2024 - 1 Of 35 Which Of The Following Best Describes A Sunk Cost Removed Costs

ACC 240 Final exam guide – 2024

1 of 35

Which of the following best describes a sunk cost?

[removed]	Costs that were incurred in the past and cannot be changed
[removed]	Benefits foregone by choosing a particular alternative course of action
[removed]	A factor that restricts the production or sale of a product
[removed]	Expected future data that differ among alternatives

Question

2 of 35

Opportunity cost is best described by which of the following?

[removed]	Benefits foregone by choosing a particular alternative course of action
[removed]	Costs that were incurred in the past and cannot be changed
[removed]	The distribution of all products to be sold
[removed]	Expected future costs that differ among alternatives

Question

3 of 35

Expected future data that differs among alternative courses of action are referred to as

[removed]	relevant information.
[removed]	historical information.
[removed]	predictable information.
[removed]	irrelevant information.

Question

4 of 35

Which of the following is a sunk cost?

[removed]	Operating costs for a new vehicle
[removed]	Trade in value of old vehicle
[removed]	Purchase price of vehicle to be traded in
[removed]	Purchase price of new vehicle

Question

5 of 35

Managers should consider all of the following when deciding whether to accept a special order, except

[removed]	available excess capacity.
[removed]	the variable costs associated with the special order.
[removed]	the effect of the order on regular sales.
[removed]	fixed costs that will not be affected by the order.

Question

6 of 35

A company should ________ when making a short-term special decision.

[removed]	focus on qualitative factors only
[removed]	focus on quantitative factors only
[removed]	separate variable costs from fixed costs
[removed]	use a traditional direct costing approach

Question

7 of 35

Comfort Cloud manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is currently producing and selling 75,000 seats per year. The following information relates to current production:

Sale price per unit	$400

Variable costs per unit:
Manufacturing	$220
Marketing and administrative	$50

Total fixed costs:
Manufacturing	$750,000
Marketing and administrative	$200,000

If a special sales order is accepted for 3,200 seats at a price of $350 per unit, and fixed costs increase by $12,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

[removed]	Decrease by $244,000
[removed]	Increase by $404,000
[removed]	Increase by $256,000
[removed]	Increase by $244,000

Question

8 of 35

Which of the following types of cash outlays has its own budget?

[removed]	Capital expenditures
[removed]	Dividends
[removed]	Income taxes
[removed]	All of the above

Question

9 of 35

A company should ________ when projecting cash receipts for a given month.

[removed]	include only cash collections from sales made in that month
[removed]	only list COD sales made in that month
[removed]	only list credit sales made in that month
[removed]	include cash to be collected in that month regardless of when the sale was made

Question

10 of 35

The term cash budget is best defined by which of the following?

[removed]	A company’s plan for purchases of property, plant and equipment, and other long-term assets
[removed]	Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance
[removed]	A system for evaluating the performance of each responsibility center and its manager
[removed]	A budget that projects cash inflows and outflows and the end of period budgeted balance sheet

Question

11 of 35

All of the following are considered when preparing the cash budget except

[removed]	payments for inventory.
[removed]	cash receipts from customers.
[removed]	depreciation expense.
[removed]	cash payments to suppliers.

Question

12 of 35

The final step in creating the financial budget is the preparation of which of the following?

[removed]	Master budget
[removed]	Cash budget
[removed]	Operating budgets
[removed]	Budgeted balance sheet

Question

13 of 35

Einstein Company is preparing its cash budget for the upcoming month. The beginning cash balance for the month is expected to be $14,000. Budgeted cash receipts are $84,000, while budgeted cash disbursements are $72,000. Einstein Company wants to have an ending cash balance of $40,000. The excess (deficiency) of cash available over disbursements for the month would be

[removed]	$170,000.
[removed]	$(26,000).
[removed]	$112,000.
[removed]	$26,000.

Question

14 of 35

Roman Company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $40,000. Budgeted cash receipts are $101,000, while budgeted cash disbursements are $123,000. Roman Company wants to have an ending cash balance of $45,000. How much would Roman Company need to borrow to achieve its desired ending cash balance?

[removed]	$18,000
[removed]	$27,000
[removed]	$23,000
[removed]	$63,000

Question

15 of 35

Lubrizol is a chemical company that specializes in producing lubricants. Lubrizol was acquired in 2011 for $9 billion by investment holding company Berkshire Hathaway. Lubrizol is likely to be classified as a(n)

[removed]	cost center.
[removed]	investment center.
[removed]	profit center.
[removed]	revenue center.

Question

16 of 35

The reservations department for a car rental chain is likely to be classified as a(n)

[removed]	cost center.
[removed]	investment center.
[removed]	profit center.
[removed]	revenue center.

Question

17 of 35

A potential advantage of decentralization is which of the following?

[removed]	Benchmarking
[removed]	Promotes goal congruence and coordination
[removed]	Provides training
[removed]	Provides feedback

Question

18 of 35

Pizza Hut, a division of Yum! Brands, is most likely treated as a(n)

[removed]	cost center.
[removed]	investment center.
[removed]	profit center.
[removed]	revenue center.

Question

19 of 35

Honda’s East Liberty Auto Plant which builds Honda cars is most likely treated as a(n)

[removed]	cost center.
[removed]	investment center.
[removed]	profit center.
[removed]	revenue center.

Question

20 of 35

The manager of the corporate division of Anthropologie (a retail clothing chain) would be in charge of a(n)

[removed]	investment center.
[removed]	cost center.
[removed]	profit center.
[removed]	revenue center.

Question

21 of 35

The store manager for the Dick’s Sporting Goods location in Columbus, Ohio, is in charge of a(n)

[removed]	cost center.
[removed]	investment center.
[removed]	profit center.
[removed]	revenue center.

Question

22 of 35

Rzepka Corporation manufactures jeweled cell phone cases. The following materials standards have been established for the jewels used to decorate the cell phone cases.

Standard quantity per case (grams)	3.5
Standard price per gram of jewels	$ 3.00

The following data relates to the production of the cell phone cases during June:

Actual jewels purchased and used (grams)	1,400
Actual cost of jewels purchased	$ 4,100
Actual number of cases produced	500

What is the materials price variance for jewels in June?

[removed]	$100 favorable
[removed]	$100 unfavorable
[removed]	$4,200 favorable
[removed]	$4,200 unfavorable

Question

23 of 35

An LCD screen is purchased to be used in the manufacturing of a digital watch. The standard price for the LCD screen used is $40.00. During the month of February, 3,400 screens were purchased and used. The materials price variance was $6,000 unfavorable. The standard number of screens allowed for the actual number of watches manufactured during the period was 25,000 screens. The actual purchase price of each LCD screen would be closest to

[removed]	$39.76 per LCD screen.
[removed]	$40.24 per LCD screen.
[removed]	$38.24 per LCD screen.
[removed]	$41.76 per LCD screen.

Question

24 of 35

Madden Corporation manufactures t-shirts, which is its only product. The standards for t-shirts are as follows:

Standard direct materials cost per yard	$ 8
Standard direct materials quantity per t-shirt (yards)	1.5

During the month of May, the company produced 1,250 t-shirts. Related production data for the month follows:

Actual yards of direct material purchased	1,400
Actual direct materials total cost	$ 15,500

What is the direct materials quantity variance for the month?

[removed]	$ 4,300 favorable
[removed]	$ 4,300 unfavorable
[removed]	$ 3,800 favorable
[removed]	$ 3,800 unfavorable

Question

25 of 35

A favorable direct labor efficiency variance might indicate that

[removed]	higher skilled workers were used that performed the task slower than expected.
[removed]	higher skilled workers were used that performed the task faster than expected.
[removed]	lower skilled workers were paid a higher wage than expected.
[removed]	lower skilled workers were paid a lower wage than expected.

Question

26 of 35

A company receives an unusually high number of orders in a month. To produce all of the orders within the scheduled dates of delivery, the company pays employees an extra $8 per hour for every hour of overtime the employees work. Which variance would be directly impacted?

[removed]	Materials price variance
[removed]	Materials quantity variance
[removed]	Labor efficiency variance
[removed]	Labor rate variance

Question

27 of 35

A favorable direct labor efficiency variance and an unfavorable direct labor rate variance might indicate which of the following?

[removed]	Unskilled workers using more actual hours than standard, paid at a higher rate per hour than the standard rate
[removed]	Unskilled workers using less actual hours than standard, paid a lesser rate per hour than the standard rate
[removed]	Skilled workers using less actual hours than standard, paid at a higher rate per hour than the standard rate
[removed]	Skilled workers using more actual hours than standard, paid at a higher rate per hour than the standard rate

Question

28 of 35

The ________ variance measures whether the quantity of direct labor used to make the actual number of outputs is within the standard allowed for that number of outputs.

[removed]	production volume
[removed]	overhead flexible budget
[removed]	rate
[removed]	efficiency

Question

29 of 35

The process of choosing among different alternative investments due to limited resources is referred to as

[removed]	capital investing.
[removed]	capital rationing.
[removed]	resource rationing.
[removed]	resource allocation.

Question

30 of 35

The term ________ is best described as the length of time required to recover the cost of an investment.

[removed]	time value of money
[removed]	payback period
[removed]	capital budgeting
[removed]	annuity

Question

31 of 35

All else being equal, a company would choose to invest in a capital asset if which of the following is true?

[removed]	If the payback period equals the amount invested
[removed]	If the expected accounting rate of return is less than the required rate of return
[removed]	If the expected accounting rate of return is greater than the required rate of return
[removed]	If the average amount invested is equal to the net cash inflows

Question

32 of 35

The formula for calculating the accounting rate of return for a capital asset is

[removed]	average annual operating income from asset/amount invested in asset.
[removed]	average annual net cash inflow from asset/amount invested in asset.
[removed]	(average annual operating income + depreciation expense)/amount invested in asset.
[removed]	D) (average annual cash inflows – depreciation expense)/(amount invested in asset + residual value of asset).

Question

33 of 35

Gomez Corporation is considering two alternative investment proposals with the following data:

	Proposal X	Proposal Y
Investment	$ 850,000	$ 468,000
Useful life	8 years	8 years
Estimated annual net cash inflows for eight years	$ 125,000	$ 78,000
Residual value	$ 40,000	$ –
Depreciation method	Straight-line	Straight-line
Required rate of return	14%	10%

How long is the payback period for Proposal X?

[removed]	10.90 years
[removed]	6.00 years
[removed]	6.80 years
[removed]	21.25 years

Question

34 of 35

Gomez Corporation is considering two alternative investment proposals with the following data:

	Proposal X	Proposal Y
Investment	$ 850,000	$ 468,000
Useful life	8 years	8 years
Estimated annual net cash inflows for eight years	$ 125,000	$ 78,000
Residual value	$ 40,000	$ –
Depreciation method	Straight-line	Straight-line
Required rate of return	14%	10%

How long is the payback period for Proposal Y?

[removed]	21.25 years
[removed]	6.00 years
[removed]	6.80 years
[removed]	11.70 years

Question

35 of 35

(Use present value tables in textbook.) Hincapie Manufacturing is evaluating investing in a new metal stamping machine costing $30,924. Hincapie estimates that it will realize $12,000 in annual cash inflows for each year of the machine’s 3-year useful life. The internal rate of return (IRR) for the machine is approximately

[removed]	8%.
[removed]	10%.
[removed]	5%.
[removed]	6%.

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