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1.) Brennan Co. manufactures office furniture. During the most productive month of the year, 3,600 desks were manufactured at a total cost of $192,000. In its slowest month, the company made 1,200 desks at a cost of $72,000. Using the high-low method of cost estimation, total fixed costs in August are
d. cannot be determined from the data given.
2.) The systematic examination of the relationships among selling prices, volume of sales and production, costs, expenses, and profits is termed
a. contribution margin analysis.
b. cost-volume-profit analysis.
c. budgetary analysis.
d. gross profit analysis.
3.) If sales are $200,000, variable costs are 58% of sales, and operating income is $30,000, what is the contribution margin ratio?
4.) Salter Inc.’s unit selling price is $40, the unit variable costs are $25, fixed costs are $135,000, and current sales are 10,000 units. How much will operating income change if sales increase by 5,000 units?
a. $75,000 increase
b. $60,000 decrease
c. $100,000 increase
d. $135,000 decrease
5.) If fixed costs are $850,000 and variable costs are 75% of sales, what is the break-even point (in dollars)?
6.) If fixed costs are $250,000, the unit selling price is $105, and the unit variable costs are $65, what is the break-even sales (in units)?
a. 3,846 units
b. 2,381 units
c. 10,000 units
d. 6,250 units
7.) If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point (in dollars)?
8.) Flynn Co. has the following operating data for its manufacturing operations: Unit selling price $250 Unit variable cost $100 Total fixed costs $840,000 The company has decided to increase the wages of hourly workers, which will increase the unit variable cost by 10%. Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 4%. If sales prices are held constant, the next break-even point for Flynn Co. will be
a. increased by 640 units.
b. increased by 400 units.
c. decreased by 640 units.
d. increased by 800 units.
9.) The point where the profit line intersects the horizontal axis on the profit-volume chart represents
a. the maximum possible operating loss.
b. the maximum possible operating income.
c. the total fixed costs. d. the break-even point.
10.) With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit. Such an analysis is called
a. “what if” or sensitivity analysis.
b. vary the data analysis.
c. computer-aided analysis.
d. data gathering.
11.) Assume that Crowley Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $20 and $45, respectively. Crowley has fixed costs of $350,000. The break-even point in units is a. 14,000 units.
b. 25,278 units.
c. 8,000 units.
d. 10,769 units.
12.) The relative distribution of sales among the various products sold by a business is termed the
a. business's basket of goods.
b. contribution margin mix.
c. sales mix.
d. product portfolio.
13.) The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is termed
a. manufacturing margin.
b. contribution margin.
c. differential cost.
d. differential revenue.
14.) The amount of increase or decrease in cost that is expected from a particular course of action as compared to an alternative is termed
a. period cost.
b. product cost
d. discretionary cost.
15.) A cost that will NOT be affected by later decisions is termed a
a. historical cost.
b. differential cost.
c. sunk cost.
d. replacement cost.
16.) A business is considering a cash outlay of $500,000 for the purchase of land, which it could lease for $40,000 per year. If alternative investments are available that yield a 21% return, the opportunity cost of the purchase of the land is
17.) A business received an offer from an exporter for 10,000 units of product at $13.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available: Domestic unit sales price $21 Unit manufacturing costs: Variable 12 Fixed 5 What is the amount of the gain or loss from acceptance of the offer?
a. $35,000 loss
b. $40,000 gain
c. $15,000 gain
d. $50,000 gain
18.) A practical approach that is frequently used by managers when setting normal long-run prices is the
a. cost-plus approach.
b. economic theory approach.
c. price graph approach.
d. market price approach.
19.) Which of the following is NOT a cost concept commonly used in applying the cost-plus approach to product pricing?
a. Total cost concept
b. Product cost concept
c. Variable cost concept
d. Fixed cost concept
20.) In using the total cost concept of applying the cost-plus approach to product pricing, what is included in the markup?
a. Total selling and administrative expenses plus desired profit
b. Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit
c. Total costs plus desired profit
d. Desired profit
21.) What pricing method is used if all costs are considered and a fair markup is added to determine the selling price?
a. Total cost method
b. Demand-based method
c. Variable cost method
d. Markup method
22.) The unit selling price for the company’s product is
23.) Soap Company manufactures Soap X and Soap Y and can sell all it can make of either. Based on the following data, which statement is true? X Y Sales Price $20 $25 Variable Cost 14 15 Hours needed to process 3 5
a. X is more profitable than Y.
b. Y is more profitable than X.
c. Neither X nor Y have a positive contribution margin.
d. X and Y are equally profitable.
24.) Soap Company manufactures Soap X and Soap Y and can sell all it can make of either. Based on the following data, if Soap could reduce the processing time for X by 10%, which of the following statements is true? X Y Sales Price $20 $25 Variable Cost 14 15 Hours needed to process 3 5
a. There would be no difference in the contribution margin per hour as compared to it before the processing time reduction.
b. It would take 162 minutes to process one unit of X.
c. The contribution margin per hour for X would be $2.
d. Soap Y would still be the most profitable.
25.) What is a bottleneck?
a. A narrow area in the plant layout often causing the production process to slow due to the inability of production workers to move the product from station to station
b. A manufacturing strategy used to control the production process by minimizing or eliminating excess inventory
c. The point in the manufacturing process where demand for the product exceeds the ability to produce the product
d. All of these describe a bottleneck in the production process.