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Unformatted text preview: CC203 Managerial Accounting Multiple Choice Questions Name __ ___________________________________________ Instructions: Circle the single most correct answer for each question. Your score on this exam will be calculated by dividing the number of correct answers by the total number of questions. 1. Suture Corporation's discount rate is 12%. If Suture has a 5-year investment project that has a project profitability index of zero, this means that: A) the net present value of the project is equal to zero. B) the internal rate of return of the project is equal to the discount rate. C) the payback period of the project is equal to the project's useful life. X D) both A and B above are true. 2. Which of the following is the correct calculation for the degree of operating leverage? A) net operating income divided by total expenses. B) net operating income divided by total contribution margin. X C) total contribution margin divided by net operating income. D) variable expense divided by total contribution margin. 3. Which of the following budgets are prepared before the sales budget? Budgeted Income Statement Direct Labor Budget A) Yes Yes B) Yes No C) No Yes X D ) No No 4. Amster Corporation has not yet decided on the required rate of return to use in its capital budgeting. This lack of information will prevent Amster from calculating a project's: Payback Net Present Value Internal Rate of Return A) No No No B) Yes Yes Yes C) No Yes Yes X D ) No Yes No 5. Which of the following statements is correct with regard to a CVP graph? A) A CVP graph shows the maximum possible profit. X B) A CVP graph shows the break-even point as the intersection of the total sales revenue line and the total expense line. C) A CVP graph assumes that total expense varies in direct proportion to unit sales. D) A CVP graph shows the operating leverage as the gap between total sales revenue and total expense at the actual level of sales. 6.If income taxes are ignored, how is depreciation used in the following capital budgeting techniques? Internal Rate of Return Net Present Value X A ) Excluded Excluded B) Excluded Included C) Included Excluded D) Included Included 7. If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is: X A) equal to 16%. B) less than 16%. C) greater than 16%. D) cannot be determined from this data. 8. Three potential investment projects (A, B, and C) at Nit Corporation all require the same initial investment, have the same useful life (3 years), and have no expected salvage value. Expected net cash inflows from these three projects each year is as follows: A B C Year 1............. $1,000 $2,000 $3,000 Year 2............. $2,000 $2,000 $2,000 Year 3............. $3,000 $2,000 $1,000 What can be determined from the information provided above?...
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- Spring '09