Question

Question 1

1. Calculate the break-even point in dollars from the following information. Selling price per unit is $50, variable costs per unit are $30 and fixed costs for the year are $25 000

   	a.	$1 250
   	b.	Unable to be determined from the information given
   	c.	$83 333
   	d.	$41 667
   	e.	$62 500

1 points

Question 2

1. If McLeod Ltd’s selling price is $50 per unit, fixed costs are $499 800, and the contribution margin ratio is 0.34. The break-even in sales dollars (rounded to the nearest dollar) is:

   	a.	$499 800
   	b.	$169 932
   	c.	$1 470 000
   	d.	Unable to be determined from the information given
   	e.	$757 273

1 points

Question 3

1. Which of the following can be a cost object?

   	a.	A department
   	b.	All of the options can be cost objects
   	c.	A product
   	d.	A geographic location
   	e.	A service unit

1 points

Question 4

1. If ROA increased from 8.0% to 8.5% it may be because  

   	a.	The company increases total assets
   	b.	The company increases sales revenue
   	c.	The company increases total expenses
   	d.	The company increases share capital
   	e.	The company increases its liabilities

1 points

Question 5

1. If Debt Ratio decreased from 36% to 33%, it means,

   	a.	financial risk decreases
   	b.	leverage will not be affected
   	c.	leverage increases
   	d.	financial risk increases
   	e.	the company may have increased its long-term debt

1 points

Question 6

1. Mermaid Enterprises, a manufacturing firm, is considering investing $420,000 in a new machine. It is estimated that the net cash flow per year will be $150,000 and the machine will have a 5-year useful life. The residual value expected at the end of the 5-year life is $80,000. The accounting rate of return is:

   	a.	19.5%
   	b.	60%
   	c.	Unable to be determined from the information given
   	d.	35.7%
   	e.	32.8%

1 points

Question 7

1. Which of the following statements about vertical analysis is correct:

   	a.	it compares numbers reported on the financial statements in the current period with those from the previous period
   	b.	it compares numbers reported on a financial statement to another number on the same statement
   	c.	it determines the profitability of the entity
   	d.	it compares ratios from different financial statements
   	e.	it requires a minimum of 3 years of data to provide meaningful analysis

1 points

Question 8

1. Holland Ltd made these estimates for the six months ending 31 December.

   Cash receipts from services provided	$60 000
   Cash payments for expenses	40 000
   Payment for purchase of equipment	18 500
   Depreciation of equipment	4 000
   Borrowings from the bank	15 000
   Rent paid in advance	3 000

   The cash balance at 1 July is $13 000. The estimated cash balance at 31 December is:

   	a.	deficit of $15 000
   	b.	surplus of $33 000
   	c.	surplus of $13 500
   	d.	surplus of $26 500
   	e.	surplus of $11 000

Answer 1

Question 1: The correct option is E i.e $62,500.

Break-even point (in dollars) = Fixed cost / Contribution * Sales

= (25,000 / 20) * 50

Break-even point (in dollars) = $62,500.

Question 2: The correct option is C i.e $1,470,000.

Break-even point (in dollars) = Fixed cost / Contribution margin ratio

= $499,800 / 0.34

Break-even point (in dollars) = $1,470,000.

Question 3: The correct option is B i.e All of the options can be cost objects.

A cost object is anything for which a separate measurement of costs is desired. For e.g. Product, Service, Customer, Activity, Project, and Department.

Question 4: The correct option is B i.e The company increases sales revenue.

ROA = Net income / Total assets

Thus, ROA increases because the company increases sales revenue which leads to an increase in net income.