2/23

Question 1

Initial investment 20k FA and 10k WC. FA have no salvage value and WC will be completely recovered at project end. The org cost of capital is 16%. PV of ordinary annuity for four years is 2.8 and PV of $1 at four years is .6. What is the annual net cash inflow required for the project to break even.

Answer 1

30k initial investment
10K x .6 = 6k recoup of WC.

30 - 6 = 24k

24k / 2.8 = 8,571

Question 2

A steering committee should be formed to

Answer 2

guide and oversee systems development and acquisition

Question 3

Standards imposed by management without employee input are

Answer 3

authoritative standards

Question 4

Standards based on optimal, normal or less than optimal conditions are

Answer 4

Ideal standards

Question 5

Standards imposed on a per unit basis that assumes normal conditions are

Answer 5

Attainable standards

Question 6

Standards developed in collaboration with employees are

Answer 6

participative standards

Question 7

an international business completed a circular business combination of euro properties. All of the following would represent valid reasons for this type of combination, except

-helps achieve better economies of scale
-improves restaurant locations and sales
-centralizes European property management
-reduces operating costs

Answer 7

helps achieve better economies of scale

a circular combination has different types of businesses that come together under single management.

This reduces costs, not necessarily economies of scale.

A horizontal combination would likely improve economies of scale.

Question 8

Allocations by unit volume
Kerosene - 3500 gal./month for 3 months, 4260 for 9
Fuel oil - 8490 gal/month for 4 months; 10000 for 8
Joint costs $45,000

Calculate allocated joint costs

Answer 8

3500 * 3 = 10,500
4260 * 9 = 38,340
10,500 + 38,340 = 48,840

8490 * 4 = 33,960
10,000 * 8 = 80,000
33,960 + 80,000 = 113,960

113,960 + 48,840 = 162,800

48,840 / 162,800 = 30%
113,960 /162,800 = 70%

.3 * 45,000 = 13,500
.7 * 45,000 = 31,500

Question 9

Sales value known at split off
Liquid Asphalt - 2850 gal sold at $13
Gasoline - 1900 gal sold at $18
Joint costs - $6500

calculate allocated joint costs

Answer 9

2850 * 13 = 37,050
1900 * 18 = 34,200
37050 + 34200 = 71250
37050 / 71250 = 52%
34200 / 71250 = 48%

.52 * 6500 = 3380
.48 * 6500 = 3120

Question 10

No sales value known at split off
Coal Tar - 4000 lbs sold at $40; further processing 52,000
Paraffin - 2800 lbs sold at $60; further processing 36000

joint costs $80,000

calculate allocated joint costs

Answer 10

4000 x 40 -52000 = 108,000
2500 x 60 - 36000 = 132000
108000 + 132000 = 240000
108000 / 240000 = .45
132000 / 240000 = .55

.45 x 80000 = 36000
.55 x 80000 = 44000

Question 11

Evaluation of internal and external factors contributing to an organization’s success is referred to as

Answer 11

a SWOT analysis

Question 12

During the process of transforming data into information that can be used in a relational database, which of the following must be used to create a relationship between two tables?

-conceptual-level schema
-a foreign key
- the primary key
-a data dictionary

Answer 12

A foreign key

• conceptual-level schema is the structure of the database and the design at a conceptual level
• foreign key is attributes in one table that are primary keys in another.
• Primary keys are unique identifiers for specific rows within a table and are made up of one ore more attributes.
• data dictionary provides information about the data in a database.

Question 13

A validity check creates

Answer 13

a framework so values entered into a foreign key field must first be entered in a corresponding table with the primary key.

Question 14

A reasonableness test validates

Answer 14

the logic of input values where fields are dependent or relevant to each other.

Question 15

Calculate the budgeted variable cost per unit for yr 2 using the high-low method

Answer 15

find the high units, find the low units
high - low = change in units
find the high dollars, find the low dollars
high - low = change in dollars
dollars / units = variable cost per unit

Question 16

calculate the budgeted total fixed cost for year 2 using the high-low method.

Answer 16

First get the variable cost per unit using the high-low method.
Find either the high or the low units and dollars.
high units x vc/unit hi-lo = total vc
total cost - vc = fc

be careful if the numbers are per year or per month. if they are per month x12.

Question 17

The existence of a compliance program that includes both ethics training and a hotline for anonymous reporting is evidence of

Answer 17

development of ethical values and ensuring that those values are understood and taken seriously.

Question 18

Considering the SCOR model of supply chain, what key management process does collecting and processing vendor payments fall into?

Answer 18

Source

payments to vendors are part of sourcing your materials.

Question 19

ROI is criticized as a performance measure since it is not well balanced. What characteristic does ROI lack

Answer 19

ROI does not balance long and short term issues.

Question 20

calculate the net amount from an interest rate swap.

Answer 20

Notional amount x underlying rate
amount paid based on settlement payment date.
amount received based on fixed interest…
compare the settlement options vs fixed

Question 21

The SCOR model of supply chain operations, which of the following key management processes does managing AR and collections from customers fall into

Answer 21

Deliver

Question 22

The capital asset pricing model formula is

Answer 22

Req rate of return = RF + Beta (Expected market return - RF)

Question 23

Jones Corp had an opportunity to use its capacity to produce and extra 5,000 units with a contribution margin of $5 per unit or rent out the space for $10,000. What is the opportunity cost

Answer 23

10,000

The value of the next best use of the space.
It is not the difference between the options.

Question 24

The best basis for setting standards is

Answer 24

Engineering standards based on attainable performance.

Question 25

The residual income method measures the

Answer 25

excess of actual income earned by an investment over the amount required to achieve that rate of return.

Question 26

Public Key Infrastructure represents the

Answer 26

mechanisms used to issue keys and digital certificates.

Question 27

Smith legal services has offered to represent a plaintiff for a retainer of 20k plus 40% of any award over 20k. Smith expects to incur our of pocket expenses of 15k. The probabilities are
Award 100,000 - 70%
Award 0 - 30%

What is the expected value

Answer 27

20k retainer + .4 (100k - 20k) - 15k expenses = 37k

20k - 15k = 5k

37k * .7 + 5k * .3 = 27,400

Question 28

Per title III of SARBOX, audit committee members must be members of the company’s

Answer 28

board of directors.

They must be otherwise independent. Cannot accept compensation for consulting or advisory services.

Question 29

A company needs to increase its working capital by 100. The company’s AR averages 125 per month. A factor will advance up to 80% of the face value at 10% and charge 2%. Estimated to save 24 in collection expense. Use a 360 day year.

What is the cost of factoring

Answer 29

125 x .02 x (360/30) = 30
(125 x .8) x (.1/.12) x (360/30) = 10
30 + 10 = 40
40 - 24 = 16
16 / 100 = 16

Question 30

Universal limits its operations to exports to foreign countries. What can be said about universals exposure to exchange rate risk?

Answer 30

It is subject to transaction and economic risks.

transaction - settlement of exports
economic - satisfaction of domestic
translation - foreign investment or sub

Question 31

A preferred stock is sold for 101, has a face value of 100, fees of 5 per share and annual dividend of 10. If the tax rate is 40 percent, the cost of funds for the preferred stock is

Answer 31

101 - 5 = 96
10 / 96 = 10.4%