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| 1 | |
Which of the following is not a short-term operating decision? |
| | A) | Decision to buy a new plant in the next month. |
| | B) | Decision to buy a component rather than make it ourselves. |
| | C) | Decision to stop producing a particular product for the next six months |
| | D) | Decision to reduce the normal price to get a large order from one customer |
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| 2 | |
The term for the difference between the selling price and variable costs is: |
| | A) | markup |
| | B) | net income |
| | C) | gross margin |
| | D) | contribution margin |
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| 3 | |
The breakeven point is the point at which: |
| | A) | total contribution margin equals total fixed costs |
| | B) | total fixed costs equal total variable costs |
| | C) | the total revenue line intersects the Y axis |
| | D) | the total cost line intersects the X axis |
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| 4 | |
Stay Dry, Inc. sells umbrellas for $8.00 each. The variable cost per umbrella is $5.25. Total fixed costs are $3,800. The contribution margin ratio is: |
| | A) | .34 |
| | B) | .48 |
| | C) | .17 |
| | D) | Cannot be determined |
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| 5 | |
Stay Dry, Inc. sells umbrellas at a selling price of $8 each. The variable cost per umbrella is $5.25. Total fixed costs are $3,800. The breakeven point in units is: |
| | A) | 1,382 |
| | B) | 724 |
| | C) | 439 |
| | D) | 518 |
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| 6 | |
Complexions Corporation manufactures one product, Smooth-All, which moisturizes dry skin. The unit contribution margin for Smooth-All is $6.15, while total fixed costs amount to $341,000. Given a selling price of $12.80 per unit and a target profit of $175,000, Complexions must sell: |
| | A) | 40,313 units |
| | B) | 77,594 units |
| | C) | 83,903 units |
| | D) | 26,992 units |
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| 7 | |
The Shady Acres Company sells a "one size fits all" broad-brim hat for $7.75. Variable costs per unit are $1.48, while total fixed costs amount to $207,000. The corporate tax rate is 20% and the company wants to earn an after-tax profit of $200,000. What is the dollar value of sales that Shady Acres must generate to achieve their goal? |
| | A) | $384,034 |
| | B) | $1,491,965 |
| | C) | $564,895 |
| | D) | $371,545 |
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| 8 | |
Direct material is an example of a: |
| | A) | unit-related cost. |
| | B) | batch-related cost. |
| | C) | facility-sustaining cost |
| | D) | product-sustaining cost. |
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| 9 | |
Life insurance on the product-line managers is an example of a/an |
| | A) | unit-related cost. |
| | B) | batch-related cost. |
| | C) | facility-sustaining cost |
| | D) | product-sustaining cost. |
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| 10 | |
Smith's Protective Gear manufactures gloves. It produces 100 pairs of gloves at a time. When 100 pairs are completed, an inspector examines 5% of the gloves before they are shipped to retailers. The inspectors salary is an example of a/an |
| | A) | unit-related cost. |
| | B) | batch-related cost. |
| | C) | facility-sustaining cost |
| | D) | product-sustaining cost. |
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| 11 | |
Hoops! is a manufacturer of basketball backboards. It has been approached by a large European retailer about the possibility of producing a special order of backboards at a price 10% under the going rate. Under which of the following conditions should Hoops! accept this offer? |
| | A) | The firm has the capacity to produce the special order. |
| | B) | The firm has the capacity to produce the special order and the special-order price exceeds the fixed cost related to the special order. |
| | C) | The firm has the capacity to produce the special order and the special-order price exceeds the total variable cost of the special order. |
| | D) | The firm has the capacity to produce the special order and the special-order price exceeds the incremental cost of the special order. |
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| 12 | |
If fixed costs decrease, how will this affect the contribution margin, profit and breakeven point? |
| | A) |  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078136601/794873/4chap_1.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (10.0K)</a>]]> |
| | B) |  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078136601/794873/4chap_2.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (10.0K)</a>]]> |
| | C) |  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078136601/794873/4chap_3.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (10.0K)</a>]]> |
| | D) |  <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0078136601/794873/4chap_4.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (9.0K)</a>]]> |
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| 13 | |
Hawaii On My Mind produces flowered shirts which normally sell for $24 each. The total cost to manufacture each shirt is $17, which consists of $9 of variable costs and $8 of fixed costs. A hotel chain has approached Hawaii On My Mind with a special order for 3,000 shirts at $15 each. Assuming Hawaii On My Mind has sufficient excess capacity to fill this special order without affecting sales to current customers, it should: |
| | A) | reject the offer since income will decrease by $6,000 |
| | B) | accept the offer since income will increase by $18,000 |
| | C) | reject the offer since income will decrease by $18,000 |
| | D) | accept the offer since income will increase by $6,000 |
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| 14 | |
A product line should not be temporarily discontinued if |
| | A) | it is operating at a loss. |
| | B) | it is failing to produce the desired profit. |
| | C) | the relevant costs saved are less than the relevant revenue lost |
| | D) | dropping the product line will adversely affect remaining workers. |
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| 15 | |
Harkens Ltd. currently produces all it's product components. Another firm has offered to supply the components at $12 each. Harkens' total cost per component is as follows:
Direct Material 7.00
Direct Labor 1.40
Variable Overhead 3.80
Fixed Overhead 3.20
The fixed overhead is based on production of 3,000 casings, and none of it would be eliminated if Harkens accepted the offer. By how much would profit change if Harkens accepts this offer and purchases 3,000 components? |
| | A) | $15,000 decrease |
| | B) | $10,200 increase |
| | C) | $10,800 decrease |
| | D) | $600 increase |
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