11. (TCO 6) Cleaners, Inc. is considering purchasing equipment costing $30,000 with a six-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return. What is the approximate net present value of this investment? (Points : 5)

$13,800

$1,794

$886

$2,748

 

 

12. (TCO 7) Which of the following would not appear as a fixed expense on a selling and administrative expense budget? (Points : 5)

Freight-out

Office salaries

Property taxes

Depreciation

 

 

13. (TCO 7) If the required materials to be purchased are 18,000 pounds, the production needs are three times the direct materials purchases, and the beginning direct materials are three and a half times the direct materials purchases, what are the desired ending direct materials in pounds? (Points : 5)

45,000

9,000

27,000

18,000

 

 

14. (TCO 8) Standards that are based on efficient activity with allowances for unavoidable losses are called _______ (Points : 5)

basic standards.

maximum efficiency standards.

currently attainable standards.

expected standards.

 

 

15. (TCO 9) A static budget _____________. (Points : 5)

should not be prepared in a company

is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs

shows planned results at the original budgeted activity level

is changed only if the actual level of activity is different than originally budgeted

 

 

16. (TCO 9) If costs are not responsive to changes in activity level, how are they best described? (Points : 5)

Mixed

Flexible

Variable

Fixed

 

 

17. (TCO 9) Using the high-low method, what is the fixed cost for the following information?

Month

Miles

Total Cost

 

January

80,000

$96,000

 

February

50,000

$80,000

 

March

70,000

$94,000

 

April

90,000

$130,000

 

(Points : 5)

$17,500

$36,000

$14,000

$50,000

 

 

18. (TCO 10) Which of the following statements regarding budget reports is incorrect? (Points : 5)

The cost of budget reports should not outweigh the benefits.

Budget reports are used for planning, control, and information.

Reports prepared for upper management typically have fewer details than reports prepared for lower-level managers.

Reports are prepared more frequently for upper management than for lower-level managers.