment for $100,000 that is expected to generate cash inflows from operations of $30,000 in each of the next 5 years. The machine will be depreciated on a straight-line basis with no salvage value. Assume the following present value factors and determine the net present value of the investment by Clark Company.

   Period	PV of $ @12%	PV of an Annuity of $1 at 12%
   1	0.8929	0.8929
   2	0.7972	1.6901
   3	0.7118	2.4018
   4	0.6355	3.0373
   5	0.5574	3.6048

   		$8,144
   		$8.881
   		$12,100
   		$16,288

1 points   

QUESTION 6

1. A corporation with taxable income of $100,000 and a tax rate of 40% is selling a machine. The original cost of the machine is $8,000, and the machine has been depreciated $4,000. If the machine is sold for $6,000, the amount of after-tax cash generated by this sale would be:

   		$(1,600)
   		$4.400
   		$5,200
   		$6,000

1 points   

QUESTION 7

1. What ratio is used to measure a firms liquidity?

   		Debt ratio
   		Asset turnover
   		Current ratio
   		Return on equity

1 points   

QUESTION 8

1. What ratio is used to determine a firm's leverage?

   		Debt ratio
   		Current ratio
   		Asset turnover
   		Return on equity

1 points   

QUESTION 9

1. What ratio is used to measure a firm's efficiency at using its assets?

   		Current ratio
   		Asset turnover
   		Return on sales
   		Return on equity

1 points   

QUESTION 10

1. What ratio is used to measure the profit earned on each dollar invested in a firm?

   		Current ratio
   		Asset turnover ratio
   		Return on sales
   		Return on equity

1 points   

QUESTION 11

1. What ratio represents an indication of investors' expectations concerning a firm's growth potential?

   		Earnings per share
   		Return on equity
   		Price-earnings ratio
   		Asset turnover

1 points   

QUESTION 12

1. Information from Blain Company's balance sheet is as follows. What is Blain's current ratio?

   Cash	$1,200,000.00
   Marketable Securities	$3,750,000.00
   Accounts Receivable	$28,800,000.00
   Inventories	$33,150,000.00
   Prepaid Expense	$600,000.00
   Total Current Assets	$67,500,000.00
   Notes Payable	$750,000.00
   Accounts Payable	$9,750,000.00
   Accrued Expenses	$6,250,000.00
   Income Taxes Payable	$250,000.00
   Payments due with one year on long-term debt	$1,750,000.00
   Total Current Liabilities	$18,750,000.00

   		.26 to 1
   		.3 to 1
   		1.8 to 1
   		3.6 to 1

1 points   

QUESTION 13

1. Based on the following information of Dietrich Company, if manufacturing overhead is applied at the rate of 80% of direct labor cost, what is the overhead for August?

   Direct materials costs	$35,000
   Direct labor hours	6,000
   Direct labor costs	$30,000
   Actual manufacturing overhead	$25,000
   Machine Hours worked	3,000

   		$1,000 overapplied
   		$1,000 underapplied
   		$5,000 overapplied
   		$5,000 underapplied

1 points   

QUESTION 14

1. Which of the following types of companies would be least likely to use a process costing system?

   		A tile installation company
   		A tire manufacturing company
   		A crayon manufacturing company
   		A fast food restaurant

1 points   

QUESTION 15

1. Which of the following business would be most likely to use a job costing system?

   		Compter disk manufacturer
   		Manufacturer of hair care products
   		Commercial building construction company
   		Candy manufacturer

1 points   

QUESTION 16

1. Traditional product costing systems usually assume that:

   		Products consume overhead costs
   		Activities consume overhead costs
   		Cost pools do not exist
   		Overhead costs are insignificant

1 points   

QUESTION 17

1. An appropriate cost driver for inspection costs is:

   		Number of inspected products sold
   		Quantity of items produced
   		Direct labor hours
   		Number of inspections completed

1 points   

QUESTION 18

1. ABC is most concerned with which of the following costs?

   		Direct materials
   		Direct labor
   		Manufacturing overhead
   		Indirect materials

1 points   

QUESTION 19

1. The process of measuring, monitoring, and minimizing prevention, appraisal, internal failure and external failure costs is:

   		Activity-based costing
   		Cost of quality
   		JIT
   		Prevention costs

1 points   

QUESTION 20

1. The just-in-time inventory system focus is:

   		A low cost supplier
   		State of art, high technology equipment
   		Multiskilled workers
   		Waste elimination

Answer 1

Answer :

1. Option - C, The salvage value

Explanation :

The salvage value is the amount which comes from sale or disposal of asset at the end of its useful life. It is cash inflow from capital assets not cash outlay.

2. Option - C, Payback method

Explanation :

Payback method does not consider the time value of money for capital budgeting methods.

Payback period = Initial Investment / Net cash flow per period

3. Option - A, 4 years

Explanation :

Payback period = Initial Investment / Net cash flow per period

= $74,400 / $18,600

= 4 years

4. Option - A, If its net present value is less than zero

Explanation :

NPV = Present value of annual cash inflow - Initial Investment

As per NPV method, project is accepted only when net present value is zero or more than zero.

5. Option - A, $8,144

Explanation :

NPV = Present value of annual cash inflow - Initial Investment

= [$30,000 x PVAF(12%,5years) - $100,000

= [$30,000 x 3.6048] - $100,000

= $108,144 - $100,000

= $8,144