28 I ale whichp $12 of variable and S5 of fixed costs to produce one bathroom sells for $35. A foreign wholesaler offers to purchase 3,000 scales incur special shipping costs of SI per scale if the order were normally at $15 each. Gamer would accepted. Garner has sufficient unused capacity to produce the 3,000 scales. special order is accepted, what will be the effect on net income? A) $6,000 decrease B) $6,000 increase C) $9,000 decrease D) $45,000 increase 29. In 2012, Hagar Corp. sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $455,000. The same variable expenses per unit expenses are expected for 2013. If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2013? A) 3,360 B) 3,033 C) 3,500 D) 3,159 and fixed If there were 60,000 pounds of raw materials on hand on January 1, 120,000 pounds are desired for inventory at January 31, and 410,000 pounds are required for January production, how many pounds of raw materials should be purchased in January? A) 290,000 pounds B) 470,000 pounds C) 530,000 pounds D) 350.000 pounds Inc. estimates its sales at 200,000 units in the first quarter and that sales will ncrease by 20.000 units each quarter over the year. They have, and desire, a 25% ending finished goods. Each unit sells for S35, 40% of the sales are for cash, 70% inventory of of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Cash collections for the third quarter are budgeted at A) $9,576,000, B) $4,746,000. C) $6,888,000. D) $8,274,000. Version 3 Page 7 35. Brady Corp is Pro jected net annual cash flows over the project's life are: the purchase of a piece of equipment that costs $20,000. Cash Flow $ 3,000 8,000 15,000 9,000 The cash payback period is A) 2.31 years. B) 2.40 years. C) 2.29 years. D) 2.60 years 36. For Franklin, Inc., sales is $1.500,000, fixed expenses are $450,000, and the contribution margin ratio is 36%. What are the total variable expenses? A) $540,000 B) $960,000 C) $1,500,000 D) $288,000 37. Mini Inc. is contemplating a capital project costing $47.019. The project will provide annual cost savings of $18,000 for 3 years and have a salvage value of $3,000. The company's required rate ofretum is 10%. The company uses straight-line depreciation. Present Value PV of an Annuity of Lat 10% 909 ofLat 10% Year 909 1.736 2.487 826 751 This project is A) acceptable because it has a zero NPV B) unacceptable because it earns a rate less than 10%. C) acceptable because it has a positive NPV D) unacceptable because it has a negative NPV, 38. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month was A) $300 unfavorable. B) $150 favorable. C) $5,700 favorable. D) $300 favorable. Version 3 Page 9 39. The profitability index is computed by dividing the ) initial investment by the total cash flows B) total cash flows by the initial investment. C) initial D) present value of cash flows by the initial by the present value of cash flows 40. Assuming that the direct materials used costs using the following information. thuat the d Rfollowing infr1400,000, compute the total manufacturing Raw materials inventory, January 1 Raw materials inventory, December 31 Work in process, Work in process, December 31 Finished goods, January 1 Finished goods, December 31 Raw materials purchases Direct labor 20,000 40,000 18,000 January 1 12,000 40,000 32,000 1,400,000 560,000 150,000 0,000 400,000 420,000 Factory utilities Indirect labor Factory depreciation Operating expenses A) $2.360,000. B) $2.560,000. C) $2,980,000 D) $2,554,000. 41 , Dunbar Manufacturing's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $44,000. If sales are expected to increase 580,000, by how much will the company's net income increase? A) $36,000 B) $56,000 C) $12,000 D) $24,000 42. Molina Company has beginning and ending work in process inventories of $130,000 and $145,000 respectively. If total manufacturing costs are $650,000, what is the total cost of goods manufactured? A) $665,000. B) $780,000 C) $795,000. D) $635,000. Version 3 Page 10 43. A disadvantage of the cash payback technique is that it A) ignores the time value of money. B) ignores obsolescence factors. C) ignores the cost of an investment. D) is complicated to use. 44. Which of the following is an irrelevant cost? A) An opportunity cost B) An incremental cost C) A sunk cost D) An avoidable cost 45. A company uses 8,400 pounds of materials and exceeds the standard by 300 pounds. The quantity variance is $1,800 unfavorable. What is the standard price? A) $2 B) $4 C) Cannot be determined from the data provided. D) $6 46. The per-unit standards for direct labor are 2 direct labor hours at $15 per hour. If in producing 1,800 units, the actual direct labor cost was $48,000 for 3.000 direct labor hours worked, the total direct labor variance is A) $6,000 unfavorable. B) $1,800 unfavorable. C) $6,000 favorable. D) $3,750 unfavorable. 47. The degree of operating leverage A) cannot be used to compare companies. B) measures how much of each sales dollar is available to cover fixed expenses. C) does not provide a reliable measure of a company's earnings volatility D) is computed by dividing total contribution margin by net income. 48. LKN Company had net credit sales of $4,290,000 and cost of goods sold of $3,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The accounts receivable turnover ratio was A) 7.2 times. B) 6.1 times. C) 3.3 times. D) 6.6 times. Version 3 Page 11