2009 B-3 Class Questions Preview

# 2009 B-3 Class Questions Preview - Business Environment...

This preview shows pages 1–3. Sign up to view the full content.

Business Environment & Concepts 3 Class Questions 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. 1. CPA-05605 During 1994, Deet Corp. experienced the following power outages: Number of outages Number of per month months 0 3 1 2 2 4 3 3 12 Each power outage results in out-of-pocket costs of \$400. For \$500 per month, Deet can lease an auxiliary generator to provide power during outages. If Deet leases an auxiliary generator in 1995, the estimated savings (or additional expenditures) for 1995 would be: a. (\$3,600) b. (\$1,200) c. \$1,600 d. \$1,900 CPA-05605 Choice "c" is correct. Savings: 0 outages x 3 mo = 0 1 outages x 2 mo = 2 2 outages x 4 mo = 8 3 outages x 3 mo = 9 19 Total Outages Out-of-pocket cost x \$400 Cost to be saved \$7,600 Cost of generator (\$500 × 12 months) (6,000 ) Estimated net savings \$1,600 Choice "a" is incorrect. The estimated savings is dependent on the number of outages and on the number of months, as there are two costs involved. A loss of \$3,600 only assumes that there are 6 outages (the total in the column for "number of outages per month" without considering the number of months for each row) times \$400, less the cost of \$6,000 for the generator. Choice "b" is incorrect. The estimated savings is not the difference between the out-of-pocket costs times 12 outages and the cost of the generator times 12 months. Choice "d" is incorrect. The cost of the generator is a monthly cost, not dependent on the number of power outages. Do not multiply \$500 by the 19 power outages to calculate the cost of the generator; multiply the cost of the generator by 12 months.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Business Environment & Concepts 3 Class Questions 2 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. 2. CPA-03283 In equipment-replacement decisions, which one of the following does not affect the decision-making process? CPA-03283 Choice "b" is correct. The original FMV of the old equipment is a sunk cost that does not affect equipment-replacement decisions. All of the following items affect the decision process: 3. CPA-03358 When the risks of the individual components of a project's cash flows are different, an acceptable procedure to evaluate these cash flows is to: CPA-03358 Choice "d" is correct. Discount rates may be adjusted to factor differences in risk into cash flow analysis.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern