Multiple Choice Answers

Question 1
The best measure of managerial efficiency in the use of investments in assets is:

a. rate of return on stockholders’ equity
b. investment turnover
c. income from operations
d. inventory turnover

Question 2 The following data relate to direct materials costs for November:

Actual costs 4,500 pounds at $6.00
Standard Costs 4,600 pounds at $5.50
What is the direct materials price variance?

a. $2,250 favorable
b. $2,250 unfavorable
c. $2,300 unfavorable
d. $1,700 unfavorable

Question 3
Mathews Company is considering replacing equipment which originally cost $250,000 and which has $225,000 accumulated depreciation to date. A new machine will cost $500,000 and the old equipment can be sold for $6,000. What is the sunk cost in this situation?

a. $225,000
b. $25,000
c. $250,000
d. $19,000

Question 4
In capital rationing, an initial screening of alternative proposals is usually performed by establishing minimum standards. Which of the following evaluation method(s) are normally used?

a. Cash payback method and average rate of return method
b. Average rate of return method and net present value method
c. Net present value method and cash payback method
d. Internal rate of return and net present value methods

Question 5
If fixed costs are $850,000 and variable costs are 75% of sales, what is the break-even point (dollars)?

a. $1,133,333
b. $1,983,333
c. $3,400,000
d. $2,550,000