ACCT 301 Week 6 Quiz SOLVED

ACCT 301 Week 6 Quiz SOLVED

1.
Question :
(TCO 9) Which one of the following stages of the management decision-making process is properly sequenced?
 
Student Answer:

Evaluate possible courses of action, make decision
 
 
 
Review the actual impact of the decision, determine possible courses of action
 
 
 
Assign responsibility for the decision, identify the problem
 
 
 
Make a decision, assign responsibility
 
Instructor Explanation:
Chapter 9, Page 408
 
 
 
 

2.
Question :
(TCO 9) When is incremental analysis most useful?
 
Student Answer:
 
After a decision has been made to determine its effectiveness
 
 
 
In choosing between capital budgeting methods
 
 
 
In evaluating the profitability of a company
 
 

In developing relevant information for management decisions
 
Instructor Explanation:
Chapter 9, Page 409
 
 
 

3.
Question :
(TCO 9) Which of the following will never be a relevant cost?
 
Student Answer:
 
Opportunity cost
 
 

Sunk cost
 
 
 
Variable cost
 
 
 
Fixed cost
 
Instructor Explanation:
Chapter 9, Page 410
 
 
 
 

4.
Question :
(TCO 9) A company is deciding whether or not to replace some old equipment with new equipment. Which of the following is not considered in the incremental analysis?
 
Student Answer:
 
Annual operating cost of the new equipment
 
 
 
Annual operating cost of the old equipment
 
 
 
Net cost of the new equipment
 
 

Book value of the old equipment
 
Instructor Explanation:
Chapter 9, Page 417
 
 
 
 

5.
Question :
(TCO 9) It costs Lannon Fields $14 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30. A buyer in Mexico offers to purchase 2,000 units at $18 each. Lannon has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income?
 
Student Answer:
 
decrease $4,000
 
 
 
increase $4,000
 
 
 
increase $36,000
 
 

increase $8,000
 
Instructor Explanation:
Chapter 9, Page 411
 
 
 

6.
Question :
(TCO 9) Wishnell Toys can make 1,000 toy robots with the following costs:

Direct Materials $70,000
Direct Labor 26,000
Variable Overhead 15,000
Fixed Overhead 15,000

The company can purchase the 1,000 robots externally for $120,000. The avoidable fixed costs are $5,000 if the units are purchased externally. What is the cost savings if the company makes the robots?
 
Student Answer:
 
$1,000
 
 
 
$5,000
 
 
 
$10,000
 
 

$4,000
 
Instructor Explanation:
Chapter 9, Pages 412-413
 
 
 
 

7.
Question :
(TCO 9) All of the following are relevant to the sell or process-further decision, except for __________
 
Student Answer:
 
costs incurred beyond the split-off point.
 
 
 
revenues at the split-off point.
 
 

costs incurred before the split-off point.
 
 
 
revenues beyond the split-off point.
 
Instructor Explanation:
Chapter 9, Pages 414-416
 
 
 

8.
Question :
(TCO 8) Most of the capital budgeting methods use __________
 
Student Answer:
 
accrual accounting numbers.
 
 

cash flow numbers.
 
 
 
net income.
 
 
 
accrual accounting revenues.
 
Instructor Explanation:
Chapter 10, Page 445
 
 
 
 

9.
Question :
(TCO 8) The capital budgeting decision depends in part on the __________
 
Student Answer:
 
availability of funds.
 
 
 
relationships among proposed projects.
 
 
 
risk associated with a particular project.
 
 

all of the above
 
Instructor Explanation:
Chapter 10, Page 446
 
 
 
 

10.
Question :
(TCO 8) The cash-payback technique __________
 
Student Answer:
 
should be used as a final screening tool.
 
 
 
can be the only basis for the capital-budgeting decision.
 
 

is relatively easy to compute and understand.
 
 
 
considers the expected profitability of a project.
 
Instructor Explanation:
Chapter 10, Pages 447-448
 
 
 
 

11.
Question :
(TCO 8) All of the following statements about intangible benefits in capital budgeting are correct, except that they __________
 
Student Answer:
 
include increased quality and employee loyalty.
 
 
 
are difficult to quantify.
 
 
 
are often ignored in capital-budgeting decisions.
 
 

cannot be incorporated into the NPV calculation.
 
Instructor Explanation:
Chapter 10, Page 454
 
 
 
 

12.
Question :
(TCO 8) The profitability index __________.
 
Student Answer:
 
does not take into account the discounted cash flows.
 
 
 
is calculated by dividing total cash flows by the initial investment.
 
 

allows comparison of the relative desirability of projects that require differing initial investments.
 
 
 
will never be greater than 1.
 
Instructor Explanation:
Chapter 10, Pages 456-457
 
 
 
 

13.
Question :
(TCO 8) Post audits of capital projects __________
 
Student Answer:
 
are usually foolproof.
 
 
 
are done using different evaluation techniques than were used in making the original capital budgeting decision.
 
 

provide a formal mechanism by which the company can determine whether existing projects should be supported or terminated.
 
 
 
all of the above
 
Instructor Explanation:
Chapter 10, Page 458
 
 
 
 

14.
Question :
(TCO 8) A company has a minimum required rate of return of 9% and is considering investing in a project that costs $50,000 and is expected to generate cash inflows of $20,000 at the end of each year for 3 years. The profitability index for this project is __________
 
Student Answer:
 
0.99.
 
 
 
1.00.
 
 

1.01.
 
 
 
1.20.
 
Instructor Explanation:
Chapter 10, Page 457
 
 
 
 

15.
Question :
(TCO 8) Disadvantages of the annual rate of return method include all of the following, except that __________
 
Student Answer:
 
it relies on accrual accounting numbers instead of actual cash flows.
 
 
 
it does not consider the time value of money.
 
 
 
no consideration is given as to when the cash inflows occur.
 
 

management is unfamiliar with the information used in the computation.
 
Instructor Explanation:
Chapter 10, Page 462