1. You invested $5,000 in the Cog corporation and $5,000 in the Gear corporation. Both of these corporations have $100 million in total assets. The Cog corporation had a net profit of $5 million and the Gear corporation had a net profit of $10 million. You read their annual reports and both companies had established a goal of having net profit equal to 10% of total assets. Which of the following statements is true regarding these 2 firms?

Cog is effective and more efficient than Gear.
Cog is effective but less efficient than Gear.
Gear is effective and more efficient then Cog.
Gear is effective but less efficient than Cog.
Cannot tell without more information.
2 points

2. Sam quit his job as an accountant with We Keep Books Accurately to open his own accounting firm. He earned $40,000 with the accounting firm We Keep Books Accurately. During the current year Sam had revenues of $190,000 and total expenses of $110,000. Sam earned an

accounting profit of $40,000.

accounting profit of $80,000 and an entrepreneurial profit of $40,000.

entrepreneurial profit of $80,000, but an accounting of $40,000.

entrepreneurial profit of $80,000.

Cannot tell from the information provided.

3. Sam quit his job as an accountant with We Keep Books Accurately to open his own accounting firm. He earned $40,000 with the accounting firm We Keep Books Accurately. During the current year Sam had revenues of $150,000 and total expenses of $110,000. For Sam the opportunity cost of going into business was

$40,000.

$110,000.

$150,000.

zero because he has a profitable business.

4. All of the costs that a firm must pay, even if there are no sales, are

contribution costs.

fixed costs.

variable costs.

sales cost.

5. Table 5-1. Steel Shelf Company

Category Cost  Payment Period Cost

Rent   Monthly  $ 3,000

Utilities  Monthly  1,100

Insurance  Quarterly  1,200

Property Taxes Annually  6,000

Steel   Per Shelf  9.00

Forming  Per Shelf  0.25

Labor   Per Shelf  0.75

Price   Per Shelf  20.00

Refer to Table 5-1. The Steel Shelf company has variable costs per unit of ________
$10.00

$18.33

$20.00

$25.00

$30,00

6. Table 5-1. Steel Shelf Company

Category Cost  Payment Period  Cost

Rent   Monthly   $ 3,000

Utilities  Monthly   1,100

Insurance  Quarterly   1,200

Property Taxes Annually   6,000

Steel   Per Shelf   9.00

Forming  Per Shelf   0.25

Labor   Per Shelf   0.75

Price   Per Shelf   20.00

Refer to Table 5-1. The Steel Shelf company has monthly fixed costs of _____ and a contribution margin of _____.

$5,000; $10

$5,000; $20

$5,800; $10

$11,300; $10

$11,300; $20

7. Refer to Table 5-1. The Steel Shelf company has a monthly break-even quantity of _____ shelves.

250

500

580

1,130

Cannot calculate with information provided.

8. Refer to Table 5-1. If the Steel Shelf Company wants to earn a profit of $3,000 per month they will have to produce _____ shelves.

500

800

1,000

1,500

9. Refer to Table 5-1. The Steel Shelf company has annual fixed costs of ________ .

$5,300
$56,400
$60,000
$69,600
$135,600

10. The Steel Shelf company has to have annual revenue of _____ in order to break even.

$10,000
$120,000
$69,600
$135,600
Cannot calculate with information provided.

11. The earning power of a company can be defined as the product of 2 factors:

fixed asset turnover and cash flow per share.
net profit margin and fixed asset turnover.
net profit margin and total asset turnover.
total asset turnover and earnings per share.
12.When using an ABC inventory analysis, the inventory items that make up approximately _______ percent but account for approximately ______ percent of total costs are classified as C items.
10-15, 75
10-15, 10-15
75-80, 10-15
75-80, 75-80
13.Randy Jones decided to run an ABC analysis of his 500 stock keeping inventory items. He found that his average inventory was $200,000 and that there were 50 items out of the 500 that cost him $153,000. These 50 items would be classified as ___ items.
A
B
C
D
14.Business obligations that are normally paid within one year are
equipment loans.
mortgages.
long-term debt.
short-term debt.
15.The primary concern in current liabilities management is to pay obligations
after they are due.
before they are due.
when they are due.
all of the above are concerns.
16.Which of the following typically is not classified as an accrued liability?
Federal employment taxes.
Monthly mortgage payments.
Monthly sales tax owed to the city.
State employment taxes.

17. Use the following information to answer this question: Bill’s Furniture has just completed the first year of operation for his business and has the following information: sales, $200,000; cost of goods sold, $140,000; rent, $18,000; utilities, $8,400; insurance, $2,000; depreciation on equipment, $3,500; and interest, $10,000. Your forecast indicates that your sales will increase by 20%. Your rental agreement provides for a 3 increase percent per year. Bill has just read an article indicating that utility costs in his area will increase by 10% next year. Also, Bill just received a notice from his insurance company stating that his quarterly premium will increase to $600 beginning the first quarter of next year. The depreciation expense on the equipment will not change; however, Bill’s loan amortization schedule indicates that interest expense next year will be $9,000. Pro forma sales for Bill’s second year of operation is __________.
$40,000.
$200,000
$240,000
$220,000

18.Use the following information to answer this question: Bill’s Furniture has just completed the first year of operation for his business and has the following information: sales, $200,000; cost of goods sold, $140,000; rent, $18,000; utilities, $8,400; insurance, $2,000; depreciation on equipment, $3,500; and interest, $10,000. Your forecast indicates that your sales will increase by 20%. Your rental agreement provides for a 3 increase percent per year. Bill has just read an article indicating that utility costs in his area will increase by 10% next year. Also, Bill just received a notice from his insurance company stating that his quarterly premium will increase to $600 beginning the first quarter of next year. The depreciation expense on the equipment will not change; however, Bill’s loan amortization schedule indicates that interest expense next year will be $9,000. The projected rent expense for Bill’s second year of operation is __________.
$18,000.
$18,540.
$23,400.
$19,800.

19.Use the following information to answer this question: Bill’s Furniture has just completed the first year of operation for his business and has the following information: sales, $200,000; cost of goods sold, $140,000; rent, $18,000; utilities, $8,400; insurance, $2,000; depreciation on equipment, $3,500; and interest, $10,000. Your forecast indicates that your sales will increase by 20%. Your rental agreement provides for a 3 increase percent per year. Bill has just read an article indicating that utility costs in his area will increase by 10% next year. Also, Bill just received a notice from his insurance company stating that his quarterly premium will increase to $600 beginning the first quarter of next year. The depreciation expense on the equipment will not change; however, Bill’s loan amortization schedule indicates that interest expense next year will be $9,000. Pro forma net income for Bill’s Furniture in the second year is __________.
$18,100.
$30.160.
$21,720.
$29,320.

20. Which of the following statements about forecasting is false?
Product life cycle influences the length of the forecast.
The forecasting horizon should be at least as long as your strategic plan.
The longer the time horizon the more accurate the forecast will be.
The longer the time horizon the more inaccurate the forecast will be.
There is an inverse relationship between forecast accuracy and time.

21.Which of the following is the most appropriate firm to use the survey of sales force?

Ace Hardware
Best Buy
Burger King
IBM
K-Mart

22.Which of the following statements about forecasting is false?
Product life cycle influences the length of the forecast.
The forecasting horizon should be at least as long as your strategic plan.
The longer the time horizon the more accurate the forecast will be.
The longer the time horizon the more inaccurate the forecast will be.
There is an inverse relationship between forecast accuracy and time.

23.If a firm has $400,000 in credit sales and $100,000 in accounts receivable, accounts receivable turnover is.
25%.
4.
5.
14.

24.Marketable securities
consist of government securities only.
normally pay a higher rate of interest than checking accounts.
never require an investment strategy.
never offer any risk.

25.Which of the following is a method used to speed up cash receipts?
lock box.
electronic funds transfer.
writing a check.
a and b above.
b and c above.

26.All of the following are part of working capital except
accounts receivable.
inventory.
mortgage.
cash.
none of the above.