QUESTION: 53

Financing decisions in a budget are used to construct all of the following pro forma financial statement components EXCEPT:

debt.
interest expense.
shareholder’s equity.
inventory.

Answer(s): D

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At the end of the year, ABC Company’s actual revenue is $85,000,000 versus budget revenue of $90,000,000. Actual operating expenses are $20,000,000 versus budget operating expenses of $22,000,000. Budget variance analysis would indicate a(n):

favorable revenue variance and an unfavorable operating expenses variance.
favorable revenue variance and a favorable operating expenses variance.
unfavorable revenue variance and a favorable operating expenses variance.
unfavorable revenue variance and an unfavorable operating expenses variance.

Answer(s): C

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QUESTION: 55

Which of the following is NOT a drawback to using ROI as a performance measure?

It may be misleading when cash flows are not evenly distributed over time.
It does not consider the profit generated by a project.
It does not include a charge for cost of capital.
It may lead to rejection of a positive NPV project.

Answer(s): B

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QUESTION: 56

XYZ Company has one inventory supplier, and title to inventory is transferred to the company during the manufacturing process. Which of the following BEST describes XYZ’s relationship with its supplier?

Collateralized
Outsourced
Supplier-managed
Paid-on-production

Answer(s): D

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