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STR 581 WEEK 4 CAPSTONE FINAL EXAM PART 2 MAY 2017 (100%) Blanrin Inc. currently produces all the components for the products it makes and sells. The total costs of producing a component, Component
STR 581 WEEK 4 CAPSTONE FINAL EXAM PART 2 MAY 2017 (100%)
Blanrin Inc. currently produces all the components for the products it makes and sells. The total costs of producing a component,
Component Y, for one of its products are given below. The annual requirement of Component Y is 2,200 units.
Direct materials
$19,800
Direct labor
11,000
Variable manufacturing overhead
15,400
Fixed manufacturing overhead
13,200
An external supplier offers to sell the component to Blanrin Inc. for $23 per unit. After analysis, it is found that if the company buys the component instead of producing it, all of its variable costs and $8,200 of its fixed overhead costs will be eliminated. If Blanrin Inc. decides to buy the component instead of manufacturing it, how will the decision affect the company?
ANSWER:
Bob is a project leader in a software company. He assigns tasks to his team members, explains how to execute the tasks, and sets weekly goals for them. He convenes meetings to discuss the progress of projects at each stage of execution and does not bother about the personal issues of his team when he evaluates any dip in their performance with respect to the targets he set. In accordance with House’s path-goal theory, which of the following leadership behaviors does Bob display?
ANSWER:
Josh and Mike are discussing the pros and cons of the Sarbanes-Oxley Act. While Josh argues that the act has a high compliance cost, Mike is of the opinion that companies can easily avoid these costs by choosing to go dark and delisting their shares from exchanges. Josh, in turn, states that such a choice comes with its own drawbacks. Which of the following statements best supports Josh’s argument?
ANSWER:
Jose, a financial expert of Cerione Ltd., analyzes the data given below. What conclusion is he likely to arrive at?
Sales
$161,000
Cost of goods sold
110,000
Gross margin
$ 51,000
Total selling and administrative expenses
39,500
Net operating income
$ 11,500
Interest expenses
2,170
Net income before taxes
$ 9,330
Income tax (30%)
2,799
Net income
$ 6,531
ANSWER:
Calculate the total equivalent units for materials from the information given below.
Percentage complete
Units
Materials
Conversion
Work in process, June 1
1,100
60%
35%
Units started into production during June
22,500
Units completed and transferred to the next department
21,800
100%
100%
Work in process, June 30
1,800
50%
15%
ANSWER:
Jonah’s Restaurant reports net income of $20,000 during the year 2015. It distributes a dividend of $6,000 to its shareholders. Calculate the retention ratio.
ANSWER:
Intanke Inc. manufactures vacuum cleaners. The following information is available for the company.
Per unit cost
Sales
$550
Variable expenses
370
The fixed expenses are $95,000. Calculate the net operating income for 750 vacuum cleaners.
ANSWER:
The financial manager of a company needs to measure
how efficiently the company’s total assets are being used to generate sales. From the information given below, calculate the relevant ratio he needs for this purpose.
Cash
$220,000
Accounts receivable
1,800,000
Inventory
950,000
Plant and equipment
1,330,000
Sales
10,000,000
ANSWER:
The following information is given for Rafea Corporation.
Rafea Corporation
Balance Sheet
December 31, 2016
Assets
Liabilities
Cash
$ 20,300
Accounts payable
$ 82,400
Marketable securities
33,000
Bonds payable
215,300
Accounts receivable
74,200
Common stock
78,900
Inventory
82,400
Paid-in-capital
37,600
Fixed assets
258,500
Retained earnings
54,200
468,400
468,400
Which of the following can be inferred from the data?
ANSWER:
Yalken Corporation is considering the purchase of a new machine. The cost of the machine is $250,000. The cash flows for five years are given below.
Year 1
Year 2
Year 3
Year 4
Year 5
Cash flows
$84,790
$102,500
$70,580
$64,760
$115,700
The company is in the 35 percent tax bracket. Assuming that the cost of capital is 12%, calculate the net present value.
ANSWER:
The capital structure for Purnen Corporation is given below. Calculate the weighted average cost of capital (WACC).
Debt: 10%, 1,500 bonds, 20 years to maturity, selling for 105% of par. The bonds have a $1,000 par value each and make annual payments.
Common stock: 3,000,000 shares outstanding at a par value of $1, selling for $35 a share. The expected dividend is $2.8, and the growth rate is 10%.
Preferred stock: 5,000 shares of 6% preferred stock outstanding, selling for $103 a share and having a par value of $100. The flotation cost is $3, and the dividend is $9.
The corporate tax rate is 35%.
ANSWER:
Mark wants to withdraw $6,500 at the end of three years and $8,000 at the end of five years. He wants to do this in such a way that the account balance drops to zero after the last withdrawal. Assuming that the interest rate is 5%, how much money should Mark deposit today to ensure that his needs are met?
ANSWER:
Ray is an entrepreneur who has recently started his own venture. Since he does not have the resources to hire a financial expert, he has to manage the company’s finance in addition to managing the company. He needs to calculate the working capital of his business. From the following information, calculate the net working capital.
Cash
$20,000
Accounts receivable
12,000
Accounts payable
14,500
Inventory
32,000
Accrued expenses
6,500
ANSWER:
Susan is a financial manager at Rvetz Corporation. She wants to evaluate the efficiency with which the company is using its resources. For this reason, she needs to calculate the operating margin from the information given below.
Net sales
$3,500,000
Cost of goods sold
1,750,000
Office rent
54,500
Selling expenses
350,000
Interest expense
50,000
Other operating expenses
88,500
Which of the following will be the result?
ANSWER:
Raul needs to choose one alternative from the four alternatives given below. Applying the concept of time value of money, which of the following alternatives should he select?
ANSWER:
Rinetin Corporation has been falsifying its financial statements for the past year. The staff in the accounting department of the company have been fake employee IDs and recording payments on the company’s payroll. The funds sent to these fake employees are then redirected to the company’s bank accounts. When Rinetin Corporation is audited, the auditors fail to discover this fraud because of their negligence. Months later, a whistle-blower alerts the appropriate authorities about the company’s deceptive practices. In this scenario, the accountants who conducted the audit of the company will be held civilly liable under __________.
ANSWER:
Calculate depreciation from the following information.
Accounting profit break-even point
2,871 units
Fixed costs
$4,083,200
Sales price
$42 per unit
Total variable costs
$2,600
Number of units
100
ANSWER:
Darrin Corporation is considering a proposal to purchase a new piece of equipment. The cost of the equipment is $16,611. The equipment is estimated to provide an annual cash flow of $3,000 for the next nine years. The company has a required rate of return of 15%. Calculate the internal rate of return (IRR), and interpret the results. Use the present value of an annuity table.
Tanial Inc. has $950,000 in assets and $400,000 in debt. If it earns net income of $350,000, calculate the return on assets
ANSWER:
Gina and Samantha are discussing the Sarbanes-Oxley Act of 2002. Gina argues that although the act requires the management of a company to explicitly declare in writing that a company’s financial statements accurately and fairly represent the financial results, no steps have been taken to ensure that this rule is followed. Which of the following statements weakens Gina’s argument?
ANSWER:
Rick, a certified accountant, is asked to conduct an audit of the financial statements of Schenk Ltd. However, the company refuses to cooperate with Rick and does not provide him with the necessary information. This makes it impossible for him to carry on with the audit. In this scenario, which of the following opinions is Rick most likely to express?
ANSWER:
Robert is a manager of a small-scale firm. He needs to decide whether the firm has sufficient resources to meet its short-term obligations. Calculate the ratio that Robert needs to calculate from the information given below.
Cash and cash equivalents
$1,057,600
Accounts receivables
1,556,500
Short-term investments
770,300
Other current assets
420,500
Accounts payable
995,700
Long-term debt
528,000
Short-term debt
176,000
Other current liabilities
2,495,700
ANSWER:
Calculate the direct labor quantity variance from the information given below.
Standard rate
$13 per hour
Standard hours
4,300 hours
Actual hours
5,000 hours
Actual rate
$11.50 per hour
ANSWER:
Wilande Inc., a leading apparel store, acquires Parewa Inc., an energy drink manufacturer. This is an example of a __________.
ANSWER:
Which of the following scenarios illustrates a violation of the Sarbanes-Oxley Act?
ANSWER:
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- 165 orders completed
- ANSWER
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