Solved by verified expert :WEEK 6
Question 1. Question
: (TCO 9) To guide cost
allocation decisions, the cause-and-effect criterion

may allocate corporate salaries to divisions
based on profits.

is used less frequently than the other

is the primary criterion used in
activity-based costing.

is a difficult criterion on which to obtain

Question 2. Question
: (TCO 9) Which cost-allocation
criterion is superior when making an economic decision?

Fairness-or-equity criterion

Ability-to-bear criterion

Cause-and-effect criterion

All of the above

Question 3. Question
: (TCO 9) The MOST likely reason
for NOT allocating corporate costs to divisions include that

divisions receive no benefits from corporate

these costs are not controllable by division

these costs are incurred to support division
activities, not corporate activities.
division resources are already used to attain
corporate goals.

Question 4. Question
: (TCO 9) Identifying
homogeneous cost pools

requires judgment and should be reevaluated
on a regular basis.
should include the input of management.

should include a cost-benefit analysis.

All of the above

Question 5. Question
: (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?

Variable costs

Fixed costs

Neither fixed nor variable costs

Both fixed and variable costs

Question 6. Question
: (TCO 10) The stage of the
capital budgeting process in which a firm obtains funding for the project is

obtain-information stage.

implement the decision, evaluate performance,
and learn stage.

make-predictions stage.

Question 7. Question
: (TCO 10) Assume your goal in
life is to retire with $1 million.
Howmuch would you need to save at the end of each year if investment
rates average 9% and you have a 15-year work life?





Question 8. Question
: (TCO 10) If the net present
value for a project is zero or positive, this means that the

project should be accepted.

project should not be accepted.

expected rate of return is below the required
rate of return.

Both 1 and 3 are correct.

Question 9. Question
: (TCO 10) An important
advantage of the net-present-value method of capital budgeting over the
internal rate-of-return method is

the net present value method is expressed as
a percentage.

the net present values of individual projects
can be added to determine the effects of accepting a combination of projects.
there is no advantage.

Both 1 and 2 are correct.

Question 10. Question
: (TCO 10) Upper Darby Park
Department is considering a new capital investment. The following information is available on the
investment. The cost of the machine will
be $150,000. The annual cost savings if
the new machine is acquired will be $40,000.
The machine will have a five-year life, at which time the terminal
disposal value is expected to be $20,000.
Upper Darby Park Department is assuming no tax consequences. If Upper Darby Park Department has a required
rate of return of 10%, which of the following is closest to the present value
of the project?






Question 1. Question
: (TCO 11) The four cost
categories in a cost of quality program are

product design, process design, internal
success, and external success.
prevention, appraisal, internal failure, and
external failure.

design, conformance, control, and process.

design, process specification, on-time
delivery, and customer satisfaction.

Question 2. Question
: (TCO 11) ________ is a formal
means of distinguishing between random and nonrandom variation in an operating

Statistical process control (SPC)

A Pareto diagram

A cause-and-effect diagram

A fishbone diagram

Question 3. Question
: (TCO 11) Which of the
following is NOT one of the three mainmeasurements in the theory of

Investments or inventory

Other operating costs

Manufacturing lead time

Throughput contribution

Question 4. Question
: (TCO 11) A liability claim is
an example of

external failure costs.

internal failure costs.

prevention costs.

appraisal costs.

Question 5. Question
: (TCO 11) Regal Products has a
budget of $900,000 in 20X3 for prevention costs. If it decides to automate a portion of its
prevention activities, it will save $60,000 in variable costs. The new method will require $18,000 in
training costs and $120,000 in annual equipment costs. Management is willing to adjust the budget
for an amount up to the cost of the new equipment. The budgeted production level is 150,000
units. Appraisal costs for the year are
budgeted at $600,000. The new prevention
procedures will save appraisal costs of $30,000. Internal failure costs average $15 per failed
unit of finished goods. The internal
failure rate is expected to be 3% of all completed items. The proposed changes will cut the internal
failure rate by one-third. Internal
failure units are destroyed. External
failure costs average $54 per failed unit.
The company’s average external failuresaverage 3% of units sold. The new proposal will reduce this rate by
50%. Assume all units produced are sold
and there are no ending inventories. How
much will appraisal costs change assuming the new prevention methods reduce
material failures by 40% in the appraisal phase?

$60,000 increase


$30,000 decrease

$240,000 decrease

Question 6. Question
: (TCO 12) The amount of time
between when a customer places an order for a product or requests a service to
when the product or service is delivered to that customer is called

customer-response time.

order receipt time.

order delivery time.

manufacturing lead time.

Question 7. Question
: (TCO 12) Quality costs include

prevention costs.

stockout costs.

purchasing costs.

ordering costs.

Question 8. Question
: (TCO 12) Which of the
following statements about the economic-order-quantity decision model is FALSE?

It assumes ordering costs and carrying costs
are relevant.

It assumes stockout costs are irrelevant if
no stockouts occur.
It assumes purchasing costs are relevant when
the cost per unit changes due to the quantity ordered.
It assumes quality costs are irrelevant if
quality is unaffected by the number of units purchased.

Question 9. Question
: (TCO 12) When using a
vendor-managed inventory system to enhance the features of supply-chain
management, a challenging issue is

problems of communication and trust.

the sharing of accurate, timely, and relevant
information about sales forecasts.
potentially incompatible information systems.

All of the above

Question 10. Question
: (TCO 12) Liberty Celebrations,
Inc., manufactures a line of flags. The
annual demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in
inventory is $1.60, and the cost to initiate a production run is $40. There are no flag displays on hand but
Liberty had scheduled 60 equal production runs of the display sets for the
coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days
per year. Assume that sales occur
uniformly throughout the year and that production is instantaneous.
If Liberty Celebrations does not maintain a safety stock,
the estimated total carrying cost for the flag displays for the coming year is





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