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Study Resources (Accounting)

21) Landmark Company is considering an investment in new equipment costing $360,000. The equipment will be depreciated on a straight-line basis over a five-year life and is expected to generate net cash inflows of $70,000 the first year, $80,000 the second year, and $120,000 every year thereafter until the fifth.
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  Learning Objective 22-1 1) Budgeting is a technique that is used to plan for future cash inflows and outflows. 2) A goal of the budgeting process is to assist managers with coordinating and implementing the business plan. 3) Budgets provide benchmarks that help managers evaluate performance. 4) A goal of the budgeting process.
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  Learning Objective 23-1 1) A static budget is prepared for one level of sales volume. 2) A favorable variance reflects an increase in operating income. 3) A variance is the difference between an actual amount and a budgeted amount. 4) Flexible budgets are budgets that summarize cost and revenue information at various volume.
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Learning Objective 24-2 1) Performance evaluation systems provide top management with a framework for maintaining control over the organization. 2) Companies benchmark their performance against the performance of their competitors and also against their own past performance. 3) Decentralization increases the difficulty of achieving goal congruence among managers. 4) If a manager's performance.
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31) Simms Manufacturing is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $620,000 $400,000 Useful life 8 years 8 years Estimated annual net cash inflows for 8 years $130,000 $80,000 Residual value $0 $0 Depreciation method Straight-line Straight-line Discount rate 9% 10% What is the net present value of Proposal X, taking into consideration the initial outlay and the subsequent cash inflows? Present Value of an Annuity.
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21) Felton Manufacturing provides the following data excerpted from its 3rd quarter budget: Jul Aug Sep Cash collections $50,000 $40,000 $48,000 Cash payments:    Purchases of inventory 31,000 22,000 18,000    Operating expenses 12,000 9,000 11,600    Capital expenditures 0 25,000 0 The cash balance at June 30 is projected to be $4,000.  Based on the above data, how.
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11) The payback method and the rate of return method are powerful, comprehensive evaluation tools, and would normally be sufficient to make a final investment decision. 12) Which of the following methods ignores the time value of money? A) Payback B) Internal rate of return C) Return on assets D) Net present value 13) Which capital.
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11) Craig Manufacturing Company's budgeted income statement includes the following data: Data extracted from budgeted income statement Mar Apr May Jun Sales $120,000 $90,000 $95,000 $100,000 Commission exp. - 15% of sales 18,000 13,500 14,250 15,000 Salary exp 30,000 30,000 30,000 30,000 Miscellaneous expense — 4% of sales 4,800 3,600 3,800 4,000 Rent expense 3,600 3,600 3,600 3,600 Utility expense 1,900 1,900.
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11) Manufacturing companies that use standard costs do NOT need to compute inventory cost based on LIFO, FIFO, or weighted average. 12) Price Variance = (Actual Price x Actual Quantity) - (Standard Price x Standard Quantity). 13) Efficiency Variance = (Standard Price x Actual Quantity) - (Standard Price x Standard Quantity). 14) The.
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Learning Objective 22-3 1) Budgeted operating expenses for the current year include the expiration of insurance that was paid for in a previous period. 2) A department store has budgeted cost of sales of $36,000 for its men's suits in March.  Management also wants to have $15,000 of men's suits in.
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11) Onyx Company prepared a static budget at the beginning of the month.  At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology.  Data are as follows: Static budget:Sales volume: 1,000 unitsPrice: $70 per unit Variable expense:  $32 per unitFixed expenses:  $37,500 per month Operating.
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31) Western Outfitters Mountain Sports projected 2011 sales of 75,000 units at a unit sale price of $12.00. Actual 2011 sales were 72,000 units at $14.00 per unit.  Variable costs were budgeted at $4.00 per unit; actual amount was $4.75 per unit.  Budgeted fixed costs totaled $375,000 while actual fixed.
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21) Compound interest used in discounted cash flow calculations assumes that companies will reinvest future cash flows when they are received. 22) Which of the following is TRUE of discounted cash flow methods like NPV and IRR? A) They use simple interest calculations. B) They assume that cash flows will be reinvested when.
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Learning Objective 22-6 1) One of the key functions of responsibility accounting is to evaluate the performance of company managers and the units they manage. 2) Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions?Construction, Manufacturing, and Military.  The total monthly.
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31) Liam O'Connor is responsible for managing the residential construction division of a large diversified real estate development company. Liam's business unit would most accurately be described as a(n): A) cost center. B) revenue center. C) profit center. D) investment center. 32) John McGee is responsible for managing the Midwest sales region of a home.
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Learning Objective 23-4 1) For standard costing methodology, good business practices would emphasize using unfavorable variances as a way of assigning blame to the responsible managers, and favorable variances as a way of rewarding managers. 2) When a company is using standard costs, a favorable variance is a definite indication that.
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11) Faas Marine Stores Company manufactures decorative fittings for luxury yachts which require highly skilled labor, and special metallic materials.  Faas uses standard costs to prepare its flexible budget.  For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows: Materials:  .
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Learning Objective 23-6 1) Atlantic Manufacturing Company uses standard costing methodology in their journal entries and accounts.  Standards for direct materials are as follows: Pounds per unit2.0Price per pound$5.00 Atlantic plans to produce 3,000 units of product, and has just purchased 10,000 pounds of raw materials for a net cost of $48,000. .
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21) Bartholomew Manufacturing Company is preparing the operating budget for the first quarter of 2012. They forecast sales of $50,000 in January, $60,000 in February, and $70,000 in March.  Cost of goods sold is budgeted at 40% of Sales. Variable and fixed expenses are as follows: Variable:Miscellaneous expenses : 20% of.
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Learning Objective 22-4 1) The budgeted cash collections for the current month typically take into consideration collections pertaining to credit sales of prior months. 2) The cash budget can be prepared before the sales budget. 3) The cash budget may be used to determine whether a company will need additional financing for.
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11) If $5,000 is invested in an account with 7% interest compounding yearly, what will the balance of the account be after 3 years?  Please refer to the following Future Value table: Future Value of $1 4% 5% 6% 7% 1 1.040 1.050 1.060 1.070 2 1.082 1.103 1.124 1.145 3 1.125 1.158 1.191 1.225 4 1.170 1.216 1.262 1.311 5 1.217 1.276 1.338 1.403 6 1.265 1.340 1.419 1.50 A) $6,180 B) $6,211 C) $5,867 D) $6,125 12) If $1,000 is invested in an account with 9% interest compounding.
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11) Alpine Productions uses a standard costing system for recording transactions; they also prepare an internal-use income statement using standard cost methodology.  At the end of 2011, Alpine reported the following data: Sales revenues:$500,000 Cost of goods sold (standard costing)$382,500 Marketing & admin expenses$105,000 Variances: Sales revenue $4,000 F Direct materials price variance 20 U Direct materials efficiency variance 300.
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Learning Objective 23-2 1) The sales volume variance is the difference between the static budget and the flexible budget amounts, and is caused by actual sales volume being different than budgeted sales volume. 2) Which of the following BEST describes sales volume variance? A) Difference between actual amounts and the flexible budget.
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21) A company is analyzing month-end results compared to both static and flexible budgets.  This month the actual sales volume was lower than projected in the static budget. What kind of variance would that produce? A) Unfavorable flexible budget variance for variable expenses B) Unfavorable sales volume variance for variable expenses C) Unfavorable.
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11) Allbrand Company uses standard costs for their manufacturing division. Standards specify 0.1 direct labor hours per unit of product.  At the beginning of the year, the static budget for variable overhead costs included the following data: Production volume:  5,000 units Estimated variable overhead costs:$12,500 Estimated direct labor hours:500 hours At the end of.
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41) At June 30, 2012, Alpha Company's cash balance is $4,000.  Alpha is now preparing their cash budget for the third quarter of 2012.  The following data is provided: Cash budget Jul Aug Sep Beginning cash balance $4,000 $8,000 $6,958 Cash collections 50,000 40,000 48,000 Cash available 54,000 48,000 54,958 Cash payments:    Purchases of inventory 31,000 22,000 18,000   .
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51) Pentangle Company has prepared a preliminary cash budget for the 3rd quarter as shown below: Cash Budget Jul Aug Sep Beginning cash balance $32,000 $4,400 $6,900 Cash collections 49,400 51,000 44,600 Cash available 81,400 55,400 51,500 Cash payments:    Purchases of inventory 36,000 9,000 11,000    Operating expenses 41,000 30,500 30,900    Capital expenditures 0 9,000 7,700 Total cash payments $77,000 $48,500.
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61) AAA Company is preparing its 3rd quarter budget and provides the following data: Jul Aug Sep Cash collections $50,000 $40,000 $48,000 Cash payments:    Purchases of inventory 31,000 22,000 18,000    Operating expenses 12,000 9,000 11,600    Capital expenditures 0 19,000 0 Cash balance at June 30 is projected to be $4,000.  The company is required to maintain.
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21) Billy Pierce invests $8,000 at the end of each year for 5 years at 6%.  What is the future value of the investment? Future Value of an Annuity of $1 4% 5% 6% 7% 8% 9% 1 1.000 1.000 1.000 1.000 1.000 1.000 2 2.040 2.050 2.060 2.070 2.080 2.090 3 3.122 3.153 3.184 3.215 3.246 3.278 4 4.246 4.310 4.375 4.440 4.506 4.573 5 5.416 5.526 5.637 5.751 5.867 5.985 6 6.633 6.802 6.975 7.153 7.336 7.523 7 7.898 8.142 8.394 8.654 8.923 9.200 8 9.214 9.549 9.897 10.26 10.64 11.03 9 10.58 11.03 11.49 11.98 12.49 13.02 10 12.01 12.58 13.18 13.82 14.49 15.19 A) $45,096 B) $51,008 C) $49,599 D) $47,523 22) If Billy Pierce invests $1,000 at the end of each year for 8 years, and he.
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21) Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions-Construction, Manufacturing, and Military.  The Construction Division has been allocated a total of $192,000 of costs from the procurement department.  Of that amount, 75% is considered traceable to the three product.
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41) Please review the information on 4 potential investments: Project A Project B Project C Project D Initial investment $200,000 $250,000 $300,000 $90,000 PV of cash inflows $285,000 $295,000 $420,000 $94,000 Payback period (years) 7.2 6.0 9.5 2.0 NPV of project $85,000 $45,000 $120,000 $4,000 Profitability index 1.43 1.18 1.40 1.04 Based on the above data, which project carries the.
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11) If an operating division or a product line of a company was eliminated, which of the following statements would be TRUE? A) Traceable fixed costs would be eliminated. B) Untraceable fixed costs would be eliminated. C) Variable costs of the product would continue, but be reallocated elsewhere. D) Traceable fixed costs would continue,.
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  Learning Objective 24-1 1) When a small company grows to a large size, it may decide to decentralize because it is difficult for one owner (or manager) to manage an entire, large business. 2) Small companies tend to use centralized decision-making because of the smaller scope of their operations. 3) Companies that.
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31) Purchases for May were $100,000, while expected purchases for June and July are $110,000 and $125,000, respectively.  All purchases are paid 25% in the month of purchase and 75% the following month.  At what amount are June payments for purchases budgeted? A) $102,500 B) $107,500 C) $110,000 D) $121,250 32) Hatfield Company has the.
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Learning Objective 22-2 1) The capital expenditure budget is part of the operating budget. 2) The master budget includes 3 components-the operating budget, the capital expenditures budget and the financial budget. 3) The production budget must be prepared before any other component of the operating budget. 4) The capital expenditure budget stands alone.
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Learning Objective 21-3 1) If Teddy Godfried invests $400,000 today at a rate of 9% compounding yearly, his investment will grow to $1,000,000 in 10 years. Future Value of $1 4% 5% 6% 7% 8% 9% 1 1.040 1.050 1.060 1.070 1.080 1.090 2 1.082 1.103 1.124 1.145 1.166 1.188 3 1.125 1.158 1.191 1.225 1.260 1.295 4 1.170 1.216 1.262 1.311 1.360 1.412 5 1.217 1.276 1.338 1.403 1.469 1.539 6 1.265 1.340 1.419 1.501 1.587 1.677 7 1.316 1.407 1.504 1.606 1.714 1.828 8 1.369 1.477 1.594 1.718 1.851 1.993 9 1.423 1.551 1.689 1.838 1.999 2.172 10 1.480 1.629 1.791 1.967 2.159 2.367 2) Simms Manufacturing is considering two alternative investment proposals with the following data: Proposal X Proposal Y Investment $620,000 $400,000 Useful life 8 years 8 years Estimated annual net cash inflows.
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58) Craig Manufacturing Company's budgeted income statement includes the following data: Data extracted from budgeted income statement Mar Apr May Jun Sales $120,000 $90,000 $95,000 $100,000 Commission expense - 15% of sales 18,000 13,500 14,250 15,000 Salary exp 30,000 30,000 30,000 30,000 Miscellaneous expense — 4% of sales 4,800 3,600 3,800 4,000 Rent expense 3,600 3,600 3,600 3,600 Utility expense 1,900 1,900.
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21) The following information describes a company's usage of direct labor in a recent period: Actual direct labor hours used 44,000 Actual rate per hour $20 Standard rate per hour $18 Standard hours for units produced 42,000 How much is the direct labor efficiency variance? A) $40,000 unfavorable B) $40,000 favorable C) $36,000 favorable D) $36,000 unfavorable 22) The following information describes a company's.
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Learning Objective 23-5 1) When completing a standard costing income statement, favorable variances for direct materials or direct labor will go to reduce the "cost of goods sold at standard cost." 2) When completing a standard costing income statement, unfavorable variances for direct materials or direct labor will go to reduce.
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11) Portobello Company prepared the following static budget for the coming month:   Static Budget Units/volume 5,000 Per Unit Sales revenue $3.00 $15,000 Variable expenses $1.80 9,000 Contribution margin 6,000 Fixed expenses 5,000 Operating income/(loss) $1,000 If a flexible budget was prepared at a volume of 6,000, how much would the operating income be? A) ($200) B) $500 C) $2,200 D) $1,000 12) Ibis Company.
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11) Which of the following describes the operating expenses budget? A) It aids in planning to ensure the company has adequate inventory on hand. B) It captures the variable and fixed expenses of the business. C) It depicts the breakdown of sales based on terms of collection. D) It helps in planning to ensure.
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11) A product line at Coca-Cola is most likely treated as a(n): A) cost center. B) revenue center. C) profit center. D) investment center. 12) Which of the following is a cost center? A) A company's legal department B) A company's sales department C) A product line of a particular company D) A company's individual stores 13) Which of the.
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