International Issues in Management Accounting

Chapter 18 International Issues in Management Accounting

MULTIPLE CHOICE

1.What should the management accountant do in the global business environment?

• stay current in a variety of business areas
• familiarize himself/herself with the accounting rules of the countries in which the firm

operates

• acquire good training and education and stay abreast of changes in the accounting field
• all of the above

ANS:D DIF:2 REF:p. 818 OBJ:1 NAT:AACSB Reflective thinking | IMA Global business 2.A multinational corporation is a corporation that

• imports raw materials from other nations
• exports finished goods to other nations
• produces goods in a foreign trade zone
• engages in any of the above activities

ANS:D DIF:1 REF:p. 818 OBJ:2 NAT:AACSB Reflective thinking | IMA Global business 3.The tariff levied on imported goods by the federal government is recorded as

• delivery cost
• raw material cost
• selling and administrative cost
• income taxes

ANS:B DIF:2 REF:p. 819 OBJ:2 NAT:AACSB Reflective thinking | IMA Global business 4.How can a company reduce tariffs on imported goods?

• restrict the amount of imported materials
• alter the materials by adding U.S. resources
• utilize foreign trade zones
• all of the above

ANS:D DIF:2 REF:p. 819 OBJ:2 NAT:AACSB Reflective thinking | IMA Global business 5.Which of the following benefits are available to a company located in a foreign trade zone?

• can avoid duty payments
• can assemble high tariff parts into a lower tariff product
• allows the importation and use of substandard materials
• all of the above

ANS:D DIF:2 REF:p. 819 OBJ:2 NAT:AACSB Reflective thinking | IMA Global business 1 This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher.Test Bank for Managerial Accounting (International Edition) 8e Hansen Mowen (All Chapters Arranged Reverse: 18-1) 1 / 4

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6.At what point must a company pay duty on goods leaving a foreign trade zone?

• at point of entry into the U.S.
• at point of departure from the foreign trade zone
• at any time the U.S. government demands payment
• never because goods in a foreign trade zone are duty free

ANS:B DIF:2 REF:p. 819-820 OBJ:2 NAT:AACSB Reflective thinking | IMA Global business 7.Exporting products is more complicated for the management then selling products domestically because

• foreign countries have various import and tariff regulations
• there are foreign currency transaction risks
• both a and b
• none of the above

ANS:C DIF:2 REF:p. 820 OBJ:2 NAT:AACSB Reflective thinking | IMA Global business Figure 18-1 Imports, Ltd., imports merchandise that it resells in the United States. Inventory shrinkage due to breakage is about 5 percent of the total. The average tariff rate on the imports is 20 percent, and the company's carrying cost is 12 percent.The average shipment is $400,000, and inventory is stored an average of three months before it is moved from the warehouse in the foreign trade zone. The company averages four shipments a year.

8.Refer to Figure 18-1. If Imports, Ltd., is located in a foreign trade zone, total tariff and tariff-related costs per year associated with the imports would be

• $304,000
• $313,120
• $324,000
• $329,600

ANS:A

SUPPORTING CALCULATIONS:

Tariff and tariff-related costs per shipment = $400,000 ´ 95% ´ 20% = $76,000 $76,000 ´ 4 shipments per year = $304,000 DIF:2 REF:p. 820 OBJ:2

NAT:AACSB Analytic | IMA Global business

9.Refer to Figure 18-1. If Imports, Ltd., is NOT located in a foreign trade zone, total tariff and tariff- related costs per year associated with the imports would be

• $324,000
• $313,120
• $304,000
• $329,600

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Chapter 18/International Issues in Management Accounting 3

ANS:D

SUPPORTING CALCULATIONS:

Tariff and tariff-related costs per shipment =

($400,000 ´ 20%) + ($400,000 ´ 20% ´ 12% ´ 3/12) = $82,400

$82,400 ´ 4 shipments per year = $329,600 DIF:2 REF:p. 820 OBJ:2

NAT:AACSB Analytic | IMA Global business

Figure 18-2 Pier Seven, Ltd., imports merchandise that it resells in the United States. Inventory shrinkage due to breakage is about 8 percent of the total. The average tariff rate on the imports is 15 percent, and the company's carrying cost is 10 percent.The average shipment is $150,000, and inventory is stored an average of four months before it is moved from the warehouse in the foreign trade zone. The company averages three shipments per year.

10.Refer to Figure 18-2. If Pier Seven, Ltd., is located in a foreign trade zone, total tariff and tariff- related costs per year associated with the imports would be

• $67,500
• $62,100
• $20,700
• $22,500

ANS:B

SUPPORTING CALCULATIONS:

Tariff and tariff-related costs per shipment = $150,000 ´ 92% ´ 15% = $20,700 $20,700 ´ 3 shipments per year = $62,100 DIF:2 REF:p. 820 OBJ:2

NAT:AACSB Analytic | IMA Global business

11.Refer to Figure 18-2. If Pier Seven, Ltd., is NOT located in a foreign trade zone, total tariff and tariff-related costs per year associated with the imports would be

• $69,750
• $67,500
• $73,500
• None of the above

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ANS:A

SUPPORTING CALCULATIONS:

Tariff and tariff-related costs per shipment =

($150,000 ´ 15%) + ($150,000 ´ 15% ´ 10% ´ 4/12) = $22,500 + $750 = $23,250

$23,250 ´ 3 shipments per year = $69,750 DIF:2 REF:p. 820 OBJ:2

NAT:AACSB Analytic | IMA Global business

Figure 18-3 Merit, Ltd., imports merchandise that it resells in the United States. The merchandise is stored in a company warehouse that is located in a foreign trade zone. Inventory shrinkage due to breakage is about 4 percent of the total. The average tariff rate on the imports is 18 percent, and the company's carrying cost is 9 percent.The average shipment is $400,000, and inventory is stored an average of four months before it is moved from the warehouse in the foreign trade zone.

12.Refer to Figure 18-3. If Merit uses a foreign trade zone, total tariff and tariff-related costs per year associated with the imports would be

• $207,360
• $209,424
• $218,610
• $239,409

ANS:A

SUPPORTING CALCULATIONS:

Tariff and tariff-related costs per shipment = $400,000 ´ 96% ´ 18% = $69,120 $69,120 ´ 3 shipments per year = $207,360 DIF:2 REF:p. 820 OBJ:2

NAT:AACSB Analytic | IMA Global business

13.Refer to Figure 18-3. If Merit does NOT use a foreign trade zone, total tariff and tariff-related costs per year associated with the imports would be

• $212,896
• $222,480
• $228,638
• $242,560

This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher.

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