Question

2. Which of the following types of compensation does not provide a deduction to the firm for tax purposes?

Select one:

a. Perks

b. Qualified stock options

c. Retirement plans

d. Current bonus

e. Performance shares

3. Parkside Inc. has three divisions (Entertainment, Plastics, and Video Card), each of which is considered an investment center for performance-evaluation purposes. The Entertainment Division manufactures video arcade equipment using products produced by the other two divisions, as follows:

1. The Entertainment Division purchases plastic components from the Plastics Division that are considered unique (i.e., they are made exclusively for the Entertainment Division). In addition, the Plastics Division makes less-complex plastic components that it sells externally, to other producers.
2. The Entertainment Division purchases, for each unit it produces, a video card from Parkside's Video Card Division, which also sells this video card externally (to other producers).
The per-unit manufacturing costs associated with each of the above two items, as incurred by the Plastic Components Division and the Video Card Division, respectively, are:

	Plastic Components	Video Cards
Direct material	$1.25	$2.40
Direct labor	2.35	3.00
Variable overhead	1.00	1.50
Fixed overhead	0.40	2.25
Total cost	$5.00	$9.15

Assume that the Plastics Division has excess capacity and it has negotiated a transfer price of $5.60 per plastic component with the Entertainment Division. This price will likely:  

Select one:

a. Cause the Plastics Division to reduce the number of commercial plastic components it manufactures

b. Motivate both divisions because estimated profits will be shared

c. Encourage the Entertainment Division to seek an outside source for plastic components

d. Demotivate the Plastics Division, causing mediocre performance

e. Motivate the Plastics Division to increase the portion of its manufacturing devoted to the Entertainment Division

4. Michael Porter's five competitive forces include which one of the following?

Select one:

a. Global competition.

b. Intensity of demand by customers.

c. Bargaining power of competitors.

d. Intensity of rivalry among competitors.

5.Information pertaining to Yekstop Corp.'s sales revenue is presented below:

	November	December	January
Cash sales	$96,000	$125,000	$78,000
Credit sales	288,000	450,000	234,000
Total sales	$384,000	$575,000	$312,000

Management estimates that 4% of credit sales are eventually uncollectible. Of the collectible credit sales, 65% are likely to be collected in the month of sale and the remainder in the month following the month of sale. The company desires to begin each month with an inventory equal to 75% of the sales projected for the month. All purchases of inventory are on open account; 30% will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling prices.

Total budgeted inventory purchases in November by Yekstop Corp. are:  

Select one:

a. $258,750

b. $316,350

c. $384,000

d. $489,150

e. $527,250

Answer 1

2. Answer is (e) Preference shares

3.
Answer is (e) Motivate the Plastics Division to increase the portion of its manufacturing devoted to the Entertainment Division
This is because Plastics Division has excess capacity and is taking profits as well

4.
Answer is (d) Intensity of rivalry among competitors.

5.

	November
Sales	$      384,000.00
Purchase Costs	$      230,400.00	=384000*60%
Add : Desired Ending Inventory	$      258,750.00	=575000*60%*75%
Less : Beginning Inventory	$      172,800.00	=384000*60%*75%
Budgeted Purchase	$      316,350.00

Ending Inventory = 75% of Purchase cost of next month sales
Beginning Inventory = 75% of Purchase cost of current month sales

Answer is (b) $316,350