Sept 26 Problems Flashcards
Procedural control that will prevent file destruction by properly identifying each file…
External labels
Which of the following management techniques focuses on set of procedures to determine inventory levels for demand dependent inventory types such as work in process and raw materials?
Materials requirements planning
Under the Just in time purchase system,
What cost will increase?
What cost will decrease?
Stock out costs will increase
Carrying costs will decrease
Production volume variance
Production volume variance =
budgeted fixed overhead - applied fixed overhead
Budgeted fixed overhead equals
Fixed overhead costs x number of frames manufactured
Developing hedges necessary to mitigate interest rate risk is…
Not part of the control cycle approach to risk management
When evaluating capital budgeting techniques, the payback period emphasizes…
Liquidity
Variable overhead efficiency variance equation
Variable overhead efficiency variance =
Standard variable overhead rate
x difference between actual and budgeted DLHS
Calculate difference between actual and budgeted direct labor hours
Actual direct labor hours
- (actual quantity produced x budgeted DLH/frame)
Net domestic product (at market cost) calculation 3
Gross domestic product (GDP)
- depreciation
= net domestic product (at market cost)
Net national income (at factor cost) equation 3
Net domestic product (at market cost)
- indirect business taxes
= net national income (at factor cost)
Net cost of debt for issuing new debt involves…
Multiplying by (1 - tax rate)
The benefits of debt financing over equity financing are likely to be highest in with…2
1 high marginal tax rates
2 few noninterest tax benefits
What costs are relevant in short term decision making?
Incremental fixed costs
Incremental costs represent…
Difference in total costs between 2 alternatives
Reducing the costs of flowcharting would involve…
Flowcharting software
Level of safety stock in inventory management depends on all of the following except the…
Cost to reorder stock
If a vacuum cleaner store in once quiet location is now near a large entertainment complex, it’s fair value should be based upon…
Use of a small restaurant serving meals and alcohol
Cost of financing factor calculation:
Working capital = $100,000
A/R average $125,000 per month
Factor will advance up to 80% of face value of receivables at 10% and charge fee on 2% on all receivables purchased. The controller estimates the firm would save $24,000 in collection expense. 6 steps
Interest on average balance =
$100,000 working capital x 10%. $10,000
Fee payable to factor
(2% of purchased receivables). $30,000
(2% x $125,000 x 12)
= $40,000
Less savings on collection expense. (24,000)
Net cost. $16,000
Cost (as % of working capital). 16%
16,000/100,000
When is data collection most critical in the implementation of an improvement initiative for a hospital attempting to improve emergency room care patient satisfaction? 3
1 before
2 during
3 after
The cost to issue new common stock, uses what formula?
Gordon growth model:
Ks = [dividend/price (1-flotation)] + G
What is the cost to issue new common stock when stock is $40/share, dividend is $2.20 per share. Common dividend is anticipated to grow 6% annually and costs to issue new common stock are 5% of market value?
Cost to issue = $2.33/($40 x (1-.05)) + 0.06
A company enters into an agreement with a firm which will factor the company’s A/R. The factor agrees to buy the company’s receivables, which average $100,000 per month and have an average collection period of 30 days. The factor will advance up to 80% of the face value of receivables at an annual rate of 10% and charge a fee of 2% on all receivables purchased. The controller of the company estimates that the company would save $18,000 in collection expenses over the year. Fees and interest are not deducted in advance. Assuming a 360 day year, what is the cost of financing? 10 steps
Amount of receivables factored $100,000
Less: 20% factoring reserve (1.00 - 0.80). (20,000)
Amount loaned to company. 80,000
2%factoring fee (assessed on entire $100,000). $2,000
10% interest for 30 days assessed on entire $80k. 667
Total fees assessed on $80,000 loan. 2,667
Less savings in expenses ($18,000/12). (1,500)
Monthly interest 1,167
Monthly interest rate. (1,167/80,000). 1.46%
Annual rate (1.46% x 12). 17.5%
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