(TCO 9) Which of the following is a major accounting contribution to the managerial decision-making process in evaluating possible courses of action? (Points : 4) Determine who is responsible for the decision. Prepare internal reports that review the a

1. (TCO 9) Which of the following is a major accounting contribution to the managerial decision-making process in evaluating possible courses of action? (Points : 4) Determine who is responsible for the decision. Prepare internal reports that review the actual impact of a decision made. Calculate how much should be invested for each potential project. Select possible actions that management should consider. 2. (TCO 9) When is incremental analysis most useful? (Points : 4) After a decision has been made to determine its effectiveness In choosing between capital budgeting methods In evaluating the profitability of a company In developing relevant information for management decisions 3. (TCO 9) What is the nature of an opportunity cost? (Points : 4) It is always variable. It is a potential benefit. It is included as part of cost of goods sold. It is a sunk cost. 4. (TCO 9) A company is deciding whether or not to replace some old equipment with new equipment. Which of the following is not considered in the incremental analysis? (Points : 4) Annual operating cost of the new equipment Annual operating cost of the old equipment Net cost of the new equipment Book value of the old equipment 5. (TCO 9) It costs Lannon Fields $14 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30. A buyer in Mexico offers to purchase 2,000 units at $18 each. Lannon has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income? (Points : 4) decrease $4,000 increase $4,000 increase $36,000 increase $8,000 6. (TCO 9) Harrison Company determines that an opportunity cost of an alternate course of action is relevant to a make-or-buy decision. Which statement is true of the opportunity cost? (Points : 4) Should be added to the buy costs Should be subtracted from the make costs Should be added to the make costs Should be ignored if it does not involve a cash outlay 7. (TCO 9) Whisker Clean Company spent $8,000 to produce product 89, which can be sold as is for $10,000 or processed further, incurring additional costs of $3,000, and then sold for $14,000. Which amounts are relevant to the decision about product 89? (Points : 4) $8,000, $10,000, and $14,000 $8,000, $3,000, and $14,000 $10,000, $3,000, and $14,000 $8,000, $10,000, $3,000, and $14,000 8. (TCO 8) Most of the capital budgeting methods use __________ (Points : 4) accrual accounting numbers. cash flow numbers. net income. accrual accounting revenues. 9. (TCO 8) The first step in the capital budgeting evaluation process is to __________ (Points : 4) request proposals for projects. screen proposals by a capital budgeting committee. determine which projects are worthy of funding. approve the capital budget. 10. (TCO 8) If a payback period for a project is greater than its expected useful life, the __________ (Points : 4) project will always be profitable. entire initial investment will not be recovered. project would only be acceptable if the company’s cost of capital was low. project’s return will always exceed the company’s cost of capital. 11. (TCO 8) All of the following statements about intangible benefits in capital budgeting are correct, except that they __________ (Points : 4) include increased quality and employee loyalty. are difficult to quantify. are often ignored in capital-budgeting decisions. cannot be incorporated into the NPV calculation. 12. (TCO 8) The capital-budgeting method that takes into account both the size of the original investment and the discounted cash flows is the __________ (Points : 4) cash-payback method. internal rate of return method. net present value method. profitability index. 13. (TCO 8) Performing a post audit is important because __________ (Points : 4) managers will be more likely to submit reasonable data when they make investment proposals if they know their estimates will be compared to actual results. it provides a formal mechanism by which the company can determine whether existing projects should be terminated. it improves the development of future investment proposals because managers improve their estimation techniques by evaluating their past successes and failures. all of the above 14. (TCO 8) A company has a minimum required rate of return of 9% and is considering investing in a project that costs $50,000 and is expected to generate cash inflows of $20,000 at the end of each year for 3 years. The profitability index for this project is __________ (Points : 4) 0.99. 1.00. 1.01. 1.20. 15. (TCO 8) The annual rate of return method is based on __________ (Points : 4) accounting data. the time value of money data. market values. cash flow data.