Accounting Expert Answers & Study Resources : Page 319

5) The present value of tax savings from depreciation deductions from an accelerated depreciation method will be ________ those from the straight-line method. A) the same as B) greater than C) less than D) none of the above 6) Haworth Company is considering the purchase of a labor saving piece of equipment with the following.

11) Higher-level managers have the best information concerning local conditions. 12) Local managers in decentralized organizations tend to duplicate services that may be less expensive if centralized. 13) The costs of accumulating and processing information frequently decline under decentralization. 14) Managers in decentralized units may waste time negotiating with other units about goods.

6) A machine that costs $180,000 is expected to generate $40,000 in cost savings annually for five years. The terminal value at the end of five years is $10,000. Assume straight-line depreciation is used. Ignore income taxes. What is the payback period? A) 3.00 years B) 4.00 years C) 4.20 years D) 4.50 years 7).

11) Total quality management (TQM) ________. A) does not advocate high quality levels for all products B) is not used in the development of organizational goals C) promotes maximizing the cost of quality D) focuses on the prevention of defects and on the achievement of customer satisfaction 12) Inspection costs of incoming raw materials are.

2) In the net present value method, the disposal value of a long-term asset at the end of its useful life is considered to be a ________. A) cash outflow at time zero B) cash inflow at time zero C) cash outflow in the year of disposal D) cash inflow in the year of.

27) When determining a transfer price, outlay cost is often the variable cost for producing the item transferred. 28) In cases of constrained capacity, the opportunity cost of transferring a product internally is zero. 29) Dysfunctional decisions are decisions that conflict with organizational goals and objectives. 30) It is recommended that standard costs.

21) Using the net present value method, managers sum the present values of all expected future cash flows from the project and ________. A) add the initial investment B) subtract the initial investment C) ignore the initial investment D) add the depreciation expense 22) If the net present value of an investment project is positive,.

42) In general, use of economic profit or EVA will promote goal congruence and lead to better investment decisions than the use of ROI. 43) Possible definitions of invested capital for purposes of calculating return on investment include total assets and total stockholders' equity. 44) The proponents of gross book value for.

50) Hudson Company has two divisions. The following information is available: North Division      South Division Revenue for year$300,000$500,000 Operating income before taxes for year$100,000$90,000 Average invested capital for year$100,000$200,000 Invested capital at end of year$200,000$300,000 Tax rate30%30% After-tax cost of capital for year20%15% Required: 1. Using operating income after taxes as the income measure, compute the following for each division: A) Return.

7) If a selling segment has excess capacity, the opportunity cost of selling a product internally equals ________. A) the variable costs of producing the product B) the contribution margin the producing segment could have received from selling in the external market rather than the internal market C) the variable costs plus the.

2) ________ costs provide evidence about a manager's performance. ________ costs do not provide evidence about a manager's performance. A) Allocated; unallocated B) Controllable; uncontrollable C) Uncontrollable; controllable D) Allocated; third party 3) Which of the following statements about responsibility centers is FALSE? A) Responsibility centers usually have one goal. B) Management control systems monitor responsibility center.

25) When undertaking a capital budgeting problem with taxes, the total cash effect of depreciation expense on a long-term asset is equal to ________. A) $0 B) depreciation expense times the tax rate C) depreciation expense times (1 minus the tax rate) D) depreciation expense divided by the tax rate 26) Levine Company will purchase.

7) A plant asset with a book value of $200,000 is sold for $150,000. The applicable tax rate is 40%. What is the tax effect of the loss on sale? A) $20,000 cash outflow B) $20,000 cash inflow C) $30,000 cash inflow D) $170,000 cash inflow 8) The cash inflow from the sale of a.

31) The net present value of a project is zero. The minimum desired rate of return used to obtain the net present value of zero is 8%. Which of the following statements is TRUE? A) The project is desirable if the minimum desired rate of return is 10%. B) The project is.

15) A five year recovery period for a long-term asset means ________. A) the number of years it takes to recover the cost of a long-term asset B) the number of years a company expects to use a long-term asset C) the number of years a company can depreciate a long-term asset for.

  10.1   Questions 1) The concentration of decision-making authority only at the highest levels of the organization is called ________. A) management by objective B) balanced scorecard C) decentralization D) centralization 2) All of the following are disadvantages of decentralization EXCEPT for ________. A) Local managers make decisions that are not in the organization's best interests. B) Managers spend.

10.8   Questions 1) Multinational companies use transfer prices to minimize worldwide income taxes, ________ and ________. A) tariffs; financial restrictions imposed by U.S. government B) tariffs; import duties C) financial restrictions imposed by U.S. government; import duties D) foreign bribes; import duties 2) ABC Division is in the United States with high income tax rates. ABC.

40) The following data was obtained for a company that makes statues: Standard Inputs ExpectedStandard Price                     For Each Unit of Output              Per Unit of Input Direct material5 pounds$12 per pound Direct labor1.5 hours$12 per hour During the month of July, the company actually produced 1,000 statutes, which is 100 units less than expected. Direct material purchased.

7) The flexible budget variance for variable overhead costs is composed of a(n) ________ variance and a(n) ________ variance. A) efficiency; effective B) spending; rate C) quantity; efficiency D) spending; efficiency 8) The variable overhead efficiency variance depends on whether the quantity of the cost driver used is more or less than ________. A) the standard.

7) Which of the following statements about performance reports and variances is FALSE? A) They are most effective when managers use them positively to encourage employees to improve performance. B) When they are used negatively, employees will resist and undermine these techniques. C) These tools should be used to find weaknesses and deficiencies.

21) Which of the following statements about productivity is FALSE? A) Productivity is a measure of outputs divided by inputs. B) The fewer inputs needed to produce a given output, the more productive the organization. C) Inputs and outputs are difficult to measure. D) Productivity measures can be compared over time without making adjustments.

6) Financial performance measures are usually not included in a balanced scorecard. 7) Describe a balanced scorecard and identify the categories of key performance indicators advocated by Kaplan and Norton. 9.8   Questions 1) Management control systems in nonprofit organizations will probably never be as highly developed as those in profit-seeking firms. Which of.

  9.1   Questions 1) Elements of the planning and control process for a management control system do NOT include ________. A) measure, monitor and report B) plan and execute C) evaluate and reward D) feedback and control 2) Planning in the management control system does NOT include ________. A) defining goals B) establishing plans to achieve goals C) carrying out.

32) One cause of a flexible budget variance for direct labor may be a difference between standard and actual hourly wage rates for factory workers. 33) A quantity variance for direct materials measures the deviation between the quantity of inputs that should have been used to achieve the actual output and.

34) Property taxes on a building used by a segment are not considered when evaluating the performance of the segment manager. 35) Fixed costs not controllable by a segment manager usually include depreciation and property taxes on the building used by the segment. 36) When evaluating a segment manager, unallocated costs usually.

37) CIS Company has the following information available: Quality engineering of products$20,000 Technical support provided by CIS to suppliers$2,000 Cost of field servicing$80,000 Supervision of testing activities$30,000 Net cost of spoilage$55,000 Depreciation of testing equipment$4,500 Plant utilities in inspection area$100,000 Retesting of reworked products$200,000 Lost sales arising from a reputation for poor quality products$1,000,000 Reinspection of reworked products$44,000 Warranty replacements$3,000 Returns and.

4) When comparing projects using the total project approach, a manager should choose the project with the ________. A) smallest net present value B) largest net present value C) zero net present value D) largest differential net present value 5) The ________ approach computes the differences in cash flows between two alternatives and then finds.

12) Residual income is defined as ________. A) sales less operating expenses B) operating income divided by revenue C) net operating profit after tax less a capital charge D) net operating profit after tax 13) The following information pertains to the Vertigo Company: Total assets$150,000 Total current liabilities$110,000 Total expenses$70,000 Total liabilities$115,000 Total revenues$80,000 Return on sales equals ________. A) 12.5% B) 50.0% C).

3) Profit-center managers always have more decentralized decision-making authority than cost-center managers. 4) In designing management control systems, top managers should consider the system's impact on the behavior of employees. 10.3   Questions 1) Managers' incentives for performance are defined as the ________. A) relationship between cost and perceived benefit B) relationship between goal congruence and.

32) Return on investment equals operating income divided by investment. 33) Return on sales can be computed by multiplying return on investment by the capital turnover. 34) Return on investment equals return on sales divided by capital turnover. 35) Return on sales equals revenue divided by income. 36) Capital turnover equals revenue divided by.

9.6   Questions 1) Which of the following is NOT an appraisal cost for quality control? A) inspection and testing of purchased materials B) product quality audits C) maintenance of test equipment D) training program for material suppliers 2) Which of the following is NOT a prevention activity for quality control? A) improvements in production processes B) engineering analyses.

2) Julie Company's revenues for the year are $300 and average invested capital for the year is $240. Expenses are currently 50% of revenues. Julie Company's current return on investment is ________. A) 50% B) 62.5% C) 80% D) 100% 3) Maury Company's revenues are $300 for the year. Average invested capital for the year.

24) The following information is available for Halquist Stone Company and its two divisions, Crushed Stone and Fieldstone. WholeCrushed Company       Stone    Fieldstone Net sales$100,000$60,000$40,000 Fixed costs controllable by Division Manager16,50012,5004,000 Fixed costs controlled by others8,0005,0003,000 Variable costs: Cost of merchandise sold24,50017,5007,000 Operating expenses16,40010,0006,400 Unallocated costs1,000 What is the contribution controllable by the manager of the Crushed Stone Division? A) $20,000 B) $32,500 C) $35,000 D) $42,500 25) The.

  11.1   Questions 1) Investments of large amounts of cash in plant assets are called ________. A) cash outflows B) capital budgeting C) capital projects D) capital outlays 2) The most widely used capital budgeting models are ________. A) payback method B) accounting rate of return C) return on investment D) discounted cash flow methods 3) Which of the following statements is.

22) The following information pertains to Sanjay Company: Total assets$50,000 Total current liabilities$30,000 Total expenses$60,000 Total liabilities$45,000 Total revenues$100,000 Invested capital is defined as total assets. What is the capital turnover? A) 0.40 B) 0.63 C) 1.79 D) 2.00 23) The following information pertains to Kumperor Company: Average total assets$100,000 Total current liabilities$30,000 Total expenses$60,000 Total liabilities$35,000 Total revenues$80,000 Invested capital is defined as total assets. What.

31) Productivity is a measure of inputs divided by outputs. 32) Increased productivity can be shown by maintaining the number of inputs but increasing the number of outputs. 33) A measure of labor productivity is sales revenue divided by the number of employees. 34) When comparing productivity measures over time, changes in the.

4) Transfer prices are ________. A) revenues of the segment producing the transferred product B) costs of the segment acquiring the transferred product C) costs of the segment producing the transferred product D) revenues of the segment producing the transferred product and costs of the segment acquiring the transferred product 5) A transfer price exists.

11) Pennsylvania Company is considering two investments. The relevant data follows: Project A        Project B Cost$205,010$259,770 Annual cash savings (end of year)$50,000$60,000 Terminal salvage value$0$0 Estimated useful life in years55 Minimum desired rate of return10%10% Method of depreciationStraight-lineStraight-line Present ValuePresent Value Of $1of Ordinary for 5 periodsAnnuity of $1                                               for 5 periods 5%0.78354.3295 6%0.74734.2124 7%0.7134.1002 8%0.68063.9927 10%0.62093.7908 12%0.56743.6048 14%0.51943.4331 Ignoring taxes, the internal rate of return for Project A is.

35) Stanley Company has obtained the following information about a proposed project: Annual cash operating savings (excluding depreciation) for 5 years (end of year)$50,000 Depreciation expense per year for tax purposes$33,000 Estimated salvage value in 5 years$10,000 Cost of equipment$175,000 Required rate of return10% Income tax rate40% Estimated useful life (in years)5 Depreciation method for tax purposesStraight-line Present value of.

11) The purpose of performance measures is to set direction and to motivate managers. 12) The first and most basic component in a management control system is the employee's goals. 13) In the management control system, feedback and learning affect all elements of the system. 14) Measures of performance do not have to.

39) Shaley Company has two divisions and the following information available: a. Net sales were $130,000. $90,000 was attributed to the Jewel Division. b. Variable costs were $80,000. 40% was attributed to the Song Division. c. Total separable fixed costs controllable by division managers were $30,000, of which $20,000 applied to the Jewel.

50) Whitney Company is contemplating three different equipment investments. The relevant data follows: Proposal D      Proposal O     Proposal G Cost$200,000$300,000$830,000 Annual cash savings (end of year)$40,000$70,000$150,000 Terminal salvage value$10,000$5,000$20,000 Estimated useful life in years101010 Minimum desired rate of return12%12%12% Method of depreciationStraight-lineStraight-lineStraight-line The present value factor of an ordinary annuity of one for 10 periods at 12% is 5.6502. The present.

16) Bryant Company has obtained the following data about a possible planned investment: Cost$270,000 Terminal salvage value in 8 years$10,000 Annual cash operating savings for 8 years (end of year)$50,000 Estimated useful life in years8 Minimum desired rate of return10% Present value of ordinary annuity of one, 10%, 8 periods5.3349 Present value of one, 10%, 8 periods0.4665 The.

41) Discounted-cash-flow models are not based on the theory of compound interest. 42) The minimum desired rate of return for an investment under the NPV method is based on the cost of capital. 43) If a company accepts a project with a negative NPV, the project will increase the value of the.

4) Wendell Company has the following information available for the past quarter: Division ADivision BDivision C Sales$250,000$400,000$350,000 Variable expenses52%30%40% Fixed expenses controllable by division manager$60,000$200,000$175,000 Fixed expenses controllable by others$10,000$5,000$7,500 Unallocated expenses for all three divisions are $25,000. What is the contribution by Division C? A) $2,500 B) $27,500 C) $35,000 D) $210,000 5) A manager at a local home improvement.

14) The following information is available for Half Price Books Inc. and its two divisions, Books and Periodicals: WholeBooksPeriodicals Company     Division     Division Net Sales$100,000$50,000$50,000 Fixed Costs Controllable By Division Manager26,50022,5004,000 Fixed Costs Not Controlled By Division Manager18,00015,0003,000 Variable Costs: Cost of Merchandise Sold24,50017,5007,000 Operating Expenses17,40010,0007,400 Unallocated Costs4,000 What is the contribution margin for the Periodicals Division? A) $29,600 B) $32,600 C) $35,600 D) $43,000 15) Assume you are preparing.

17) Capricorn Company's records reveal the following: Division X Market price of finished component to outsiders$32 per unit Variable costs per component$24 per unit Division Y Sale price of finished product$42 per unit Variable costs: Division X (1 component)? Division Y Assembly9 per unit Division Y Packaging4 per unit Division Y wants to buy the component from Division X. The.

8) The components of a successful organization are organizational learning, business process improvement, ________ and ________. A) profitability; organizational culture B) profitability; customer satisfaction C) customer satisfaction; financial strength D) goal congruence; managerial effort 9) A well-designed management control system ignores nonfinancial objectives and focuses on financial objectives to develop and report performance measures. 10) Nonfinancial.

12) The term "cost center" may be used to describe responsibility centers that are assigned responsibility for capital investment. 13) A set of machines may be a responsibility center for a production supervisor. 14) The entire firm may be a responsibility center for the firm's president. 15) Responsibility centers usually have a single.

9) Why do some companies prefer the use of economic profit over return on investment in decision-making? A) The calculations for economic profit are easier. B) The data needed to calculate return on investment are not always available. C) Return on investment can motivate managers to make investment decisions that are not in.