Final Exam Review Spring 20181. When a company invests in a capital asset, recouping the original investment is called return on investment.Unit 9-1, LO1 – False – When a company invests in a capital asset, recouping the original investment is called return of investment.12.Capital budgeting decisions involve both outflows of cash at one or more times and inflows of cash at other times.Unit 9-2, LO2 – True LO: 2, Bloom: K, Unit: 9-2, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA FN: Decision Modeling, AICPA PC: Problem Solving and Decision Making, IMA: Investment Decisions23.A dollar received today isa. Worth less than a dollar received in the future discounted at 12% interest.b. Worth more than a dollar received at any time in the future.c. Worth less than a dollar received in the future if the current interest rate is lower than the anticipated future interest rate.d. None of these answer choices are correct.Unit 9-2, LO2 – B34.Dina Jones just learned that she received an inheritance from her grandmother. The inheritance provides for Dina to receive $5,000 per year at the end of the year for each of the next 5 years. Using the following factors, what is the value of this inheritance to Dina today?Type of cash flow (n) Periods(i) Interest rateFactorPV of $1 5 10% .62092FV of $1 5 10% 1.61051PV ordinary annuity 5 10% 3.79079FV ordinary annuity 5 10% 6.10510PV annuity due 5 10% 4.16986a. $15,523b. $20,849c. $18,954d. $30,526Unit 9-2, LO2 – C4LO: 2, Bloom: C, Unit: 9-2, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Cost ManagementSolution: $5,000 x 3.79079 = $18,9545. Welcher, Inc. plans to purchase equipment with a cost of $142,500. The company expects annual cash inflows from the equipment of $30,000. The equipment has an estimated life of 8 years, no estimated salvage life, and a required rate of return is 6%. The payback period for the equipment is closest toa. 1 year.b. 1.5 years.c. 5 years.d. 8 years.Unit 9-4, LO5 – CLO: 5, Bloom: AP, Unit: 9-4, Difficulty: Easy, Min: 3, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Investment DecisionsSolution: $142,500 ÷ $30,000 = 4.75 years (closest to 5 years) 56. If a cost was incurred to support the company as a whole, then it is a common cost.Ans: TLO: 2, Bloom: K, Unit: 10-2, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA FN: Reporting, AICPA PC: Communication, IMA: Performance Measurement67. At Devoe Manufacturing, the Southern Division is responsible for the production and selling of products in fifteen states. This division is an example of which of the following responsibility centers?a. Cost centerb. Revenue centerc. Profit centerd. Investment centerAns: C, LO: 1, Bloom: AP, Unit: 10-1, Difficulty: Moderate, Min: 2, AACSB: Communication, AICPA FN: Reporting, AICPA PC: Communication, IMA: Performance Measurement78. Sphinx division of Shepherd Corporation generated division generated net revenues of $12,000,000 and variable expenses of $7,700,000. If common corporate fixed costs were $1,000,000 andthe segment margin was $1,300,000, what are the division’s directfixed expenses?a. $4,300,000b. $3,000,000c. $300,000d. The answer cannot be determined from the information given.Ans: B, LO: 2, Bloom: AP, Unit: 10-2, Difficulty: Easy, Min: 2, AACSB: Communication, AICPA FN: Decision Modeling, AICPA PC: Problem Solving and Decision Making, IMA: Decision AnalysisSolution: $12,000,000 - $7,700,000 – X = $1,300,000; X = $3,000,00089. Noble Corporation had sales of $3,000,000 and operating income of $500,000. Noble also had $900,000 of assets on January 1 and $800,000 on December 31. What is the corporation’s ROI for the year?a. 26.7%b. 35.3%c. 58.8%d. 59.9%Ans: C, LO: 3, Bloom: AP, Unit: 10-3, Difficulty: Easy, Min: 3, AACSB: Analytic, AICPA FN: Measurement, AICPA PC: Problem Solving and Decision Making, IMA: Performance MeasurementSolution: $500,000 ÷ [($900,000 + $800,000) ÷2] = 58.8%910.Bethlehem Corporation had $1,000,000 in sales which resulted in operating income of $62,000. On January 1, Bethlehem reported $920,000 in assets. Because of a downturn in the economy, Bethlehem sold several assets during the year. Its December 31 balance sheet reported only $580,000 in assets.Required:a. Calculate Bethlehem’s margin.b. Calculate Bethlehem’s asset turnover.c. Calculate Bethlehem’s return on investment.Solution:a. $62,000/$1,000,000 = 6.2%b. $1,000,000/$750,000 = 1.33333c. .062 x 1.3333 = 8.27%1011.Match the following terms to the appropriate statement by placing the letter to the left of each statement.a. Balanced scorecard f. Learning and growth perspectiveb. Benchmarking g. Manufacturing cycle efficiencyc. Delivery cycle time h. Manufacturing cycle timed. Financial perspective i. Performance dashboardse. Internal business process perspectivej. Strategy map____ 1. A visual display of the key measures related to an organization’s operational goals and strategies____ 2. A management tool that integrates performance measures across four different perspectives to guide operations toward achieving an organization’s strategy____ 3. Answers the question, “Are we developing employees and providing technologies that facilitate change and improvement.”____ 4. The practice of using data from other organizations to identify the processes and practices associated with world-class performance____ 5. The time between an order’s placement and its shipment____ 6. The time from the start of production to the shipment of the product to the customer____ 7. Answers the question, “How do investors see us?”____ 8. A pictorial representation of the cause-and-effect relationships embodied in the strategy____ 9. The ratio of value-added processing time to total manufacturing time____ 10. Focuses on creating products and services that customers desire and delivering them in a timely manner.1. i – Performance dashboard2. a– Balanced scorecard3. f – Learning and growth perspective4. b – Benchmarking5. c – Delivery cycle time6. h– Manufacturing cycle time7. d –Financial perspective8. j – Strategy map9. g –Manufacturing cycle efficiency10. e –Internal business processes perspective1112.Midland Industries is the manufacturer of metal-frame backyard pools and pool accessories. The controller of the company recognizes that the success of the company depends on both financial and