COST ACCT MCQ’S-Cannon Cannery, Inc. estimated its factory overhead at $510,000 for 2007….

1.Cannon Cannery, Inc. estimated its factory overhead at $510,000 for 2007, based on a normal capacity of 100,000 direct manufacturing labor hours. Standard direct manufacturing labor hours for the year totaled 105,000, while the factory overhead control account at the end of the year showed a balance of $540,000. How much was the underapplied factory overhead for 2007?a. $0b. $ 4,500c. $27,000d. $30,0002.Unlike the traditional full-absorption cost system, activity-based costing (ABC) assignsa. Costs to individual products based only on nonfinancial variables.b. Costs to individual products based on various activities involved.c. Overhead to individual products based on some common measure of production volume.d. Only costs which can be directly traced to individual products3.Newman Products has received proposals from several banks to establish a lockbox system to speed up receipts. Newman receives an average of 700 checks per day averaging $1,800 each, and its cost of short-term funds is 7% per year. Assuming that all proposals will produce equivalent processing results and using a 360-day year, which one of the following proposals is optimal for Newman?a. A $0.50 fee per check.b. A flat fee of $125,000 per year.c. A fee of 0.03% of the amount collected.d. A compensating balance of $1,750,0004.The theory underlying the cost of capital is primarily concerned with the cost ofa. Long-term funds and old funds.b. Short-term funds and new funds.c. Long-term funds and new funds.d. Any combination of old or new, short-term or long-term funds5.10: DQZ Telecom is considering a project for the coming year that will cost $50,000,000. DQZ plans to use the following combination of debt and equity to finance the investment: Issue $15,000,000 of 20-year bonds at a price of 101, with a coupon rate of 8%, and flotation costs of 1.5% of par. The after flotation cost yield is 8.08%. Use $35,000,000 of funds generated from earnings. The equity market is expected to earn 12%. US Treasury bonds are currently yielding 5%. The beta coefficient for DQZ is estimated to be .60. DQZ is subject to an effective corporate income tax rate of 40%. Assume that the after-tax cost of debt is 7% and the cost of equity is 12%. Determine the weighted-average cost of capital.a. 10.50%b. 8.50%c. 9.50%d. 6.30%6. Zero-coupon bondsa. Sell for a small fraction of their face value because their yield is much lower than the market rate.b. Increase in value each year as they approach maturity, providing the owner with the total payoff at maturity.c. Are redeemable in measures of a commodity such as barrels of oil, tons of coal, or ounces of rare metal (e.g., silver).d. Are high-interest-rate, high-risk, unsecured bonds which have been used extensively to finance leveraged buyouts.7.Which of the following is not a limitation on the use of ROI as a performance measure?a. It could cause managers to postpone critical expenditures.b. It could cause managers to not accept projects that would be advantageous to the firm.c. It could be affected arbitrarily by allocation of indirect costs.d. It is unrelated to shareholder value.8. A company has two divisions. Division A has operat¬ing income of $500 and total assets of $1,000. Division B has operating income of $400 and total assets of $1,600. The required rate of return for the company is 10%. The company s residual income would be which of the following amounts?a. $0b. $260c. $640d. $9009. A company reports the following account balances at year-end: Account Balance Long-term debt $200,000 Cash 50,000 Net sales 600,000 Fixed assets (net) 320,000 Tax expense 67,500 Inventory 25,000 Common Stock 100,000 Interest expense 20,000 Administrative expense 35,000 Retained earnings 150,000 Accounts payable 65,000 Accounts receivable 120,000 Cost of goods sold 400,000 Depreciation expense 10,000 Additional Information: The opening balance of common stock was $100,000 The opening balance of retained earnings was $82,500 The company had 10,000 common shares outstanding all year No dividends were paid during the year At year-end, the company has a book value per share, to the nearest cent, ofa. $10.00b. $15.00c. $21.63d. $25.0010.A company has $450,000 per year of fixed production costs, of which $150,000 are noncash outlays. The variable cost per unit is $15, and the unit selling price is $25. The breakeven volume in sales units for this company would bea. 18,000 units.b. 30,000 units.c. 45,000 units.d. 60,000 units. 11.In the past, four direct labor hours were required to produce each unit of product Y. Material costs were $200 per unit, the direct labor rate was $20 per hour, and factory overhead was 3 times direct labor cost. In budgeting for next year, management is planning to outsource some manufacturing activities and to further automate others. Management estimates these plans will reduce labor hours by 25%, increase the factory overhead rate to 3.6 times direct labor costs, and increase material costs by $30 per unit. Management plans to manufacture 10,000 units. What amount should management budget for cost of goods manufactured?a. $4,820,000b. $5,060,000c. $5,200,000d. $6,500,0001 points 12.Light Company has 2,000 obsolete light fixtures that are carried in inventory at a manufacturing cost of $30,000. If the fixtures are reworked for $10,000, they could be sold for $18,000. Alternately, the light fixtures could be sold for $3,000 to a jobber located in a distant city. In a decision model analyzing these alternatives, the opportunity cost would bea. $ 3,000b. $10,000c. $13,000d. $30,00013.Koby Co. has sales of $200,000 with variable expenses of $150,000, fixed expenses of $60,000, and an operating loss of $10,000. By how much would Koby have to increase its sales in order to achieve an operating income of 10% of sales?a. $400,000b. $251,000c. $231,000d. $200,00014.A multiperiod project has a positive net present value. Which of the following statements is correct regarding its required rate of return?a. Less than the company’s weighted-average cost of capital.b. Less than the project’s internal rate of return.c. Greater than the company’s weighted-average cost of capital.d. Greater than the project’s internal rate of return.15If management has a variable rate short-term loan and is concerned about the volatility of short-term interest rates, which of the following would not be an effective hedging strategy?a. Purchase a short position in the Treasury bill futures market.b. Enter into an interest rate swap.c. Enter into a forward contract to sell Treasury bonds in the future.d. Enter into a forward contract to purchase Treasury bills in the future.16. Which of the following describes a normal yield curve?a. Upward sloping.b. Downward sloping.c. Flat.d. Humped.17.An efficient portfolio is one thata. Has no risk.b. Has measurable risk.c. Has the highest return.d. One that meets the investor’s tradeoff between risk and return. 18.In statistical analysis, a weighted-average using probabilities as weights is thea. Standard deviation.b. Expected value.c. Coefficient of variation.d. Objective function.19. Normal Company produced 600 units of one of its products last year. The standard for labor hours allowed was 2 hours per unit at a standard rate of $6 per hour. Actual hours worked amounted to 1,230 hours. The labor rate variance was $246 unfavorable, and the labor efficiency variance was $180 unfavorable. What was the actual labor cost for the period?a. $7,200b. $7,626c. $7,380d. $7,134 20.Normal Company produced 600 units of one of its products last year. The standard for labor hours allowed was 2 hours per unit at a standard rate of $6 per hour. Actual hours worked amounted to 1,230 hours. The labor rate variance was $246 unfavorable, and the labor efficiency variance was $180 unfavorable. What was the actual labor cost for the period?a. $7,200b. $7,626c. $7,380d. $7,1341 points 20.An organization s managerial decision-making model for capital budgeting is based on the net present value of discounted cash flows. The same organization s managerial performance evaluation model is based on annual divisional return on investment. Which of the following is true?a. Divisional managers are likely to maximize the measures in the decision-making model.b. Divisional managers are likely to maximize the measures in the performance evaluation model.c. The manager has an incentive to accept a project with a positive net present value that initially has a negative effect on net income.d. The use of models with different criteria promotes goal congruence.1 points 21.Which of the following items represents a business risk in capital structure decisions?a. Management preferences.b. Cash flow.c. Timing of information.d. Contractual obligations22.Division Z of a company produces a component that it currently sells to outside customers for $20 per unit. At its current level of production, which is 60% of capacity, Division Z s fixed cost of producing this component is $5 per unit and its variable cost is $12 per unit. Division Y of the same company would like to purchase this component from Division Z for $10. Division Z has enough excess capacity to fill Division Y s requirements. The managers of both divisions are compensated based upon reported profits. Which of the following transfer prices will maximize total company profits and be most equitable to the managers of Division Y and Division Z?a. $18 per unit.b. $12 per unit.c. $20 per unit.d. $22 per unit.23.A forward contract involvesa. A commitment today to purchase a product on a specific future date at a price determined today.b. A commitment today to purchase a product only when its price increases above its current exercise price.c. A commitment today to purchase a product some time during the current day at its present price.d. A commitment today to purchase a product on a specific future date at a price to be determined some time in the future.24.Net present value as used in investment decision-making is stated in terms of which of the following options? Cash flow Earnings before interest, taxes, and depreciation Earnings before interest and taxes Net income25.The prime rate is the Size of the commitment fee on a commercial bank loan Effective cost of commercial paper Effective cost of a commercial bank loan Rate charged on business loans to borrowers with high credit ratings26.When compared with a debt-to-assets ratio, a debt-to-equity ratio is Unrelated to the debt-to-assets ratio About the same as the debt-to-assets ratio Lower than the debt-to-assets ratio Higher than the debt-to-assets ratio27.The type of option that does not have the backing of stock is called a(n) Unsecured option Naked option Covered option Does not exist.28.Compared to another bond with the same risk and maturity but without a conversion feature, a convertible bond is likely to have a Higher face amount Lower face amount Higher coupon rate Lower coupon rate29.Which of the following formulas should be used to calculate the economic rate of return on common stock? Dividends per share divided by market price per share Market price per share divided by earnings per share (Dividends + change in price) divided by beginning price (Net income – preferred dividend) divided by common shares outstanding30.In practice, dividends Fluctuate more widely than earnings Tend to be a lower percentage of earnings for mature firms Usually exhibit greater stability than earnings Are usually set as a fixed percentage of earnings