Question 1

Billings Rail Company's sales for the next five months are as follows:

February	$175,000
March	$160,000
April	$145,000
May	$135,000
June	$130,000

Collection history for the company indicates that 50% of sales are collected in the month of the sale, 38% is collected in the following month, and 12% of sales are uncollectible. How much are total budgeted cash receipts for April?

	A.	$123,800
	B.	$154,300
	C.	$72,500
	D.	$133,300

2 points

Question 2

Budgeted sales (in units) for Falter Company are as follows:

September	50,000 units
October	60,000 units
November	55,000 units
December	80,000 units

The company wishes to have 20% of the next month's sales on hand at the end of each month. How much is budgeted production for November?

	A.	60,000 units
	B.	61,000 units
	C.	50,000 units
	D.	71,000 units

2 points

Question 3

Tech Star Company must maintain a minimum cash balance of $25,000. At the beginning of June the company's cash balance was $17,000. Budgeted cash receipts for June are $150,000 and budgeted cash disbursements are $201,000. Budgeted net income for July totals $11,000. During July, how much will Tech Star Company need to borrow?

	A.	$34,000
	B.	$59,000
	C.	$43,000
	D.	$9,000

2 points

Question 4

A flexible budget takes into account the fact that when production levels change

	A.	total fixed costs remain the same.
	B.	variable costs per unit changes.
	C.	fixed costs per unit remain the same.
	D.	None of the above is true.

2 points

Question 5

Good Stuff Restaurant expects to make the following inventory purchases:

Month

Purchases

October	$80,000
November	100,000
December	160,000

During September, the restaurant purchased $72,000 of inventory. The restaurant typically pays for 25% of the inventory purchases within the month of the purchase and 75% in the following month. Estimate the cash disbursements that will be made in November for purchases related to inventory.

	A.	$95,000
	B.	$100,000
	C.	$115,000
	D.	$85,000

2 points

Question 6

The produce division of Boot Ship Nutrition had invested capital of $800,000 last year. If the minimum required rate of return is 15% and last year's residual income was $60,000, how much was NOPAT?

	A.	$60,000
	B.	$120,000
	C.	$400,000
	D.	$180,000

2 points

Question 7

Fred's Fenders' cost of capital is 15%, and its required rate of return is 12%. The company has noninterest-bearing current liabilities of $50,000 and total assets of $350,000. Fred's NOPAT is $100,000. How much is Fred's residual income?

	A.	$55,000
	B.	$45,000
	C.	$52,000
	D.	$64,000

2 points

Question 8

Dingo is one of the divisions of Alpha Corporation. Dingo's invested capital is $500,000. Last year, Dingo recorded NOPAT of $80,000 on sales of $360,000. Which one of the following correctly calculates return on investment using the two components of return on investment?

	A.	$80,000 $360,000
	B.	1.39 11.5
	C.	22.22% 0.72
	D.	$80,000 ($500,000 - $80,000)

2 points

Question 9

Residual income is NOPAT with an adjustment for

	A.	standard cost variances.
	B.	profit required for the level of investment in the investment center.
	C.	taxes and depreciation.
	D.	accounting distortions.

2 points

Question 10

The income that is used in the calculation of return on investment is usually

	A.	EBIT (earnings before interest and taxes).
	B.	net income as defined by GAAP.
	C.	net income plus depreciation expense.
	D.	NOPAT (net operating profit after taxes).