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Learning Objective 26-4 1) Net present value is defined as the difference between the present value of the project's net cash inflows and the cost of investment. 2) Management's minimum desired rate of return on a capital investment is known as the return on investment. 3) The residual value is discounted as a.
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41) Gamma Corp. is considering an investment opportunity with the following expected net cash inflows: Year 1, $250,000; Year 2, $350,000; Year 3, $395,000. The company uses a discount rate of 12%, and the initial investment is $750,000. The following table is available: Present Value of $1: 10% 12% 14% 15% 1 0.909 0.893 0.877 0.870 2 0.826 0.797 0.769 0.756 3 0.751 0.712 0.675 0.658 4 0.683 0.636 0.592 0.572 5 0.621 0.567 0.519 0.497 The IRR of the project will.
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11) Which of the following most accurately describes the annuity? A) an investment which produces increasing cash flows overtime B) an installment loan with amortizing principal payments C) a stream of equal installments of cash flows made at equal time intervals D) a term life insurance policy 12) Lora Corp. is going to receive $10,000.
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21) Moon Beverages Corporation provides the following financial information: Minimum acceptable operating income $556,600 Average total assets $2,530,000 Operating income $708,400 Return on investment 28% Net sales $900,000 Calculate the residual income (RI) of Moon Corp. A) $1,156,000 B) $300,000 C) $151,800 D) $58,200 22) Moon Beverages Corporation provides the following financial information: Minimum acceptable operating income $556,600 Average total assets $2,530,000 Operating income $708,400 Return on investment 28% Net sales $900,000 Calculate the target rate of.
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11) Rica Company is a price-taker and uses a target-pricing approach. Refer to the following information: Production volume 600,000 units per year Market price $30 per unit Desired operating income 15% of total assets Total assets $13,900,000 What is the target full product cost in total for the year? Assume all units produced are sold. A) $18,000,000 B) $15,915,000 C) $13,900,000 D) $2,085,000 12) Rica Company is.
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21) Cheong Automobiles Company fabricates inexpensive automobiles for sale to third world countries. Each vehicle includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows: Volume 900 units per month Variable cost per unit $8 per unit Fixed costs $14,000 per month A factory in Indonesia has offered to supply Cheong with ready-made.
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31) The following details are provided by Doppler Systems: Project A Project B Project C Project D Initial investment $420,000 $200,000 $550,000 $500,000 PV of cash inflows $570,000 $380,000 $800,000 $390,000 Payback period (years) 3.6 3.2 4.0 2.0 NPV of project $150,000 $180,000 $250,000 ($110,000) Calculate the profitability index for Project A. A) 0.98 B) 1.08 C) 1.36 D) 1.66 32) The following details are provided by Doppler Systems: Project A Project B Project C Project D Initial investment $420,000 $200,000 $550,000 $500,000 PV of cash inflows $570,000 $380,000 $800,000 $390,000 Payback period (years) 3.6 3.2 4.0 2.0 NPV of.
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21) Healthier Living Company manufactures two products—toaster ovens and bread machines. The following data are available: Toaster Ovens Bread Machines Sale price $80 $150 Variable costs $40 $70 Healthier Living can manufacture six toaster ovens per machine hour and four bread machines per machine hour. Healthier Living's production capacity is 1,800 machine hours per month. What is the contribution.
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41) In making product mix decisions under constraining factors, which of the following is the key to choosing the product type to be maximized? A) revenue per unit B) contribution margin per unit of product C) contribution margin per unit of the constraining factor D) gross profit per unit using traditional costing 42) Custom Furniture.
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21) The following details are provided by a manufacturing company: Product line Investment $1,000,000 Useful life 12 years Estimated annual net cash inflows for first year $400,000 Estimated annual net cash inflows for second year $350,000 Estimated annual net cash inflows for next ten years $300,000 Residual value $50,000 Depreciation method Straight-line Required rate of return 12% Calculate the payback period for the investment. A) 2.5 years B) 2.83 year C).
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Learning Objective APP. C-2 1) A general ledger is an accounting journal designed to record one specific type of transaction. 2) Sales on account are recorded in a cash receipts journal. 3) A subsidiary ledger is a record of accounts that provides supporting details on individual balances, the total of which appears in.
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Learning Objective 26-2 1) The accounting rate of return method and the payback method are often used as preliminary screening measures but are insufficient to fully evaluate a capital investment. 2) All else being equal, investments with longer payback periods are preferable. 3) Net cash inflows from a capital investment arise from.
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31) Clay Corporation manufactures two styles of lamps—a Bedford Lamp and a Lowell Lamp. The following per unit data are available: Bedford Lamp Lowell Lamp Sale price $25 $35 Variable costs $17 $23 Machine hours required for 1 lamp 2 4 Total fixed costs are $30,000, and Clay can sell a maximum of 10,000 units of each style of lamp annually. Machine.
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Learning Objective 24-3 1) Management by exception directs the management's attention to important differences between the actual and the budgeted amounts. 2) Uncontrollable costs are the costs that can be influenced by the decisions of a manager. 3) Cost center responsibility reports typically focus on the flexible budget variance. 4) A unique factor of.
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11) Both the sales volume variance and the flexible budget variance help revenue center managers understand why they have exceeded or fallen short of budgeted revenue. 12) Milliken Inc. provides the following information: Actual Sales Static Budget Flexible Budget Sales Volume Variance Sale Revenue $556,500 $525,000 $450,000 ? Calculate the sales volume variance. A) $31,500 F B) $31,500 U C) $75,000 U D) $106,500 F 13).
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Learning Objective 24-2 1) Performance evaluation systems provide top management with a framework for maintaining control over the entire organization. 2) Communicating the expectations of top management to segment managers improves goal congruence. 3) The practice of comparing a company's achievements against the best practices in the industry is known as goal congruence. 4).
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Learning Objective 25-4 1) Doro Fill Company fabricates inexpensive automobiles for sale to third world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows: Volume 800 units per month Variable cost per unit $7 per unit Fixed costs $15,000 per month A factory in Indonesia has offered to supply.
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11) The purchases journal is a special journal used to record ________. A) cash receipts, interest rate payments, and purchases B) credit sales of assets that occur infrequently such as buildings, property, and equipment C) credit sales of inventory D) merchandise inventory, office supplies, and other assets purchased on account 12) Which of the following.
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21) A company has four vendors and the accounts payable subsidiary ledger shows the following balances. Alpha $275,821 Beta 143,474 Gamma 78,943 Delta 34,187 Calculate the accounts payable balance in the general ledger. A) $419,295 B) $532,425 C) $275,821 D) $256,604 22) Which of the following is true of a sales journal? A) It is a special journal used to record all the cash sales. B).
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Learning Objective APP. C-3 1) Cash purchases are recorded in the purchases journal. 2) The purchases journal is a special journal used to record all purchases of merchandise inventory, office supplies, and other assets on account. 3) When recording in a purchases journal with a periodic inventory system, the Merchandise Inventory DR column.
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Learning Objective 24-5 1) The transfer price is the transaction amount of one unit of goods when the transaction occurs between the company and its customers. 2) The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize the overall company profits. 3) A cost-based.
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11) Payback provides management with valuable information about the time period within which the cash invested will be recouped. 12) Net present value and internal rate of return consider the time value of money, so they are appropriate for longer-term capital investments 13) Which of the following best describes a post-audit in.
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11) When a company is evaluating an investment proposal with high risk, a low discount rate should be used, and vice versa. 12) Compound interest used in discounted cash flow calculations assumes that companies will reinvest future cash flows whenever they are received. 13) If an investment project's internal rate of return.
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11) Which of the following is most likely a key performance indicator of the internal business perspective of the balanced scorecard? A) number of units produced per hour B) employee turnover C) cash flow D) number of cross-trained employees 12) One part of the balanced scorecard helps management answer the question, "How do we look.
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11) The return on investment of a company can be improved by either increasing average total assets or decreasing operating income. 12) Residual income is used as a key performance indicator for evaluating an investment center's financial performance. 13) Recreation Equipment Company has several divisions that are investment centers. Data for the.
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11) Which of following statements is true of short-term decision making? A) Fixed costs and variable costs must be analyzed separately. B) All costs behave in the same way. C) Unit manufacturing costs are variable costs. D) All costs involved in a decision are considered relevant. 12) Which of the following is a historical cost.
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Learning Objective 26-21 1) An operational asset used for a long period of time is known as a capital asset. 2) The acquisition or construction of a capital asset is known as a capital investment. 3) A post-audit in capital budgeting is a comparison of the actual results of capital investments with the.
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Learning Objective 25-2 1) Special sales orders increase operating income if the revenue from the order exceeds the incremental variable and fixed costs incurred to fill the order. 2) In deciding whether to accept a special sales order, management should only consider the quantitative data and disregard qualitative factors. 3) Fixed costs are.
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Learning Objective APP. C-1 1) An accounting information system (AIS) collects, records, stores, and processes accounting data to produce information that is useful for decision makers. 2) The collection of time records is an accounting information system activity that is classified as a business transaction that involves the sale of merchandise inventory. 3).
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21) Which of the following is a responsibility that is common to the managers of cost, profit, and investment centers? A) generating revenues B) generating profits C) managing the invested capital D) controlling costs 22) Qvoware Inc. sells cosmetic products in the United States. Which one of the following is most likely to be a.
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Learning Objective 25-3 1) A company has two different products that sell to separate markets. Financial data are as follows: Product A Product B Total Revenue $15,000 $9,000 $24,000 Variable cost (8,000) (9,200) (17,200) Fixed cost (allocated) (4,000) (1,000) (5,000) Operating income $3,000 $(1,200) $1,800 Assume that fixed costs are all unavoidable and that dropping one product would not impact sales of the other. Because the contribution margin of Product B.
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21) Which of the following is a key performance indicator of the financial perspective in a balanced scorecard? A) hours of employee training B) number of warranty claims C) percentage of market share D) return on investment 22) Which of the following is a key performance indicator of the internal business perspective in a balanced.
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11) One of the advantages of a computerized accounting information system, as compared to a manual one, is that it does not cost to ensure that the firm's data and information are secure. 12) In an accounting information system, outputs are the reports used for decision making, including the financial statements. 13).
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Learning Objective 24-4 1) Companies evaluate investment centers using the same measures as the profit centers. 2) Operating income alone does not indicate how efficiently a segment is using its assets. 3) Return on investment focuses on net income in the numerator of the ratio. 4) Managers of investment centers are responsible not only.
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21) An accounting information system is said to be relevant, if it ________. A) works smoothly with the business's employees and organizational structure B) safeguards a business's assets and reduces the likelihood of fraud and errors C) provides information that will improve decision making and reduce uncertainty D) accommodates changes in the business over.
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Learning Objective 26-3 1) The fact that invested cash earns income over time is called the time value of money. 2) An annuity refers to a series of equal cash flows received or paid annually. 3) All else being equal, the shorter the investment period, the higher the total amount of interest earned. 4).
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21) Gamma Corporation is considering an investment of $500,000 in a land development project. It will yield cash flows of $200,000 for 5 years. The company uses a discount rate of 9%. What is the net present value of the investment? Present value of annuity of $1: 8% 9% 10% 1 0.926 0.917 0.909 2 1.783 1.759 1.736 3 2.577 2.531 2.487 4 3.312 3.24 3.17 5 3.993 3.89 3.791 A) $230,000 B) $278,000 C) $330,000 D) $200,000 22).
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