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Bu330 accounting for managers set-3

  

Question-1

In a special sales order decision, incremental fixed costs that will be incurred if the special order is accepted are considered to be:

    

A. opportunity costs. 

B. irrelevant to the decision. 

C. relevant to the decision. 

D. sunk costs.

Question-2

Blue Technologies manufactures and sells DVD players. Great Products Company has offered Blue Technologies $22 per DVD player for 10,000 DVD players. Blue Technologies’ normal selling price is $30 per DVD player. The total manufacturing cost per DVD player is $18 and consists of variable costs of $14 per DVD player and fixed overhead costs of $4 per DVD player. (NOTE: Assume excess capacity and no effect on regular sales.)
 

How much are the expected increase (decrease) in revenues and expenses from the special sales order?

    

A. Expected increase in revenues $220,000; expected increase in expenses $140,000 

B. Expected increase in revenues $220,000; expected increase in expenses $40,000 

C. Expected increase in revenues $300,000; expected increase in expenses $140,000 

D. Expected increase in revenues $220,000; expected increase in expenses $120,000

Question-3

The horizontal line intersecting the vertical y-axis at the level of total cost on a CVP graph represents:

    

A. total costs. 

B. total variable costs. 

C. total fixed costs. 

D. breakeven point.

Question-4

A product is sold at $60.00 per unit, the variable expense per unit is $30, and total fixed expenses are $200,000, what are the breakeven sales in dollars?

    

A. $3,333 

B. $100,000 

C. $133,333 

D. $400,000

Question-5

To find the number of units that need to be sold in order to breakeven or generate a target profit, the formula used is:

    

A. (fixed expenses + operating income) ÷ contribution margin per unit. 

B. (fixed expenses + operating income) ÷ contribution margin ratio. 

C. (fixed expenses – operating income) ÷ contribution margin ratio. 

D. (fixed expenses – operating income) ÷ contribution margin per unit.

Question-6

Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is currently producing and selling 75,000 seats per year. The following information relates to current production: 

  

Sale price per unit

$400

 

 

Variable costs per unit:

$220

 

    Manufacturing

$50

 

    Marketing and   administrative

 

 

Total fixed costs:

 

    Manufacturing

$750,000

 

    Marketing and   administrative

$200,000

 If a special sales order is accepted for 3,000 seats at a price of $300 per unit, and fixed costs increase by $10,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)

    

A. Decrease by $80,000 

B. Increase by $230,000 

C. Increase by $90,000 

D. Increase by $80,000

Question-7

Samson Incorporated provided the following information regarding its only product: 

  

Sale price per unit

$50.00

 

Direct materials used

$160,000

 

Direct labor incurred

$185,000

 

Variable manufacturing overhead

$120,000

 

Variable selling and   administrative expenses

$70,000

 

Fixed manufacturing overhead

$65,000

 

Fixed selling and administrative   expenses

$12,000

 

Units produced and sold

20,000

 

 

Assume no beginning inventory

 Assuming there is excess capacity, what would be the effect on operating income of accepting a special order for 1,200 units at a sale price of $47 per product? The 1,200 units would not require any variable selling and administrative expenses. (NOTE: Assume regular sales are not affected by the special order.)

    

A. Increase by $84,300 

B. Decrease by $28,500 

C. Increase by $24,300 

D. Increase by $28,500

Question-8

The area to the right of the breakeven point and between the total revenue line and the total expense line represents:

    

A. expected profits. 

B. expected losses. 

C. variable expenses. 

D. fixed expenses.

Question-9

The Muffin House produces and sells a variety of muffins. The selling price per dozen is $15, variable costs are $9 per dozen, and total fixed costs are $4,200. How many dozen muffins must The Muffin House sell to breakeven?

    

A. 10,500 

B. 700 

C. 280 

D. 175

Question-10

The breakeven point may be defined as the number of units a company must sell to do which of the following?

    

A. Generate a net loss 

B. Generate a zero profit 

C. Earn more net income than the previous accounting period 

D. Generate a net income

Question-11

To find the breakeven point using the shortcut formulas, you use:

    

A. zero for the contribution margin per unit. 

B. zero for the fixed expenses. 

C. zero for the contribution margin ratio. 

D. zero for the operating income.

Question-12

Assume the following amounts: 

  

Total fixed costs

$24,000

 

Selling price per unit

$20

 

Variable costs per unit

$15

 
 

If sales revenue per unit increases to $22 and 12,000 units are sold, what is the operating income?

    

A. $264,000 

B. $60,000 

C. $108,000 

D. $84,000

Question-13

Pluto Incorporated provided the following information regarding its single product: 

  

Direct materials used

$240,000

 

Direct labor incurred

$420,000

 

Variable manufacturing overhead

$160,000

 

Fixed manufacturing overhead

$100,000

 

Variable selling and administrative   expenses

$60,000

 

Fixed selling and administrative   expenses

$20,000

 The regular selling price for the product is $80. The annual quantity of units produced and sold is 40,000 units (the costs above relate to the 40,000 units production level). The company has excess capacity and regular sales will not be affected by this special order. There was no beginning inventory. What would be the effect on operating income of accepting a special order for 3,500 units at a sale price of $55 per product?

    

A. Increase by $115,500 

B. Increase by $269,500 

C. Decrease by $115,500 

D. Decrease by $269,500

Question-14

A manager should always reject a special order if:

    

A. the special order price is less than the variable costs of the order. 

B. there is available excess capacity. 

C. the special order price is less than the regular sales price. 

D. the special order will require variable nonmanufacturing expenses.

Question-15

Which of the following best describes a “sunk cost”?

    

A. Costs that were incurred in the past and cannot be changed 

B. Benefits foregone by choosing a particular alternative course of action 

C. A factor that restricts the production or sale of a product 

D. Expected future data that differ among alternatives

Question-16

Corny and Sweet grows and sells sweet corn at its roadside produce stand. The selling price per dozen is $3.75, variable costs are $1.25 per dozen, and total fixed costs are $750.00. What are breakeven sales in dollars?

    

A. $563 

B. $300 

C. $375 

D. $1,125

Question-17

If total fixed costs are $455,000, the contribution margin per unit is $25.00, and targeted operating income is $25,000, how many units must be sold to breakeven?

    

A. 11,375,000 

B. 19,200 

C. 18,200 

D. 625,000

Question-18

“Contribution margin per unit” is best described by which of the following?

    

A. Sales price per unit minus fixed cost per unit 

B. Sales price per unit minus variable cost unit 

C. Sales price per unit minus fixed and variable costs per unit 

D. Units sold time contribution margin ratio

Question-19

The effect of a plant closing on employee morale is an example of which of the following?

    

A. A qualitative factor 

B. A quantitative factor 

C. A sunk cost 

D. A variable cost

Question-20

The performance evaluation of a profit center is typically based on its:

    

A. flexible budget variance. 

B. static budget variance. 

C. return on investment. 

D. return on assets.

Question-21

Brockman Company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $35,000. Budgeted cash disbursements are $123,000, while budgeted cash receipts are $130,000. Brockman Company wants to have an ending cash balance of $48,000. How much would Brockman Company need to borrow to achieve its desired ending cash balance?

    

A. $6,000 

B. $90,000 

C. $42,000 

D. $55,000

Question-22

Green Company has budgeted sales of 23,000 units for June and 25,000 units for July. Green’s policy is to maintain its finished goods inventory at 25% of the following month’s sales. Accordingly, at the end of May, Green had 5,750 units on hand. How many units must it produce in June in order to support the sales goal and maintain its policy regarding finished goods inventory?

    

A. 6,250 units 

B. 23,000 units 

C. 23,500 units 

D. 29,250 units

Question-23

The difference between actual and budgeted figures is known as:

    

A. fluctuations. 

B. variances. 

C. overages. 

D. underages.

Question-24

All of the following are responsibility centers EXCEPT:

    

A. profit centers. 

B. investment centers. 

C. customer centers. 

D. cost centers.

Question-25

The results of a customer survey about customer experiences with the company’s services would be an example of measuring which perspective?

    

A. Financial 

B. Customer 

C. Internal business 

D. Learning and growth

Question-26

Which of the following types of cash outlays has its own budget?

    

A. Capital expenditures 

B. Dividends 

C. Income taxes 

D. All of the above

Question-27

The ________ budget is the only budget stated ONLY in units, not dollars.

    

A. production 

B. sales 

C. direct materials 

D. manufacturing overhead

Question-28

In a(n) ________ center, managers are accountable for both revenues and costs.

    

A. cost 

B. profit 

C. equity 

D. investment

Question-29

For the most recent year, Robin Company reports operating income of $650,000. Robin’s sales margin is 10%, and capital turnover is 2.0. What is Robin’s return on investment (ROI)?

    

A. 5% 

B. 1% 

C. 100% 

D. 20%

Question-30

If a company must decrease its selling price while all of the company’s expenses remain constant, what will happen to return on investment (ROI)?

    

A. ROI will decrease. 

B. ROI will increase. 

C. ROI will not be affected. 

D. We cannot determine the effect from the information provided.

Question-31

Regarding the budgeting process, which of the following statements is true?

    

A. The budget should always be designed by top corporate management. 

B. The budget should be approved by the company’s external auditors. 

C. The budget should be designed from the bottom up, with input from employees at all levels. 

D. All of the listed statements are true regarding the budgeting process.

Question-32

Feeney Furniture prepared the following sales budget. 

  

Month

Cash Sales

Credit Sales

 

March

$20,000

$10,000

 

April

$36,000

$16,000

 

May

$42,000

$40,000

 

June

$54,000

$48,000

 Credit collections are 15% two months following the sale, 50% in the month following the sale, and 30% in the month of sale. The remaining 5% is expected to be uncollectible. What are the total cash collections in June?

    

A. $36,800 

B. $90,800 

C. $86,000 

D. $96,600

Question-33

Assume Cucumber Company expects each division to earn an 8% target rate of return. Assume the Company’s Pickle Division had the following results.
 

Sales $24,500,000
Operating income $1,250,000
Total assets $15,500,000
 

The Division’s ROI is:

    

A. 8.1%. 

B. 15.8%. 

C. 5.1%. 

D. 7.0%.

Question-34

Budget committees most often would include all of the following people EXCEPT:

    

A. CEO. 

B. research and development manager. 

C. shareholder. 

D. marketing manager.

Question-35

Assume Cucumber Company expects each division to earn an 8% target rate of return. Assume the Company’s Pickle Division had the following results.
 

Sales $24,500,000
Operating income $1,250,000
Total assets $15,500,000
 

The Division’s RI is:

    

A. ($10,000). 

B. $10,000. 

C. ($710,000). 

D. $710,000.

Question-36

Kotrick Company has beginning inventory of 15,000 units and expected sales of 23,000 units. If the desired ending inventory is 18,000 units, how many units should be produced?

    

A. 20,000 

B. 56,500 

C. 10,000 

D. 26,000

Question-37

Forty Winks Corporation manufactures nightstands. The production budget shows that Forty Winks Corporation plans to produce 1,200 nightstands in March and 1,050 nightstands in April. Each nightstand requires .50 direct labor hours in its production. Forty Winks Corporation has a direct labor rate of $12 per direct labor hour. What is the total combined direct labor cost that should be budgeted for March and April?

    

A. 6,300 

B. 7,200 

C. 27,000 

D. 13,500

Question-38

Selected financial data for The Portland Porcelain Works Coffee Mug Division is as follows. 

  

Sales

$2,300,000

 

Operating income

$414,000

 

Total assets

$718,750

 

Current liabilities

$180,000

 

Target rate of return

10%

 

Weighted average cost of capital

8%

 What is The Portland Porcelain Works Coffee Mug Division capital turnover?

    

A. 5.6 

B. 12.8 

C. 3.2 

D. 1.7

Question-39

Beginning inventory is $120,000 and ending inventory is 60% of beginning inventory. Compute cost of goods sold for the period if purchases are $400,000.

    

A. $72,000 

B. $448,000 

C. $520,000 

D. $592,000

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