Quiz 7 Cost Accounting

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Name: ________________________ Class: ___________________ Date: __________
Quiz 7
1) Which of the following involves significant financial investments in projects to develop new products, expand production capacity, or remodel current production facilities?
A) capital budgeting
B) working capital
C) master budgeting
D) project-cost budgeting

Answer: A
Diff: 1
Terms: capital budgeting
Objective: 1
AACSB: Reflective thinking

2) The two factors capital budgeting emphasizes are:
A) qualitative and nonfinancial
B) quantitative and nonfinancial
C) quantitative and financial
D) qualitative and financial

Answer: C
Diff: 1
Terms: capital budgeting
Objective: 2
AACSB: Reflective thinking

3) The stage
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What is the internal rate of return?
A) 15%
B) 16%
C) 17%
D) 18%

Answer: B
Explanation:
B) $921,250 = $250,000F
F = 3.685
Chart criteria for six years is 3.685 = 16%
Diff: 3
Terms: internal rate-of-return (IRR) method, required rate of return (RRR)
Objective: 2
AACSB: Analytical skills

10) Investment A requires a net investment of $1,600,000. The required rate of return is 12% for the four-year annuity. What are the annual cash inflows if the net present value equals 0? (rounded)
A) $378,966
B) $526,836
C) $549,696
D) $591,466

Answer: B
Explanation:
B) 3.037 × ACI - $1,600,000 = $0 = $526,836
Diff: 3
Terms: net present value (NPV) method, internal rate-of-return (IRR) method
Objective: 2
AACSB: Analytical skills

11) The degree of freedom to make decisions is:
A) decentralization
B) autonomy
C) centralization
D) motivation

Answer: B
Diff: 1
Terms: autonomy
Objective: 1
AACSB: Reflective thinking

Answer the following questions using the information below:

Penn Oil Corporation has two divisions, Refining and Production. The company 's primary product is Luboil Oil. Each division 's costs are provided below:

Production: Variable costs per barrel of oil $ 9 Fixed costs per barrel of oil $ 6 Refining: Variable costs per barrel of oil $30 Fixed costs per barrel of oil $36

The Refining Division has been operating at a capacity of 40,000 barrels a day

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