BA225 Managerial Accounting
University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 4
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1. The kind of responsibility center that would be evaluated by comparing income on assets to the amount of assets invested is:
2. Thanks to her firm's decentralization and use of responsibility accounting, Melanie has more time to review a proposed new joint venture with one of the firm's business partners. What advantage of decentralization does this illustrate?
3. What amount of cash must be invested today in order to have $30,000 at the end of one year assuming the rate of return is 9%?
4. Chartreuse Company has two investment opportunities. Both investments cost $5,000 and will provide the following net cash flows:
The total present value of Investment A's cash inflows assuming a 10% minimum rate of return is (round to the nearest whole dollar):
5. Leon wants to determine the net present value for a proposed capital investment. He has determined the desired rate of return, the expected investment time period, a series of cash inflows of equal amount, the salvage value of the investment, and the required cash outflows. Which of the following tables would most likely be used to calculate the net present value of the investment?
6. A customary assumption in capital budgeting analysis is that:
7. Houston Corporation has two operating divisions, A and B. The following information is provided for Division A:
Division B uses the type of product produced by Division A and has approached Division A about buying the product internally. Division B is currently paying $45 to purchase the product from an outside source. If Division A sells internally it can save $1 per unit in variable costs. Assuming Division A is operating at capacity, what price should it charge Division B if the transfer is to be made?
8. The purposes of the postaudit for capital investments include all of the following except:
9. A capital investment project may provide cash inflows from:
10. An investment that cost $48,000 provided annual cash inflows of $9,000 per year for six years. The desired rate of return is 10%. The actual return from the investment was:
11. A tool that is often used to depict the lines of authority and responsibility within a firm is:
12. A major benefit of a decentralized organization is that:
13. A responsibility report provided to a manager typically includes:
14. Horak Company reported the following information for 2007:
The company's return on investment for 2007 was:
15. Johanssen Company reported the following information for 2007:
The company's operating income for 2007 was:
16. Management recently instituted a new training program for upper level managers. They budgeted the cost of the new program at $1,000 per employee trained but actual costs were $1,250 per employee trained. The difference between the budgeted cost for training and the actual cost of training is called a:
17. Melanie Company is considering a capital project that costs $16,000. The project will deliver the following cash flows:
Using the incremental approach, the payback period for the investment is:
18. Select the incorrect statement concerning the application of the controllability concept to responsibility accounting.
19. The Fairland Restaurant chain had a 12% return on a $60,000 investment in new ovens. The investment resulted in increased sales and an increase in income that was 4% of the increase in sales. The increase in sales was:
20. The rate of return that equates the present value of cash inflows and outflows is the:
21. Which capital budgeting technique defines returns in terms of income instead of cash flows?
22. Which of the following statements about return on investment is false?
23. Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?
24. Which of the following would be considered a cash inflow in determining the value of a capital investment?
25. Which one of the following statements describes an ordinary annuity?
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