Question 1

A firm has daily cash receipts of $100,000 and collection time of 2 days. A bank has offered to reduce

the collection time on the firm’s deposits by 2 days for a monthly fee of $500. If money market rates

are expected to average 6% during the year, the net annual benefit (loss) from having this service is

Options :

A : $3,000

B : $12,000

C : $0

D : $6,000

Answer: D

Question 2

A manufacturing company produces plastic utensils for a particular segment at the lowest possible cost. The company is pursuing a cost?

Options :

A : Leadership strategy

B : Focus strategy

C : Differentiation strategy

D : Containment strategy

Answer: B

Question 3

Austin Manufacturing, which is subject to a 40% income tax rate, had the following operating data

for the period just ended.

Management plans to improve the quality of its sole product by (1) replacing a component that costs

$3.50 with a higher-grade unit that costs $5.50, and (2) acquiring a $180,000 packing machine. Austin

will depreciate the machine over a 10-year life with no estimated salvage value by the straight-line

method of depreciation. If the company wants to earn after-tax income of $172,800 in the upcoming

period, it must sell

Options :

A : 19,300 units.

B : 21,3l6units.

C : 22,500 units.

D : 23,800 units.

Answer: C

Question 4

Which of the following is a true statement about packaging?

Options :

A : A customer ordinarily will not pay more for a better package

B : The package advertises the firm’s and brand’s image

C : Packaging identifies and describes the product and gives usage instructions

D : The package only provides the benefits associated with shipping and product protection

Answer: B

Question 5

Which one of the following factors might cause a firm to increase the debt in TTS financial structure?

Options :

A : An increase in the corporate income tax rate.

B : Increased economic uncertainty

C : An increase in the federal funds rate.

D : An increase in the price-earnings ratio.

Answer: A

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