Accounting 100 Mid Semester Mock Test 2 1.

Weaknesses differ from threats in a SWOT analysis as they:

A) Have an external focus B) Are distinctive to the business s competitors C) Are controllable by the business D) Are based on future trends or events E) None of the above

2. Which of the following has been the most influential in redefining the role of accountants as analysts and decision makers, rather than as mainly number-crunchers?

A) The collapse of major company groups B) The trend towards globalisation C) Developments in information technology D) The increase in demand for non-financial information E) None of the above

3. A company is different to a partnership because it is said to have:

A) A collective approach B) Limited liability C) A series of networks D) Unlimited liability E) None of the above

4. Which question can cost-volume-profit analysis not assist in answering?

A) Will the firm have sufficient funds to meet its commitments to creditors?

B) If variable costs, such as labour, are replaced with fixed costs, such as machinery, what will be the impact on profits? C) What additional sales volume is required to offset an increase in purchase costs? D) What is the most profitable sales mix? E) None of the above

5. Which of these is an advantage of the payback method of capital budgeting?

A) It can be used to separate investments when other methods show similar returns B) A quick payback period reduces the risk of the investment C) The sooner cash is recovered the sooner it can be reinvested D) All of the above E) None of the above

6. If variable costs are 60% of sales and fixed costs are $100,000, the break even sales dollar is?

A) $6,000 B) $250,000 C) $100,000 D) None of the above E) Cannot be calculated

7. Greg runs a catering business, and is organising the reception for a small wedding of 75 guests. The fixed costs are $8,000 and he is expecting a cost of $13 per head to his business for a three course meal. How much will he have to charge per head to achieve a profit of $5,000? A) $186.33 B) $160.33 C) $66.67 D) None of the above E) Cannot be calculated

8. Oogle Co sells a single product for $40 per unit. Fixed costs are $16,000 and variable costs equal 75% of sales. If fixed costs increase be $10,000, how much will they have to increase sales by to earn profits equal to those earned before costs increased?

A) $10,000 B) $100,000 C) $40,000 D) None of the above E) Cannot be calculated

9. Uma and Leopold manufacture t shirts which sell for $70 in their retail stores. This month they expect to make sales of 1800 t shirts and will incur the following costs:

Direct Labour Electricity Machine hours Raw materials Manufacturing overhead

$42,500 $17,800 $23,500 $22,200 $85,000

They also are aiming to fill a special order for blouses and britches. They have offered $63 for 700 t shirts. What is the outcome of accepting this special order given a maximum capacity of 2000?

A) Loss, $700 B) Gain, $9800 C) Gain, $6300 D) None of the above E) Cannot be calculated

10. Jenna is organising a carnival themed party at her university and at the very least would like to put on the event regardless of whether a profit is made. She has estimated the following costs and expects 100 attendees:

Food per person: Beverages per person: Venue hire per person Music Equipment Decorations

$4 $11 $2 $500 $300

How much should she charge for the tickets if she aims to run the evening at a break even?

A) $17 B) $15 C) $25 D) None of the above E) Cannot be calculated

11. T & C Company manufacture and sell coffee mugs at a price of $17 each. The production costs each month are equal to $51,000 with the fixed overheads totalling $70,000. They usually manufacture 5000 mugs a month with this representing 80% of full capacity. In addition, T2 have approached them and asked them to fill a special order of 2,000 coffee mugs at $12 each. What will be the outcome if this offer is accepted?

A) Loss, $1500 B) Loss, $2190 C) Gain, $3600 D) None of the above E) Cannot be calculated

12. If T2 decided they only needed 1700 units, what is the minimum price that T & C could do the special order for?

A) $17,340 B) $20,400 C) $22,440 D) None of the above E) Cannot be calculated

13. Charlie expects the following cash flows from the new strawberry chocolate fondue fountain in his chocolatier. Year 1 $2000 Year 2 $2800 Year 3 $4100 Year 4 $3500 Year 5 $4600 Year 6 $7800

Given the fountain cost $21,300 originally, by what time can he expect to have recovered his initial investment? A) 5 years 6 months B) 5 years 7 months C) 5 years 4 months D) None of the above E) Cannot be calculated

14. What is the present value of an annuity that pays $6000 per year for 8 years, if the interest rate is 2.5%?

A) $48,000.00 B) $58,483.34 C) $43,020.60 D) None of the above E) Cannot be calculated

15. Sylvia is considering investing her savings into buying a shop to run her cupcake business out of. The initial cost is $510,000, however, she expects to receive net cash flows of $64,000 for the next 10 years at which point she wants to sell the premises to her granddaughter. Being a close family member, Sylvia is only going to ask for $600,000 for the property. Her current cost of capital is equal to 8%. What will be the outcome of Sylvia s business decision?

A) $197,356.09 B) $519,440.00 C) $(80,560.00) D) None of the above E) Cannot be calculated

16. Calculate the present value of $300 received in 2 years, $ 450 received in 5 years and $180 received in 7 years, given an interest rate of 12%.

A) $575.92 B) $2950,67 C) $1041.60 D) None of the above E) Cannot be calculated

17. Federation products has the following data: Net annual cash flows of $2800 Life of the new asset is expected to be 10 years Salvage value is equal to $6000 Cost of capital is 8% The cost of the investment is $19,000, half of which will be paid now, the other half paid in one year

What is the net present value?

A) $5788.00 B) $3270.86 C) $2567.16 D) None of the above E) Cannot be calculated

18. Turtle technologies has the following sources of finance: Source Westpac NAB Aussie ING Amount $45,000 $31,000 $13,700 $4,800 Interest Rate 8.5% 10% 11.2% 14%

What is their average weighted cost of capital? A) 10.93% B) 10.60% C) 9.65% D) None of the above E) Cannot be calculated

19. EIW are considering buying a new machine that will produce the following net annual cash flows over the next 5 years: Year 1 $20,000 Year 2 $23,000 Year 3 $38,000 Year 4 $42,000 Year 5 $28,000

The salvage value on the machine is $35,000 when the original cost was $110,000. Assuming a cost of capital of 10% what is the present value of the cash flows? A) $111,812.41 B) $23,544.65 C) $133,544.65 D) None of the above E) Cannot be calculated

20. What would be the payback period?

A) 3 years 8 months B) 3 years 6 months C) 3 years 3 months

D) None of the above E) Cannot be calculated

21. Ted is considering two new wireless systems for his business. Both have the same total of net annual cash flows over their useful lives. System A earns 20,000 every year for 5 years, the system B has the following cash flows: Year 1 $10,000 Year 2 $20,000 Year 3 $30,000 Year 4 $20,000 Year 5 $20,000

System A expects to receive a scrap value of $12,000 and the other estimates $15,000. Ted uses a cost of capital equal to 8%.

What is the net present value for system B?

A) $78,535.27 B) $88,742.02 C) $79,854.00 D) None of the above E) Cannot be calculated

22. Aidan needs $35,000 to buy a car. Commonwealth bank will loan him the money over 3 years at a 10% interest rate. If the interest rate is calculated quarterly, what is the amount of Aidan s repayments?

A) $3412.00 B) $14,073.75 C) $12,254.90 D) None of the above E) Cannot be calculated

Cash Budget, questions 23 through 30.

Pike Logistics Ltd. has employed you to take a look at their cash flows and highlight areas of poor cash flow. So far their own attempts to manage this aspect of their business have failed and they are beginning to feel the pinch of poor cash management. Using the following information, prepare them with a cash budget for the quarter ending 30 June 2010 and answer the following questions in relation to the budget.

Sales Estimates Month January February March April May June Credit collection
y

Cash 8,000 9,700 6,300 10,100 7,900 13,400

Credit 19,900 23,100 21,600 17,800 20,000 24,500

On average customers usually pay 20% in the month of sale, 40% in the month following sale, 15% in the second month after sale, 15% in the third month after sale and the remaining 10% is written off to bad debts

Purchases Month March April May June Cash 5,200 4,700 6,300 9,200 $ Credit 15,600 17,000 18,800 16,800 $

Payment for credit items is usually split 50% in the month of purchase and 50% in the following month

In April the company plans on selling their current work van and expect to receive $11,000

Their yearly insurance premium to the value of $10,000 is due in June

Due to recent events, it is likely that litigation fees are going to arise in April. The resulting cost is expected to be $24,000

The company incurs the following monthly costs:

Utilities Rent Depreciation Freight costs

$3,000 $4,600 $1,700 $2,000

Opening cash balance is $47,000 April May June

23. What were the total cash receipts for April?

A) $27,900 B) $38,900 C) $39,750 D) None of the above E) Cannot be calculated

24. What were the total cash payments for April?

A) $54,600 B) $56,300 C) $55,300 D) None of the above E) Cannot be calculated

25. What was the opening balance for May?

A) $32,150 B) $19,600 C) $29,600 D) None of the above E) Cannot be calculated

26. What were the credit purchases in May? A) $25,100 B) $22,600 C) $17,900 D) None of the above E) Cannot be calculated

27. What is the surplus/deficit for May?

A) $3,125 B) $13,125 C) $19,375 D) None of the above E) Cannot be calculated

28. What are the credit sales for June?

A) $15,570 B) $24,500 C) $18,810 D) None of the above E) Cannot be calculated

29. What are the total cash payments for the month of June? A) $46,600 B) $45,600 C) $48,300 D) None of the above E) Cannot be calculated

30. What was the closing cash balance for June? A) $(1,955) B) $9,685 C) $6,975 D) None of the above E) Cannot be calculated