ACCT 434 Week 6 Quiz (Updated)

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ACCT 434 Week 6 Quiz (Updated)


1. (TCO 9) To guide cost allocation decisions, the benefits-received criterion (Points : 5)

may use an allocation base of division revenues to allocate advertising costs.
is the primarily used criterion in activity-based costing.
results in subsidizing products that are not profitable.
generally uses the cost driver as the cost allocation base.


Question 2.2. (TCO 9) Which cost-allocation criterion is MOST likely to subsidize poor performers at the expense of the best performers? (Points : 5)

Cause-and-effect criterion
Ability-to-bear criterion
Fairness-or-equity criterion
Benefits-received criterion


Question 3.3. (TCO 9) The MOST likely reason for NOT allocating corporate costs to divisions include that (Points : 5)

divisions receive no benefits from corporate costs.
these costs are not controllable by division managers.
these costs are incurred to support division activities, not corporate activities.
division resources are already used to attain corporate goals.


Question 4.4. (TCO 9) Identifying homogeneous cost pools (Points : 5)

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 5.5. (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? (Points : 5)

Variable costs
Fixed costs
Neither fixed nor variable costs
Both fixed and variable costs

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Question 6.6. (TCO 10) The capital budgeting method, which calculates the expected monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present using the required rate of return, is the (Points : 5)

accrual accounting rate-of-return method.
net-present-value method.
payback method.
sensitivity method.


Question 7.7. (TCO 10) Assume your goal in life is to retire with $1.5 million. How much would you need to save at the end of each year if interest rates average 5% and you have a 25-year work life? (Points : 5)



Question 8.8. (TCO 10) The net-present-value method focuses on (Points : 5)

cash inflows.
accrual-accounting net income.
cash outflows.
both cash inflows and cash outflows.


Question 9.9. (TCO 10) A “what-if” technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes is called (Points : 5)

adjusted rate-of-return analysis.
internal rate-of-return analysis.
sensitivity analysis.
net-present-value analysis.


Question 10.10. (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 5-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? (Points : 5)




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