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Study Resources (Accounting)

101) The Deerfield Company has annual productive capacity of 60,000 units per year.  Budgeted operating results for 2006 are as follows: Revenues (50,000 units @ $10)$500,000 Variable costs: Manufacturing (50,000 @ $3.20)$160,000 Selling (50,000 @ $0.80)    40,000  200,000 Contribution margin$300,000 Fixed costs: Manufacturing100,000 Selling and administrative    80,000  180,000 Operating income$120,000 A wholesaler from another country wants to buy 5,000 units.
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82) The tax rate paid on additional amounts of pretax income. 83) The process of determining which long-term capital assets to acquire. 84) Future cash flows expressed in present value terms. 85) The factor used to convert  future cash flow to its present value. 86) The value that will accumulate by the end of.
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Beta Company has the following information: Number of Years         5              10               15       Amount of annual cash inflow $8,000 (c) $ 4,200 Required initial investment (a) $100,000 $32,000 Internal rate of return 8 percent 10 percent (e) Minimum desired rate of return 10 percent (d) 8 Percent Net present value (b) $ 5,200 (f) 21) What is (a)? A) $31,944 B) $30,328 C) $11,747 D) $12,882 22) What is (b)? A) $-0- B) $(1,616) C).
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108) DOCA Corp. is considering the following two capital projects: Machine AMachine B Cost$200,000$150,000 Additional annual revenues$220,000$  80,000 Additional annual cash expenses$140,000$  30,000 Terminal salvage value-0--0- Required after-tax rate of return10%10% Useful life of machine5 yrs.5 yrs. Appropriate tax rate25%25% CCA class9(25%)9(25%) Additional data (for interest rate of 10 percent, 5 periods): Present value of $10.6209 Future value of $11.6105 Present value of annuity.
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81) The predicted future costs and revenues that will differ among alternative courses of action. 82) Any method of making a choice, sometimes requiring elaborate quantitative procedures. 83) Costs that will not continue if an ongoing operation is changed or deleted. 84) Costs that continue even if an operation is halted. 85) The item.
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1) A budget is a formal, quantitative expression of plans that provides a benchmark against which to measure actual performance. 2) A capital budget is a periodic business plan that includes a coordinated set of detailed operating schedules and financial statements. 3) An operating budget is the major part of a master.
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56) The total cash collections in July will be A) $140,000. B) $126,000. C) $80,000. D) $66,000. 57) The total cash collections in August will be A) $180,000. B) $100,000. C) $165,000. D) $ 85,000. 58) The total cash received in June on June sales will be A) $ 70,000. B) $100,000. C) $ 86,000. D) $ 46,000. 59) The total cash received in May.
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1) Opportunity cost is the maximum available contribution to profit foregone by using limited resources for a particular purpose. 2) An outlay cost is a cost that requires a cash disbursement. 3) All fixed costs are irrelevant and only variable costs are relevant to the decision-making process. 4) Make-or-buy decisions can apply to.
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36) The second step in preparing the master budget is preparing the A) sales budget. B) budgeted income statement. C) cash budget. D) budgeted balance sheet. 37) The last step in preparing the financial budget is preparing the A) budgeted income statement. B) cash budget. C) budgeted balance sheet. D) sales budget. 38) Expenses that are NOT influenced by sales.
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61) Which of the following statements about depreciation is TRUE? A) The tax effects of depreciation are not adjusted for inflation. B) The tax effects of depreciation must be adjusted for inflation. C) Canadian tax laws allow for inflation adjustments to depreciation each year. D) Capital investment is encouraged by not allowing depreciation to.
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99) Drost, Inc. has budgeted sales of $150,000 with the following budgeted costs: Direct materials$31,500 Direct labour20,500 Factory overhead: Variable18,500 Fixed28,000 Selling and administrative expenses: Variable12,000 Fixed16,000 Compute the average target profit percentage for setting prices as a percentage of: a.Prime costs. b.Total costs. c.Total variable costs. d.Variable manufacturing costs. e.Total manufacturing costs. 100) Ellson Corp. has budgeted sales of $487,500 with the following budgeted.
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36) Which of the following statements regarding special order decisions is false? A) A fixed-cost element of an identical amount that is common among all alternatives is essentially irrelevant. B) Fixed cost per unit is equal to total fixed costs divided by a selected volume level. C) The contribution approach offers more detailed.
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112) A capital investment project requires an investment of $50,000 and has an expected life of four years.  Annual cash flows at the end of each year are expected to be as follows: YEARAMOUNT 1$15,000 220,000 325,000 415,000 a. Compute the payback period assuming that the cash flows occur evenly throughout the year. b. Determine the accounting.
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84) A relevant costing analysis that focuses on whether a component should be made internally or purchased externally. 85) A relevant costing analysis that focuses on whether a product should be processed beyond the split-off point. 86) The point where products become distinguishable after passing through a common process. 87) A relevant costing.
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94) The juncture in manufacturing where the joint products become individually identifiable. 95) Any costs beyond the split-off point. 96) The costs of manufacturing joint products prior to the split-off point. 97) The periodic cost of equipment which is spread over the future periods in which the equipment is expected to be used. 98).
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110) The Malloy Corporation is contemplating the replacement of some old equipment. The pertinent information is as follows: Replacement Old Equipment  Equipment  Original cost$36,000$30,000 Useful life in years106 Current age in years40 Book value$24,000- Disposal value now$17,500- Disposal value in 6 years00 Annual cash operating costs$   9,000$   5,500 Required: Prepare a cost comparison of all relevant items for the.
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102) The Tippett Company manufactures two products, 12-07 and 19-01.  Contribution margin per unit is determined as follows: 12-0719-01 Revenue$25$20 Variable costs1512 Contribution margin$10$  8 Total demand for 12-07 is 5,000 units and for 19-01 is 10,000 units. Direct labour is a scarce resource.  40,000 direct labour hours are available during the year.  Product 12-07 requires.
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106) The annual income statement of ZAP Inc. shows the following items: Sales$800,000 Total expenses (excluding amortization)$560,000 Amortization$160,000 Average income tax rate20 percent Capital Cost Allowance$140,000 Required: Compute the following amounts (ignore present value considerations): a.Net after-tax accounting income b.Total net after-tax cash inflow from operations 107) The owner of a construction company is contemplating possible purchase of new.
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Below are two potential investment alternatives: Case X Case Y Initial capital investment $120,000 $180,000 Estimated useful life          3 yrs.           3 yrs. Estimated terminal salvage value           -0-           -0- Estimated annual savings in cash operating costs $ 50,000 $ 80,000 Minimum desired rate of return 10 percent    12 percent PV of $1 (3 years) PV of an Annuity of $1 (3 years)    8 percent 0.7938 2.5771 10.
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91) Radke, Inc. gathered the following information regarding its one and only product: Direct materials used$14,000 Direct labour24,000 Variable factory overhead28,000 Fixed factory overhead18,000 Variable selling and administrative expenses30,000 Fixed selling and administrative expenses16,000 Units produced and sold5,000 Selling price per unit$30 Required: a.Compute the unit manufacturing cost of the product under the   absorption approach. b.Compute the unit manufacturing cost of.
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46) Assuming Eagan Company can increase the selling price of product B to  $21,000, all other information remaining constant, operating income  will A) decrease $ 2,000. B) decrease $ 6,000. C) increase $21,000. D) increase $ 2,000. 47) The item that restricts or constrains the production or sale of a product or service is the A).
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111) A capital investment project requires an investment of $200,000.  It has an expected life of 5 years with annual cash flows of $50,000 received at the end of each year. a. Compute the payback period for the project. b. Determine the accounting rate of return for the project based on the.
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116) Lawton Co. is evaluating a project that requires an investment of $400,000. The company plans to dispose of the property at the end of the fourth year for $121,620. Information about cash flows associated with the project is as follows: Annual revenues$250,000 Annual operating costs$100,000 All cash flows occur at the end.
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31) Assume straight-line amortization in all computations, and ignore income taxes. The internal rate of return in case Y is approximately A) 10 percent. B) 12 percent. C) 14 percent. D) 16 percent. Below are two potential investment alternatives: Case X Case Y Initial capital investment $120,000 $180,000 Estimated useful life          3 yrs.           3 yrs. Estimated terminal salvage value           -0-           -0- Estimated annual savings.
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66) The total of all manufacturing costs plus the total of all selling and administrative costs is equal to A) marginal cost. B) target cost. C) full cost. D) contribution cost. 67) All of the following represent a popular markup formula for pricing EXCEPT A) as a percentage of fixed costs. B) as a percentage of variable.
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56) The costs of manufacturing joint products after the split-off point are referred to as A) joint costs. B) outlay costs. C) opportunity costs. D) separable costs. 57) Which of the following is NOT an example of a joint product? A) Sponges B) Chemicals C) Lumber D) Meat packing 58) Two or more manufactured products that have relatively significant sales.
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97) Mudd Corp. manufactures two styles of table lamps, Gold and Silver.  The following data is available: Gold Silver Selling price per unit$50$70 Variable cost per unit$34$46 Machine hours required1.63 Total fixed costs$60,000 Mudd can sell a maximum of 10,000 units of each style of lamp.  Machine hour capacity is 25,000 hours per year. Required: a.Which lamp has.
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92) Any capital budgeting model that explicitly considers the time value of money in identifying criteria for accepting or rejecting proposed projects. 93) The rate of return used to compute the present value of future cash flows. 94) The rate of return that equates the present value of a project's cash inflows.
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46) Once product M is produced, processing it further will cause profits to A) increase by $160,000. B) decrease by $ 80,000. C) decrease by $160,000. D) increase by $ 80,000. 47) Product L A) should be processed further to increase profits by $130,000. B) should be sold at split-off since processing further would only reduce profits.
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106) Knight, Inc. produces three products using a joint process which requires $115,000 in joint costs. The products A, B and C can be sold at split-off or processed further and then sold. The production level for each product is 8,000 units. The following unit information is also available: Separable Processing Sales ValueCosts.
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113) The Quast Company is considering a capital investment project that requires an investment of $37,910.  The project is expected to have annual cash inflows of $10,000 occurring at the end of each of the next five years. a. Determine the internal rate of return for the project. b. Determine the net.
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95) Muench Company has three departments.  Data for the most recent year is presented below:      M        L        B   Sales$2,000$1,000$400 Variable expenses640260170 Fixed expenses: Unavoidable46026060 Avoidable580520270 Required: a.Compute the operating income of the company. b. Compute the contribution margin and operating income of each department. c.Should any department(s) be eliminated? Which one(s) and why? 96) Morrow, Inc..
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104) Swenson Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of  10,000 units of this part are as follows: Direct materials$ 100,000 Direct labour170,000 Variable factory overhead300,000 Fixed factory overhead  250,000 $820,000 Of the fixed factory overhead costs, $35,000 is avoidable. Required: a.Assuming there is.
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26) An example of a financial budget is a(n) A) sales budget. B) cash budget. C) purchases budget. D) budgeted income statement. 27) Which of the following is a major part of the master budget that focuses on the income statement and its supporting schedules? A) Operating budget B) Financial budget C) Cash budget D) Capital budget 28) Which of.
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71) The cost of capital for the firm is A) 8%. B) 6%. C) 10%. D) 12%. 72) Using the cost capital as the discount rate, the net present value of the project is A) $89,360. B) $108,480. C) $114,680. D) $228,180. 73) The approximate internal rate of return of the project is A) 8%. B) 12%. C) 12.5%. D) 14%. 74) Miller Manufacturing has.
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46) The desired ending inventory for July is A) $39,000. B) $42,250. C) $21,000. D) $31,000. 47) The total purchases budgeted for June should be A) $204,750. B) $164,125. C) $162,500. D) $ 87,500. 48) The total purchases budgeted for July should be A) $169,000. B) $208,000. C) $165,750. D) none of the above. Ogden Manufacturing Company has the following information: Month Budgeted Sales January $190,000 February 212,500 March 230,000 April 197,500 Budgeted Expenses per.
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16) Decisions made during long-range planning include all of the following EXCEPT A) addition or deletion of product line. B) design and location of new plants. C) acquisitions of buildings and equipment. D) acquisition of office supplies. 17) Managers need budgets for all of the following reasons EXCEPT A) to guide them in allocating resources. B) to.
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114) The Serena Company is evaluating two mutually exclusive projects with three-year lives.  Each project requires an investment of $10,000.  The projects have the following cash inflows received at the end of each year. YEARPROJECT 1PROJECT 2 1$2,000$  6,000 24,0004,000 36,0002,000 TOTAL$12,000$12,000 a. Determine the net present value of each project using an 8% discount rate. b..
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56) The effect of price changes on sales volume is A) marginal revenue. B) price elasticity. C) maximization of profits. D) imperfect competition. 57) In perfect competition, the profit-maximizing volume is the quantity at which A) marginal cost equals marginal revenue. B) marginal revenue exceeds marginal cost. C) marginal revenue exceeds price. D) price exceeds marginal cost. 58) A firm.
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