21. The term “division margin” is used to describe the:

21. The term “division margin” is used to describe the:

A) Excess of manufacturing margin over all variable expenses

B) Sum of division cost of goods sold and net income

C) Amount a given division contributes toward covering common corporate expenses

D) Excess of division sales over its variable manufacturing expenses

22. What is a transfer price?

A) The amount charged for a product or service that one division provides another

B) The amount charged for goods and services offered to the government

C) An amount charged to cover the costs associated with import/export taxes

D) The amount charged the final consumer to cover all costs incurred along the value chain

23. Sales for the year = $108,229, Net Income for the year= $13,144, Income from equity investments = $3,309, and average Equity during the year = $47,556. Return on equity (ROE) for the year is:

A) 12.1%

B) 27.6%

C) 43.9%

D) 227.6%

E) There is not enough information to answer the question

24. The audit report is addressed to:

A) The audit committee

B) The board of directors

C) The shareholders

D) The board of directors and the shareholders

E) The Securities and Exchange Commission (SEC)

25. In 2006, Delphi Corporation had current assets of $9,916 million and current liabilities of $8,404 million. The firm’s net working capital is:

A) $9,916 million

B) $1,512 million

C) $(1,512) million

D) $18,320 million

E) None of the above

26. How would a purchase of $150 of inventory on credit affect the income statement?

A) It would increase liabilities by $150

B) It would decrease retained earnings by $150

C) It would increase assets by $150

D) Both A and C, above

E) None of the above

27. Which account is least likely to appear in an accounting adjustment?

A) Interest expense

B) Cost of goods sold

C) Cash

D) Sales

28. A statement of cash flows usually does not include which of the following?

A) Net income

B) Increase in accounts receivable

C) Contributed Capital

D) Depreciation expense

E) All of the above

29. Liquidity refers to:

A) The life cycle of the company

B) The amount of receivables the company has in the balance sheet

C) The amount of financial leverage

D) None of the above

30. The fiscal 2010 financial statements for Walgreen, Inc., report net sales of $67,420 million, net operating profit after tax of $2,145 million, net operating assets of $14,921 million. The 2009 balance sheet reports net operating assets of $14,140 million. Walgreen’s 2010 net operating asset turnover is:

A) 3.2%

B) 6.96

C) 4.52

D) 4.64

E) There is not enough information to calculate the ratio.

31. In fiscal 2011, Microsoft Corp. reported a statutory tax rate of 35.0%, an effective tax rate of 17.53% and a tax rate on operating profit of 16.94%. The 2011 income statement reported income tax expense of $4,921 million. What did Microsoft report as income before income tax expense that year?

A) $14,060 million

B) $28,071 million

C) $29,050 million

D) $7,571 million

E) None of the above

32. Dow Chemical Corporation plans to build a laboratory dedicated to a special project. The company will not use the laboratory after the project is finished. Under GAAP, this laboratory should be:

A) Capitalized and depreciated.

B) Expensed in the current year.

C) Depreciated and expensed.

D) Capitalized only.

E) None of the above

33. At what amount will accounts receivable be reported on the balance sheet if the gross receivable balance is $20,000 and the allowance for uncollectible accounts is estimated at 15% of gross receivables?

A) $3,000

B) $23,000

C) $20,000

D) $17,000

34. The 2011 financial statements of BNSF Railway Company report total revenues of $19,548 million, accounts receivable of $1,189 million for 2011 and $955 million for 2010. The company’s accounts receivable turnover for the year is:

A) 16.4 days

B) 20.5 times

C) 18.2 days

D) 18.2 times

E) None of the above

35. Which of the following would not be considered an intangible asset?

A) Trademarks and internet domain names

B) Plant, Property, and Equipment

C) Patents, computer software, databases and trade secrets

D) Customer lists, production backlog, and customer contracts

E) None of the above

36. When equity method accounting is used for investment, which component of ROE would always be understated?

A) Net Profit Margin

B) Total Asset Turnover

C) Financial leverage

D) Return on Equity

E) None of the above

37. Wild Inc. receives a bill from Easton Inc. for $15,000. Easton has credit terms of 2/15, net 45. If Wild takes advantage of the discount, how much cash do they pay to Easton?

A) $15,300

B) $15,000

C) $14,700

D) $13,500

E) None of the above

38. Kirner Electric Corp. sells $100,000 of bonds to private investors. The bonds have an 8% coupon rate and interest is paid semiannually. The bonds were sold to yield 9%.

What periodic interest payment does Kirner make?

A) $16,000

B) $ 4,000

C) $ 8,000

D) $ 2,250

E) None of the above

39. Which of the following should not be included in accumulated other comprehensive income?

A) Minimum pension liability

B) Currency translation adjustment

C) Unrealized gains and losses on available-for-sale securities

D) Unrealized gains and losses on trading securities

E) None of the above

40. The equity carve-out in which the parent company distributes the subsidiary’s shares as a dividend to shareholders is called which of the following?

A) Sell-Off

B) Spin-Off

C) Split-Off

D) Stock Split

E) None of the above

41. Which of the following cost categories would most likely use the number of orders placed with suppliers as its allocation base?

A) Accounting

B) Maintenance and repairs

C) Personnel

D) Purchasing

42. Which of the following is not a benefit of just-in-time processing?

A) Control of significant inventory balances

B) Enhanced product quality

C) Reduction of rework costs

D) Production cost savings

43. From a value chain perspective, value is defined by which of the following?

A) Only the costs associated with producing a product

B) The amount of worth the final customer places on a product or service

C) All costs necessary to deliver a product or service to the end user.

D) All costs associated with the life of a product or service (including all upstream and downstream costs

44. World-class organizations operating in competitive markets are more likely to take which one of the following approaches toward pricing?

A) Begin with cost data as given and determine price by adding a reasonable mark-up.

B) Determine price based on the amount management believes customers are willing to pay.

C) Employ a cost-based approach to pricing.

D) Determine the price that keeps the facilities fully utilized

45. Evaluating plans and budgets in comparison with actual activities is directly related to:

A) Cost control

B) Planning

C) Financial analysis

D) Control

46. Budgets improve ____________________ and ____________________.

A) Communication; profits

B) Information; revenues

C) Revenues; profits

D) Communication; coordination

47. Both investment center and cost center managers are responsible for managing:

A) Revenues

B) Net income

C) Costs

D) Contribution margins

48. By using time and motion studies, it is possible to determine how long it takes to perform an activity. This information is often used to formulate:

A) Standard allowances for labor hours

B) Standard labor prices

C) Standard allowances for materials

D) Standard material prices

49. Costs that would not be incurred if the segment were discontinued are called:

A) Avoidable segment costs

B) Indirect segment costs

C) Variable segment costs

D) Both A and C

50. Which of the following would normally not be included in an investment center’s asset base?

A) Accounts receivable

B) Equipment

C) Land for a future plant site

D) Inventory