ACCOUNTING

uestion 25. 25. Prepare a cash budget and a flexible operating budget from facts and assumptions provided. Use the following to answer the next TWO questions: In correspondence to SLOAT question number 7a. The amount of cash collected during the month of June should be: (Points : 5)

$32,000 $40,000 $40,400 $41,000

Question 26. 26. In correspondence to SLOAT question number 7b. The cash disbursements during the month of June for goods purchased for resale and for selling and administrative expenses should be: (Points : 5)

$40,000 $41,000 $42,500 $43,500

Question 27. 27. In correspondence to SLOAT question number 7c. The term flexible budget refers to a budget in which: (Points : 5)

budgeted costs are adjusted in proportion to the difference between budgeted costs and actual costs. budgeted variable costs are adjusted in proportion to the difference between budgeted variable costs and actual variable costs. budgeted variable are adjusted in proportion to the difference between budgeted units of production and actual units produced. budgeted variable costs are adjusted in proportion to the difference between budgeted variable cost per unit and actual variable cost per unit.

Question 28. 28. In correspondence to SLOAT question number 7d. Idlewild Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn’s guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn’s overhead budget for the most recent month appears below: (Points : 5)

$7,793.90 $61,541.00 $8,512.90 $7,739.00

Question 29. 29. In correspondence to SLOAT question number 8a. (Points : 5)

increase by $40,000 decrease by $10,000 decrease by $22,000 decrease by $28,000

Question 30. 30. In correspondence to SLOAT question number 8b. (Points : 5)

decrease by $4,000 increase by $21,000 increase by $3,000 increase by $5,700

Question 31. 31. In correspondence to SLOAT question number 8c. Wenig Inc. has some material that originally cost $73,500. The material has a scrap value of $45,600 as is, but if reworked at a cost of $6,600, it could be sold for $58,100. What would be the incremental effect on the company’s overall profit of reworking and selling the material rather than selling it as is as scrap? (Points : 5)

$22,000 decrease $67,600 decrease $51,500 increase $5,900 increase

Question 32. 32. In correspondence to SLOAT question number 8d. (Points : 5)

$35,000 increase $10,000 decrease $45,000 increase $70,000 increase

Question 33. 33. In correspondence to SLOAT question number 9a. Apply commonly used techniques such as ROI (DuPont method) and Residual Income for measuring the performance of investment center managers. Which of the following changes would NOT change return on investment (ROI)? (Points : 5)

The division decreases sales and expenses by the same percentage. The division increases total assets. The division increases sales dollars by the same amount that total assets increase. The division decreases sales and expenses by the same dollar amount.

Question 34. 34. In correspondence to SLOAT question number 9b. The residual income for the Hum Division last year was: (Points : 5)

$126,000 $46,000 $78,000 $22,000

Question 35. 35. In correspondence to SLOAT question number 9c. The return on investment last year for the Hum Division was: (Points : 5)

75% 25% 35% 12%

Question 36. 36. In correspondence to SLOAT question number 9d. Which of the following is NOT an advantage of ROI? (Points : 5)

It encourages managers of departments with high ROIs to invest in average ROI projects. It encourages managers to pay careful attention to the relationships among sales, expenses, and investment. It encourages cost efficiency. It discourages excessive investment in operating assets.

Question 37. 37. In correspondence to SLOAT question number 10a. Evaluate proposed capital budget expenditures on the basis of commonly used project assessment techniques. The following information is to be used for the next TWO questions: Waterman Publishing is considering the purchase of a used printing press costing $38,400. The printing press would generate a net cash inflow of $16,000 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company’s cost of capital is 10 percent. The company uses straight-line depreciation. The project’s accounting (simple) rate of return (rounded to the nearest percent) on the initial investment is closest to: (Points : 5)

8.3 percent 10 percent 42 percent 75 percent

Question 38. 38. In correspondence to SLOAT question number 10b. The investment’s payback period in years (rounded to two decimal points) is: (Points : 5)

2.00 2.13 2.40 3.00

Question 39. 39. In correspondence to SLOAT question number 10c. Project A has a predicted payback period of 2.5 and Project B has a predicted payback period of 5. Based on this information we can conclude: (Points : 5)

Project B is definitely more desirable than Project A and should be implemented. Project B provides twice the return of Project A Project B is preferred to Project A, but it is not necessarily twice as profitable Project B is less desireable than Project A

Question 40. 40. In correspondence to SLOAT question number 10d. This is a reason to employ the net present value method in making capital expenditure decisions. (Points : 5)

The NPV method determines the length of time necessary to recover the entire cost of an investment from the resulting annual net cash flow The NPV method determines the rate of return on average investment The NPV method considers the timing of future cash flows All of the above

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