Sept 16 Quiz

Question 1

In which stage of a firm’s development is it most likely to seek and obtain external equity financing in the form of venture capital?

Answer 1

Rapid growth

Question 2

Depreciation expense is excluded from NPV calculation when…

Answer 2

Income tax is ignored

Question 3

How can a company eliminate exchange risk associated with a trade payable due in 60 days?

Answer 3

Buy foreign currency forward today

Question 4

A disadvantage of the net present value method of capital expenditure evaluation is that it…

Answer 4

Does not provide true rate of return on investment

Question 5

When economists are concerned about the liquidity preference function they are interested in…

Answer 5

The relationship of demand for money and the rate of interest

Question 6

Tax basis = $80,000
Cost to remove = $50,000
Salvage value = $10,000
Effective tax rate = 40%
What is the appropriate end of life cash flow related to these items that should be able used in the analysis?

Answer 6

Outflow Cost to remove = ($50,000)
Inflow: salvage value =. $10,000
Inflow: tax savings from
Net loss 48,000 = (80k - 10k + 50k)x 40%

Question 7

The EOQ model does not give…

Answer 7

Management flexibility

Question 8

The gross margin ratio can be subjected to detailed analysis by a firm’s…

Answer 8

Management

Question 9

When switching from a traditional job costing system to a just in time operation with a backflush costing system what costs are affected?2

Answer 9

Decrease in inspection costs

2) decrease in detail of costs tracked to jobs

Question 10

Quarterly production.        Frequency
1,000 units.                          2
1,500 units.                          3
2,000 units.                          4
2,500 units.                          1
Assuming P1 is to be produced internally, what is the expected quarterly production?

Answer 10

Sum of:
1,000 x 20%
1,500 x 30%
2,000 x 40%
2,500 x 10%

Question 11

Risk adverse, define 2

Answer 11

Investor is willing to take risk,

But believes they should be reasonably compensated for level
Of risk take

Question 12

Average inventory level equation, using EOQ

Answer 12

Average inventory level = 1/2(EOQ) + safety stock

Question 13

What is the equation for weighted avg. EUs?

Answer 13

Weighted avg. EUs = Units completed + work done on ending WIP

Question 14

What is the equation for weighted avg. cost per direct labor EU?

Answer 14

Weighted avg. Cost/direct labor EU =

Total labor cost/equivalent units

Question 15

What is the equation for ending direct labor WIP?

Answer 15

Ending direct labor WIP = (EI x DL%) x cost/DL EU

Question 16

Which of the following forecasting methods relies mostly on judgement?

Answer 16

Delphi

Question 17

Companies that adopt just in time purchasing systems often experience a…

Answer 17

Reduction in the number of suppliers

Question 18

What is the weighted avg. of EUs? when:
Beg. Units = 2,000
Units started = 8,000
Spoilage normal = 500
Units completed and transferred = 7,000
Ending work in process 80% complete = 2,500

Answer 18

Equivalent units =

units completed + normal spoilage + 80% ending units

Question 19

Using the weighted avg method, what is the conversion cost transferred to the second production department?
Beg. Units = 2,000
Units started = 8,000
Spoilage normal = 500
Units completed and transferred = 7,000
Ending work in process 80% complete = 2,500
Cost per unit = $9

Answer 19

Conversion cost transferred =

cost/unit x (ending units + normal spoilage)

Question 20

Based on potential sale of 500 units per year, a new product has estimated traceable cost of $990,000. What is the target price per unit to obtain a 15% profit margin on sales? Calculate alpha and numerical

Answer 20

Selling price = product cost + (product cost x % markup)

= ($990,000/500) + (($990,000/500) x 0.15)

Question 21

A project has an initial investment of $100,000 and a project profitability index of 1.15. The firm’s cost of capital is 12%. The net present value of the project is…

Answer 21

Present value of future inflows =
Initial investment x profitability index
100,000 x 1.15

NPV = present value of future inflows - initial investment
115,000 - 100,000

Question 22

An in-exchange premise as used when making a fair value calculations assumes that the maximum value of items being valued would come from…

Answer 22

Using the item alone

Question 23

Manufacturing cycle efficiency equation

Answer 23

Manufacturing cycle efficiency =

manufacturing or process time/time of manufacturing start to delivery

Question 24

What is the best method for evaluating whether discontinuing a business segment will increase profits?

Answer 24

Relevant cost

Question 25

Relevant cost is best for decision making because relevant cost includes only…

Answer 25

Future costs that differ between alternatives being considered

Question 26

What is an inventory management technique that focuses on a set of procedures to determine inventory levels for demand dependent inventory types such as work in process and raw materials?

Answer 26

Materials requirements planning

Question 27

Which of the following is a disadvantage of using a process costing system versus job order costing? 2

Answer 27

1 involves calculation of stage of completion goods in process

2 and use of equivalent units

Question 28

When ranking NPV of projects in terms of preference you should…

Answer 28

Divide:

NPV/investment required

Question 29

If a company already sells all of its units and variable costs are $12/unit and division B pays $18/unit from outsiders to sell for $20, is it profitable for the company if division A sells 15,000 units to division B for $16/unit?

Answer 29

No, B only saves $2/unit, while A loses $4/unit (16-12)

Question 30

Delivery cycle days equation 5

Answer 30

Delivery cycle days =
Wait time order placement
\+ start of production
\+ inspection time
\+ process time
\+ move time

Question 31

Data warehouse is an example of…

Answer 31

Online analytical processing

Question 32

A contract that allows a holder to purchase a specified quantity of an instrument at a specified price

Answer 32

An option

Question 33

Monopolistic completion involves…

Answer 33

A large number of seller of differentiated products

Question 34

If a company implements a JIT system, what costs will increase and what costs will decrease?

Answer 34

Stockout costs will increase

Carrying costs will decrease