1:04 Done 10 of 16 5. _d _Which of the following factors should not be deemed important when deciding whether or not to investigate a variance? a. Magnitude and/or trend of the variance over time. b. Whether the variance is favorable or unfavorable. C. Likelihood that the variance will recur in the future. d. None of the above, they are all important. 6. b A primary objective in measuring productivity is to improve operations by either (i) using fewer inputs to produce the same output, or (ii) producing: a. Fewer outputs with the fewer inputs. b. More outputs with the same inputs. c. More outputs with more inputs. d. None of the above 7. A firm with a declining market share percentage may still earn a higher operating income if the: a. Market as a whole is shifting. b. Market as a whole is stable. c. Market as a whole is growing. d. None of the above Question 8 thru 11 are based on the following information: Broha Company manufactured 1,500 units of its only product during 2019 with the following inputs: 450 pounds of Material A at a cost of $1.50 per pound 300 pounds of Material H at a cost of $2.75 per pound 300 direct labor hours at $20 per hour The firm manufactured 1,800 units of the same product in 2018 with the following inputs: 500 pounds of Material A at a cost of $1.20 per pound 360 pounds of Material H at a cost of $2.50 per pound 400 direct labor hours at $18 per hour (Round all calculations to 2 significant digits) R In 2019, the partial financial productivity of Material A is: a. 0.03 b. 0.05 C. 3.00 d. 3.33 e. None of the above In 2018, the partial operational productivity of Material A is: a. 0.28 b. 0.33 C. d. 3.33 None of the above 10. In 2019, the partial financial productivity of direct labor is: a. 0.20 b. 0.25 C. 0.40 d. 2.50 e. None of the above1:04 Done 12 of 16 20. A company established a branch to sell automobile seat covers. The company purchases these covers and stores them in a warehouse. The covers are then shipped from the warehouse to both the home office and the new branch. Home office management is responsible for setting the transfer price of the covers charged to the branch. Per unit costs of the covers are: 60.00 purchase price 2.50 shipping cost to warehouse 3.00 handling cost, including $1 allocated administrative overhead 3.50 shipping cost to branch, paid by home office According to the general transfer pricing formula given in the text, the minimum transfer price that home office should change the branch is: a. $62.50 b. $63 50 566.00 d, $68.00 e. None of the above Question 21 and 22 are based on the following information: Parkside Inc. has three divisions (Entertainment, Plastics, and Video Card), each of which is considered an investment center for performance evaluation purposes. The Entertainment Division manufactures video arcade equipment using products produced by the other two divisions, as follows: The Entertainment Division purchases plastic components from the Plastics Division that are considered unique lie. made lusively for the Entertainment Division). In addition, the Plastics Division makes less- complex plastic components that it sells externally, to other producers. The Entertainment Division purchases, for each unit it produces, a video card from the Video Card Division, which also sells this video card externally (to other producers). Neither the Plastic Component nor the Video Card divisions are currently operating at full capacity. The per-unit manufacturing costs associated with each of the above two items, as incurred by the Plastic Components Division and the Video Card Division, respectively, are: Plastic Components Video Cards Direct material $ 1.25 $ 2.40 Direct labor 2.35 3.00 Variable overhead 1.00 1.50 Fixed overhead 0.40 2.25 Total cost $ 5.00 $ 9.15 The Plastics Division sells its commercial products at full cost plus a 25% markup and believes the proprietary plastic component made for the Entertainment Division would sell for $6.25/unit on the open market. The market price of the video card used by the Entertainment Division is $10.98/unit. 21. A per-unit transfer price from the Video Cards Division to the Entertainment Division at Its full (absorption) cost of $9.15, would; a. Satisfy the Video Cards Division profit desire by allowing recovery of opportunity costs. b. Provide no profit incentive for the Video Cards Division to control or reduce costs. c. Encourage the Entertainment Division to purchase video cards from an outside source. d. None of the above1:04 Done 13 of 16 15. . _3 A unit of an organization is referred to as a profit center if it has: a. Authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply. b. Authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply, and significant control over the amount of invested capital. C. Authority to make decisions over the most significant costs of operations, including the power to choose the sources of supply. d. Authority to provide specialized support to other units within the organization. e. None of the above. 16. Home Products Inc. has failed to reach its planned activity level during its first two years of operation. The following table shows the relationship between actual units produced and actual units sold in years 1 and 2, and the projected relationship for Year 3. All prices and costs have remained the same for the last two years and are expected to do so in Year 3. Income has been positive in both Year 1 and Year 2. Planned Units Produced Units Sold Production Year 1 90,000 90,000 100,000 Year 2 95,000 95,000 100,000 Year 3 95,000 30.000 100,000 Because Home Products uses a full (absorption) costing system, one would predict operating income for Year 3, under full (absorption) costing method, to be: a. Greater than operating income under variable costing. b. The same as operating income under variable costing. C. Less than the operating income under variable costing. . None of the above 17. The Soda Division of Pepsi Corporation had sales of $5,500,000 and operating income of $1,375,000 last year. The total assets of the Pasta Division were $2,750,000, while current liabilities were $330,000. Pepsi Corporation's target rate of return is 15%, while its weighted average cost of capital is 8%. The effective tax rate for the company is 30%. What is the Pasta Division's residual income (RI)? a. $330,000 b. $768,900 1:375, 000 - ( c. $962,500 d. $1,155,000 e. None of the above. 18. C Put simply, transfer pricing is a management tool for assigning a "price" to internally transferred goods (or services) in order to simulate the marketplace, thus encouraging managers to make decisions that are in the best interest of the: a. Producing (i.e., selling) unit within the firm. b. The firm as a whole. c. Operating units in the short run, and the firm in the long-run. d. None of the above 19. _ A measure of the manager's ability to control expenses and increase revenues to improve profitability is: a. Return on investment (ROI). b. Return on sales (ROS). C. Asset turnover (AT). d. None of the aboveNone of the above. 25. Blue Star Co. has total current assets of $2,000,000, total assets of $5,000,000, total current liabilities of $800,000, total liabilities of $3,000,000 and total Shareholders' equity of $2,000,000. If the company collects $100,000 of its accounts receivable and purchases $100,000 of inventory on account, while none of its other assets and liabilities change, its current ratio will: a. Increase b. Decrease Done c. Remain the same 1:04 d. The answer cannot be determined from the information given. PART II - Bonus/Penalty Multiple Choice. Attempting/complet ng these questions are 100% OPTIONAL - If student elects to attempt/complete some or all of these questions, they will either be (1) awarded 2 points for each correct answer or fil) assessed a penalty of 1 point for each Incorrect answer. The maximum net bonus points that a student may earn is 6 points and the maximum net penalty points that a student may be assessed is minus - 3 points. Choose the best answer in the space provided. Show all work clearly and legibly - all amounts must be accompanied with a labe ch amount represents. 1. (BONUS) When the mix of products sold shifts toward the high contribution margin product, the total: Sales mix variance is favorable. Sales volume variance is favorable Market mix variance is favorable. Sales mix variance is unfavorable. Sales price variance is favorable. _(BONUS) A firm's reduction of its selling prices in order to secure higher sales volumes andfor market shares: Will always generate higher sales volumes and market shares. Can have a negative impact on a firm's profitability. Should not usually affect profitability. Should not usually affect contribution margins. e. Should not usually affect sales mix. _(Bonus) Firms with high operating leverage tend to have 14 of 16 High asset turnover and high return on sales. Low asset turnover and low return on sales. Low asset turnover and high return on sales. High asset turnover and low return on sales. Decreased levels of short-term fixed costs. (BONUS) The primary limitation of a full-cost based transfer pricing system is that: The supplying and purchasing divisions are more likely to make decisions that are inconsistent with the goals of the organization There will be little incentive on the part of the supplying manager to supply goods and services efficiently. Managers may spend too much time negotiating the transfer price Managers may find that the transfer price is difficult to compute. e. Such transfer prices are not currently allowed for federal income tax purposes.1:04 Done 15 of 16 22. Assume that the Entertainment Division is able to purchase a large quantity of video cards from an outside source at $8.70/unit. The Video Cards Division, having excess capacity, agrees to lower its transfer price to $8.70/unit. This action would likely: a. Optimize the profit goals of the Entertainment Division while subverting the profit goals of Parkside Inc. as a whole. b. Cause mediocre behavior in the Video Cards Division as lost opportunity costs increase. C. Optimize the overall profit goals of Parkside Inc. d. None of the above. 23 The following performance information was assembled for the Rodman Corporation for fiscal years 2017 and 2018: 2017 2018 Change Sales $2,400 $3,000 Cost of Goods Sold (1,300) (1,500) Gross Profit $1,100 $1,500 SG&A Expenses (700) 800 Operating Profit $ 400 $ 700 Less - income taxes (100 [175) Net Operating Profit $ 300 $ 525 Wed. average cost of capital (WACC] 10% 10% Net capital employed: Property, Plant & Equip. (a) $1,500 $1,875 +5375 Working Capital 50 625 45125 $2,100 $2.500 (a) - assume that all PP&E was fully depreciated at end of 2017 and all 2018 additions occurred at end of year - therefore no depreciation expense in 2018. For 2018, the amount of Free Cash Flow (FCF) generated by the Rodman Corporation was: a. $400,000 $525,000 C. $25,000 d. $150,000 e. None of the above 24. The following information is from Cleveland, Inc.'s annual report for the years ended December 31: 2012 2011 2010 Sales $120,000 $110,000 $100,000 Cost of goods sold 58,000 52,000 46,000 Gross profit 62,000 58,000 54,000 51.7% 52.7% 54.0%% Operating expenses 48,000 44,000 42,000 Interest expense 12,000 9,000 6,000 Net income $ 2,000 $ 5,000 $ 6,000 Referring to the annual report above, which of the following provides a valid explanation for the change in the gross profit (margin) % over the three-year period 2010 thru 2012? a. Foreign competition has made it difficult to sell as many products as Cleveland sold in the past. b. Cleveland has raised its selling price per unit. Suppliers have raised the prices they charge for the goods that Cleveland purchases, but Cleveland has not passed these higher costs through to its customers by means of higher selling prices. d. Suppliers have lowered the prices they charge for the goods that Cleveland purchases, but Cleveland has not passed these cost savings through to its customers by means of lower selling prices.1:04 Done 16 of 16 20. A company established a branch to sell automobile seat covers. The company purchases these covers and stores them in a warehouse. The covers are then shipped from the warehouse to both the home office and the new branch. Home office management is responsible for setting the transfer price of the covers charged to the branch. Per-unit costs of the covers are: 60.00 purchase price 2.50 3.00 shipping cost to warehouse 3.50 handling cost, including $1 allocated administrative overhead shipping cost to branch, paid by home office According to the general transfer pricing formula given in the text, the minimum transfer price that home office should charge the branch is: a. $62.50 b. $63.50 C. $66.00 d. $68.00 None of the above Question 21 and 22 are based on the following information: Parkside Inc. has three divisions (Entertainment, Plastics, and Video Card], each of which is considered an investment center for performance evaluation purposes. The Entertainment Division manufactures video arcade equipment using products produced by the other two divisions, as follows: The Entertainment Division purchases plastic components from the Plastics Division that are considered unique (i.e. made exclusively for the Entertainment Division). In addition, the Plastics Division makes less- complex plastic components that it sells externally, to other producers. The Entertainment Division purchases, for each unit it produces, a video card from the Video Card Division, which also sells this video card externally (to other producers). Neither the Plastic Component nor the Video Card divisions are currently operating at full capacity. The per-unit manufacturing costs associated with each of the above two items, as incurred by the Plastic Components Division and the Video Card Division, respectively, are: UCM 11. Sales (Mar Plastic Components Video Cards Direct material $ 1.25 $ 240 Direct labor 2.35 3,00 Variable overhead 1.00 1.50 Josuepen Aius Fixed overhead 0.40 2.25 $ 5.00 5 9.15 asong x 5% XIW S. Total cost The Plastics Division sells its commercial products at full cost plus a 25%% markup and believes the proprietary plastic component made for the Entertainment Division would sell for $6.25/unit on the open market. The market price of the video card used by the Entertainment Division is $10.98/unit. 4. Act (prod 21. A per-unit transfer price from the Video Cards Division to the Entertainment Division at its full (absorption) cost of $9.15, would: Satisfy the Video Cards Division profit desire by allowing recovery of opportunity costs. b. Provide no profit incentive for the Video Cards Division to control or reduce costs. c. Encourage the Entertainment Division to purchase video cards from an outside source. -ket Size Of d. None of the above