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NEW QUESTION 61
Oliver owns a computer repair company. He is looking to close of of his departments as the demand for computer cleaning has dropped dramatically in the last 2 years and is no longer profitable.
The contribution margin of the department is £12,000, and the overheads are £23,000 (out of which
£4,000 cannot be eliminated).
How would closing this department impact operating income?
- A. Increase operating income by £12,000
- B. Increase operating income by £7,000
- C. Decrease operating income by £7,000
- D. Decrease operating income by £12,000
Answer: B
NEW QUESTION 62
One of a company's products is sold to three customers: A, B and C. These customers do not buy anything else from the company. The product costs $20 per unit to manufacture and is sold to the customers for $50 per unit.
The following table shows data for sales and selling costs for the latest period.
Delivery costs of $32,000 and general overheads of $60,000 were incurred during the period.
Deliveries to customers A and B were made by a courier in batches of 100 units; the courier charged
$300 for each batch delivered to customer A and $400 for each batch delivered to customer B.
Deliveries to customer C were made by mail in batches of 10 units at a cost of $60 per batch.
Which of the following statements is correct?
- A. Customer A has the highest sales revenue, the highest profit, and the highest profit:sales ratio
- B. Customers B and C have the same profit:sales ratio.
- C. Customer B has the lowest sales revenue, the lowest profit, and the lowest profit:sales ratio.
- D. Customer B has the highest profit:sales ratio.
Answer: D
NEW QUESTION 63
Which TWO of the following expressions are correct?
- A. 1 + real rate = (1 + money rate) / (1 + inflation rate)
- B. 1 + inflation rate = (1 + money rate) x (1 + real rate)
- C. 1 + real rate = (1 + inflation rate) / (1 + money rate)
- D. 1 + money rate = (1 + inflation rate) / (1 + real rate)
- E. 1 + money rate = (1 + real rate) x (1 + inflation rate)
Answer: A,E
NEW QUESTION 64
Place the correct quality cost classification against each cost described below.
Answer:
Explanation:
NEW QUESTION 65
Company S has two divisions, X and Y. Division X transfers 50,000 component units to Division Y each quarter. The market price of the component is $20. Division X's variable cost is $10 per unit and its fixed cost is $150,000 each quarter.
What price would be credited to Division X for each component that it transfers to Division Y under:
two-part tariff pricing (where the two divisions have agreed that the fixed fee will be $100,000); and dual pricing (based on market price and marginal cost).
- A. Two-part tariff pricing = $13
Dual pricing = $22 - B. Two-part tariff pricing = $10
Dual pricing = $20 - C. Two-part tariff pricing = $12
Dual pricing = $18 - D. Two-part tariff pricing = $10
Dual pricing = $22
Answer: B
NEW QUESTION 66
Which of the following statements about modified internal rate of return (MIRR) and internal rate of return (IRR) is correct?
- A. MIRR favours projects with long payback periods whereas IRR does not.
- B. MIRR and IRR will always rank competing projects in the same order.
- C. MIRR uses a more realistic reinvestment assumption than IRR.
- D. A project's MIRR will always be higher than its IRR.
Answer: C
NEW QUESTION 67
A company is investing $150,000 in a project which will yield an annual cash inflow of $40,000 for eight years. The company's cost of capital is 10%.
To the nearest $100, what is the project's equivalent annual net present value?
- A. $11,900
- B. $7,900
- C. $63,400
- D. $21,300
Answer: A
NEW QUESTION 68
An organization wants to increase the use value that customers place on one of its products - a laptop computer.
Which of the following actions, taken to increase the value to the customer, would increase the product's use value?
Select ALL that apply.
- A. Changing the color of the computer's case.
- B. Fitting advanced components to improve the computer's performance.
- C. Launching a marketing campaign designed to build the company's brand.
- D. Installing a touch screen to improve the computer's functionality.
- E. Adopting a premium pricing strategy for the computer.
Answer: B,D
NEW QUESTION 69
A project has a positive net present value (NPV) when discounted at a company's weighted average cost of capital (WACC). The project has also been evaluated using a range of other investment appraisal techniques.
It has now been recognized that the project is of much higher risk than the average risk of the company's existing portfolio of projects. It has therefore been decided that the discount rate to be used when evaluating this project should be the WACC adjusted for risk.
As the result of changing the discount rate as described, which of following statements are correct?
Select ALL that apply.
- A. The net present value would increase.
- B. The accounting rate of return would decrease.
- C. The net present value would decrease.
- D. The profitability index would remain unchanged.
- E. The internal rate of return would remain unchanged.
- F. The internal rate of return would decrease.
Answer: C,E
NEW QUESTION 70
An 80% learning curve is expected for a repetitive and complex task.
Which of the following statements is correct?
- A. Each unit produced will take 20% less time to produce than the previous unit.
- B. The cumulative average time per unit will reduce by 20% every time the output is doubled.
- C. Each unit produced will take 80% less time to produce than the previous unit.
- D. The cumulative average time per unit will reduce by 80% every time the output is doubled.
Answer: B
NEW QUESTION 71
Which of the following correctly defines the expected value of a project?
- A. The present value of the positive cash flows that the project will generate.
- B. The most likely amount of incremental wealth that the project will generate.
- C. The weighted average of the possible outcomes of the project.
- D. The actual amount of incremental wealth that the project will generate.
Answer: C
NEW QUESTION 72
Using Porter's value chain, place the tokens to correctly categories the following activities of a manufacturing company.
Answer:
Explanation:
NEW QUESTION 73
An organization is considering purchasing a new machine which will cost $600,000. The new machine will generate cost savings of $200,000 each year for five years. The cost of capital is 12%.
The profitability index (PI) for the investment in the new machine is:
Give your answer to one decimal place.
Answer:
Explanation:
1.2, 0.2
NEW QUESTION 74
An electronics company sells a range of tablet computers. Tablet computers come complete with an operating system that is regarded as the market leader. The company aims to launch a new version of its hardware every eighteen months and a major update to its software every three years. The latest version of the tablet computer is always sold at a higher price, but the older version that has been replaced is then sold for a time at a discounted price.
Which pricing model does this company appear to be using?
- A. Skimming and loss leader pricing
- B. Penetration and loss leader pricing
- C. Penetration and product bundling
- D. Skimming and product bundling
Answer: D
NEW QUESTION 75
A company has invested $500,000 in developing a new product and requires a return of 12% on this investment.
The company has researched the market and has set the selling price for the new product at $300 per unit. At this price, sales volume for next year is forecast to be 500 units. The forecast unit cost is $210.
What is the target cost gap per unit for the coming year?
Give your answer to the nearest whole $.
Answer:
Explanation:
$30
NEW QUESTION 76
The money cost of capital is 12%. The expected rate of inflation is 4%. What is the real cost of capital?
Give your answer to 2 decimal places.
Answer:
Explanation:
7.69 %, 7.70 %
NEW QUESTION 77
The following data are available for a division for the latest period.
What is the division's residual income for the period?
- A. $3,000
- B. 12.50%
- C. 31.25%
- D. $36,000
Answer: A
NEW QUESTION 78
In order to remain competitive an organization wishes to achieve cost savings for one of its existing products.
Which of the following correctly describes methods which the organization can use to achieve these cost savings?
Select ALL that apply.
- A. Kaizen costing is seeking to make cost savings by continuously making small incremental cost reductions while the product is in production.
- B. Target costing is continuously setting new stretch targets while the product is in production.
- C. Value engineering is a fundamental rethinking and radical redesign of an organization's existing processes.
- D. Functional analysis is carried out only on existing products and is concerned only with minimizing the cost of the originally defined functions of a product.
- E. Value analysis is examining a product's costs in order to achieve its purpose at a reduced cost while maintaining its reliability and quality.
Answer: A,E
NEW QUESTION 79
A company is investing $200,000 in a project which will generate a cash flow of $60,000 each year for five years starting immediately. The company's cost of capital is 7%.
The net present value of the investment to the nearest $100 is $
Answer:
Explanation:
63200
NEW QUESTION 80
Which TWO of the following statements are correct?
- A. Loss leadership pricing is appropriate for a new product which is not part of a range of products.
- B. It is worthwhile for a company to sell further units when the marginal revenue is greater than the marginal cost.
- C. Price is the only factor affecting the demand for products and services.
- D. Demand functions can be predicted accurately and the relationship between price and quantity demanded is always constant.
- E. Premium pricing is possible when there is a measure of product or service differentiation.
Answer: B,E
NEW QUESTION 81
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