ACCT 505 Week 8 Final Exam (Version 2)

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Product Description

1.
A good example of a common cost
which normally could not be assigned to
products on a segmented income statement
except on an arbitrary basis would be:

2.
Turnover is computed by dividing
average operating assets into:
3.
A segment of a business responsible for
both revenues and expenses would be
called:
4.
All other things being equal, if a
division's traceable fixed expenses
increase:
5.
In computing the margin in a ROI
analysis, which of the following is used?
6.
Net operating income is defined as:
7.
Suppose a manager is to be measured
by residual income. Which of the following
will not result in an increase in the residual
income figure for this manager, assuming
other factors remain constant?
8.
During April, Division D of Carney
Company had a segment margin ratio of
15%, a variable expense ratio of 60% of

sales, and traceable fixed expenses of

$15,000. Division D's sales were closest to:
9.
Cable Company had the following results
for the year just ended:
10. The segment margin ratio in Store J was:
11. Company A's residual income is:
12. Company A's return on investment (ROI)
is:
13. If South wants a residual income of
$50,000 and the minimum required rate of
return is 10%, the annual turnover will have
to be:
14. How much is the return on the
investment?
15. Consider a decision facing a firm of
either accepting or rejecting a special offer
for one of its products. A cost that is not
relevant is:
16. A study has been conducted to
determine if Product A should be dropped.

Sales of the product total $200,000 per

year; variable expenses total $140,000 per
year. Fixed expenses charged to the product
total $90,000 per year. The company
estimates that $40,000 of these fixed
expenses will continue even if the product
is dropped. These data indicate that if
Product A is dropped, the company's overall
net operating income would:
17. Manor Company plans to discontinue a
department that has a contribution margin
of $24,000 and $48,000 in fixed costs. Of
the fixed costs, $21,000 cannot be avoided.
The effect of this discontinuance on Manor's
overall net operating income would be
a(an):
18. Manor Company plans to discontinue a
department that has a contribution margin
of $25,000 and $50,000 in fixed costs. Of
the fixed costs, $21,000 cannot be

eliminated. The effect on the profit of Manor

Company of discontinuing this department
would be:
19. Green Company produces 1,000 parts
per year, which are used in the assembly of
one of its products. The unit product cost of
these parts is:
20. Pitkin Company produces a part used in
the manufacture of one of its products. The
unit product cost of the part is $33,
computed as follows:
21. Cardinal Company needs 20,000 units of
a certain part to use in one of its products.
The following information is available:
22. Products A, B, and C are produced from
a single raw material input. The raw
material costs $90,000, from which 5,000
units of A, 10,000 units of B, and 15,000
units of C can be produced each period.
Product A can be sold at the split-off point

for $2 per unit, or it can be processed

further at a cost of $12,500 and then sold
for $5 per unit. Product A should be:
23. The sunk cost in this situation is:
24. How much of the unit product cost of
$59.90 is relevant in the decision of
whether to make or buy the part?
25. If direct labor-hours is the company's
production constraint, then the three
products should be produced in the order:
26. If Austin chooses to produce 4,000
afghans each month, the change in the
monthly net operating income as compared
to selling 4,000 spindles of yarn is:
27. What is the lowest price Austin should
be willing to accept for one afghan as long
as it can sell spindles of yarn to the outside
market for $12 each?

28. (Ignore income taxes in this problem.)

How is depreciation handled by the
following capital budgeting techniques?
29. The payback method measures:
30. The evaluation of an investment having
uneven cash flows using the payback
method:
31. If the net present value of a project is
zero based on a discount rate of sixteen
percent, then the time-adjusted rate of
return:
32. (Ignore income taxes in this problem.) A
company with $800,000 in operating assets
is considering the purchase of a machine
that costs $75,000 and which is expected to
reduce operating costs by $20,000 each
year. The payback period for this machine
in years is closest to:
33. (Ignore income taxes in this problem.)
Denny Corporation is considering replacing

a technologically obsolete machine with a

new state-of-the-art numerically controlled
machine. The new machine would cost
$450,000 and would have a ten-year useful
life. Unfortunately, the new machine would
have no salvage value. The new machine
would cost $20,000 per year to operate and
maintain, but would save $100,000 per year
in labor and other costs. The old machine
can be sold now for scrap for $50,000. The
simple rate of return on the new machine is
closest to:
34. Perkins Company is considering several
investment proposals, as shown below:
35. (Ignore income taxes in this problem.)
The following data pertain to an investment
proposal:
36. (Ignore income taxes in this problem.)
Sam Weller is thinking of investing $70,000
to start a bookstore. Sam plans to withdraw

$15,000 from the business at the end of

each year for the next five years. At the end
of the fifth year, Sam plans to sell the
business for $110,000 cash. At a 12%
discount rate, what is the net present value
of the investment?
37. The immediate cash outflow required for
this project would be:
38. The present value of all future operating
cash inflows is closest to:
39. The present value of the net cash flows
(all cash inflows less all cash outflows)
occurring during year 4 is:
40. The present value of the net cash flows
(all cash inflows less all cash outflows)
occurring during year 6 is closest to:
1.