Which of the following segment performance measures will increase if there is a decrease in the selling expenses for that segment?

Return on Investment = Yes; Residual Income = Yes

Return on Investment = No; Residual Income = Yes

Return on Investment = Yes; Residual Income = No

Return on Investment = No; Residual Income = No

Question 2 (3 points)Save

For performance evaluation purposes, the variable costs of a service department should be charged to operating departments using:

the actual variable rate and the budgeted level of activity for the period.

the budgeted variable rate and the actual level of activity for the period.

the budgeted variable rate and the budgeted level of activity for the period.

the actual variable rate and the peak-period or long-run average servicing capacity.

Question 3 (3 points)Save

Which of the following companies is following a policy with respect to the costs of service departments that is not recommended?

To charge operating departments with the depreciation of forklifts used at its central warehouse, Shalimar Electronics charges predetermined lump-sum amounts calculated on the basis of the long-term average use of the services provided by the warehouse to the various segments.

Manhattan Electronics uses the sales revenue of its various divisions to allocate costs connected with the upkeep of its headquarters building.

Rainier Industrial does not allow its service departments to pass on the costs of their inefficiencies to the operating departments.

Golkonda Refinery separately allocates fixed and variable costs incurred by its service departments to its operating departments.

Question 4 (4 points)Save

Uchimura Corporation has two divisions: the AFE Division and the GBI Division. The corporation's net operating income is $42,000. The AFE Division's divisional segment margin is $15,700 and the GBI Division's divisional segment margin is $175,400. What is the amount of the common fixed expense not traceable to the individual divisions?

$149,100

$57,700

$217,400

$191,100

Question 5 (3 points)Save

Which of the following cash flows is relevant in a decision about accepting Alternative X or Alternative Y?

a cash inflow for Alternative X that is not a cash inflow for Alternative Y.

a cash inflow that is lost if Alternative X is accepted and is not lost if Alternative Y is accepted.

a cash outflow that is avoided if Alternative X is accepted and is not avoided if Alternative Y is accepted.

all of the above.

Question 6 (4 points)Save

Beaver Company (a multi-product firm) produces 5,000 units of Product X each year. Each unit of Product X sells for $8 and has a contribution margin of $5. If Product X is discontinued, $18,000 of fixed overhead would be eliminated. As a result of discontinuing Product X, the company's overall operating income would:

decrease by $25,000

increase by $43,000

decrease by $7,000

increase by $7,000

Question 7 (3 points)Save

Which of the following best describes an opportunity cost:

it is a relevant cost in decision making, but is not part of the traditional accounting records.

it is not a relevant cost in decision making, but is part of the traditional accounting records.

it is a relevant cost in decision making, and is part of the traditional accounting records.

it is not a relevant cost in decision making, and is not part of the traditional accounting records.

Question 8 (4 points)Save

Hodge Inc. has some material that originally cost $74,600. The material has a scrap value of $57,400 as is, but if reworked at a cost of $1,500, it could be sold for $54,400. What would be the incremental effect on the company's overall profit of reworking and selling the material rather than selling it as is as scrap?

-$79,100

-$21,700

-$4,500

$52,900

Question 9 (6 points)Save

Rice Corporation currently operates two divisions which had operating results last year as follows:

West Division:

Sales $600,000

Variable costs 310,000

Contribution margin 290,000

Traceable fixed costs 110,000

Allocated common corporate costs 90,000

Net operating income (loss) $90,000

Troy Division:

Sales $300,000

Variable costs 200,000

Contribution margin 100,000

Traceable fixed costs 70,000

Allocated common corporate costs 45,000

Net operating income (loss) ($ 15,000)

Since the Troy Division also sustained an operating loss in the prior year, Rice's president is considering the elimination of this division. Troy Division's traceable fixed costs could be avoided if the division were eliminated. The total common corporate costs would be unaffected by the decision. If the Troy Division had been eliminated at the beginning of last year, Rice Corporation's operating income for last year would have been:

$15,000 higher

$30,000 lower

$45,000 lower

$60,000 higher

Question 10 (6 points)Save

Supler Company produces a part used in the manufacture of one of its products. The unit product cost is $18, computed as follows:

Direct materials = $8

Direct labor = $4

Variable manufacturing overhead = $1

Fixed manufacturing overhead = $5

Unit product cost (total of above costs) = $18

An outside supplier has offered to provide the annual requirement of 4,000 of the parts for only $14 each. It is estimated that 60 percent of the fixed overhead cost above could be eliminated if the parts are purchased from the outside supplier. Based on these data, the per-unit dollar advantage or disadvantage of purchasing from the outside supplier would be:

$1 disadvantage

$1 advantage

$2 advantage

$4 disadvantage

Question 11 (6 points)Save

Landor Appliance Company makes and sells electric fans. Each fan regularly sells for $42. The following cost data per fan is based on a full capacity of 150,000 fans produced each period.

Direct materials = $8

Direct labor = $9

Manufacturing overhead

(70% variable and 30% unavoidable fixed) = $10

A special order has been received by Landor for a sale of 25,000 fans to an overseas customer. The only selling costs that would be incurred on this order would be $4 per fan for shipping. Landor is now selling 120,000 fans through regular channels each period. What should Landor use as a minimum selling price per fan in negotiating a price for this special order?

$28

$27

$31

$24

Question 12 (6 points)Save

The constraint at Rauchwerger Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below:

Product WX:

Selling price per unit = $192.00

Variable cost per unit = $158.72

Minutes on the constraint = 3.20

Product KD:

Selling price per unit = $542.66

Variable cost per unit = $420.54

Minutes on the constraint = 8.60

Product FS:

Selling price per unit = $222.84

Variable cost per unit = $167.76

Minutes on the constraint = 3.60

Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource?

$33.28 per unit

$10.40 per minute

$122.12 per unit

$15.30 per minute

Question 13 (6 points)Save

Khiem, Inc. manufactures baseball gloves that normally sell for $55 each. Khiem currently has 400 defective gloves in inventory that have $35 of materials, labor, and overhead assigned to each glove. The defective gloves can either be completely repaired at a cost of $25 per glove or sold as is at a reduced price of $18 per glove. Khiem would be better off by:

$2,000 to sell the gloves at the reduced price.

$2,800 to sell the gloves at the reduced price.

$4,800 to repair the gloves and sell them at the normal price.

$5,200 to sell the gloves at the reduced price.

Question 14 (4 points)Save

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 = No; Net Present Value = No; Internal Rate of Return = No

Payback = Yes; Net Present Value = Yes; Internal Rate of Return = Yes

Payback = No; Net Present Value = Yes; Internal Rate of Return = Yes

Payback = No; Net Present Value = Yes; Internal Rate of Return = No

Question 15 (3 points)Save

If the net present value of a project is zero based on a discount rate of 16%, then the internal rate of return is:

equal to 16%.

less than 16%.

greater than 16%.

cannot be determined from this data.

Question 16 (3 points)Save

The project profitability index and the internal rate of return:

will always result in the same preference ranking for investment projects.

will sometimes result in different preference rankings for investment projects.

are less dependable than the payback method in ranking investment projects.

are less dependable than net present value in ranking investment projects.

Question 17 (3 points)Save

In an equipment investment decision, which of the following amounts would be unaffected by a change in the tax rate?

the present value of the initial investment in the equipment.

the present value of the increase in working capital needed.

the present value of the salvage value of the equipment.

both A and B above.

Question 18 (8 points)Save

(Ignore income taxes in this problem.) Nevus Tattoo Parlor is considering a capital budgeting project. This project will initially require a $25,000 investment in equipment and a $3,000 working capital investment. The useful life of this project is 5 years with an expected salvage value of zero on the equipment. The working capital will be released at the end of the 5 years. The new system is expected to generate net cash inflows of $9,000 per year in each of the 5 years. Nevus' discount rate is 14%. The net present value of this project is closest to:

$(3,088)

$3,383

$4,454

$5,897

Question 19 (4 points)Save

(Ignore income taxes in this problem.) The Poteran Company is considering a machine that will save $3,000 a year in cash operating costs each year for the next six years. At the end of six years it would have no salvage value. If this machine costs $9,060 now, the machine's internal rate of return is closest to:

18%

20%

22%

24%

Question 20 (4 points)Save

(Ignore income taxes in this problem.) You have deposited $7,620 in a special account that has a guaranteed interest rate of 19% per year. If you are willing to completely exhaust the account, what is the maximum amount that you could withdraw at the end of each of the next 7 years? Select the amount below that is closest to your answer.

$1,295

$2,056

$2,219

$1,089

Question 21 (6 points)Save

Wedge Corporation uses a discount rate of 14% and has a tax rate of 30%. The following cash flows occur in the last year of a 10-year equipment selection investment project:

Cost savings for the year = $180,000

Working capital released = $120,000

Salvage value of equipment = $25,000

At the end of the ten years when the equipment is sold, its net book value for tax purposes is zero. The total after-tax present value of the cash flows above is closest to:

$45,765

$48,465

$61,425

$71,145

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