MULTIPLE CHOICE. CROUge the question. 1) All of the following statements describ

Question

MULTIPLE CHOICE. CROUge the question. 1) All of the following statements describe qualities of relevance except 1) A) Relevant information requires a high degree of precision. B) Relevant information is future oriented. includes qualitative as well as quantitative data. D) Relevant information differs between the alternatives. 2) Osprey Company is trying to decide between the following two alternatives: 2) Alternative A Alternative E Projected revenue Direct material Assembly labor Production supervisor's salary Facility-related costs Proit $50,000 6,000 9,000 10,000 10,000 $15,000 $60,000 12,000 9,000 10,000 15,000 $14,000 Which of the following conclusions can be drawn from this example? A) Variable costs are always relevant for decision making. B) Relevant costs may include variable costs and fixed costs. C) Fixed costs are sunk and thus are never relevant for decision making. D) None of these 3) QRC Company is trying to decide which one of two alternatives it will accept. The 3) costs and revenues associated with each alternative are listed below: Unit-level costs Batch-level costs Product-level costs Facility-level costs Alternative A Alternative B Projected revenue S 62,500 75,000 18,000 12,000 8,500 6,250 12,500 6,250 7,500 5,000 What is the differential revenue for this decision? A) $25,000 B) S62,500 C) S12,500 D) $75,000

Explanation / Answer

Question (1) Answer: A Question (2) Answer: A & B Question (3) The company will accept alternative C The differential revenue is $ 12500 Question (4) sq.ft. Unit level material 11000 0.18 1980 Unit level labour 11000 0.25 2750 Unit level variable overhead 11000 0.08 880 Variable cost 5610 Price offered by customer 4500 Loss 1110 The answer is B The company will lose $1110 Question (5) Valley Farm Supply Cash at beginning of period 80000 Receipts 350000 Disbursements 290000 Cash at end of period 140000 The correct answer is A Question (6) October November December Purchases on account 30000 40000 50000 Accounts payable at beginning of year 85000 Total payable 115000 Payments same month 16500 22000 27500 Payments previous month 13500 18000 Total payments 16500 35500 45500 Accounts payable at beginning of year 85000 Purchases 380000 465000 Payments 395000 Ending balance 70000 The answer is A Question 7 Sentra Sporting Co. November December January Budgeted cost of goods sold 40000 50000 70000 Desired ending inventory 7500 10500 Inventory needed 47500 60500 less beginning inventory 6000 7500 Purchases 41500 53000 The answer is A Question (8) Amount after one year 60000 Rate of return 9% Present investment 55045.87 The answer is D Question (9) Ashley Expected rate of return 12% Amount expected per year 100000 Period of investment in years 5 Present investment 360478 The answer is C Question (10) The answer is A Question (11) The answer is A Question (12) Cost of asset per year (useful life 5 years zero salvage vlue) 7200 (Not relevant) Addition to net income per year 12000 Useful life in years 5 The formula linking present value with original investment is: PV = (rate of interest, number of periods, annuity) Applying this formula: 35,887 where the rate of return is 20% The investment is approximately 36000 The answer is D

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