saint leo university MBA 566 quiz 8

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1.Volume variances are computed for which of the following costs? (Points : 2)





2.Summer Company’s static budget is based on a planned activity level of 25,000 units. Later, the company’s management accountant prepared a budget based on 30,000 units. The company actually produced and sold 29,000 units. In evaluating its performance, management should compare the company’s actual revenues and costs to which of the following budgets? (Points : 2)





3.A budget prepared at a single volume of activity is referred to as a: (Points : 2)





4.When would a variance be labeled as favorable? (Points : 2)





5.The research and development department of a large manufacturing company would likely be organized as a(n): (Points : 2)





6.The practice of delegating authority and responsibility is referred to as: (Points : 2)





7.Butler Company developed a static budget at the beginning of the company’s accounting period based on an expected volume of 4,000 units:

Per unit
Revenue $4.00
Variable costs 1.50
Contribution margin $2.50
Fixed costs 2.00
Net income $0.50

If actual production totals 5,000 units, the flexible budget would show fixed costs of: (Points : 2)





8.Assuming actual volume is 11,000 units and planned volume is 10,000 units, the sales volume variance: (Points : 2)





9.Which of the following statements about ROI is false? (Points : 2)





10.Bilbo Company evaluates its managers on the basis of return on investment (ROI). Division Three has an ROI of 15% while the company as a whole has an ROI of only 10%. Which of the following performance measures will motivate the managers of Division Three to accept a project earning a 12% return? (Points : 2)





11.Hansen Company reported the following information for 2010:

Sales $787,000
Average Operating Assets $375,000
Desired ROI 9%
Residual Income $ 11,250

The company’s operating income for 2010 was: (Points : 2)





12.An even stream of payments over equal time periods where the cash flows are assumed to occur at the end of each period is referred to as a(n): (Points : 2)





13.What amount of cash would result at the end of one year, if $17,000 is invested today and the rate of return is 10%? (Points : 2)





14.Which capital budgeting technique defines returns in terms of income instead of cash flows? (Points : 2)





15.Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar? (Points : 2)





16.Which of the following would be considered a cash inflow in determining the value of a capital investment? (Points : 2)





17.Austin Company is considering a capital project that will return $100,000 each year for five years. At the company’s hurdle rate of 10%, the present value of the annuity is $379,100. What will be the company’s return on investment in Year 1? (Points : 2)





18.Which of the following statements concerning payback analysis is true? (Points : 2)





19.Mountain Brook Company is considering two investment opportunities whose cash flows are provided below:

Year Investment A Investment B
0 ($15,000) ($9,000)
1 5,000 5,000
2 5,000 4,000
3 5,000 3,000
4 4,000 1,000

The company’s hurdle rate is 12%. What is the present value index of Investment A? (Points : 2)





20.An investment that costs $25,000 will produce annual cash flows of $5,000 for a period of 6 years. Further, the investment has an expected salvage value of $3,000. Given a desired rate of return of 12%, the investment will generate a: (Points : 2)





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