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    Accounting problems.

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    26. Dude Outfitters uses the same production line to make shirts and jeans from denim and rivets. Information on the production resources and product demand follows:

    Shirts Jeans
    Expected annual demand (units) 8,000 12,000
    Denim requirement per unit 2 yards 3 yards
    Rivet requirement per unit 5 13
    Direct labour required per unit 3 hours 4 hours
    Machine hours required per unit 2 hours 1 hour

    In the coming year, the firm expects to acquire the following resources: denim (50,000 yards); rivets (200,000); direct labour (70,000 hours); and machine time (30,000 hours). Which of the resources may serve as a constraint on the firm's ability to satisfy the expected demand for each product?
    a. denim and rivets
    b. rivets, direct labour, and machine time
    c. denim and direct labour
    d. rivets and direct labour

    27. Imposed budgets are
    a. prescribed by courts for companies in bankruptcy proceedings.
    b. required by law for not-for-profit entities.
    c. prepared by the board of directors and communicated to top and lower-level managers.
    d. prepared by top management and communicated to lower-level managers.

    28. The degree to which top management allows participation in the budgeting process by lower-level managers generally depends on
    a. the size of the organization and the sophistication of the organization's accounting system.
    b. top management's awareness of the advantages of participation and its level of confidence in those advantages.
    c. lower-level management's desire to participate and the organization's level of profitability.
    d. the specificity of the organization's goals and the number of organizational units.

    29. Phillip Inc. expects to sell 18,400 school bags in October. Each bag requires 3 square feet of fabric. October beginning inventories are estimated at 8,000 bags and 32,000 square feet of fabric. Phillip wants to end October with 9,200 bags and 36,000 square feet of fabric. How many square feet of fabric should Phillip Inc. plan to purchase in October?
    a. 51,200
    b. 58,800
    c. 59,200
    d. 62,800

    30. In preparing the July 2004 budget, Robinson Company has the following information available:

    Accounts Receivable balance on June 30 $350,000
    Estimated credit sales for July 400,000
    Estimated collections in July for credit sales in July and prior months 320,000
    Estimated write-offs in July for uncollectible credit sales 16,000
    Estimated provision for doubtful accounts for credit sales in July 12,000

    What is the projected balance of Accounts Receivable at July 31, 2004?
    a. $402,000
    b. $414,000
    c. $426,000
    d. $430,000

    31. Which of the following is an advantage of decentralization?
    a. personnel may not have good decision-making skills
    b. it can be expensive
    c. it helps top management recognize and develop managerial talent
    d. it may require more effective methods of communication among employees

    32. Efficiency can be measured as
    a. actual output divided by actual input.
    b. actual input divided by planned output.
    c. actual output divided by planned output.
    d. planned output divided by actual output.

    33. Which of the following costs are often under the control of a revenue centre manager?
    a. advertising
    b. staff's mileage and travel-related costs
    c. building depreciation
    d. all of the above are under a revenue centre manager's control

    34. Which of the following activities is not performed by accountants in a business process redesign project?
    a. suggesting baseline performance measurements
    b. measuring achieved performance of redesigned processes
    c. determining which processes are to be reengineered
    d. all of the above are performed by accountants

    35. Sharing inside information with suppliers and customers
    a. can help a company find ways to decrease costs and improve the profitability of firms in the value chain.
    b. will result in vertical and/or horizontal price fixing among the firms in the value chain.
    c. will eliminate a firm's competitive advantage and core competencies.
    d. decreases a firm's ability to utilize target costing and value engineering techniques.

    36. MRP is designed to accomplish all of the following except
    a. project work centre workloads.
    b. identify potential bottlenecks.
    c. generate a time-sequenced schedule for purchases and production component needs.
    d. eliminate bottlenecks in the workplace.

    37. An annuity is
    a. an investment contract.
    b. a reduction in cash operating costs.
    c. an equal annual cash flow.
    d. an amount indicated at any time period on a timeline.

    38. Discounting cash flows requires information about the
    a. amount of cash flows and company's borrowing rate.
    b. timing of cash flows, amount of cash flows, company's discount rate, and company's borrowing rate.
    c. timing of cash flows, amount of cash flows, and company's discount rate.
    d. timing of cash flows, amount of cash flows, and company's borrowing rate.

    A project requiring an initial investment of $200,000 will generate equal net annual cash inflows of an unknown amount for 5 years. The project will have no salvage value. If the correct discount rate for this type of project is 12%, what is 39. the minimum net annual cash inflow for this project to be acceptable? (Round to the nearest dollar.)
    a. $113,480
    b. $ 72,096
    c. $ 55,482
    d. $ 40,000

    40. A company is considering an investment in a new project that has the following characteristics:

    Initial cost $700,000
    Net annual pre-tax cash inflow $140,000
    Annual operating cost savings $70,000
    Expected salvage value $0
    Income tax rate 40%
    Expected life 10 years

    What is the after-tax payback period for this investment?
    a. 5.00 years
    b. 10.00 years
    c. 8.33 years
    d. 6.25 years

    41. Business assets do not include
    a. happy employees.
    b. a safe working environment.
    c. bank overdrafts.
    d. cash.

    42. Which of the following is the best definition of liabilities?
    a. obligations of the enterprise arising from past transactions
    b. amounts owing in the future to creditors and owners
    c. estimates of the enterprise's future cash outflows
    d. expected payments to creditors and banks

    43. The income statement measures
    a. the wealth of the company at a single point in time.
    b. the difference in wealth between two points in time.
    c. changes in wealth according to Customs and Revenue regulations.
    d. the change in the wealth of the company since it was founded.

    44. The statement of retained earnings is best described as explaining
    a. changes in the income statement's retained earnings.
    b. the financial structure of the company.
    c. the changes in the balance sheet's retained earnings.
    d. changes in the amount of cash not yet paid to creditors.

    45. Cash movements come from
    a. revenues, expenses, amortization, and the sale of shares.
    b. receipts, payments, repaying debts, and the purchase of shares.
    c. revenues, receipts, expenses, and the repaying of debts.
    d. payments, expenses, receipts, and amortization.

    46. In order to calculate cash flow from operating activities it is necessary to
    a. add back amortization expense to net income.
    b. deduct decreases in inventory from net income.
    c. add reductions in accounts payable to net income.
    d. deduct amounts paid for the purchase of plant and equipment.

    47. Other things equal, if the management of a company keeps the company's stock of assets up to date, the company's return on investment will
    a. rise compared to equivalent companies who do not follow the company's example.
    b. fall compared to equivalent companies who do not follow the company's example.
    c. stay at the same level as that of equivalent companies who do not follow the company's example.
    d. It is not possible to say, based on the information provided.

    48. Stock markets adjust prices of companies' securities
    a. as each company issues its annual and quarterly reports.
    b. as the government issues financial information.
    c. as tax rates change.
    d. on the basis of any information they receive.

    49. Betty Robson is considering an investment opportunity. She can pay RP Company $5,000 today, and they will guarantee her a return payment of $1,500 per year at the end of each of the next 7 years. She will have to borrow the $5,000 at 10% to take advantage of this opportunity. What is the present value of the investment that Betty is considering?
    a. $7,302
    b. $8,033
    c. $9,744
    d. $10,500

    50. In present value analysis
    a. the higher the interest rate, the better the project.
    b. it pays to be patient and concentrate on projects whose major cash flows are further in the future.
    c. other things equal, the earlier the cash flow in the life of the project, the better.
    d. none of the above

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    Solution Summary

    The problem set deals with issues in accounting including income statement, payback period etc.