Bender Day 13

Question 1

What costs are in variable costs?

Answer 1

1. Direct Materials
2. Direct Labor
3. Variable Overhead
4. Shipping/Packaging
5. Variable selling expenses

MCQ-03695

Question 2

Why would EVA be higher than the Residual Income method for an investment?

Answer 2

Cost of capital is less than the hurdle rate

if the cost of capital is lower under EVA than the hurdle rate under residual income, the required return will be lower under EVA and overall EVA will be higher than Residual Income

MCQ-07780

Question 3

The Imputed Interest rate under residual income can be characterized as:

Answer 3

Historical weighted average cost of capital for the company

MCQ-03452

Question 4

In the regression formula Y is the ____ variable

Answer 4

Dependent

X = Independent

MCQ-07725

Question 5

What is true regarding sales and costs presented on a Breakeven chart?

Answer 5

Sales only equal total cost at the Breakeven Point

MCQ-07744

Question 6

Equation: APR quick PMT discount

Answer 6

360 / Pay Period - Discount Period

X

Discount % / 100% - Discount %

MCQ-07798

Question 7

What’s an example of aggressive working Capital Management

Answer 7

Using a current liability to purchase a current asset (AP buys inventory)

Note: using a 2 yr note to purchase marketable securities (is an example of conservative working Capital MGMT) bc LT Debt buys CA

MCQ-07784

Question 8

During the year XYZ increases variable SG&A expenses while fixed SG&A stay the same, what happens to contribution margin?

Answer 8

Operating margin will be the same under Absorption approach and Contribution approach

MCQ-07720

Question 9

What inventory method has to be used for external financial reporting?

Answer 9

Absorption

MCQ-07734

Question 10

If tax rates are expected to decrease, the WACC will:

Answer 10

Increase, bc the after tax cost of debt will decrease

MCQ-07791