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31.A company should not deviate from the traditional approaches to price determination. 32.A good starting point for any pricing method is to develop a price based on the cost of producing the good or service. 33.Gross margin pricing establishes selling prices at an amount that is a stipulated rate above variable production.
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14.Management of the Krausse Savings and Loan Association is in the process of evaluating the purchase of a new check sorting machine. The model under review will cost $70,000 and will require installation costs of $10,000. Similar machines have a ten-year life, and management has estimated that this sorter will.
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8.The Cal-Fruit Company specializes in decorative fruit baskets. Currently, the company is analyzing purchase alternatives for a fruit-polishing machine. Data relevant to the decision are as follows: Machine AMachine B Cost$90,000$82,000 Useful life5 years5 years Residual value$2,000$3,000 Estimated annual net cash flows$35,000$30,000 Present value multipliers at 12 percent: Dollar received at the end of five years.567 Dollar received.
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81.Using a market transfer price would cause the selling division manager to sell directly to an outside customer rather than transferring goods to a buying division manager. 82.The weakness of the cost-plus pricing method is that cost recovery is guaranteed to the selling division. 83.Overall company profits are rarely affected if a.
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11.Dun & Bradstreet publishes a.data on average ratios and relationships. b.credit ratings of companies. c.data on industry norms. d.all of these. 12.Within a few days of certain major events, a report must be issued by publicly held corporations to a.stockholders. b.the SEC. c.Dun & Bradstreet. d.creditors. 13.Publicly held corporations must file annual reports with the SEC. All such reports are.
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  SHORT ANSWER 1.Lightfoot, Inc., is an international shoe company that specializes in retailing medium-priced goods. Retail outlets are located throughout the world. Management wishes to create an image of giving the customer the most quality for the money spent. Selling prices are developed to attract customers away from competitors. End-of-the-month sales.
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TRUE/FALSE 1.It is in the best interests of a company to base executive compensation on a single performance measure. 2.Per the Sarbanes-Oxley Act of 2002, a compensation committee, comprised of a public corporation's top executives, must be established to determine the salaries and wages of its employees. 3.Per the Sarbanes-Oxley Act of 2002,.
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  SHORT ANSWER 1.Identify and describe three traits that differentiate management information systems (MIS) from traditional management accounting techniques. 2.The following statement appears in the annual report of Ryan, Inc., for the year ended January 1, 2008: “We are confident that our ever-increasing emphasis on customer service will enhance our reputation as the.
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51.Computing the target cost for a product is the first step in target costing. 52.When using traditional, cost-based pricing, the pricing decision is made before products have been put into production. 53.Committed costs are engineered into a product or service at the design stage of product development. 54.A target cost is an anticipated.
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11.An external issue to be considered when setting a price is a.the quality of competing products or services. b.the quality of materials and labor. c.a price geared toward a minimum return on investment. d.the total costs of the product or service. 12.Fixed costs that change for activity outside the relevant range would include a.supervision costs. b.electricity costs. c.production.
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12.You are given the following present value factors at 8 percent, the Tehachapi Glass Company's minimum desired rate of return: End of PeriodPresent Value of $1Present Value of an Annuity of $1 1.926.926 2.8571.783 3.7942.577 4.7353.312 5.6813.993 6.6304.623 The Tehachapi Glass Company is considering the replacement of a piece of equipment. The old machine has a carrying value.
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61.Days' payable is a measure of a.liquidity. b.volatility. c.long-term solvency. d.profitability. 62.The following information pertains to Jasmin Corporation. Assume that all balance sheet amounts represent both average and ending figures. Jasmin Corporation Partial Balance Sheet December 31, 20xx Liabilities and Stockholders' Equity Current liabilities$ 60,000 Long-term liabilities90,000 Stockholders' equity150,000 Total liabilities and stockholders' equity$300,000 Jasmin Corporation Income Statement For the Year Ended December 31, 20xx Net sales$80,000 Cost.
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41.The receivable turnover and inventory turnover ratios are used to analyze a.leverage. b.long-term solvency. c.profitability. d.liquidity. 42.Days' inventory on hand is used to analyze a.cash flow adequacy. b.liquidity. c.profitability. d.long-term solvency. 43.Which of the following describes the interest coverage ratio? a.Income before income taxes plus interest expense divided by interest expense b.Income after income taxes plus interest expense divided by interest expense c.Income.
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4.Travis Morgan is the chief accountant for Hill Industries. The company has three divisions that manufacture computer disk drives. The industry is very competitive, and Hill Industries has lost market share in each of the last four years. Three years ago, management announced a companywide restructuring and the adoption of.
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11.Internal failure costs and prevention costs make up the costs of conformance. 12.External failure costs are the costs incurred after the product is shipped or the service is delivered to the customer. 13.Cost control concerns have largely been replaced with concern for nonfinancial measures in JIT settings. 14.The key to good quality control.
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61.Target costing is a useful pricing tool because it allows the company to critically analyze the potential for success of a product before committing resources to its production. 62.Transfer prices are used for internal decisions and performance evaluation purposes and are not made known to the outside world. 63.A set of rules.
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21.In the new manufacturing environment, the point of sale and shipment of a product ends the management accountant's responsibility with respect to the product. 22.Service businesses cannot measure the quality of their work. 23.Benchmarking and process mapping are two methods to measure quality. 24.Quality in manufacturing simply means a product has to be.
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31.A negotiated transfer price a.is one that is bargained for between the managers of the buying and selling divisions. b.would not be based on a product market price that has been reduced through bargaining by division managers. c.could never be used in an agreement based on standard costs and a profit margin. d.is usually.
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  MULTIPLE CHOICE 1.Executive officers' compensation is typically comprised of all of the following except a.incentive bonuses. b.declared dividends. c.stock option awards. d.annual base salaries. 2.Market strength refers most closely to the ability to a.survive for many years. b.pay bills when they fall due. c.earn a satisfactory net income. d.increase the wealth of stockholders. 3.The ability to pay bills when due and.
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  1.Does the existence of conglomerates make financial performance evaluation easier or more difficult? Why? 2.Lois Kent has owned and managed the operations of a small chain of sporting goods stores for the past two years. She has asked her administrative assistant to provide her with some annual reports of other companies.
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31.Internal reports on quality at the Acme Publishing Company generated the following information for the Trade Division for the first three months of the year: Total sales$1,000,000 Costs of quality: Prevention22,500 Appraisal47,000 Internal failure36,000 External failure64,000 Compute the costs of nonconformance as a percentage of total sales. a.12.0% b.5.4% c.1.3% d.10% 32.Which of the following specific measures of vendor quality would be.
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11.Focusing pricing objectives on sales growth can provide a measure of increasing market share as well as an incentive and target for managers for a period of time. 12.A manager may deviate from the four pricing rules if a specific short-term objective is being targeted. 13.Setting appropriate prices is one of the.
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11.CAD is a.a cost allocating decision. b.computer aided downtime. c.a computer-based engineering system. d.an organizational environment. 12.When a firm changes to a JIT operating and management philosophy, a.it attempts to increase the number of suppliers it has for each item it uses to ensure a reliable flow of materials into the production process. b.it seeks out the.
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  MULTIPLE CHOICE 1.The primary focus of a management information system is on the management of a.people. b.costs. c.activities. d.time. 2.Information captured by a management information system allows managers to do all of the following except a.determine accurate product or service costs. b.improve processes. c.provide timely feedback. d.satisfy all customer inquiries. 3.How does an ERP system differ from an MIS? a.The ERP system.
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31.A change in the company's auditors must be reported to the SEC within a few days of the change. 32.Vertical analysis will result in common-size statements. 33.Trend analysis requires the establishment of a base year for comparison purposes. 34.Vertical analysis is the same as common-size analysis. 35.Horizontal analysis will reveal the percentage of net.
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7.Management of Mountain Berry Industries has just decided to employ a set of transfer prices for intracompany transfers between departments. The objective is to include return on assets as part of the performance evaluation of managers of the various cost centers. Data from the Molding Department for the past six.
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16.San Joaquin Manufacturing Company specializes in the production of precision tools. Management is in the process of selecting a new drill press. The press under consideration will cost $180,000 plus necessary installation charges of $25,000. Past experience indicates that the press will last for ten years and should have a.
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TRUE/FALSE 1.Many traditional management information systems do not produce meaningful results for today's business environment. 2.Traditional management information systems focus on financial reporting. 3.A management information system can be designed to support many different types of management philosophies. 4.The primary focus of a management information system is management of costs. 5.A management information system is.
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41.Return on assets pricing has the same objective as gross margin pricing for the price determination process. 42.Because a business should have as its primary objective the earning of a minimum rate of return on assets, the return on assets pricing method has a great deal of appeal and support. 43.For the.
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21.Most companies issue interim financial statements to the public on a monthly basis. 22.Interim financial statements report data for a period of more than one year. 23.One of the main parts of an annual report of a publicly held corporation is the five- to ten-year projection. 24.Reports made to the SEC by public.
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TRUE/FALSE 1.The long-term objectives of a company need not include statements concerning pricing policy. 2.A company that produces standard items for a competitive market should have the same pricing strategies as a company that makes unique items custom-designed for its customers. 3.A company producing custom-designed products for its customers can be more conservative.
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  MULTIPLE CHOICE 1.An example of a pricing objective is to a.have prices that top the market. b.maintain or gain market share. c.maximize losses. d.minimize quality and cost. 2.An example of a pricing objective is to a.ignore long-term pricing strategies in favor of short-term profits. b.increase market share irrespective of the cost of a product. c.maintain a price that is.
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71.The concept of transfer pricing is widely accepted because of its ability to assist in performance evaluation of managers in a company with decentralized divisions. 72.Transfer pricing can create problems if a company division can purchase inputs outside of the company at a price lower than the internal transfer price from.
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31.In a common-size financial statement, a designation of 25 percent could not be given to a.total stockholders' equity. b.net revenues. c.net earnings. d.total current assets. 32.Ratios are most useful in identifying a.causes. b.differences. c.relationships. d.trends. 33.A common measure of liquidity is a.profit margin. b.receivable turnover. c.return on assets. d.asset turnover. 34.A common measure of profitability is the a.asset turnover. b.debt to equity ratio. c.current ratio. d.receivable turnover. 35.A common measure.
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21.The pricing method that establishes selling prices based on a stipulated rate above total production costs is a.return on assets pricing. b.target cost pricing. c.gross margin pricing. d.time and materials pricing. 22.The pricing method that is used primarily by service businesses is a.return on assets pricing. b.gross margin pricing. c.target cost pricing. d.time and materials pricing. 23.The pricing method that.
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3.Lethal Industries has recently patented a new product called MaxiDrive, an automobile oil for maximum engine performance. The following annual information was developed by the company's controller for use in price determination: Variable production costs$1,860,000 Fixed overhead620,000 Selling expenses420,000 General and administrative expenses230,000 Desired profit342,000 Annual demand for the product is expected to be 500,000 quarts..
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21.Erin Stover has been appointed chief accountant for Dancer Industries. The company has three divisions that manufacture floor tiles. The industry is very competitive, and Dancer Industries has lost market share in each of the last four years. Three years ago, management announced a companywide restructuring and the adoption of.
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5.The Mahola Company operates as three autonomous divisions. Each division has a general manager in charge of product development, production, and distribution. Management recently adopted total quality management and the divisions now track, record, and analyze their costs and nonfinancial measures of quality. All three divisions are competing in a.
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11.Financial statement analysis can be both past- and future-oriented. 12.The use of rule-of-thumb measures is not an exact science and should be used with great care. 13.Rule-of-thumb measures are the best standards of comparison in financial performance evaluation. 14.A limitation of using industry norms in financial performance evaluation is that some companies in.
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9.Seven years ago, Jared Singh formed the Singh Corporation and began producing computer equipment for home use. Because of the highly technical and competitive nature of the industry, Singh established a research and development division that is responsible for continuous evaluation and updating of critical electronic parts used in all.
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21.The ability to set the one perfect price will never be achieved because there will always be changes in circumstances that will justify a different price. 22.Economic theory indicates that as you market a product, price reductions will have to be made to sell additional units. 23.Under microeconomic theory, total revenue will.
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51.Days' payable measures the relative size of accounts payable. 52.Asset turnover is most closely associated with a company's liquidity position. 53.Both profit margin and asset turnover affect a company's return on assets. 54.The cash flow yield equals net income divided by net cash flows from operating activities. 55.Declining profitability and liquidity ratios are indications.
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21.In a common-size income statement for a retail store, the 100 percent amount is for a.net revenues. b.cost of goods sold. c.gross profit. d.net income. 22.In a common-size balance sheet for a retail store, the 100 percent amount is for a.merchandise inventory. b.total property, plant, and equipment. c.total assets. d.total current assets. 23.In a trend analysis, an index number of.
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5.Regal Kitchens, Inc., is considering the production of a new kitchen vent system. The Marketing Department has determined that there would be demand for the product at or below a selling price of $150 per unit. Anticipated unit costs are as follows: Direct materials$26.00 Direct labor costs Manufacturing Hours2.2 Hourly rate$12.00 Assembly Hours2.5 Hourly rate$10.00 Machine hours2 Regal uses the.
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6.The following data have been gathered for a capital investment decision. The amounts relate to a 14 percent discount factor.   End of PeriodPresent Value of $1Present Value of an Annuity of $1 1.877.877 2.7691.646 3.6752.321 4.5922.913 5.5193.432 6.4563.888 a. Compute the present value of the following cash flows. Use a discount rate of 14 percent. Year 1$40,000 Year 260,000 Year 350,000 Year.
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6.Linda Klein is the chief accountant for Hogan Industries. The company has three divisions that manufacture wind velocity gauges. The industry is very competitive, and Hogan Industries has lost market share in each of the last four years. Three years ago, management announced a companywide restructuring and the adoption of.
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10.The Pink Thai Restaurant is considering the purchase of a second oven that would accommodate its new take-out business. The oven would cost $17,000, have an estimated $5,000 residual value, and would be kept for six years. Annual net cash inflows would increase by $3,960. Pink Thai uses the straight-line.
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