If Finance Companies with a Greater Rate-Sensitivity of Liabilities Than

question 5

Multiple Choice

If finance companies with a greater rate-sensitivity of liabilities than assets wanted to reduce interest-rate risk, they could

• A)shorten their average asset life.
• B)lengthen their average asset life.
• C)shorten the maturity of debt that they issue.
• D)make greater use of fixed-rate loans.

Analyze special order decisions and the relevance of differential analysis in managerial decision-making.

Apply the total cost method of cost-plus pricing to determine product prices.

Calculate profit goals as a return on invested assets and understand its impact on pricing strategies.

Understand and apply the markup percentage concept in cost-plus pricing.

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Definitions:

Job-Order Costing System

An accounting method used to allocate costs to specific jobs or orders, typically used in situations where products or services are distinct and made to order.

Predetermined Overhead Rate

An estimated charge per unit of activity used to allocate manufacturing overhead costs to products or job orders, calculated before the period begins based on expected costs and activity levels.

Machine-Hours

A measure of the amount of time a machine is operated in the production process, used as a basis for allocating manufacturing overhead.

Markup

The sum added onto the purchase price of merchandise to cover both overhead expenses and profit, ultimately setting the retail price.