str 581 final exam


61) According to the Principle of Risk-Return Trade-Off, investors require a higher return to compensate for __________.
A.  lack of diversification
B.  less risk
C.  greater risk
D.  diversification
62) You do a study and find out that, on average, stock prices for firms decrease 3% for every 5% decrease in inside ownership. You are watching the nightly business report and find out that Magic Tape’s stock has announced that insiders have sold 10% of their holdings. You are concerned because you own 1,000 shares of Magic Tape and it had closed the day before unchanged at $30 per share. If markets are at least semi-strong form efficient, what would you expect?
  A.  You would expect Magic Tape to close at $28 the day of the announcement.
 B.  You would lose $1,800.
 C.  You would lose $2.00 per share
 D.  You would lose $4,000.
63) Which of the following is not an advantage of going public?
  A.  Going public enables a firm to raise additional capital. 
 B.  Going public generally brings a lower price in the public market than in the venture capital or private placement markets.
 C.  Going public achieves liquidity and diversification for current shareholders
 D.  Going public gives existing shareholders a chance to sell portions of their shares as part of the IPO giving them a cash return on their investment and allows them to diversify their investment portfolios.
64) Which of the following is not an advantage of going public?
  A.  Going public makes the common stock negotiable and creates a visible market value.
 B.  Going public increase the firm's equity financing flexibility.
 C.  Going public makes it easier for a firm to acquire other firms in exchange for shares of its stock.
 D.  Going public makes securities worth more because of their decreased liquidity.
65) Undertaker Corporation has a joint process that produces three products: P, G, and A. Each product may be sold at split-off or processed further and then sold. Joint processing costs for a year amount to $25,000. Other relevant data are as follows:
Product Sales Value at Split-off Processing Costs after Split-off Sales Value at Completion
P $62,000 $5,000 $88,000
G 12,500 6,500 19,000
A 9,400 5,000 12,000
Product G _____.
A.  should be processed further to increase profits by $6,500.
B.  should be processed further to increase profits by $19,000.
C.  an be processed further or sold at split off; there is no difference in profit.
D.  should be sold at split off since processing further would only reduce profits by $6,500.
66) Baden Company manufactures a product with a unit variable cost of $50 and a unit sales price of $88. Fixed manufacturing costs were $240,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $70 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:
  A.  Income would decrease by $4,000.
 B.  Income would increase by $70,000.
 C.  Income would increase by $20,000
 D.  Income would increase by $4,000.
67) Transfer-pricing systems exist to _____.
A.  encourage managers to purchase goods and services internally
B.  maximize worldwide taxes, duties, and tariffs
C.  evaluate segment performance
D.  all of these answers are correct
68) Which one of the following managerial accounting approaches attempts to allocate manufacturing overhead in a more meaningful fashion?
  A.  Theory of constraints.
 B.  Activity-based costing.
 C.  Total-quality management
 D.  Just-in-time inventory.
69) The opportunity cost of an alternate course of action that is relevant to a make-or-buy decision is
A.  subtracted from the "Make" costs.
 B.  Added to the "Make" costs.
C.  added to the "Buy" costs.
D.  none of these
70) Which of the following does not appear as a separate section on the cash budget?
  A.  Cash receipts
 B.  Capital expenditures
 C.  Financing
 D.  Cash disbursements


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