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Accounting  – Business Finance

Question 1
 Companies must ALWAYS examine their pricing:
based on the supply of the product
based on the cost of producing the product
through the eyes of their competitors
through the eyes of their customers
Question 2 
All of the following are true regarding target costing EXCEPT:
improvements are implemented in small incremental amounts
customer input is essential to the target costing process
input is requested from suppliers and distributors
a key goal is to minimize costs over the product’s useful life
Question 3 
Braun’s Brakes manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply:
ModelX ModelY Model Z
Selling price $50 $60 $70
Direct materials 6 6 6
Direct labor ($12 per hour) 12 12 24
Variable support costs ($4 per march hour) 4 8 8
Fixed support costs 10 10 10
Which model has the greatest contribution margin per unit?
Model X
Model Y
Model Z
Models X and Y
Question 4 
The FIRST step to successful balanced scorecard implementation is clarifying the:
organization’s vision and strategy
elements that pertain to value-added aspects of the business
owner’s expectations about return on investment
objectives of all four balanced scorecard measurement perspectives
Question 5 
Balanced scorecard objectives are in balance when:
debits equal credits
financial performance measurements are less than the majority of measurements
the measurements are fair
the measurements reflect an improvement over the previous year
Question 6 
The capital budgeting method that calculates the discount rate at which the present value of expected cash inflows from a project equals the present value of expected cash outflows is the:
net present value method
accrual accounting rate-of-return method
payback method
internal rate of return
Question 7 
Crush Company makes internal transfers at 160% of full cost. The Soda Refining Division purchases 40,000 containers of carbonated water per day, on average, from a local supplier, who delivers the water for $40 per container via an external shipper. To reduce costs, the company located an independent supplier in Illinois who is willing to sell 40,000 containers at $30 each, delivered to Crush Company’s Shipping Division in Missouri. The company’s Shipping Division in Missouri has excess capacity and can ship the 40,000 containers at a variable cost of $4.50 per container. What is the total cost of purchasing the water from the Illinois supplier and shipping it to the Soda Division?
$1,200,000
$1,380,000
$1,600,000
$180,000
Question 8 
Caruso Cool manufactures single room sized air conditioners. The cost accounting system estimates manufacturing costs to be $95 per air conditioner, consisting of 75% variable costs and 25% fixed costs. The company has surplus capacity available. It is Caruso Cool’s policy to add a 30% markup to full costs.
Caruso is invited to bid on a one-time-only special order to supply 50 air conditioners. What is the lowest price Caruso should bid on this special order?
$4,750.00
$3,562.50
$6,250.00
$6,175.00
Question 9 
Timothy Company has invested $2,000,000 in a plant to make vending machines. The target operating income desired from the plant is $300,000 annually. The company plans annual sales of 1,500 vending machines at a selling price of $2,000 each.
What is the markup percentage as a percentage of cost for Timothy Company?
15.0%
17.6%
10.0%
11.1%
Question 10 
A(n) ________ is a binding agreement between a multinational and the United States Internal Revenue Service to obtain approval for a specific transfer price for a number of years.
Tax Treaty
Advanced Pricing Agreement
Revenue Ruling
Dual Price Ruling
Question 11 
Which of the following is a force that shapes an organization’s profit potential?
Investors
Potential entrants into the market
Creditors
Research and development
Question 12 
The economic order quantity ignores:
purchasing costs
relevant ordering costs
stockout costs
Both A and C are correct.
Question 13 
Dakoil Corporation has two divisions, Refining and Production. The company’s primary product is Enkoil Oil. Each division’s costs are provided below:
The Refining Division has been operating at a capacity of 40,000 barrels a day and usually purchases 25,000 barrels of oil from the Production Division and 15,000 barrels from other suppliers at $20 per barrel.

Production: Variable costs per barrel of oil $3
Fixed costs per barrel of oil $2
Refining: Variable costs per barrel of oil $10
Fixed costs per barrel of oil $12
What is the transfer price per barrel from the Production Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 110% of full costs?
$5.50
$22.00
$24.20
$29.70
Question 14 
The optimal safety stock level is the quantity of safety stock that minimizes the sum of the annual relevant:
stockout costs and carrying costs
ordering costs and carrying costs
ordering costs and stockout costs
ordering costs and purchasing costs
Question 15 
The FIRST step to successful balanced scorecard implementation is clarifying the:
organization’s vision and strategy
elements that pertain to value-added aspects of the business
owner’s expectations about return on investment
objectives of all four balanced scorecard measurement perspectives
Question 16 
Which capital budgeting technique(s) measure all expected future cash inflows and outflows as if they occurred at a single point in time?
net present value
internal rate of return
payback
Both A and B are correct.
Question 17 
________ means minimum constraints and maximum freedom for managers at the lowest levels of an organization to make decisions and to take actions.
Total centralization
Use of market-based transfer pricing
Total decentralization
Use of negotiated transfer pricing
Question 18 
Not counting spoiled units in the equivalent-unit calculation results in:
lower cost per good unit.
higher cost per good unit
better management information
Both A and C are correct.
Question 19 
In evaluating different alternatives, it is useful to concentrate on:
variable costs
fixed costs
total costs
relevant costs
Question 20 
When target costing and target pricing are used together:
the target cost is established first, then the target price
the target cost is the estimated long-run cost that enables a product or service to achieve a desired profit
the focus of target pricing is to undercut the competition
target costs are generally higher than current costs
Question 21 
Should assets be defined as total assets or net assets? This question is considered part of which step in designing an accounting-based performance measure?
Choose performance measures that align with top management’s financial goals.
Choose the time horizon of each performance measure.
Choose a definition for each performance measure.
Choose a measurement alternative for each performance measure.
Question 22 
Which of the following costs always differ among future alternatives?
fixed costs
historical costs
relevant costs
variable costs
Question 23 
Braun’s Brakes manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply:
Model X Model Y Model Z
Selling price $50 $60 $70
Direct materials 6 6 6
Direct labor ($12 per hour) 12 12 24
Variable support costs ($4 per match hour) 4 8 8
Fixed support costs 10 10 10
Which model has the greatest contribution margin per machine-hour?
Model X
Model Y
Model Z
Models X and Y
Question 24 
What are the major relevant costs in maintaining safety stock?
carrying costs and purchasing costs
ordering costs and purchasing costs
ordering costs and stockout costs
stockout costs and carrying costs
Question 25 
The Arvid Corporation manufactures widgets, gizmos, and turnbols from a joint process. May production is 4,000 widgets; 7,000 gizmos; and 8,000 turnbols. Respective per unit selling prices at splitoff are $15, $10, and $5. Joint costs up to the splitoff point are $75,000. If joint costs are allocated based upon the sales value at splitoff, what amount of joint costs will be allocated to the widgets?
$30,882
$26,471
$17,647
$28,125
Question 26 
If Ferry Company has a safety stock of 160 units and the average daily demand is 20 units, how many days can be covered if the shipment from the supplier is delayed by 12 days?
12.0 days
10.0 days
8.0 days
6.7 days
Question 27 
Assume your goal in life is to retire with one million dollars. How much would you need to save at the end of each year if interest rates average 6% and you have a 20-year work life?
$14,565
$27,184
$120,102
$376,476
Question 28 
Using residual income as a measure of performance rather than return on investment promotes goal congruence because residual income:
places importance on the reduction of underperforming assets
calculates a percentage return rather than an absolute return
concentrates on maximizing the return on sales
concentrates on maximizing an absolute amount of dollars
Question 29 
The Wood Furniture company produces a specialty wood furniture product, and has the following information available concerning its inventory items:
Relevant ordering costs per purchase order $150
Relevant carrying costs per year 
Required annual return on investment 10%
Required other costs per year 10%
Required other costs per year $1.40
Annual demand is 10,000 packages per year. The purchase price per package is $16
What is the economic order quantity?
150,000 units
1,000 units
75,000 units
5,000 units
Question 30 
Crystal Manufacturing Company provides glassware machines for major department store retailers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of five years and the new equipment has a value of $115,500 with a five-year life. The expected additional cash inflows are $35,000 per year. What is the payback period on this investment?
2.5 years
3.3 years
3 years
5 years
Question 31 
All of the following are methods that aid management in analyzing the expected results of capital budgeting decisions EXCEPT:
accrual accounting rate-of-return method
discounted cash-flow method
future-value cash-flow method
payback method
Question 32 
Crush Company makes internal transfers at 180% of full cost. The Soda Refining Division purchases 30,000 containers of carbonated water per day, on average, from a local supplier, who delivers the water for $30 per container via an external shipper. To reduce costs, the company located an independent supplier in Missouri who is willing to sell 30,000 containers at $20 each, delivered to Crush Company’s Shipping Division in Missouri. The company’s Shipping Division in Missouri has excess capacity and can ship the 30,000 containers at a variable cost of $2.50 per container. What is the total cost to Crush Company if the carbonated water is purchased from the local supplier?
$ 900,000
$1,200,000
$1,501,000
$1,620,000 

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