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4) Revenue at the market price less the desired operating income equals the product's target full product cost. 5) Price-setters emphasize a cost-plus pricing approach. 6) If a company is a price-taker, it has considerable flexibility in setting its products' prices. Variable manufacturing $100 per unit Variable marketing $15 per unit Fixed manufacturing $280,000 per year Fixed.
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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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29) Seven Seas Company manufactures 100 luxury yachts per month. Included in each yacht is a compact media center. Seven Seas manufactures media center in-house, but is considering the possibility of outsourcing that function. At present, the variable cost per unit is $275, and the fixed costs are $39,000 per.
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30) Clapton Corporation is considering an investment in new equipment costing $900,000. The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a salvage value of $90,000. The equipment is expected to generate net cash flows of $140,000 for each of the.
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21) Gamma Company 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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  Learning Objective 26-1 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 actual results of capital investments with the projected.
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31) The following details are provided by Dopler Company: 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 Dopler Company: 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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Learning Objective 1-6 1) The income statement shows whether or not a business can generate enough cash to pay its liabilities. 2) The balance sheet shows whether or not a business is earning profits. 3) The statement of retained earnings informs users about how much of the earnings were kept and reinvested 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 IRR is higher than.
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Learning Objective 1-3 1) Liabilities represent creditors' claims on the business's assets. 2) The left side of the accounting equation measures the amount that the business owes to creditors and to the stockholders. 3) The total of the amount of assets that a business possesses may or may not be equal to the.
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26) Macaulay Company has three product lines—D, E, and F. The following information is available: D E F Sales $70,000 $40,000 $30,000 Variable costs (40,000) (20,000) (10,000) Contribution margin 30,000 20,000 20,000 Fixed expenses (15,000) (15,000) (25,000) Operating income (loss) $15,000 $5,000 ($5,000) Macaulay Company is thinking of dropping product line F because it is reporting an operating loss. Assume that $15,000 of total fixed costs could be eliminated by dropping F. What effect.
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20) Newman Automobiles Manufacturing is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $10,000,000 $500,000 Useful life 5 years 5 years Estimated annual net cash inflows for 5 years $2,000,000 $95,000 Residual value $50,000 $20,000 Depreciation method Straight-line Straight-line Required rate of return 12% 10% Calculate accounting rate of return for Proposal Y. A) 8.95% B) 10.21% C) 7.50% D) 6.57% 21) The following details are provided by a manufacturing.
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6) The only difference between present value and future value is the amount of interest that is earned in the intervening time span. 7) Paramount Company is considering purchasing new equipment costing $700,000. The management has estimated that the equipment will generate cash flows as follows: Year 1 $200,000      2 200,000      3 250,000      4 250,000      5 150,000 Present.
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Learning Objective 1-2 1) As per the economic entity assumption, an organization and its owner should be seen as the same entity. 2) The guidelines for accounting information are called Generally Accepted Accounting Principles (GAAP). 3) IFRS is the main U.S. accounting rule book and is currently created and governed by the FASB. 4).
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21) Which of the following groups of accounts normally have a debit balance? A) assets and expenses B) revenues and expenses C) liabilities and stockholders' equity D) assets and liabilities 22) Which of the following groups of accounts will decrease with a debit? A) assets and expenses B) revenues and expenses C) liabilities and stockholders' equity D) assets and.
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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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Learning Objective 1-5 1) The balance sheet of a business summarizes an entity's revenues and expenses. 2) By looking at a statement of retained earnings, the effect of dividends on the ending balance in retained earnings can be determined. 3) Financial statements are business documents that are used to communicate information needed to.
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21) Accord Corporation purchased land for $100,000 by a cash payment of $20,000 and promised to pay the remaining amount at a later period. What is the net effect of this transaction on the business's accounting equation? A) assets increase by $100,000 and liabilities decrease by $20,000 B) assets increase by $100,000.
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14) Rica Company is a price-taker and uses target pricing. Please 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 Variable cost per unit $18 per unit Fixed cost per year $5,600,000 per year With the current cost structure, Rica cannot achieve its profit goals. It.
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Learning Objective 1-4 1) John contributed $6,000 in the business by opening a bank account in the name of the business, United Internists. The corporation issued common stock to John. This transaction results in an increase in the assets of the business. 2) For an accounting equation to balance, a transaction must.
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34) Hilltop Golf Course is planning for the coming season. Investors would like to earn a 15% return on the company's $60,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $30,000,000 for the golfing season. About 600,000 rounds.
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21) Capital budgeting is: A) the process of planning the investment in long-term assets. B) preparing the budget for operating expenses. C) the process of evaluating the profitability of a business. D) the process of making pricing decisions for products. Learning Objective 26-2 1) The accounting rate of return method and the payback method are often.
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21) GAAP are the rules that govern accounting in the United States. The acronym GAAP in this statement refers to ________. A) Globally Accepted and Accurate Policies B) Global Accommodation Accounting Principles C) Generally Accredited Accounting Policies D) Generally Accepted Accounting Principles 22) The formation of a partnership firm requires a minimum of ________. A) four.
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11) Different users of financial statements focus on the different parts of the financial statements for the information they need. 12) Any person or business to whom a business owes money is called the business's creditor. 13) Managerial accounting provides information to ________. A) internal decision makers B) outside investors and lenders C) auditors D) taxing.
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31) For Revenues, the category of account and its normal balance is ________. A) stockholders' equity and a credit balance B) assets and a debit balance C) assets and a credit balance D) stockholders' equity and a debit balance 32) For Stockholders' Equity, the category of accounting equation and its normal balance is ________. A) equity.
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11) Marsh Supply Services received $1,000 cash from a customer which was owed to the business from the previous month. Which of the following accounts would decrease as a result of this transaction? A) Cash B) Equity C) Accounts Payable D) Accounts Receivable 12) Ace Inc. had the following transactions in June: Sold goods for $4,000.
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Learning Objective 1-1 1) Accounting is the information system that measures business activities, processes the information into reports, and communicates the results to decision makers. 2) Accounting is referred to as the language of business because it is the method of communicating business information to stakeholders. 3) Managerial accounting focuses on information for.
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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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11) Which of the following is a liability account? A) Accounts Receivable B) Cash C) Building D) Notes Payable 12) Which of the following is an asset account? A) Wages Payable B) Notes Payable C) Unearned Revenue D) Accounts Receivable 13) A customer's promise to pay in the future for services or goods sold is called a(n) ________. A) Accounts Receivable B).
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16) Faros Hats, Etc. has two product lines-baseball helmets and football helmets. Income statement data for the most recent year follow: Total Baseball Helmets Football Helmets Sales revenue $850,000 $500,000 $350,000 Variable expenses (530,000) (250,000) (280,000) Contribution margin $320,000 $250,000 $70,000 Fixed expenses (180,000) (90,000) (90,000) Operating income (loss) $140,000 $160,000 $(20,000) Assuming the Football Helmets line is dropped, total fixed costs remain unchanged, and the space formerly used to produce the line is.
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19) Lightening Semiconductors produces 400,000 hi-tech computer chips per month. Each chip uses a component which Lightening makes in-house. The variable costs to make the component are $1.20 per unit, and the fixed costs run $1,200,000 per month. The company has been approached by a foreign producer who can supply.
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41) Gamma Company is considering an investment opportunity with the following expected net cashinflows: 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 be: A).
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Learning Objective 2-1 1) A chart of accounts is a detailed record of the changes in a particular asset, liability, or stockholders' equity. 2) A chart of accounts is a list of all of a company's accounts with their account numbers. 3) Liabilities are economic resources that are expected to benefit the business.
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31) The taxable income of a sole proprietorship is ________. A) combined with the personal income of the proprietor B) not combined with the proprietor's personal income C) not taxable. D) handled similarly to that of a corporation 32) Genity Inc., located in Texas, records business transactions in dollars and disregards changes in the value.
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36) Kim Company's western territory's forecasted income statement for the upcoming year is as follows: Sales $850,000 Variable expenses (520,000) Contribution margin $330,000 Fixed expenses (480,000) Operating loss ($150,000) Kim Company's management is considering dropping the western territory and has determined that 80% of the fixed expenses are avoidable. What is the change in Kim Company's forecasted operating loss for the.
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6) Freemen Company's western territory's forecasted income statement for the upcoming year is as follows: Sales $800,000 Variable expenses 500,000 Contribution margin $300,000 Fixed expenses 396,000 Operating income ($96,000) Freemen Company's management is considering dropping the western territory. This move would be financially advantageous only if the company could eliminate $96,000 of fixed costs or more. 7) Tyler Corporation has provided you.
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