Sept 16 Quiz Flashcards
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?
Rapid growth
Depreciation expense is excluded from NPV calculation when…
Income tax is ignored
How can a company eliminate exchange risk associated with a trade payable due in 60 days?
Buy foreign currency forward today
A disadvantage of the net present value method of capital expenditure evaluation is that it…
Does not provide true rate of return on investment
When economists are concerned about the liquidity preference function they are interested in…
The relationship of demand for money and the rate of interest
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?
Outflow Cost to remove = ($50,000)
Inflow: salvage value =. $10,000
Inflow: tax savings from
Net loss 48,000 = (80k - 10k + 50k)x 40%
The EOQ model does not give…
Management flexibility
The gross margin ratio can be subjected to detailed analysis by a firm’s…
Management
When switching from a traditional job costing system to a just in time operation with a backflush costing system what costs are affected?2
Decrease in inspection costs
2) decrease in detail of costs tracked to jobs
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?
Sum of: 1,000 x 20% 1,500 x 30% 2,000 x 40% 2,500 x 10%
Risk adverse, define 2
Investor is willing to take risk,
But believes they should be reasonably compensated for level
Of risk take
Average inventory level equation, using EOQ
Average inventory level = 1/2(EOQ) + safety stock
What is the equation for weighted avg. EUs?
Weighted avg. EUs = Units completed + work done on ending WIP
What is the equation for weighted avg. cost per direct labor EU?
Weighted avg. Cost/direct labor EU =
Total labor cost/equivalent units
What is the equation for ending direct labor WIP?
Ending direct labor WIP = (EI x DL%) x cost/DL EU
Which of the following forecasting methods relies mostly on judgement?
Delphi
Companies that adopt just in time purchasing systems often experience a…
Reduction in the number of suppliers
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
Equivalent units =
units completed + normal spoilage + 80% ending units
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
Conversion cost transferred =
cost/unit x (ending units + normal spoilage)
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
Selling price = product cost + (product cost x % markup)
= ($990,000/500) + (($990,000/500) x 0.15)
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…
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
An in-exchange premise as used when making a fair value calculations assumes that the maximum value of items being valued would come from…
Using the item alone
Manufacturing cycle efficiency equation
Manufacturing cycle efficiency =
manufacturing or process time/time of manufacturing start to delivery
What is the best method for evaluating whether discontinuing a business segment will increase profits?
Relevant cost
Relevant cost is best for decision making because relevant cost includes only…
Future costs that differ between alternatives being considered
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?
Materials requirements planning
Which of the following is a disadvantage of using a process costing system versus job order costing? 2
1 involves calculation of stage of completion goods in process
2 and use of equivalent units
When ranking NPV of projects in terms of preference you should…
Divide:
NPV/investment required
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?
No, B only saves $2/unit, while A loses $4/unit (16-12)
Delivery cycle days equation 5
Delivery cycle days = Wait time order placement \+ start of production \+ inspection time \+ process time \+ move time
Data warehouse is an example of…
Online analytical processing
A contract that allows a holder to purchase a specified quantity of an instrument at a specified price
An option
Monopolistic completion involves…
A large number of seller of differentiated products
If a company implements a JIT system, what costs will increase and what costs will decrease?
Stockout costs will increase
Carrying costs will decrease
