Sept 26 Problems

Question 1

Procedural control that will prevent file destruction by properly identifying each file…

Answer 1

External labels

Question 2

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?

Answer 2

Materials requirements planning

Question 3

Under the Just in time purchase system,

What cost will increase?

What cost will decrease?

Answer 3

Stock out costs will increase

Carrying costs will decrease

Question 4

Production volume variance

Answer 4

Production volume variance =

budgeted fixed overhead - applied fixed overhead

Question 5

Budgeted fixed overhead equals

Answer 5

Fixed overhead costs x number of frames manufactured

Question 6

Developing hedges necessary to mitigate interest rate risk is…

Answer 6

Not part of the control cycle approach to risk management

Question 7

When evaluating capital budgeting techniques, the payback period emphasizes…

Answer 7

Liquidity

Question 8

Variable overhead efficiency variance equation

Answer 8

Variable overhead efficiency variance =
Standard variable overhead rate
x difference between actual and budgeted DLHS

Question 9

Calculate difference between actual and budgeted direct labor hours

Answer 9

Actual direct labor hours

- (actual quantity produced x budgeted DLH/frame)

Question 10

Net domestic product (at market cost) calculation 3

Answer 10

Gross domestic product (GDP)
- depreciation
= net domestic product (at market cost)

Question 11

Net national income (at factor cost) equation 3

Answer 11

Net domestic product (at market cost)
- indirect business taxes
= net national income (at factor cost)

Question 12

Net cost of debt for issuing new debt involves…

Answer 12

Multiplying by (1 - tax rate)

Question 13

The benefits of debt financing over equity financing are likely to be highest in with…2

Answer 13

1 high marginal tax rates

2 few noninterest tax benefits

Question 14

What costs are relevant in short term decision making?

Answer 14

Incremental fixed costs

Question 15

Incremental costs represent…

Answer 15

Difference in total costs between 2 alternatives

Question 16

Reducing the costs of flowcharting would involve…

Answer 16

Flowcharting software

Question 17

Level of safety stock in inventory management depends on all of the following except the…

Answer 17

Cost to reorder stock

Question 18

If a vacuum cleaner store in once quiet location is now near a large entertainment complex, it’s fair value should be based upon…

Answer 18

Use of a small restaurant serving meals and alcohol

Question 19

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

Answer 19

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

Question 20

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

Answer 20

1 before

2 during

3 after

Question 21

The cost to issue new common stock, uses what formula?

Answer 21

Gordon growth model:

Ks = [dividend/price (1-flotation)] + G

Question 22

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?

Answer 22

Cost to issue = $2.33/($40 x (1-.05)) + 0.06

Question 23

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

Answer 23

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%

Question 24

Hot site

Answer 24

Location equipped with redundant hardware and software configuration