Please choose the best letter for questions 1-9

1. Which of the following statements is not true when a company has a production bottleneck?

a.The product with the lowest unit contribution margin per production bottleneck hour is the most profitable product per bottleneck hour.

b.The product with the highest unit contribution margin per production bottleneck hour should be emphasized in the market.

c.The company should attempt to maximize its profits, subject to the production bottleneck.

d.The theory of constraints is used as a manufacturing strategy.

2. Differential analysis is also referred to as

a.cost-volume-profit analysis.

b.incremental analysis.

c.capital investment analysis.

d.break-even analysis.

3. A differential analysis is useful for all of the following decisions except

a.making or buying a component part.

b.accepting additional business at a special price.

c.discontinuing a segment or product.

d.None of these choices are correct.

4. Managers can use which of the following cost-plus methods to determine selling prices?

a.Product cost method

b.Variable cost method

c.Total cost method

d.All of these choices are correct.

5. Muy Bueno Bakery sells its special chocolate cake for $35. The total cost to produce the cake is $26. Of this amount, $4 per unit is selling costs. The total variable cost is $17. The desired profit is $9 per unit. What is the markup percentage on product cost?

a.59%

b.25%

c.40%

d.65%

6. Muy Bueno Bakery sells three different products. Currently, it is not able to meet all of its customer demand. Using the following information, what price of the cake is needed to meet the same contribution margin as the pie?

	Cake	Pie	Cookies
Unit contribution margin	$18	$11	$3
Production bottleneck hours	3	1	0.30
Variable cost	$12	$7	$1
Unit contribution margin per bottleneck hour	$6	$11	$10
Current selling price	$30	$18	$5

a.$30

b.$36

c.$42

d.$45

7. Rumba Dance Hall has offered to buy from Muy Bueno Bakery 100 of its chocolate cakes for $25 each. No variable selling costs would need to be paid, but special packaging of $100 will have to be added. Normally, Muy Bueno sells its cakes at $35 each. Its costs per cake are: materials, $12; direct labor, $5; variable factory overhead, $3; fixed factory overhead, $2; and variable selling costs, $4. How much net differential profit or loss will Muy Bueno make if it accepts this offer?

a.$200

b.$400

c.$2,500

d.$2,400

8. __________ is the method of setting prices that combines market-based pricing with a cost-reduction emphasis.

a.Target costing

b.Variable costing

c.Activity-based costing

d.Absorption costing

9. When a company has a production bottleneck, it should use __________ to determine how to maximize its profits.

a.unit contribution margin

b.residual income

c.target costing

d.return on investment