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principles of accounting volume 1

Questions and Answers of Principles Of Accounting Volume 1

Regal Executive, Inc., produces executive motor coaches and currently manufactures the tent awnings that accompany them at these costs:The company received an offer from Saied Tents to produce the
Reuben’s Deli currently makes rolls for deli sandwiches it produces. It uses 30,000 rolls annually in the production of deli sandwiches. The costs to make the rolls are:A potential supplier has
Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of
Remarkable Enterprises requires four units of part A for every unit of A1 that it produces. Currently, part A is made by Remarkable, with these per-unit costs in a month when 4,000 units were
The Party Zone is trying to decide whether or not to continue its costume segment. The information shown is available for Party Supply’s business segments. Assume that neither the Direct fixed
Party Supply is trying to decide whether or not to continue its costume segment. The information shown is available for Party Supply’s business segments. Assume that neither the Direct fixed costs
Extreme Sports sells logo sports merchandise. The company is contemplating whether or not to continue its custom embroidery service. All of the company’s direct fixed costs can be avoided if a
What are some of the qualitative issues that a special order can create?
Which of the following is sometimes referred to as the “Anti Chain Store Act”?A. Sarbanes-Oxley ActB. Robinson-Patman ActC. Wright-Patman ActD. Securities Act of 1939
Colin O’Shea has a carpentry shop that employs 4 carpenters. Colin received an order for 1,000 coffee tables. The coffee tables have a round table top and four decorative legs. An offer for $500
In “The Trouble with Outsourcing,” a Schumpeter column in The Economist, there is a statement of advice to companies, who outsource products or services: “they need to think harder about what
Trifecta Distributors has decided to discontinue manufacturing its X Plus model. Currently, the company has 4,600 partially completed X Plus models on hand. The government has put a recall on a
Many outsourced jobs have resulted in “offshoring” jobs, rather than using domestic outsourcing. If a U.S. company wants to offshore a service like customer service, for example, what are some of
________ is the act of using another company to provide goods or services that your company requires.A. AllocatingB. OutsourcingC. SegmentingD. Leasing
Ralston Dairy gathered this data about the two products that it produces:Which of the products should be processed further? Product Frozen yogurt Ice cream Current Sales Value $
Balcom Dairy gathered this data about the two products that it produces:Which of the products should be processed further? Product Cream Milk Current Sales Value $ 9,000 14,000 Estimated
Cable paper company produces many colors of paper. The current popular color is grey. To increase the production of grey paper, a decision must be made to determine what color must be dropped. The
Which of the following is a disadvantage of outsourcing?A. Freeing up capacityB. Freeing up capitalC. Transferring production and technology risksD. Limiting ability to upsize or downsize production
What type of qualitative issues should management consider if a quantitative analysis reveals that a segment should be dropped?
Underground Food Store has 4,000 pounds of raw beef nearing its expiration date. Each pound has a cost of $4.50. The beef could be sold “as is” for $3.00 per pound to the dog food processing
Beretti’s Food Mart has 6,000 pounds of raw pork nearing its expiration date. Each pound has a cost of $5.50. The pork could be sold “as is” for $2.50 per pound to the dog food processing
ZZOOM, Inc., has decided to discontinue manufacturing its Z Best model. Currently, the company has 4,600 partially completed Z Best models on hand. The government has put a recall on a particular
Strawberry Sweet Company makes a variety of jams and jellies. During June, 55,000 gallons of strawberry mash was processed at a joint cost of $40,000. This produced 42,000 gallons of preserve-grade
Which of the following is not a qualitative decision that should be considered in an outsourcing decision?A. Employee moraleB. Product qualityC. Company reputationD. Relevant costs
In the decision by a grocery company that is trying to decide whether to keep or drop the bakery department in its grocery stores, what would the bakery manager’s salary be in relationship to the
Calcion Industries produces two joint products, Y and Z. Prior to the split-off point, the company incurred costs of $36,000. Product Y weighs 25 pounds and product Z weighs 75 pounds. Product Y
At Gems in the Rough, a jewelry company, the engraving department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $56,000 per year, to ease the problem. Using
Which of the following is one of the two approaches used to analyze data in the decision to keep or discontinue a segment?A. Comparing contribution margins and fixed costsB. Comparing contribution
A company produces two products, E and F, in batches of 100 units. The production and cost data are:The company can only perform 12,000 set-ups each period yet there is unlimited demand for each
Daisy Hernandez sells girls christening dresses through the online store, Etsy. Her customers have asked if she has necklaces that could be included with the dress. Daisy found white glossy ceramic
What is of key importance for a company whose products can be processed further?
Power Corp. makes 2 products: blades for table saws and blades for handsaws. Each product passes through the sharpening machine area, which is the chief constraint during production. Handsaw blades
Quality Clothing, Inc., produces skorts and jumper uniforms for school children. In the process of cutting out the cloth pieces for each product, a certain amount of scrap cloth is produced. Quality
When should a segment be dropped?A. Only when the decrease in total contribution margin is less than the decrease in fixed costB. Only when the decrease in total contribution margin is equal to fixed
What is a general rule to remember with respect to a sell-or-process-further environment, and what costs are irrelevant to the decision?
Rough Stuff makes 2 products: khaki shorts and khaki pants for men. Each product passes through the cutting machine area, which is the chief constraint during production. Khaki shorts take 15 minutes
Power Corp. makes 2 products: blades for table saws and blades for handsaws. Each product passes through the sharpening machine area, which is the chief constraint during production. Handsaw blades
At Stardust Gems, a faux gem and jewelry company, the setting department is a bottleneck. The company is considering hiring an extra worker, whose salary will be $67,000 per year, to ease the
Laramie Industries produces two joint products, H and C. Prior to the split-off point, the company incurred costs of $66,000. Product H weighs 44 pounds and product C weighs 66 pounds. Product H
Youngstown Construction plans to discontinue its roofing segment. Last year, this segment generated a contribution margin of $65,000 and incurred $70,000 in fixed costs. Discontinuing the segment
Sports Specialists makes baseballs and softballs in a three-step process. Unfortunately, the sewing machine process has been identified as a bottleneck. Each softball has a contribution margin of
Jamboree Outfitters, Inc., produces pocket knives and fillet knives for outdoor sporting. In the process of making the knives, some irregularities occur and no further work is performed on the
Mallory’s Video Supply has changed its focus tremendously and as a result has dropped the selling price of DVD players from $45 to $38. Some units in the work-in process inventory have costs of $30
Dr. Detail is a mobile car wash. The price for a standard wash is $35 and takes half an hour. Each worker is paid $20/hr, uses $5 of materials and $0.50 per mile to use their own vehicle to travel
When operating in a constrained environment, which products should be produced?A. Products with the highest contribution margin per unitB. Products with the highest contribution margin per unit of
Sports Buffs makes basketballs and footballs in a three-step process. Unfortunately, the stem insertion process has been identified as a bottleneck. Each basketball has a contribution margin of
Bob’s Auto Repair has determined that it needs new lift equipment to acquire more business opportunities. However, one or more alternatives meet or exceed the minimum expectations Bob has for the
Margo’s Memories, a company that specializes in photography and creating family and group photo portfolios, has 50 stores in major malls around the U.S. The company is considering an online
Capital investment decisions often involve all of the following except ________.A. Qualitative factors or considerationsB. Short periods of timeC. Large amounts of moneyD. Risk
A bookstore is planning to purchase an automated inventory/remote marketing system, which includes an upgrade to a more sophisticated cash register system. The package has an initial investment cost
What are the steps involved in the process for capital decision-making?
In practice, external factors can impact a capital investment. Give a current external factor that may currently impact or cause instability of capital spending either here or abroad.
Boxer Production, Inc., is in the process of considering a flexible manufacturing system that will help the company react more swiftly to customer needs. The controller, Mick Morrell, estimated that
Jasmine Manufacturing is considering a project that will require an initial investment of $52,000 and is expected to generate future cash flows of $10,000 for years 1 through 3, $8,000 for years 4
Markoff Products is considering two competing projects, but only one will be selected. Project A requires an initial investment of $42,000 and is expected to generate future cash flows of $6,000 for
Preference decisions compare potential projects that meet screening decision criteria and will be ranked in their preference order to differentiate between alternatives with respect to all of the
A restaurant is considering the purchase of new tables and chairs for their dining room with an initial investment cost of $515,000, and the restaurant expects an annual net cash flow of $103,000 per
Assume a company is going to make an investment in a machine of $825,000 and the following are the cash flows that two different products would bring. Which of the two options would you choose based
Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to
Mason, Inc., is considering the purchase of a patent that has a cost of $85,000 and an estimated revenue producing life of 4 years. Mason has a required rate of return that is 12% and a cost of
The third step for making a capital investment decision is to establish baseline criteria for alternatives. Which of the following would not be an acceptable baseline criterion?A. Payback methodB.
What is the next thing a company needs to do after it establishes investment criteria?
Ralston Consulting, Inc., has a $25,000 overdue debt with Supplier No. 1. The company is low on cash, with only $7,000 in the checking account and does not want to borrow any more cash. Supplier No.
Chang Consulting, Inc., has a $15,000 overdue debt with Supplier No. 1. The company is low oncash, with only $4,000 in the checking account and does not want to borrow any more cash. Supplier No. 1
You are explaining time value of money factors to your friend. Which factor would you explain as being larger?A. The future value of $1 for 12 periods at 6% is larger.B. The present value of $1 for
What is the screening decision?
If a garden center is considering the purchase of a new tractor with an initial investment cost of $120,000, and the center expects a return of $30,000 in year one, $20,000 in years two and three,
A grocery store is considering the purchase of a new refrigeration unit with an initial investment of $412,000, and the store expects a return of $100,000 in year one, $72,000 in years two and three,
If you are saving the same amount each month in order to buy a new sports car when the new models are released, which of the following will help you determine the savings needed?A. Future value of
Your supervisor is on the company’s capital investment decision team that is to decide on alternatives for the acquisition of a new computer system for the company. The supervisor says, “The book
During the current year, Sokowski Manufacturing earned income of $350,000 from total sales of $5,500,000 and average capital assets of $12,000,000. What is the sales margin?
What is future value and what is one example where it might be used?
Conestoga Plumbing plans to invest in a new pump that is anticipated to provide annual savings for 10 years of $50,000. The pump can be sold at the end of the period for $100,000. What is the present
Which of the following discounts future cash flows to their present value at the expected rate of return, and compares that to the initial investment?A. Internal rate of return (IRR) methodB. Net
Why do businesses consider time value of money before making an investment decision?
How much must be invested now to receive $30,000 for 10 years if the first $30,000 is received one year from now and the rate is 8%?
How much must be invested now to receive $50,000 for 8 years if the first $50,000 is received in one year and the rate is 10%?
This calculation determines profitability or growth potential of an investment, expressed as a percentage, at the point where NPV equals zeroA. Internal rate of return (IRR) methodB. Net present
What determines the anticipated interest rate payout for an investment?
Project X costs $10,000 and will generate annual net cash inflows of $4,800 for five years. What is the NPV using 8% as the discount rate?
Wallace Company is considering two projects. Their required rate of return is 10%.Which of the two projects, A or B, is better in terms of internal rate of return? Initial investment Annual cash
The IRR method assumes that cash flows are reinvested at ________.A. The internal rate of returnB. The company’s discount rateC. The lower of the company’s discount rate or internal rate of
To calculate present value of a lump sum, which table would be used?
Project Y cost $8,000 and will generate net cash inflows of $1,500 in year one, $2,000 in year two, $2,500 in year three, $3,000 in year four and $2,000 in year five. What is the NPV using 8% as the
What is the definition of present value?
What is the difference between the discount rate used for net present value and the internal rate of return methods?
Gardner Denver Company is considering the purchase of a new piece of factory equipment that will cost $420,000 and will generate $95,000 per year for 5 years. Calculate the IRR for this piece of
Briefly explain how NPV is computed and interpreted.
Match each of the following with its appropriate term. A. Controllable factors B. Cost center C. Metric D. Goal congruence E. Investment center F. Performance measurement system i. This is the part
Consolidated Aluminum is considering the purchase of a new machine that will cost $308,000 and provide the following cash flows over the next five years: $88,000, 92,000, $91,000, $72,000, and
Match each of the following with its appropriate term: A. Performance measures B. Profit center C. Responsibility accounting D. Revenue center E. Strategic plan F. Uncontrollable factors i. The
Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the following cash flows over the next five years: $99,000, $88,000, $92,000, $87,000, and $72,000.
What is the basic benefit of using IRR?
Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The company’s
Towson Industries is considering an investment of $256,950 that is expected to generate returns of $90,000 per year for each of the next four years. What is the investment’s internal rate of return?
Taos Productions bought a piece of equipment for $79,860 that will last for 5 years. The equipment will generate net operating cash flows of $20,000 per year and will have no salvage value at the end
Cinemar Productions bought a piece of equipment for $55,898 that will last for 5 years. The equipment will generate net operating cash flows of $14,000 per year and will have no salvage value at the
What are the strengths and weaknesses of NPV?
What are the strengths and weaknesses of IRR?
How does the size of the init$#!#$ial investment affect the internal rate of return on the net present value models?

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