UNIT 4 QUIZ\t1. Question : The shadow price in a linear programming model is:\tStudent Answer:\tInteresting from a mathematical standpoint, but not useful\tfrom an accounting standpoint.\tEqual to the current market price for an additional unit of the\trelated resource.\tThe price one would be willing to pay for an additional unit of\tthe scarce resource.\tGreater than the market price for the related resource.\tZero for a binding constraint.\t\u00a0\t\u00a0\tQuestion 2. Question : Determination of the optimum short-term product mix needs to\tinclude an analysis of:\tStudent Answer:\tFully absorbed costs.\tProduction constraints.\tSales-mix costs.\tRevenue forecasts.\tJoint manufacturing costs.\t\u00a0\t\u00a0\tQuestion 3. Question : All the following are characteristic of relevant costs except:\tStudent Answer:\tThey are generally variable.\tThey are not committed.\tThey are different in amount for different options.\tThey are costs that will be incurred in the future.\tThey are inventory-related costs.\t\u00a0\t\u00a0\tUNIT 4 QUIZ\tQuestion 4. Question : Which of the following statements regarding “opportunity costs”\tis TRUE?\tStudent Answer:\tThese costs are recorded routinely by cost accounting\tsystems.\tThese costs relate to the benefit lost or foregone when a\tchosen option (course of action) precludes the benefits from an\talternative option.\tThese costs are generally deductible for federal income tax\tpurposes.\tIn terms of most short-run decisions, they are irrelevant.\t\u00a0\t\u00a0\tQuestion 5. Question : A useful device for solving production problems involving\tmultiple products and limited resources is:\tStudent Answer:\tGross profit per unit of product.\tContribution per unit of scarce resource.\tValue-stream costing.\tRelevant cost pricing.\tThe contribution income statement.\tQuestion 6. Question : Relevant costs for a make-or-buy decision for a component part\tinclude all of the following EXCEPT:\tStudent Answer:\tFixed salaries that will not be incurred if the part is\toutsourced.\tPayroll tax (unemployment insurance cost), because of\toutsourcing.\tMaterial-handling costs that can be eliminated if the part is\toutsourced.\tSpecial machinery for the part that has no resale value.\tCurrent direct material costs for the part.\t\u00a0\t\u00a0\tUNIT 4 QUIZ\tQuestion 7. Question : Which one of the following is an advantage of the book\t(accounting) rate of return method for analyzing capital\tinvestment proposals?\tStudent Answer:\tIt is not affected by different accounting methods.\tIt is precise and objective.\tData for calculating the return are typically readily available.\tThe method explicitly adjusts for the time value of money.\tThe accounting rate of return is generally approximately equal\tto a project’s internal rate of return (IRR).\t\u00a0\t\u00a0\tQuestion 8. Question : Which one of the following statements concerning capital\tbudgeting is not true?\tStudent Answer:\tA basic objective underlying capital budgeting is to select\tassets that will earn a satisfactory return.\tCapital budgeting is the process of identifying, evaluating,\tselecting, and controlling long-term investment projects.\tCapital budgeting is based on precise estimates of future\tevents.\tCapital budgeting involves estimating the revenues and costs\tof each proposed project, evaluating their merits, and choosing\tthose worthy of investment.\t\u00a0\tUNIT 4 QUIZ\tQuestion 9. Question : The after-tax cost of debt for purposes of estimating a company’s\tweighted-average cost of capital:\tStudent Answer:\tRequires an estimate of the yield-to-maturity for long-term\tbonds.\tIs equal to the pretax cost of debt times t, where t = income\ttax rate.\tIs equal to the pretax cost of debt \u00f7 (1 – t), where t = income\ttax rate.\tIs approximated by the firm’s short-term borrowing rate.\tIs estimated using the Capital Asset Pricing Model (CAPM).\t\u00a0\t\u00a0\tQuestion 10. Question : Which one of the following is an advantage of the payback\tmethod?\tStudent Answer:\tIt provides a (rough) measure of risk.\tIt is linearly related to the net present value (NPV) of a\tproposed project.\tIt considers all possible future cash flows.\tIt applies conventional discounting procedures to anticipated\tfuture cash flows.\tIt allows managers to choose between competing projects with\tdifferent useful lives.\t\u00a0\t\u00a0\tUNIT 4 QUIZ\tQuestion 11. Question : When evaluating capital budgeting decision models, the payback\tperiod emphasizes:\tStudent Answer:\tLiquidity.\tProfitability.\tCost of capital.\tAverage net income divided by average investment.\tAverage after-tax cash inflow divided by average investment.\t\u00a0\t\u00a0\tQuestion 12. Question : In a discounted cash flow (DCF) analysis, a required incremental\tinvestment in net working capital:\tStudent Answer:\tShould be amortized over the useful life of the equipment.\tCan be disregarded because the same amount of cash will be\trecovered at the end of the project’s life.\tShould be treated as a recurring cash outflow over the life of\tthe project.\tShould be treated as a reduction in the required cash outflow\tin period 0.\tShould be treated as an immediate cash outflow that is later\trecovered when it is no longer needed.\t\u00a0\t\u00a0\tUNIT 4 QUIZ\tQuestion 13. Question : Pique Corporation wants to purchase a new machine for $300,000.\tManagement predicts that the machine can produce sales of\t$200,000 each year for the next 5 years. Expenses are expected to\tinclude direct materials, direct labor, and factory overhead\t(excluding depreciation) totaling $80,000 per year. The firm uses\tstraight-line depreciation with no residual value for all depreciable\tassets. Pique’s combined income tax rate is 40%. Management\trequires a minimum after-tax rate of return of 10% on all\tinvestments.\tWhat is the present value payback period, rounded to one-tenth of\ta year? (Note: PV factors for 10% are as follows: year 1 = 0.909;\tyear 2 = 0.826; year 3 = 0.751; year 4 = 0.683; year 5 = 0.621; the\tPV annuity factor for 10%, 5 years = 3.791.)\tStudent Answer:\t2.5 years.\t3.0 years.\t3.3 years.\t3.6 years.\t4.0 years.\t\u00a0\t\u00a0\tQuestion 14. Question : A truck, costing $25,000 and uninsured, was wrecked the very\tfirst day it was used. It can either be disposed of for $5,000 cash\tand be replaced with a similar truck costing $27,000, or rebuilt for\t$20,000 and be brand new as far as operating characteristics and\tlooks are concerned. The net relevant cost of the replacing option\tis:\tStudent Answer:\t$5,000.\t$20,000.\t$22,000.\t$25,000.\tUNIT 4 QUIZ\t\u00a0\t\u00a0\tQuestion 15. Question : Carmino Company is considering an investment in equipment that\twill generate an after-tax income of $6,000 for each year of its\tfour-year life. The asset has no salvage value. The firm is in the\t40% tax bracket. The net book value (NBV) of the investment at\tthe beginning of each year will be as follows:\tYear 1 = $30,000\tYear 2 = 15,000\tYear 3 = 7,500\tYear 4 = 3,750\tThe amount of after-tax cash inflow from the asset in Year 3 is:\tStudent Answer:\t$6,600.\t$7,500.\t$8,100.\t$9,000.\t$9,750.<\/p>\n","protected":false},"excerpt":{"rendered":"
UNIT 4 QUIZ 1. Question : The shadow price in a linear programming model is: Student Answer: Interesting from a mathematical standpoint, but not useful from an accounting standpoint. Equal to the current market price for an additional unit of Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-217254","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/217254","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=217254"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/217254\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=217254"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=217254"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=217254"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}