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Accounting Quiz

Accountants are lifelong students. The weekly quizzes are open
to everyone in the wonderful field of accounting, business
and the study of accounting. Good luck!

This week's quiz brought to you by:
Jennifer A. Bagwell, MTA, CPA
Instructor, School of Accountancy
Ohio University
Athens, Ohio

Visit Quiz Archives/See Past Winners

1 - Net Present Value is calculated as the difference between:

Cash Inflows and Cash Outflows
Present Value of Cash Inflows and Present Value of Cash Outflows
Sales and Cost of Goods Sold
Revenues and Expenses

2 - A company is considering investing in an asset that is expected to earn a 15% return and will cost $250,000. The company’s desired ROI is 18% and the company is currently earning a 19% return on investment. How much income does the company expect to earn from this new investment and based on ROI, should the company make this investment?

$45,000; no
$47,500; yes
$37,500; yes
$37,500; no

3 - John Smith is considering going back to school to get an MBA degree. In weighing his options, John is looking closely at the cost of tuition and the cost of leaving work and going back to school for two years. The income that John would not earn because he decides to go back to school is an example of a(n):

Fixed Cost
Opportunity Cost
Return on Investment
Sunk Cost

4 - A company is earning a net income of $120,000 with Sales of $360,000. Their Contribution Margin is $150,000. What is the company’s operating leverage?

2.4
0.8
3
1.25

5 - The Internal Rate of Return (IRR) is:

The same as a company’s cost of capital
Used in the calculation of Net Present Value
The rate which will produce a zero Net Present Value
Used in the calculation of residual income

6 - The salary paid to an engineer that is responsible for maintaining all manufacturing equipment is considered a(n):

Period cost
Unit-level cost
Sunk cost
Product cost

7 - _________ _______ can be traced to cost objects in a cost effective manner.

Indirect costs
Direct costs
Overhead costs
Cost drivers

8 - The high-low method can be used to determine:

The fixed and variable portions of a mixed cost
The present value index
Operating leverage
Contribution margin

9 - A company has a cost that has the following details:

- At 500 units of production, the total cost is $10,000
- At 1,000 units of production, the total cost is $20,000
- At 1,500 units of production, the total cost is $40,000

Based on the above information, this cost is best classified as a:

Fixed cost
Mixed cost
Variable cost
Not enough information to determine the answer

10 - Two investments have the following expected cash flows:

Investment 1 Investment 2
2008 $5,000 $2,000
2009 1,500 2,000
2010 1,000 2,000
2011 500 2,000
Total $8,000 $8,000

Based on the time value of money concept, which of these investments would be best for a company to choose?

Investment 1
Investment 2
It does not matter; both investments provide equal cash flows
No answer

E-mail required (for purposes of contacting winners only).

	Cash Inflows and Cash Outflows
	Present Value of Cash Inflows and Present Value of Cash Outflows
	Sales and Cost of Goods Sold
	Revenues and Expenses

	The same as a company’s cost of capital
	Used in the calculation of Net Present Value
	The rate which will produce a zero Net Present Value
	Used in the calculation of residual income

	The fixed and variable portions of a mixed cost
	The present value index
	Operating leverage
	Contribution margin

	Fixed cost
	Mixed cost
	Variable cost
	Not enough information to determine the answer

	Investment 1
	Investment 2
	It does not matter; both investments provide equal cash flows
	No answer