TCO 9) To guide cost allocation decisions, the benefits-received criterion (Points : 3) may use an allocation base of division revenues to allocate advertising costs. is the primarily used criterion in activity-based costing. results in subsidizing products that are not profitable. generally uses the cost driver as the cost allocation base. 2. (TCO 9) Which cost-allocation criterion is superior when making an economic decision? (Points : 3) Fairness-or-equity criterion Ability-to-bear criterion Cause-and-effect criterion All of the above 3. (TCO 9) Some companies only allocate corporate costs to divisions that are (Points : 3) direct costs. planned and under the control of division managers. output unit-level costs. perceived as causally related to division activities. 4. (TCO 9) Corporate administrative costs allocated to a division cost pool are MOST likely to be (Points : 3) batch-level costs. product-sustaining costs. output unit-level costs. facility-sustaining costs. 5. (TCO 9) The Hassan Corporation has an electric mixer division and an electric lamp division. Of a $20,000,000 bond issuance, the electric mixer division used $14,000,000 and the electric lamp division used $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. Which corporate costs should be allocated to divisions? (Points : 3) Variable costs Fixed costs Neither fixed nor variable costs Both fixed and variable costs 6. (TCO 10) The capital budgeting method which calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present using the required rate of return is the (Points : 3) accrual accounting rate-of-return method. net-present-value method. payback method. sensitivity method. 7. (TCO 10) Assume your goal in life is to retire with $1 million. How much would you need to save at the end of each year if investment rates average 9% and you have a 15-year work life? (Points : 3) $41,286 $37,853 $25,554 $34,059 8. (TCO 10) The definition of an annuity is (Points : 3) similar to the definition of a life insurance policy. a series of equal cash flows at intervals. an investment product whose funds are invested in the stock market. Both 1 and 2 are correct. 9. (TCO 10) In situations where the required rate of return is not constant for each year of the project, it is advantageous to use (Points : 3) sensitivity analysis. the net-present-value method. the adjusted rate-of-return method. the internal rate-of-return method. 10. (TCO 10) The Zeron Corporation wants to purchase a new machine for its factory operations at a cost of $950,000. The investment is expected to generate $350,000 in annual cash flows for a period of four years. The required rate of return is 14%. The old machine can be sold for $50,000. The machine is expected to have zero value at the end of the four-year period. What is the net present value of the investment? Would the company want to purchase the new machine? Income taxes are not considered. (Points : 3) $119,550; Yes $326,750; No $1,019,550; Yes $69,550; No