14) When deciding between two alternatives, the preferred alternative always has A. no opportunity costs. B. greater revenues than the other alternatives. C. less expense than the other alternatives. D. greater incremental profit than the other alternatives. 
MGMT 640 Final Exam: Fall 2011 1) A typical use of managerial accounting is to: a) help investors and creditors assess the financial position of the company b) help management get a clean audit report c) help the marketing manager decide which product promotion to implement d) help the SEC decide whether management is in compliance of its policies 2) Management control: a) is the process of deciding which products to produce b) is the process of comparing actual results to budget c) is the process of deciding whether to close the Livonia plant d) is the process of determining how much tax should be paid this year 3) Aspen company produces widgets. August production costs are below: Widgets produced 80,000 Direct material (variable) $20,000 Direct labor (variable) $40,000 Supplies (variable) $20,000 Supervision (fixed) $30,000 Depreciation (fixed) $25,000 Other (fixed) Total $5,000 $140,000 In September, Aspen expects to produce 100,000 widgets. Assuming no structural changes, what is Aspen's production cost per widget for September? a) $1.60 b) $1.75 c) $1.40 d) $1.00 4) Use cost information in 3) above. In August, the actual direct material costs were $24,000 and Aspen produced and sold 90,000 widgets. The direct material performance variance (difference) is? a) $4,000 unfavorable b) $4,000 favorable c) $1,500 unfavorable d) $1,500 favorable 5) Managers should consider ethical aspects of their decisions because: a) of their company's code of conduct b) good ethics is good business c) otherwise they may be in legal trouble d) they are all trained to do so 6) All the following are NOT discretionary fixed costs except: A.) Insurance B.) R&D C.) Utilities D.) Commissions E.) Labor F.) C & D Only 7) Regression analysis is a statistical tool used to explain: A.) Where step cost change. B.) The \"best fit\" for a line through the data. C.) Where the relevant range is. D.) How much variance in the dependent variable is explained by the independent variables. E.) B & D only Pg. 136 F.) A & D only. 8) Breakeven point using the contribution margin approach is calculated by: a.) Adding fixed and variable costs and dividing by the sales price per unit. b.) Subtracting variable costs from sales price and dividing that number by the selling price per unit. c.) Subtracting variable costs from the selling price, adding fixed costs, and dividing by the number of units produced. d.) Subtracting variable costs per unit from selling price per unit and dividing that number into total fixed costs. e.) A & C only 9) Apple pays its managers $100,000, $200,000, and $300,000 for every 100,000, 200,000, and 300,000 units produced, respectively. Apple's management costs are: a. Fixed b. Variable c. Step d. Mixed 10) The Wall Street Journal has the following monthly data for the newspapers sold and the total cost. Use the high-low method to determine the total cost that the Wall Street Journal will incur if it is forecasting to sell 750,000 newspapers in July. Month Issues Sold Total Cost January 1,000,000 $20,000,000 February 950,000 $19,100,000 March 1,050,000 $21,060,000 April 1,200,000 $23,000,000 May 1,060,000 $21,075,000 June 800,000 $18,000,000 a. $17,625,000 b. $17,500,000 c. $17,375,000 d. $17,250,000 11) XYZ Manufacturing produces car parts. The company has a variable cost per unit of $100 and fixed costs of $100,000. The company sells each car part for about $125. Recently, the company is considering increasing its advertising by $50,000 in order to sell more car parts. How many additional parts must the company sell in order to justify the increased advertising costs? a. 2,000 units b. 4,000 units c. 6,000 units d. Cannot be determined from the information provided. 12) ABC and XYZ Companies have the following sales, variable cost, and fixed cost. If sales increase by $10,000 at each company, then: ABC XYZ Sales $50,000 $50,000 Variable Costs $10,000 $30,000 Fixed Costs $30,000 $10,000 a. ABC profits will increase by $2,000. b. XYZ profits will increase by $4,000. c. ABC and XYZ profits will increase by $4,000 and $6,000. d. XYZ profits will increase by $8,000. 13) Harley Davidson sells motorcycle X and Y. Motorcycle X sells for $10,000, has variable cost (labor and material) of $2,000, and requires 10 hours of use of machinery to produce. Motorcycle Y sells for $12,000, has variable costs (labor and material) of $8,000, and requires 2 hours of use of machinery to produce. Harley Davidson has excess capacity of 5,000 hours of use of machinery. Which motorcycle should it produce? a. Motorcycle X because it has a higher contribution margin of $8,000. b. Motorcycle Y because it has a higher contribution margin per hour of $2,000. c. Motorcycle X because it has a higher contribution margin per hour of $4,000. d. Motorcycle Y because it has a higher contribution margin of $4,000. 14) When deciding between two alternatives, the preferred alternative always has A. no opportunity costs. B. greater revenues than the other alternatives. C. less expense than the other alternatives. D. greater incremental profit than the other alternatives. 15) A company is trying to decide whether to sell partially completed goods in their current state or incur additional costs to finish the goods and sell them as complete units. Which of the following is not relevant to the decision? A. the selling price of the completed units B. the costs incurred to process the units to this point C. the selling price of the partially completed units D. the costs that will be incurred to finish the units 16) The overriding concern in forming a cost pool is to ensure that A. there are no variable costs in the cost pool. B. the total amount in the cost pool is less than the direct costs for the product. C. only costs which have been budgeted are included in the cost pool. D. the costs in the pool are homogeneous or similar. 17) A contract which specifies that the suppler will be paid for the cost of production as well as some fixed amount or percentage of cost is called a(n) A. approved overrun. B. cost-plus contract. C. allocation plan. D. indirect cost budget. 18) Cost-plus contracts are common in which of the following industries? A. manufactured home builders B. soft drink bottlers C. defense contractors D. newspaper publishers 19) Allocation of overhead based on volume such as direct labor hours: A. must be used for external financial reporting B. is always used in activity-based costing C. will over-allocate overhead to high-volume products and under-allocate to lowvolume products D. will over-allocate overhead to low-volume products and under-allocate to highvolume products 20) Aberdeen Corp. uses activity-based costing system with three activity cost pools. The following information is provided: Costs: Wages and salaries $ 220,000 Depreciation 120,000 Utilities 100,000 Total $440,000 Activity Cost Pools Assembly Setting Up Other Total Wages and salaries 60% 30% 10% 100% Depreciation 35% 45% 20% 100% Utilities 30% 40% 30% 100% How much total cost would be allocated to the Assembly activity cost pool? A. $204,000 B. $174,000 C. $440,000 D. $162,000 21) Microfiber Inc. has provided the following data from its activity-based costing system: Activity Cost Pools Total Cost Total Activity Designing products $387,539 6,512 product design hours Setting up batches $45,389 786 batch set-ups Assembling products $27,345 4,081 assembly hours The activity rate for the \"designing products\" activity cost pool is: A. $387,539 per design hour B. $40.45 per design hour C. $70.68 per design hour D. $59.51 per design hour 22) The opportunity cost of making a product when the manufacturing plant has excess capacity for which there is no alternative use is: A. the fixed manufacturing cost of the product B. the total manufacturing cost of the product C. the variable manufacturing cost of the product D. zero 23) Jupiter Corp. owns material that originally cost $50,000. It can be sold \"as is\" for $24,600, but if processed at a cost of $3,200, it could be sold for $26,000. The incremental effect on the company's overall profit of processing and selling the material rather than selling it \"as is\" would be: A. $22,800 B. -$1,800 C. -$3,200 D. -$7,600 24) How many joint products can come from a set of common inputs? A) no more than four B) only two or three C) It depends on the process involved. D) one 25) A company has $27 per unit in variable costs and $1,000,000 per year in fixed costs. Demand is estimated to be 100,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price? A) $51.80 B) $37 C) $27 D) $37.80 26) A retailer purchased some trendy clothes that have gone out of style and must be marked down to 20% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation? A) the original selling price B) the original purchase price C) the anticipated profit D) the current selling price 27) Incremental revenue is the additional revenue received as a result of selecting one decision alternative over another. A) True B) False 28) The Dynamaco Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the company wants to continue to earn a 50% return, what price should the company charge? A) $12.75 B) $14.55 C) $13.50 D) $10.95 29) Which of the following statements about prices and profit is true? A. Higher prices always lead to higher profits. B. Higher prices always lead to lower demand and lower profits. C. Higher prices combine with lower demand to change the level of profits. D. Higher prices will be offset by lower demand so profits will stay constant. 30) The TOTOM Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits? Units Sold Price 30,000 $10 40,000 $9 50,000 $8 60,000 $7 A. $10 B. $9 C. $7 D. $8 31) Santa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs. Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price? A. $39 B. $52.77 C. $50 D. $71.24 32) Sarker manufacturing company produces and sells 40,000 units of a single product. Variable costs total $80,000 and fixed costs total $120,000. If each unit is sold for $8, what markup percentage is the company using? A. 60.0% B. 160% C. 75% D. 133% 33) Customer profitability analysis might result in: A. dropping some customers that are unprofitable. B. lowering price or offering incentives to profitable customers. C. giving incentives to all customers to place orders online. D. All of the above. 34) If a company is currently operating at its breakeven point, which of the following statements is true? (Income tax considerations are ignored) A) If fixed costs increase, net income will decrease by the contribution margin ratio times the amount of the increase in fixed costs. B) If sales increase by 20%, net income will also increase by 20%, assuming that fixed costs are not equal to zero. C) If variable costs double, net income will decrease by 50%. D) Net income will decrease by the decrease in number of units sold times the contribution margin per unit. 35) Which of the following situations would most likely violate cost-volume-profit assumptions about fixed costs? A) When production volume increases beyond the capacity of the plant, a second shift will be added instead of building a new plant. B) As volume decreases, per unit fixed manufacturing overhead remains constant. C) The company's raw material supplier typically allows volume discounts when larger amounts of the raw material are purchased. D) Fixed costs per unit decrease as volume increases. MGMT 640 Final Exam: Fall 2011 1) A typical use of managerial accounting is to: a) help investors and creditors assess the financial position of the company b) help management get a clean audit report c) help the marketing manager decide which product promotion to implement d) help the SEC decide whether management is in compliance of its policies 2) Management control: a) is the process of deciding which products to produce b) is the process of comparing actual results to budget c) is the process of deciding whether to close the Livonia plant d) is the process of determining how much tax should be paid this year 3) Aspen company produces widgets. August production costs are below: Widgets produced 80,000 Direct material (variable) $20,000 Direct labor (variable) $40,000 Supplies (variable) $20,000 Supervision (fixed) $30,000 Depreciation (fixed) $25,000 Other (fixed) Total $5,000 $140,000 In September, Aspen expects to produce 100,000 widgets. Assuming no structural changes, what is Aspen's production cost per widget for September? a) $1.60 b) $1.75 c) $1.40 d) $1.00 4) Use cost information in 3) above. In August, the actual direct material costs were $24,000 and Aspen produced and sold 90,000 widgets. The direct material performance variance (difference) is? a) $4,000 unfavorable b) $4,000 favorable c) $1,500 unfavorable d) $1,500 favorable 5) Managers should consider ethical aspects of their decisions because: a) of their company's code of conduct b) good ethics is good business c) otherwise they may be in legal trouble d) they are all trained to do so 6) All the following are NOT discretionary fixed costs except: A.) Insurance B.) R&D C.) Utilities D.) Commissions E.) Labor F.) C & D Only 7) Regression analysis is a statistical tool used to explain: A.) Where step cost change. B.) The \"best fit\" for a line through the data. C.) Where the relevant range is. D.) How much variance in the dependent variable is explained by the independent variables. E.) B & D only Pg. 136 F.) A & D only. 8) Breakeven point using the contribution margin approach is calculated by: a.) Adding fixed and variable costs and dividing by the sales price per unit. b.) Subtracting variable costs from sales price and dividing that number by the selling price per unit. c.) Subtracting variable costs from the selling price, adding fixed costs, and dividing by the number of units produced. d.) Subtracting variable costs per unit from selling price per unit and dividing that number into total fixed costs. e.) A & C only 9) Apple pays its managers $100,000, $200,000, and $300,000 for every 100,000, 200,000, and 300,000 units produced, respectively. Apple's management costs are: a. Fixed b. Variable c. Step d. Mixed 10) The Wall Street Journal has the following monthly data for the newspapers sold and the total cost. Use the high-low method to determine the total cost that the Wall Street Journal will incur if it is forecasting to sell 750,000 newspapers in July. Month Issues Sold Total Cost January 1,000,000 $20,000,000 February 950,000 $19,100,000 March 1,050,000 $21,060,000 April 1,200,000 $23,000,000 May 1,060,000 $21,075,000 June 800,000 $18,000,000 a. $17,625,000 b. $17,500,000 c. $17,375,000 d. $17,250,000 11) XYZ Manufacturing produces car parts. The company has a variable cost per unit of $100 and fixed costs of $100,000. The company sells each car part for about $125. Recently, the company is considering increasing its advertising by $50,000 in order to sell more car parts. How many additional parts must the company sell in order to justify the increased advertising costs? a. 2,000 units b. 4,000 units c. 6,000 units d. Cannot be determined from the information provided. 12) ABC and XYZ Companies have the following sales, variable cost, and fixed cost. If sales increase by $10,000 at each company, then: ABC XYZ Sales $50,000 $50,000 Variable Costs $10,000 $30,000 Fixed Costs $30,000 $10,000 a. ABC profits will increase by $2,000. b. XYZ profits will increase by $4,000. c. ABC and XYZ profits will increase by $4,000 and $6,000. d. XYZ profits will increase by $8,000. 13) Harley Davidson sells motorcycle X and Y. Motorcycle X sells for $10,000, has variable cost (labor and material) of $2,000, and requires 10 hours of use of machinery to produce. Motorcycle Y sells for $12,000, has variable costs (labor and material) of $8,000, and requires 2 hours of use of machinery to produce. Harley Davidson has excess capacity of 5,000 hours of use of machinery. Which motorcycle should it produce? a. Motorcycle X because it has a higher contribution margin of $8,000. b. Motorcycle Y because it has a higher contribution margin per hour of $2,000. c. Motorcycle X because it has a higher contribution margin per hour of $4,000. d. Motorcycle Y because it has a higher contribution margin of $4,000. 14) When deciding between two alternatives, the preferred alternative always has A. no opportunity costs. B. greater revenues than the other alternatives. C. less expense than the other alternatives. D. greater incremental profit than the other alternatives. 15) A company is trying to decide whether to sell partially completed goods in their current state or incur additional costs to finish the goods and sell them as complete units. Which of the following is not relevant to the decision? A. the selling price of the completed units B. the costs incurred to process the units to this point C. the selling price of the partially completed units D. the costs that will be incurred to finish the units 16) The overriding concern in forming a cost pool is to ensure that A. there are no variable costs in the cost pool. B. the total amount in the cost pool is less than the direct costs for the product. C. only costs which have been budgeted are included in the cost pool. D. the costs in the pool are homogeneous or similar. 17) A contract which specifies that the suppler will be paid for the cost of production as well as some fixed amount or percentage of cost is called a(n) A. approved overrun. B. cost-plus contract. C. allocation plan. D. indirect cost budget. 18) Cost-plus contracts are common in which of the following industries? A. manufactured home builders B. soft drink bottlers C. defense contractors D. newspaper publishers 19) Allocation of overhead based on volume such as direct labor hours: A. must be used for external financial reporting B. is always used in activity-based costing C. will over-allocate overhead to high-volume products and under-allocate to lowvolume products D. will over-allocate overhead to low-volume products and under-allocate to highvolume products 20) Aberdeen Corp. uses activity-based costing system with three activity cost pools. The following information is provided: Costs: Wages and salaries $ 220,000 Depreciation 120,000 Utilities 100,000 Total $440,000 Activity Cost Pools Assembly Setting Up Other Total Wages and salaries 60% 30% 10% 100% Depreciation 35% 45% 20% 100% Utilities 30% 40% 30% 100% How much total cost would be allocated to the Assembly activity cost pool? A. $204,000 B. $174,000 C. $440,000 D. $162,000 21) Microfiber Inc. has provided the following data from its activity-based costing system: Activity Cost Pools Total Cost Total Activity Designing products $387,539 6,512 product design hours Setting up batches $45,389 786 batch set-ups Assembling products $27,345 4,081 assembly hours The activity rate for the \"designing products\" activity cost pool is: A. $387,539 per design hour B. $40.45 per design hour C. $70.68 per design hour D. $59.51 per design hour 22) The opportunity cost of making a product when the manufacturing plant has excess capacity for which there is no alternative use is: A. the fixed manufacturing cost of the product B. the total manufacturing cost of the product C. the variable manufacturing cost of the product D. zero 23) Jupiter Corp. owns material that originally cost $50,000. It can be sold \"as is\" for $24,600, but if processed at a cost of $3,200, it could be sold for $26,000. The incremental effect on the company's overall profit of processing and selling the material rather than selling it \"as is\" would be: A. $22,800 B. -$1,800 C. -$3,200 D. -$7,600 24) How many joint products can come from a set of common inputs? A) no more than four B) only two or three C) It depends on the process involved. D) one 25) A company has $27 per unit in variable costs and $1,000,000 per year in fixed costs. Demand is estimated to be 100,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price? A) $51.80 B) $37 C) $27 D) $37.80 26) A retailer purchased some trendy clothes that have gone out of style and must be marked down to 20% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation? A) the original selling price B) the original purchase price C) the anticipated profit D) the current selling price 27) Incremental revenue is the additional revenue received as a result of selecting one decision alternative over another. A) True B) False 28) The Dynamaco Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the company wants to continue to earn a 50% return, what price should the company charge? A) $12.75 B) $14.55 C) $13.50 D) $10.95 29) Which of the following statements about prices and profit is true? A. Higher prices always lead to higher profits. B. Higher prices always lead to lower demand and lower profits. C. Higher prices combine with lower demand to change the level of profits. D. Higher prices will be offset by lower demand so profits will stay constant. 30) The TOTOM Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits? Units Sold Price 30,000 $10 40,000 $9 50,000 $8 60,000 $7 A. $10 B. $9 C. $7 D. $8 31) Santa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs. Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price? A. $39 B. $52.77 C. $50 D. $71.24 32) Sarker manufacturing company produces and sells 40,000 units of a single product. Variable costs total $80,000 and fixed costs total $120,000. If each unit is sold for $8, what markup percentage is the company using? A. 60.0% B. 160% C. 75% D. 133% 33) Customer profitability analysis might result in: A. dropping some customers that are unprofitable. B. lowering price or offering incentives to profitable customers. C. giving incentives to all customers to place orders online. D. All of the above. 34) If a company is currently operating at its breakeven point, which of the following statements is true? (Income tax considerations are ignored) A) If fixed costs increase, net income will decrease by the contribution margin ratio times the amount of the increase in fixed costs. B) If sales increase by 20%, net income will also increase by 20%, assuming that fixed costs are not equal to zero. C) If variable costs double, net income will decrease by 50%. D) Net income will decrease by the decrease in number of units sold times the contribution margin per unit. 35) Which of the following situations would most likely violate cost-volume-profit assumptions about fixed costs? A) When production volume increases beyond the capacity of the plant, a second shift will be added instead of building a new plant. B) As volume decreases, per unit fixed manufacturing overhead remains constant. C) The company's raw material supplier typically allows volume discounts when larger amounts of the raw material are purchased. D) Fixed costs per unit decrease as volume increases. MGMT 640 Final Exam: Fall 2011 1) A typical use of managerial accounting is to: a) help investors and creditors assess the financial position of the company b) help management get a clean audit report c) help the marketing manager decide which product promotion to implement d) help the SEC decide whether management is in compliance of its policies 2) Management control: a) is the process of deciding which products to produce b) is the process of comparing actual results to budget c) is the process of deciding whether to close the Livonia plant d) is the process of determining how much tax should be paid this year 3) Aspen company produces widgets. August production costs are below: Widgets produced 80,000 Direct material (variable) $20,000 Direct labor (variable) $40,000 Supplies (variable) $20,000 Supervision (fixed) $30,000 Depreciation (fixed) $25,000 Other (fixed) Total $5,000 $140,000 In September, Aspen expects to produce 100,000 widgets. Assuming no structural changes, what is Aspen's production cost per widget for September? a) $1.60 b) $1.75 c) $1.40 d) $1.00 4) Use cost information in 3) above. In August, the actual direct material costs were $24,000 and Aspen produced and sold 90,000 widgets. The direct material performance variance (difference) is? a) $4,000 unfavorable b) $4,000 favorable c) $1,500 unfavorable d) $1,500 favorable 5) Managers should consider ethical aspects of their decisions because: a) of their company's code of conduct b) good ethics is good business c) otherwise they may be in legal trouble d) they are all trained to do so 6) All the following are NOT discretionary fixed costs except: A.) Insurance B.) R&D C.) Utilities D.) Commissions E.) Labor F.) C & D Only 7) Regression analysis is a statistical tool used to explain: A.) Where step cost change. B.) The \"best fit\" for a line through the data. C.) Where the relevant range is. D.) How much variance in the dependent variable is explained by the independent variables. E.) B & D only Pg. 136 F.) A & D only. 8) Breakeven point using the contribution margin approach is calculated by: a.) Adding fixed and variable costs and dividing by the sales price per unit. b.) Subtracting variable costs from sales price and dividing that number by the selling price per unit. c.) Subtracting variable costs from the selling price, adding fixed costs, and dividing by the number of units produced. d.) Subtracting variable costs per unit from selling price per unit and dividing that number into total fixed costs. e.) A & C only 9) Apple pays its managers $100,000, $200,000, and $300,000 for every 100,000, 200,000, and 300,000 units produced, respectively. Apple's management costs are: a. Fixed b. Variable c. Step d. Mixed 10) The Wall Street Journal has the following monthly data for the newspapers sold and the total cost. Use the high-low method to determine the total cost that the Wall Street Journal will incur if it is forecasting to sell 750,000 newspapers in July. Month Issues Sold Total Cost January 1,000,000 $20,000,000 February 950,000 $19,100,000 March 1,050,000 $21,060,000 April 1,200,000 $23,000,000 May 1,060,000 $21,075,000 June 800,000 $18,000,000 a. $17,625,000 b. $17,500,000 c. $17,375,000 d. $17,250,000 11) XYZ Manufacturing produces car parts. The company has a variable cost per unit of $100 and fixed costs of $100,000. The company sells each car part for about $125. Recently, the company is considering increasing its advertising by $50,000 in order to sell more car parts. How many additional parts must the company sell in order to justify the increased advertising costs? a. 2,000 units b. 4,000 units c. 6,000 units d. Cannot be determined from the information provided. 12) ABC and XYZ Companies have the following sales, variable cost, and fixed cost. If sales increase by $10,000 at each company, then: ABC XYZ Sales $50,000 $50,000 Variable Costs $10,000 $30,000 Fixed Costs $30,000 $10,000 a. ABC profits will increase by $2,000. b. XYZ profits will increase by $4,000. c. ABC and XYZ profits will increase by $4,000 and $6,000. d. XYZ profits will increase by $8,000. 13) Harley Davidson sells motorcycle X and Y. Motorcycle X sells for $10,000, has variable cost (labor and material) of $2,000, and requires 10 hours of use of machinery to produce. Motorcycle Y sells for $12,000, has variable costs (labor and material) of $8,000, and requires 2 hours of use of machinery to produce. Harley Davidson has excess capacity of 5,000 hours of use of machinery. Which motorcycle should it produce? a. Motorcycle X because it has a higher contribution margin of $8,000. b. Motorcycle Y because it has a higher contribution margin per hour of $2,000. c. Motorcycle X because it has a higher contribution margin per hour of $4,000. d. Motorcycle Y because it has a higher contribution margin of $4,000. 14) When deciding between two alternatives, the preferred alternative always has A. no opportunity costs. B. greater revenues than the other alternatives. C. less expense than the other alternatives. D. greater incremental profit than the other alternatives. 15) A company is trying to decide whether to sell partially completed goods in their current state or incur additional costs to finish the goods and sell them as complete units. Which of the following is not relevant to the decision? A. the selling price of the completed units B. the costs incurred to process the units to this point C. the selling price of the partially completed units D. the costs that will be incurred to finish the units 16) The overriding concern in forming a cost pool is to ensure that A. there are no variable costs in the cost pool. B. the total amount in the cost pool is less than the direct costs for the product. C. only costs which have been budgeted are included in the cost pool. D. the costs in the pool are homogeneous or similar. 17) A contract which specifies that the suppler will be paid for the cost of production as well as some fixed amount or percentage of cost is called a(n) A. approved overrun. B. cost-plus contract. C. allocation plan. D. indirect cost budget. 18) Cost-plus contracts are common in which of the following industries? A. manufactured home builders B. soft drink bottlers C. defense contractors D. newspaper publishers 19) Allocation of overhead based on volume such as direct labor hours: A. must be used for external financial reporting B. is always used in activity-based costing C. will over-allocate overhead to high-volume products and under-allocate to lowvolume products D. will over-allocate overhead to low-volume products and under-allocate to highvolume products 20) Aberdeen Corp. uses activity-based costing system with three activity cost pools. The following information is provided: Costs: Wages and salaries $ 220,000 Depreciation 120,000 Utilities 100,000 Total $440,000 Activity Cost Pools Assembly Setting Up Other Total Wages and salaries 60% 30% 10% 100% Depreciation 35% 45% 20% 100% Utilities 30% 40% 30% 100% How much total cost would be allocated to the Assembly activity cost pool? A. $204,000 B. $174,000 C. $440,000 D. $162,000 21) Microfiber Inc. has provided the following data from its activity-based costing system: Activity Cost Pools Total Cost Total Activity Designing products $387,539 6,512 product design hours Setting up batches $45,389 786 batch set-ups Assembling products $27,345 4,081 assembly hours The activity rate for the \"designing products\" activity cost pool is: A. $387,539 per design hour B. $40.45 per design hour C. $70.68 per design hour D. $59.51 per design hour 22) The opportunity cost of making a product when the manufacturing plant has excess capacity for which there is no alternative use is: A. the fixed manufacturing cost of the product B. the total manufacturing cost of the product C. the variable manufacturing cost of the product D. zero 23) Jupiter Corp. owns material that originally cost $50,000. It can be sold \"as is\" for $24,600, but if processed at a cost of $3,200, it could be sold for $26,000. The incremental effect on the company's overall profit of processing and selling the material rather than selling it \"as is\" would be: A. $22,800 B. -$1,800 C. -$3,200 D. -$7,600 24) How many joint products can come from a set of common inputs? A) no more than four B) only two or three C) It depends on the process involved. D) one 25) A company has $27 per unit in variable costs and $1,000,000 per year in fixed costs. Demand is estimated to be 100,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price? A) $51.80 B) $37 C) $27 D) $37.80 26) A retailer purchased some trendy clothes that have gone out of style and must be marked down to 20% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation? A) the original selling price B) the original purchase price C) the anticipated profit D) the current selling price 27) Incremental revenue is the additional revenue received as a result of selecting one decision alternative over another. A) True B) False 28) The Dynamaco Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the company wants to continue to earn a 50% return, what price should the company charge? A) $12.75 B) $14.55 C) $13.50 D) $10.95 29) Which of the following statements about prices and profit is true? A. Higher prices always lead to higher profits. B. Higher prices always lead to lower demand and lower profits. C. Higher prices combine with lower demand to change the level of profits. D. Higher prices will be offset by lower demand so profits will stay constant. 30) The TOTOM Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits? Units Sold Price 30,000 $10 40,000 $9 50,000 $8 60,000 $7 A. $10 B. $9 C. $7 D. $8 31) Santa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs. Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price? A. $39 B. $52.77 C. $50 D. $71.24 32) Sarker manufacturing company produces and sells 40,000 units of a single product. Variable costs total $80,000 and fixed costs total $120,000. If each unit is sold for $8, what markup percentage is the company using? A. 60.0% B. 160% C. 75% D. 133% 33) Customer profitability analysis might result in: A. dropping some customers that are unprofitable. B. lowering price or offering incentives to profitable customers. C. giving incentives to all customers to place orders online. D. All of the above. 34) If a company is currently operating at its breakeven point, which of the following statements is true? (Income tax considerations are ignored) A) If fixed costs increase, net income will decrease by the contribution margin ratio times the amount of the increase in fixed costs. B) If sales increase by 20%, net income will also increase by 20%, assuming that fixed costs are not equal to zero. C) If variable costs double, net income will decrease by 50%. D) Net income will decrease by the decrease in number of units sold times the contribution margin per unit. 35) Which of the following situations would most likely violate cost-volume-profit assumptions about fixed costs? A) When production volume increases beyond the capacity of the plant, a second shift will be added instead of building a new plant. B) As volume decreases, per unit fixed manufacturing overhead remains constant. C) The company's raw material supplier typically allows volume discounts when larger amounts of the raw material are purchased. D) Fixed costs per unit decrease as volume increases. MGMT 640 Final Exam: Fall 2011 1) A typical use of managerial accounting is to: a) help investors and creditors assess the financial position of the company b) help management get a clean audit report c) help the marketing manager decide which product promotion to implement d) help the SEC decide whether management is in compliance of its policies 2) Management control: a) is the process of deciding which products to produce b) is the process of comparing actual results to budget c) is the process of deciding whether to close the Livonia plant d) is the process of determining how much tax should be paid this year 3) Aspen company produces widgets. August production costs are below: Widgets produced 80,000 Direct material (variable) $20,000 Direct labor (variable) $40,000 Supplies (variable) $20,000 Supervision (fixed) $30,000 Depreciation (fixed) $25,000 Other (fixed) Total $5,000 $140,000 In September, Aspen expects to produce 100,000 widgets. Assuming no structural changes, what is Aspen's production cost per widget for September? a) $1.60 b) $1.75 c) $1.40 d) $1.00 4) Use cost information in 3) above. In August, the actual direct material costs were $24,000 and Aspen produced and sold 90,000 widgets. The direct material performance variance (difference) is? a) $4,000 unfavorable b) $4,000 favorable c) $1,500 unfavorable d) $1,500 favorable 5) Managers should consider ethical aspects of their decisions because: a) of their company's code of conduct b) good ethics is good business c) otherwise they may be in legal trouble d) they are all trained to do so 6) All the following are NOT discretionary fixed costs except: A.) Insurance B.) R&D C.) Utilities D.) Commissions E.) Labor F.) C & D Only 7) Regression analysis is a statistical tool used to explain: A.) Where step cost change. B.) The \"best fit\" for a line through the data. C.) Where the relevant range is. D.) How much variance in the dependent variable is explained by the independent variables. E.) B & D only Pg. 136 F.) A & D only. 8) Breakeven point using the contribution margin approach is calculated by: a.) Adding fixed and variable costs and dividing by the sales price per unit. b.) Subtracting variable costs from sales price and dividing that number by the selling price per unit. c.) Subtracting variable costs from the selling price, adding fixed costs, and dividing by the number of units produced. d.) Subtracting variable costs per unit from selling price per unit and dividing that number into total fixed costs. e.) A & C only 9) Apple pays its managers $100,000, $200,000, and $300,000 for every 100,000, 200,000, and 300,000 units produced, respectively. Apple's management costs are: a. Fixed b. Variable c. Step d. Mixed 10) The Wall Street Journal has the following monthly data for the newspapers sold and the total cost. Use the high-low method to determine the total cost that the Wall Street Journal will incur if it is forecasting to sell 750,000 newspapers in July. Month Issues Sold Total Cost January 1,000,000 $20,000,000 February 950,000 $19,100,000 March 1,050,000 $21,060,000 April 1,200,000 $23,000,000 May 1,060,000 $21,075,000 June 800,000 $18,000,000 a. $17,625,000 b. $17,500,000 c. $17,375,000 d. $17,250,000 11) XYZ Manufacturing produces car parts. The company has a variable cost per unit of $100 and fixed costs of $100,000. The company sells each car part for about $125. Recently, the company is considering increasing its advertising by $50,000 in order to sell more car parts. How many additional parts must the company sell in order to justify the increased advertising costs? a. 2,000 units b. 4,000 units c. 6,000 units d. Cannot be determined from the information provided. 12) ABC and XYZ Companies have the following sales, variable cost, and fixed cost. If sales increase by $10,000 at each company, then: ABC XYZ Sales $50,000 $50,000 Variable Costs $10,000 $30,000 Fixed Costs $30,000 $10,000 a. ABC profits will increase by $2,000. b. XYZ profits will increase by $4,000. c. ABC and XYZ profits will increase by $4,000 and $6,000. d. XYZ profits will increase by $8,000. 13) Harley Davidson sells motorcycle X and Y. Motorcycle X sells for $10,000, has variable cost (labor and material) of $2,000, and requires 10 hours of use of machinery to produce. Motorcycle Y sells for $12,000, has variable costs (labor and material) of $8,000, and requires 2 hours of use of machinery to produce. Harley Davidson has excess capacity of 5,000 hours of use of machinery. Which motorcycle should it produce? a. Motorcycle X because it has a higher contribution margin of $8,000. b. Motorcycle Y because it has a higher contribution margin per hour of $2,000. c. Motorcycle X because it has a higher contribution margin per hour of $4,000. d. Motorcycle Y because it has a higher contribution margin of $4,000. 14) When deciding between two alternatives, the preferred alternative always has A. no opportunity costs. B. greater revenues than the other alternatives. C. less expense than the other alternatives. D. greater incremental profit than the other alternatives. 15) A company is trying to decide whether to sell partially completed goods in their current state or incur additional costs to finish the goods and sell them as complete units. Which of the following is not relevant to the decision? A. the selling price of the completed units B. the costs incurred to process the units to this point C. the selling price of the partially completed units D. the costs that will be incurred to finish the units 16) The overriding concern in forming a cost pool is to ensure that A. there are no variable costs in the cost pool. B. the total amount in the cost pool is less than the direct costs for the product. C. only costs which have been budgeted are included in the cost pool. D. the costs in the pool are homogeneous or similar. 17) A contract which specifies that the suppler will be paid for the cost of production as well as some fixed amount or percentage of cost is called a(n) A. approved overrun. B. cost-plus contract. C. allocation plan. D. indirect cost budget. 18) Cost-plus contracts are common in which of the following industries? A. manufactured home builders B. soft drink bottlers C. defense contractors D. newspaper publishers 19) Allocation of overhead based on volume such as direct labor hours: A. must be used for external financial reporting B. is always used in activity-based costing C. will over-allocate overhead to high-volume products and under-allocate to lowvolume products D. will over-allocate overhead to low-volume products and under-allocate to highvolume products 20) Aberdeen Corp. uses activity-based costing system with three activity cost pools. The following information is provided: Costs: Wages and salaries $ 220,000 Depreciation 120,000 Utilities 100,000 Total $440,000 Activity Cost Pools Assembly Setting Up Other Total Wages and salaries 60% 30% 10% 100% Depreciation 35% 45% 20% 100% Utilities 30% 40% 30% 100% How much total cost would be allocated to the Assembly activity cost pool? A. $204,000 B. $174,000 C. $440,000 D. $162,000 21) Microfiber Inc. has provided the following data from its activity-based costing system: Activity Cost Pools Total Cost Total Activity Designing products $387,539 6,512 product design hours Setting up batches $45,389 786 batch set-ups Assembling products $27,345 4,081 assembly hours The activity rate for the \"designing products\" activity cost pool is: A. $387,539 per design hour B. $40.45 per design hour C. $70.68 per design hour D. $59.51 per design hour 22) The opportunity cost of making a product when the manufacturing plant has excess capacity for which there is no alternative use is: A. the fixed manufacturing cost of the product B. the total manufacturing cost of the product C. the variable manufacturing cost of the product D. zero 23) Jupiter Corp. owns material that originally cost $50,000. It can be sold \"as is\" for $24,600, but if processed at a cost of $3,200, it could be sold for $26,000. The incremental effect on the company's overall profit of processing and selling the material rather than selling it \"as is\" would be: A. $22,800 B. -$1,800 C. -$3,200 D. -$7,600 24) How many joint products can come from a set of common inputs? A) no more than four B) only two or three C) It depends on the process involved. D) one 25) A company has $27 per unit in variable costs and $1,000,000 per year in fixed costs. Demand is estimated to be 100,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price? A) $51.80 B) $37 C) $27 D) $37.80 26) A retailer purchased some trendy clothes that have gone out of style and must be marked down to 20% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation? A) the original selling price B) the original purchase price C) the anticipated profit D) the current selling price 27) Incremental revenue is the additional revenue received as a result of selecting one decision alternative over another. A) True B) False 28) The Dynamaco Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the company wants to continue to earn a 50% return, what price should the company charge? A) $12.75 B) $14.55 C) $13.50 D) $10.95 29) Which of the following statements about prices and profit is true? A. Higher prices always lead to higher profits. B. Higher prices always lead to lower demand and lower profits. C. Higher prices combine with lower demand to change the level of profits. D. Higher prices will be offset by lower demand so profits will stay constant. 30) The TOTOM Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits? Units Sold Price 30,000 $10 40,000 $9 50,000 $8 60,000 $7 A. $10 B. $9 C. $7 D. $8 31) Santa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs. Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price? A. $39 B. $52.77 C. $50 D. $71.24 32) Sarker manufacturing company produces and sells 40,000 units of a single product. Variable costs total $80,000 and fixed costs total $120,000. If each unit is sold for $8, what markup percentage is the company using? A. 60.0% B. 160% C. 75% D. 133% 33) Customer profitability analysis might result in: A. dropping some customers that are unprofitable. B. lowering price or offering incentives to profitable customers. C. giving incentives to all customers to place orders online. D. All of the above. 34) If a company is currently operating at its breakeven point, which of the following statements is true? (Income tax considerations are ignored) A) If fixed costs increase, net income will decrease by the contribution margin ratio times the amount of the increase in fixed costs. B) If sales increase by 20%, net income will also increase by 20%, assuming that fixed costs are not equal to zero. C) If variable costs double, net income will decrease by 50%. D) Net income will decrease by the decrease in number of units sold times the contribution margin per unit. 35) Which of the following situations would most likely violate cost-volume-profit assumptions about fixed costs? A) When production volume increases beyond the capacity of the plant, a second shift will be added instead of building a new plant. B) As volume decreases, per unit fixed manufacturing overhead remains constant. C) The company's raw material supplier typically allows volume discounts when larger amounts of the raw material are purchased. D) Fixed costs per unit decrease as volume increases
