ACCT 434 Week 6 Quiz

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ACCT 434 Week 6 Quiz

1.Question :(TCO 9) To guide cost allocation decisions, the fairness or equity criterion is
Student Answer: the criterion often cited in government contracts.
 superior when the purpose of cost allocation is for economic decisions.
 used more frequently than the other criteria.
 the primary criterion used in activity-based costing.


Question 2.Question :(TCO 9) Which cost-allocation criterion is MOST likely to subsidize poor performers at the expense of the best performers?
Student Answer: Cause-and-effect criterion
 Ability-to-bear criterion
 Fairness-or-equity criterion
 Benefits-received criterion

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Question 3.Question :(TCO 9) The MOST likely reason for NOT allocating corporate costs todivisions include that
Student Answer: 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.Question :(TCO 9) Corporate administrative costs allocated to a division cost pool are MOST likely to be
Student Answer: batch-level costs.
 product-sustaining costs.
 output unit-level costs.
 facility-sustaining costs.


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.  What amount of interest costs should be allocated to the electric lamp division?
Student Answer: $450,000


Question 6.Question :(TCO 10) All of the following are methods that aid management in analyzing the expected results of capital budgeting decisions EXCEPT the
Student Answer: payback method.
 future-value cash-flow method.
 discounted cash-flow method.
 accrual accounting rate-of-return method.


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 interest ratesaverage 6% and you have a 20-year work life?
Student Answer: $376,476


Question 8.Question :(TCO 10) The net-present-value method focuses on
Student Answer: cash inflows.
 accrual-accounting net income.
 cash outflows.
 both cash inflows and cash outflows.


Question 9.Question :(TCO 10) In situations where the required rate of return is not constant for each year of the project, it is advantageous to use
Student Answer: sensitivity analysis.
 the net-present-value method.
 the adjusted rate-of-return method.
 the internal rate-of-return method.


Question 10.Question :(TCO 10) The Zeron Corporation wants to purchase a new machine for its factory operations at a cost of $950,000.  The investment is expected to generate $350,000 in annual cash flows for a period of four years.  The required rate of return is 14%.  The old machine can be sold for $50,000.  The machine is expected to have zero value at the end of the four-year period.  What is the net present value of the investment? Would the company want to purchase the new machine?  Income taxes are not considered.
Student Answer: $119,550; Yes
 $326,750; No
 $1,019,550; Yes
 $69,550; No



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