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1. Question :
The purpose of incremental analysis is to find the alternative
Student Answer:
with the fewest relevant costs.
that brings in the most revenue.
that contributes the most to profits. CORRECT
with the lowest fixed costs.
Points Received: 1 of 1
Comments:
2. Question :
Which of the following typically would be considered an incremental cost?
Student Answer:
Conversion cost
Direct product cost CORRECT
Period cost
Factory overhead cost
Points Received: 1 of 1
Comments:
3. Question :
Products Green, Red, and White have unit contribution margins of $6.50, $12, and $10, respectively, and require 2, 4, and 3 direct labor hours per unit, respectively. If demand currently is far exceeding supply, on which product should the company concentrate its efforts?
Student Answer:
Green
Red
White CORRECT
Either Green or Red INCORRECT
Points Received: 0 of 1
Comments:
4. Question :
Depreciation is a unique expense because it
Student Answer:
does not require a cash outlay. CORRECT
does not affect income taxes.
is the same amount every accounting period.
has to be calculated.
Points Received: 1 of 1
Comments:
5. Question :
A project is accepted under the net present value method when
Student Answer:
the percentage return is greater than a predetermined minimum percentage.
total net cash inflows exceed the purchase price of the asset.
the purchase price of the asset is less than the present value of net cash inflows. CORRECT
the present value of net cash inflows exceeds a predetermined minimum amount.
Points Received: 1 of 1
Comments:
6. Question :
When using the net present value method to compare keeping an old building or disposing of it and acquiring a new building, the current cash residual value of the old building should be
Student Answer:
a subtraction from the price paid for the new building. CORRECT
viewed as a cash flow.
an addition to the price paid for the new building.
irrelevant to the decision. INCORRECT
Points Received: 0 of 1
Comments:
7. Question :
Chicago Co. is interested in purchasing a machine that would improve its operational efficiency. The cost is $200,000 with an estimated residual value of $20,000 and a useful life of eight years. Cash inflows are expected to increase by $40,000 a year. The company's minimum rate of return is 10 percent. The present value of $1 for eight years at 10 percent is 0.467, and the present value of an annuity of $1 at 10 percent and eight years is 5.335. The net present value of the project is
Student Answer:
$74,520.
$120,100.
$93,400.
$22,740. CORRECT
Points Received: 1 of 1
Comments:
8. Question :
Memphis Co. is going to purchase a machine for $83,200 that will increase cash flows by $40,000 in the first year, $30,000 the second year, and $25,000 the third year. The machine will have no residual value. The minimum rate of return is 10 percent. The present value factors for the three years are 0.909, 0.826, and 0.751, respectively. The machine's actual rate of return is
Student Answer:
Unable to determine from the data given
greater than 10 percent.
less than 10 percent. CORRECT
10 percent.
Points Received: 1 of 1
Comments:
9. Question :
The method of project selection that brings the time value of money into capital investment analysis is the
Student Answer:
rate of return on initial investment.
net present value method. CORRECT
payback method.
accounting rate-of-return method.
Points Received: 1 of 1
Comments:
10. Question :
An internal issue to be considered when setting a price is
Student Answer:
whether there is a sole source or heavy competition.
total demand for the product or service.
the quality of material and labor. CORRECT
the number of competing products or services.
Points Received: 1 of 1
Comments:
11. Question :
Which of the following is not a step in the target costing approach to pricing?
Student Answer:
Define the desired profit to be made on that product.
Dictate which products should not be produced. CORRECT
Compute a target cost for the product by subtracting the desired profit from the competitive market price.
Identify the price at which a product will be competitive in the marketplace.
Points Received: 1 of 1
Comments:
12. Question :
A common problem associated with transfer pricing occurs when
Student Answer:
a division purchases inputs for processing from an outside source at a price higher than the internal transfer price.
the gross margin pricing method is used to compute the price.
a division sells its excess output to an external customer.
managers do not agree with the transfer prices of the inputs provided to them or of the outputs of their own division. CORRECT
Points Received: 1 of 1
Comments:
13. Question :
Division Alpha can purchase a required part from an outside supplier at $35. Division Beta will supply the part at a transfer price of $38.50. Division Alpha's manager should
Student Answer:
pay the $38.50 price to Division Beta.
tell his immediate supervisor that Division Beta is being unreasonable.
negotiate an appropriate transfer price with the manager of Division Beta. CORRECT
buy from the outside supplier.
Points Received: 1 of 1
Comments:
14. Question :
Development of a transfer price involves
Student Answer:
the use of the highest external market price so that the transferring division is very profitable.
determination of an appropriate profit markup. CORRECT
computation of the selling and delivery costs of the item being transferred. INCORRECT
the use of a team of lawyers representing the outside interests of the company.
Points Received: 0 of 1
Comments:
15. Question :
When a buying division elects to purchase from an outside supplier,
Student Answer:
the impact on overall company profits is usually not considered in the decision.
only fixed costs should be included in the decision analysis.
the price from the outside supplier is likely to be more than the incremental cost to the supplying division.
overall company profits should be enhanced.