View the step-by-step solution to:

# (Points: 1) The examination is open book. As a result, the examination is challenging.

1.
(Points: 1)

The examination is open book. As a result, the examination is challenging. You may have to use the index in the textbook and search engines on the Web to research certain terms that are not in the chapters you covered.

Paul Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 \$22,000 400 100 500
Activity 2 \$16,240 380 200 580
Activity 3 \$14,600 500 250 750

The activity rate under the activity-based costing system for Activity 3 is closest to:

a. \$70.45.
b. \$28.87.
c. \$19.47.
d. \$58.40.

2.
(Points: 1)

Matt Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 \$20,000 100 400 500
Activity 2 \$37,000 800 200 1,000
Activity 3 \$91,200 800 3,000 3,800

The cost per unit of Product A under activity-based costing is closest to:

a. \$2.40.
b. \$3.90.
c. \$10.59.
d. \$6.60.

3.
(Points: 1)
The benefits of a successful Just-In-Time system include all of the following except:

a. funds tied up in inventories are released for use elsewhere.
b. inventory buffers are increased.
c. throughput time is reduced.
d. defect rates are decreased.

4.
(Points: 1)
A key concept of the JIT inventory system is:

a. the raw materials, work in process, and finished goods inventories of manufacturing companies act as buffers so that operations can proceed smoothly even if suppliers are late with deliveries or a department is unable to operate for a brief period due to breakdowns or other reasons.
b. the use of many suppliers so as to ensure rapid delivery of materials for production.
c. the maintenance of a stock of raw materials so that defective materials can be replaced quickly so as to maintain a high rate of productivity.
d. inventories are costly to carry and can be kept to minimum levels or eliminated completely with careful planning.

5.
(Points: 1)
The flow of goods through a JIT system is based on:

a. a workstation efficiently completing its processing of a batch of units so that the units can proceed forward to the next workstation before the next workstation is ready to receive them.
b. processing goods in large batch sizes rather than less economical small batches.
c. maintaining a stockpile of raw materials in anticipation of materials shortages.
d. producing to meet customer demand with no buildup of inventory at any point in the production process.

6.
(Points: 1)
A successful JIT system is based upon which of the following concepts?

a. The company must rely upon a large number of suppliers to ensure frequent deliveries of small lots.
b. The company should always choose those suppliers offering the lowest prices.
c. The company should avoid long-term contracts with suppliers so as to exert pressure on suppliers to make prompt and frequent deliveries.
d. A small number of suppliers make frequent deliveries of specific quantities thus avoiding the buildup of large inventories of materials on hand.

7.
(Points: 1)
A company adopting the JIT approach would:

a. produce large batches of products so as to recoup the costs associated with setups.
b. attempt to reduce setup time so as to economically produce in smaller batches.
c. adapt a functional plant layout so as to enhance production flexibility.
d. require workers to become highly specialized in operating a single machine.

8.
(Points: 1)
Greater internal failure costs as a result of appraisal activities generally result in less:

a. prevention costs.
b. appraisal costs.
c. external failure costs.
d. all of the above.

9.
(Points: 1)
In order to reduce its overall quality costs, a company should focus most of its efforts on:

a. prevention costs.
b. appraisal costs.
c. internal failure costs.
d. external failure costs.

10.
(Points: 1)
An increase in appraisal costs will usually result in an increase in:

a. prevention costs.
b. internal failure costs.
c. external failure costs.
d. opportunity costs.

11.
(Points: 1)
Which of the following would be classified as an appraisal cost on a quality cost report?

a. Returns and allowances arising from quality problems.
b. Downtime caused by quality problems.
c. Test and inspection of in-process goods.
d. Cost of field servicing and handling complaints.

12.
(Points: 1)
Which of the following would be classified as an internal failure cost on a quality cost report?

a. Supplies used in testing and inspection.
b. Final product testing and inspection.
c. Net cost of scrap.
d. Depreciation of test equipment.

13.
(Points: 1)
Which of the following would be classified as an internal failure cost on a quality cost report?

a. Re-entering data because of keying errors.
b. Final product testing and inspection.
c. Supplies used in testing and inspection.
d. Depreciation of test equipment.

14.
(Points: 1)
Which of the following would be classified as an external failure cost on a quality cost report?

a. Quality training.
b. Systems development.
c. Repairs and replacements beyond the warranty period.
d. Quality engineering.

15.
(Points: 1)
Which of the following would be classified as an external failure cost on a quality cost report?

a. Product recalls.
b. Quality engineering.
c. Quality training.
d. Systems development.

16.
(Points: 1)
An opportunity cost is:

a. the difference in total costs which results from selecting one alternative instead of another.
b. the benefit forgone by selecting one alternative instead of another.
c. a cost which may be saved by not adopting an alternative.
d. a cost which may be shifted to the future with little or no effect on current operations.

17.
(Points: 1)
Which of the following costs is often important in decision making, but is omitted from conventional accounting records?

a. Fixed cost.
b. Sunk cost.
c. Opportunity cost.
d. Indirect cost.

18.
(Points: 1)
When a decision is made among a number of alternatives, the benefit that is lost by choosing one alternative over another is the:

a. realized cost.
b. opportunity cost.
c. conversion cost.
d. accrued cost.

19.
(Points: 1)
The net present value and internal rate of return methods of capital budgeting are superior to the payback method in that they:

a. are easier to implement.
b. consider the time value of money.
c. require less input.
d. reflect the effects of depreciation and income taxes.

20.
(Points: 1)
The net present value method of capital budgeting assumes that cash flows are reinvested at:

a. the internal rate of return on the project.
b. the rate of return on the company's debt.
c. the discount rate used in the analysis.
d. a zero rate of return.

21.
(Points: 1)
The payback method measures:

a. how quickly investment dollars may be recovered.
b. the cash flow from an investment.
c. the economic life of an investment.
d. the profitability of an investment.

22.
(Points: 1)
(Ignore income taxes in this problem.) A piece of equipment has a cost of \$20,000. The equipment will provide cost savings of \$3,500 each year for ten years, after which time it will have a salvage value of \$2,500. If the company's discount rate is 12%, the equipment's net present value is:

a. \$580.
b. (\$225).
c. \$17,500.
d. \$2,275.

23.
(Points: 1)

(Ignore income taxes in this problem.) Boston Company is contemplating the purchase of a new machine on which the following information has been gathered:
Cost of the machine \$38,900
Annual cash inflows expected \$10,000
Salvage value \$ 5,000
Life of the machine 6 years

The company's discount rate is 16%, and the machine will be depreciated using the straight-line method. Given these data, the machine has a net present value of:

a. -\$26,100.
b. -\$23,900.
c. \$0.
d. +\$26,100.

24.
(Points: 1)
(Ignore income taxes in this problem.) The Whitton Company uses a discount rate of 16%. The company has an opportunity to buy a machine now for \$18,000 that will yield cash inflows of \$10,000 per year for each of the next three years. The machine would have no salvage value. The net present value of this machine to the nearest whole dollar is:

a. \$22,460.
b. \$4,460.
c. \$(9,980).
d. \$12,000.

25.
(Points: 1)
(Ignore income taxes in this problem.) A company with \$800,000 in operating assets is considering the purchase of a machine that costs \$75,000 and which is expected to reduce operating costs by \$20,000 each year. The payback period for this machine in years is closest to:

a. 0.27 years.
b. 10.7 years.
c. 3.75 years.
d. 40 years.

26.
(Points: 1)

(Ignore income taxes in this problem.) Overland Company has gathered the following data on a proposed investment project:
Investment in depreciable equipment \$150,000
Annual cash flows \$ 40,000
Life of the equipment 10 years
Salvage value -0-
Discount rate 10%

The internal rate of return on this investment is closest to:

a. 23.4%.
b. 25.4%.
c. 22.7%
d. 22.1%

27.
(Points: 1)
Which of the following would be considered a "use" of cash for purpose of constructing a statement of cash flows?

a. selling the company's own common stock to investors.
b. issuing long-term debt.
d. amortizing a patent.

28.
(Points: 1)
Which of the following would be considered a "use" of cash for purposes of constructing a statement of cash flows?

a. an increase in accounts payable.
b. an increase in prepaid expenses.
c. an increase in accrued liabilities.
d. an increase in accumulated depreciation.

29.
(Points: 1)
In a statement of cash flows, a change in prepaid expenses would be classified as:

a. an operating activity.
b. a financing activity.
c. an investing activity.
d. a noncash item that need not appear on the statement of cash flows.

30.
(Points: 1)
In a statement of cash flows, a change in the inventories account would be classified as:

a. an operating activity.
b. a financing activity.
c. an investing activity.
d. a noncash item that need not appear on the statement of cash flows.

31.
(Points: 1)
An increase in the plant and equipment account of \$100,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:

a. an addition to net income of \$100,000 in order to arrive at net cash provided by operating activities.
b. a deduction from net income of \$100,000 in order to arrive at net cash provided by operating activities.
c. an addition of \$100,000 under investing activities.
d. a deduction of \$100,000 under investing activities.

32.
(Points: 1)
An increase in the bonds payable account of \$200,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:

a. an addition of \$200,000 under investing activities.
b. a deduction of \$200,000 under investing activities.
c. an addition of \$200,000 under financing activities.
d. a deduction of \$200,000 under financing activities.

33.
(Points: 1)
Horizontal analysis of financial statements is accomplished through:

a. placing statement items on an after-tax basis.
b. common-size statements.
c. computing both earnings per share and the price-earnings ratio.
d. trend percentages.

34.
(Points: 1)
The gross margin percentage is most likely to be used to assess:

a. how quickly accounts receivables can be collected.
b. how quickly inventories are sold.
c. the efficiency of administrative departments.
d. the overall profitability of the company's products.

35.
(Points: 1)

The following data have been taken from your company's financial records for the current year:
Earnings per share \$10
Dividend per share \$ 6
Market price per share \$90
Book value per share \$70

The price-earnings ratio is:

a. 1.67 to 1.
b. 15.0 to 1.
c. 9.0 to 1.
d. 7.0 to 1.

36.
(Points: 1)

Information concerning the common stock of Morris Company as of the end of the company's fiscal year is presented below.
Number of shares outstanding 460,000
Par value per share \$ 5.00
Dividends paid per share \$ 6.00
Market price per share \$ 54.00
Earnings per share \$ 18.00

The dividend yield ratio is closest to:

a. 50.0%.
b. 33.3%.
c. 120.0%.
d. 11.1%.

37.
(Points: 1)
Braverman Company's net income last year was \$75,000 and its interest expense was \$10,000. Total assets at the beginning of the year were \$650,000 and total assets at the end of the year were \$610,000. The company's income tax rate was 30%. The company's return on total assets for the year was closest to:

a. 13.5%.
b. 12.4%.
c. 13.0%.
d. 11.9%.

38.
(Points: 1)

Selected financial data for Irvington Company appear below:
Account Balances
Beginning
of year End of
year
Preferred stock \$125,000 \$125,000
Common stock 300,000 400,000
Retained earnings 75,000 185,000

During the year, the company paid dividends of \$10,000 on its preferred stock. The company's net income for the year was \$120,000. The company's return on common stockholders' equity for the year is closest to:

a. 17%.
b. 19%.
c. 23%.
d. 25%.

39.
(Points: 1)

The following account balances have been provided for the end of the most recent year:
Total assets \$150,000
Total stockholders' equity \$120,000
Total common stock \$ 50,000 (5,000 shares)
Total preferred stock \$ 10,000 (1,000 shares)

The book value per share of common stock is:

a. \$22.
b. \$25.
c. \$20.
d. \$28.

40.
(Points: 1)
Dratif Company's working capital is \$33,000 and its current liabilities are \$80,000. The company's current ratio is closest to:

a. 1.41 to 1.
b. 0.59 to 1.
c. 3.42 to 1.
d. 0.41 to 1.

41.
(Points: 1)

Selected year-end data for the Brayer Company are presented below:
Current liabilities \$600,000
Acid-test ratio 2.5 to 1
Current ratio 3.0 to 1
Cost of goods sold \$500,000

The company has no prepaid expenses and inventories remained unchanged during the year. Based on these data, the company's inventory turnover ratio for the year was closest to:

a. 1.20 times.
b. 2.40 times.
c. 1.67 times.
d. 2.33 times.

42.
(Points: 1)
Eral Company has \$17,000 in cash, \$3,000 in marketable securities, \$36,000 in current receivables, \$24,000 in inventories, and \$45,000 in current liabilities. The company's acid-test (quick) ratio is closest to:

a. 1.78 to 1.
b. 1.24 to 1.
c. 0.80 to 1.
d. 0.44 to 1.

43.
(Points: 1)
Frantic Company had \$130,000 in sales on account last year. The beginning accounts receivable balance was \$10,000 and the ending accounts receivable balance was \$16,000. The company's accounts receivable turnover was closest to:

a. 5.00 times.
b. 13.00 times.
c. 10.00 times.
d. 8.13 times.

44.
(Points: 1)
Granger Company had \$180,000 in sales on account last year. The beginning accounts receivable balance was \$10,000 and the ending accounts receivable balance was \$18,000. The company's average collection period (age of receivables) was closest to:

a. 20.28 days.
b. 28.39 days.
c. 36.50 days.
d. 56.78 days.

45.
(Points: 1)
Last year Javer Company had a net income of \$200,000, income tax expense of \$74,000, and interest expense of \$20,000. The company's times interest earned was closest to:

a. 10.00 times.
b. 11.00 times.
c. 5.30 times.
d. 14.70 times.

46.
(Points: 1)
Karma Company has total assets of \$190,000 and total liabilities of \$90,000. The company's debt-to-equity ratio is closest to:

a. 0.47 to 1.
b. 0.90 to 1.
c. 0.53 to 1.
d. 0.32 to 1.

47.
(Points: 1)

Use the following to answer questions 47-49:
Selected financial data for Barnstable Company appear below:

19x9 19x8
(in thousands)
Sales \$1,500 \$1,200
Operating Expenses 450 400
Interest Expense 75 30
Cost of Goods Sold 900 720
Dividends Declared and Paid 30 0

For 19x9, the gross margin as a percentage of sales was:

a. 5%.
b. 60%.
c. 10%.
d. 40%.

48.
(Points: 1)
For 19x9, the net income before taxes as a percentage of sales was:

a. 10%.
b. 3%.
c. 8%.
d. 5%.

49.
(Points: 1)
For 19x9, the net operating income as a percentage of sales was:

a. 70%.
b. 8%.
c. 10%.
d. 40%.

50.
(Points: 1)

Use the following to answer question 50:
Financial statements for Larned Company appear below:

Larned Company
Statement of Financial Position
December 31, 19X6 and 19X5
(dollars in thousands)
19X6 19X5
Current assets:
Cash and marketable securities \$ 130 \$ 100
Accounts receivable, net 150 130
Inventory 100 100
Prepaid expenses 20 20
Total current assets 400 350
Noncurrent assets:
Plant & equipment, net 1,640 1,600
Total assets \$2,040 \$1,950
Current liabilities:
Accounts payable \$ 120 \$ 120
Accrued liabilities 110 80
Notes payable, short term 170 160
Total current liabilities 400 360
Noncurrent liabilities:
Bonds payable 370 400
Total liabilities 770 760
Stockholders' equity:
Preferred stock, \$20 par, 10% 120 120
Common stock, \$10 par 180 180
Additional paid-in capital--common stock 110 110
Retained earnings 860 780
Total stockholders' equity 1,270 1,190
Total liabilities & stockholders' equity \$2,040 \$1,950

Larned Company
Income Statement
For the Year Ended December 31, 19X6
(dollars in thousands)
Sales (all on account) \$2,930
Cost of goods sold 2,050
Gross margin 880
Operating expenses 350
Net operating income 530
Interest expense 40
Net income before taxes 490
Income taxes (30%) 147
Net income \$ 343

Dividends during 19X6 totalled \$263 thousand, of which \$12 thousand were preferred dividends. The market price of a share of common stock on December 31, 19X6 was \$160.

Larned Company's earnings per share of common stock for 19X6 was closest to:

a. \$18.39.
b. \$27.22.
c. \$19.06.
d. \$11.03.

### Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

### -

Educational Resources
• ### -

Study Documents

Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

Browse Documents