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Short & Long-Term Decision-Making in Accounting Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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Question 1 1. Why is payback period NOT the best capital budgeting technique?

Question 2 2. What is capital budgeting?

Question 3 3. What is gross investment?

Question 4 4. Which one of the following is NOT a mathematical term in the payback formula?

Question 5 5. What is the payback period for an investment that costs $250,000 and generates cash flow of $85,000 with annual expenses of $10,000?

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Question 6 6. Which one the following is the correct payback formula?

Question 7 7. What are the two types of investment spending?

Question 8 8. Which one is a capital good?

Question 9 9. Which of the following costs is NOT a relevant cost?

Question 10 10. If your costs are $15,000 for producing product A, and your costs are $32,500 for producing products A and B, $17,500 would be which of the following costs?

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Question 11 11. Which one is NOT a technique used to make a capital budgeting decision?

Question 12 12. Amelia's Airway replaces six airplanes and buys two new ones. What is the investment spending amount?

Question 13 13. Which of the following is the BEST explanation of payback analysis?

Question 14 14.

Given the following cash flows:

Initial investment at Time 0: $400,000

Net cash inflows: Time 1: $20,000; Time 2: $70,000; Time 3: $110,000; Time 4: $200,000; Time 5: $400,000.

(Please note that Time 0 is the start of year 1 and Time n is the end of Year n - for example Time 5 is the end of year 5.)

What is the Payback period?

Question 15 15. If you would make $1 million with decision A and $2 million with decision B, what are your opportunity costs for choosing A?

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Question 16 16. Which of the following are irrelevant costs?

Question 17 17. You are a real estate investor, and you're considering buying property A or property B. Property A costs $200,000 and will generate an annual net cash flow of $12,000 per year. Property B costs $220,000 but generates a net annual cash flow of $14,000. You want to recoup your initial investment as quickly as possible. What is the payback period for each property, and which property should you buy?

Question 18 18. What is an attempt to stimulate production by means of capital goods called?

Question 19 19. If you have three choices and with each choice these costs are different, what type of costs are they?

Question 20 20. What three factors should be taken into account when making capital budgeting decisions?

Short & Long-Term Decision-Making in Accounting Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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