5D

Question 1

Seacraft, Inc., received a request for a competitive bid for the sale of one of its unique boating products with a desired modification. Seacraft is now in the process of manufacturing this product but with a slightly different modification for another customer. These unique products are labor intensive and both will have long production runs. Which one of the following methods should Seacraft use to estimate the cost of the new competitive bid?

Expected value analysis
Learning curve analysis
Regression analysis
Exponential distribution analysis

Answer 1

Learning Curve Analysis

Since the manufacturing processes for these unique products are new, are labor intensive and have long production runs, labor becomes more skilled, and hence more efficient, over time as the new processes are learned.

This increased efficiency reduces the cost.

Thus, the method that should be used to estimate the cost of the second process is learning curve analysis

Question 2

Asta, Inc., is a medical laboratory that performs tests for physicians. Asta anticipates performing between 5,000 and 12,000 tests during the month of April. Compared to industry averages, at the low range of activity Asta has a lower sales price per test, higher fixed costs, and the same breakeven point in number of tests performed. At the high range of activity, Asta’s sales price per test and fixed costs are the same as industry averages, and Asta’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000.

Sales price per test $60
Variable costs per test 20
How is the cost of distilled water used in tests categorized?

Direct material cost
Fixed cost
Overhead cost for testing
General and administrative cost

Answer 2

Distilled water used in tests is a cost of material used directly in production, so it is a direct material cost.

“Fixed cost” is incorrect because more distilled water is used for more tests; it is a variable cost, not a fixed cost.

Question 3

____) also called ___ analysis is a technique to evaluate the relationship between costs, volume of activity, and profit

The key factors in cost-volume-profit analysis are revenues, Direct Material costs, and indirect costs T/

Answer 3

Breakeven (also called cost-volume-profit (CVP

False -Revenue, Fixed Cost & Variable Costs

Question 4

Ratio for Breakeven?

Questions on the CPA Examination often ask for breakeven stated in sales dollars. This can be obtained by computing breakeven in units and multiplying it by the sales price, or it can be computed directly as follows:

                                               FC  Breakeven sales dollars: ----------
                                       P - VC
                                           P

Answer 4

Fixed cost
__________-
Price - Variable cost/unit

Question 5

Management at MDK Corp. is deciding whether to replace a delivery van. A new delivery van costing $40,000 can be purchased to replace the existing delivery van, which cost the company $30,000 and has accumulated depreciation of $20,000. An employee of MDK has offered $12,000 for the old delivery van. Ignoring income taxes, which of the following correctly states relevant costs when making the decision whether to replace the delivery vehicle?

Purchase price of new van, disposal price of old van, gain on sale of old van

Purchase price of new van, purchase price of old van, gain on sale of old van

Purchase price of new van, disposal price of old van

Purchase price of new van, purchase price of old van, accumulated depreciation of old van, gain on sale of old van, disposal price of old van

Answer 5

Purchase price of new van, disposal price of old van

Relevant costs include all expected future costs that will differ among alternatives for a particular decision.

Other costs will not change and are not relevant to the decision.

Purchase price of the new van is relevant because that cost will not be incurred if the van is not replaced.

Disposal price of the old van is relevant because that cash will not be received unless the van is replaced.

Question 6

Critical in management decision making is the understanding that ____are irrelevant.

___costs for decision making are expected future costs that will differ among alternatives available to the firm.

___costs are useful only as they help predict the future.

Answer 6

sunk (past) costs

Relevant

Historical

Question 7

Asta, Inc., is a medical laboratory that performs tests for physicians. Asta anticipates performing between 5,000 and 12,000 tests during the month of April. Compared to industry averages, at the low range of activity Asta has a lower sales price per test, higher fixed costs, and the same breakeven point in number of tests performed. At the high range of activity, Asta’s sales price per test and fixed costs are the same as industry averages, and Asta’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000.

Sales price per test $60
Variable costs per test 20
Depreciation on the laboratory equipment is calculated on the basis of service hours. How is the depre­ciation on laboratory equipment categorized?

Direct material cost
Direct labor cost
Variable cost
General and administrative cost

Answer 7

Variable

Depreciation based on service hours is a cost that increases directly as production increases, so it is a variable manufacturing cost.

“Direct material cost” and “direct labor cost” are incorrect because this cost is not a material cost nor is it a labor cost.

Question 8

Information related to the revenue and costs of a product is as follows:

Total fixed cost per month $3,600
Desired net income per month 480
Selling price per unit 20
Variable cost per unit 15

What number of units above the breakeven level must be sold to earn the desired level of net income per month?

Answer 8

96

BE: 3600/ (20-15) = 720

Desired level of Net income = (3600+480) / (20-15) = 816.

816 - 720 = 96.

This question asks “Units ABOVE break even level”

Question 9

In the past, four direct labor hours were required to produce each unit of product Y. Material costs were $200 per unit, the direct labor rate was $20 per hour, and factory overhead was three times direct labor cost. In budgeting for next year, management is planning to outsource some manufacturing activities and to further automate others. Management estimates these plans will reduce labor hours by 25%, increase the factory overhead rate to 3.6 times direct labor costs, and increase material costs by $30 per unit. Management plans to manufacture 10,000 units. What amount should management budget for cost of goods manufactured?

Answer 9

$5,060,000

This is easy

The direct materials cost is (Old cost + Expected increase in cost) × Number of units.

($200 (Old cost) + $30 (Increase expected)) × 10,000 = $2,300,000
The direct labor cost is (Old cost - Expected decrease in cost) × Number of units.

Old cost = Labor hours required × Hourly rate = 4 × $20 = $80 (per unit)

Expected decrease in cost = $80 × 25% = $20

($80 (Old cost) - $20 (Decrease expected)) × 10,000 = $600,000

The factory overhead is expected to be 3.6 × Direct labor cost per unit × Number of units.

New direct labor cost per unit is $80 (Old cost) - $20 (Expected decrease) = $60 per unit

3.6 × $60 (Labor cost) = $216 per unit for overhead × 10,000 units = $2,160,000

Direct materials + Direct labor + Factory overhead = Total cost

$2,300,000 + $600,000 + $2,160,000 = $5,060,000

Question 10

When preparing a sales forecast, which of the following factors is not taken into consideration?

Competition
Economic conditions
Customer needs/wants
Industry trends

Answer 10

Competition

Competition is not a factor when preparing a sales forecast. While competitors cannot be ignored, the following are key to preparing a sales forecast: economic conditions, customer needs/wants, industry trends, expected marketing efforts, and the products to be sold.

Question 11

SALES FORECAST

Today, most forecasting is done using computer-based models T/F

This forecast is extremely important since nearly all other parts of the operating and financial budgets are based upon the sales forecast T/F

Answer 11

True

True

Question 12

SALES FORECAST

The sales forecast is the projection of both volume and dollar value of sales for a future period. It is based upon

\_\_\_ conditions, 
customer-anticipated product/service \_\_ and \_\_
recent industry \_\_, 
assumed expected _efforts, 
the \_\_(new and old) to be sold

Answer 12

Economic
Needs and Wants
Trends
Marketing
Products

Question 13

SALES FORECAST CONSIDERATIONS

1. Sales forecasts for each ___and each __ in each division provide a more ___total sales projection
2. Sales forecasts for various marketing regions—foreign, domestic, regional—provide superior total estimates.
3. ___rates must also be projected
4. ___ conditions need to be predicted
5. With the introduction of a new product, a firm can often have a competitive advantage with increased market share until the competition can develop similar products. T/F

Answer 13

division , product, more realistic

True

Exchange

Economic

True

Question 14

In order to increase the profit margin for a certain product, a company is planning to purchase a custom- made machine for $5,000,000. It is anticipated that the introduction of the new machine will reduce the product’s variable costs of labor and maintenance by $5.50 per unit and $.95 per unit, respectively. The product manager estimates that 500,000 units of the product will be manufactured and sold each year with a product life cycle of two years, at which time the machine will be discarded with no salvage value.

What is the company’s total cost savings over the product’s life cycle?

Answer 14

The product life cycle describes the period of time over which an item is developed, brought to market and eventually removed from the market.

The full cycle consists of four stages: introduction, growth, maturity and decline.

The company’s total cost savings over the product’s life cycle is $1,450,000, calculated as follows:

Variable cost savings
($5.50 + $.95) × 500,000 units × 2 years
$6,450,000
Initial cost (5,000,000)
Net savings $1,450,000

Question 15

____forecasting focuses on the judgment of experts when historical data is not available and when significant environmental changes cause the trends in the past to be irrelevant in predicting the future.

Answer 15

Qualitative

Question 16

TYPES OF QUALITATIVE FORECASTING

1. ____ method attempts to develop a forecast through a group consensus. Individual experts are asked to respond to an initial questionnaire (the respondants to the questionnaire generate the census)
2. ____is where the forecaster starts with a variety of assumptions and builds multiple forecasts using these various and sometimes conflicting a ssumptions.
3. ____prepared by current customers or test markets can be used to predict sale forecast
4. Forecasts by ___can be useful when introducing a new product. Most products go through the product life cycle stages of introduction, growth, maturity, and decline.

Answer 16

Delphi method

Scenario building

Surveys

analogy

Question 17

Asta, Inc., is a medical laboratory that performs tests for physicians. Asta anticipates performing between 5,000 and 12,000 tests during the month of April. Compared to industry averages, at the low range of activity Asta has a lower sales price per test, higher fixed costs, and the same breakeven point in number of tests performed. At the high range of activity, Asta’s sales price per test and fixed costs are the same as industry averages, and Asta’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000.

Sales price per test $60
Variable costs per test 20
What is the number of units Asta must sell to achieve a gross profit of $160,000?

Answer 17

9000

At low activity with fixed costs of $160,000, the unit sales necessary for a profit of $160,000 is fixed costs of $160,000 plus the profit of $160,000 (a total of $320,000) divided by unit contribution margin, or $320,000 ÷ $40 = 8,000 tests. This is outside the range within which fixed costs equal $160,000, so this answer is incorrect.

At high activity with fixed costs of $200,000, the unit sales necessary for a profit of $160,000 is fixed costs of $200,000 plus the profit of $160,000 (a total of $360,000) divided by unit contribution margin, or $360,000 ÷ $40 = 9,000 tests. This is the correct answer, since 9,000 tests can be performed with fixed costs of $200,000.

Note: I answered this wrong by answering 4000. This is asking for the total # of units. Not units above BE.

Question 18

At the breakeven point, the contribution margin equals total:

variable costs.
sales revenues.
selling and administrative costs.
fixed costs.

Answer 18

Fixed Costs

Question 19

Asta, Inc., is a medical laboratory that performs tests for physicians. Asta anticipates performing between 5,000 and 12,000 tests during the month of April. Compared to industry averages, at the low range of activity Asta has a lower sales price per test, higher fixed costs, and the same breakeven point in number of tests performed. At the high range of activity, Asta’s sales price per test and fixed costs are the same as industry averages, and Asta’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000.

Sales price per test $60
Variable costs per test 20
How is the cost of electricity to run laboratory equipment categorized?

Answer 19

Overhead

Electricity to run lab equipment is a manufacturing cost, but it is not direct labor or direct material, so “direct material cost” is incorrect. All other production costs are overhead costs, so this is part of manufacturing overhea

Question 20

Using regression analysis, Fairfield Co. graphed the following relationship of its cheapest product line’s sales with its customers’ income levels:

If there is a strong statistical relationship between the sales and customers’ income levels, which of the following numbers best represents the correlation coefficient for this relationship?

-9.00
-0.93
+0.93
+9.00

Answer 20

A negative correlation coefficient means that as one variable increases, the other decreases, so +0.93 and +9.00, which are positive, are incorrect

. The answer choices -9.00 and +9.00 are incorrect because the correlation coefficient must be between -1.0 and 1.0.

Question 21

The following information data pertains to a manufacturing company:

Total sales $80,000
Total variable costs 20,000
Total fixed costs 30,000

What is the breakeven level in sales dollars?

Answer 21

The contribution margin ratio is the contribution margin (sales of $80,000 less variable costs of $20,000, or $60,000) divided by the sales revenue of $80,000, or 0.75.

Breakeven revenue is found by dividing the fixed costs of $30,000 by the contribution margin ratio of 0.75, for breakeven sales revenue of $40,000.

BE Sales Dollars =
FC
____________
(P-VC)/P

30,000/((80000-20000)/80000) = 40,000

Question 22

A vendor offered Wyatt Co. $25,000 compensation for losses resulting from faulty raw materials. Alter­nately, a lawyer offered to represent Wyatt in a lawsuit against the vendor for a $12,000 retainer and 50% of any award over $35,000. Possible court awards with their associated probabilities are as follows:

   Award    Probability
  -------   -----------
  $75,000       0.6
        0       0.4
Compared to accepting the vendor's offer, the expected value for Wyatt to litigate the matter to verdict provides a:

Answer 22

Here there are two possible outcomes: collecting $25,000, or accepting the lawyer’s offer to represent Wyatt in the lawsuit

If the lawsuit is chosen, Wyatt will lose the $12,000 retainer, but have a 60% probability of winning $75,000 less the lawyer’s contingent fee of 50% of the award above $35,000. The contingent fee would be 50% times ($75,000 − $35,000) which is 0.50 × $40,000, or $20,000.

The value of winning the lawsuit is $75,000 less the contingent fee of $20,000, or $55,000. The expected value of winning the lawsuit is the probability of winning (60%) multiplied by the value of winning ($55,000), or $33,000. However, Wyatt will have to pay the retainer of $12,000, leaving a net expected value of $21,000.

Comparing a gain of $25,000 from accepting the vendor’s offer with an expected value of $21,000 of filing the lawsuit leaves a loss of $4,000 to file the lawsuit, as compared to accepting the vendor’s offer.

Loss of 4k is the answer

Question 23

Box Co. uses regression analysis to estimate the functional relationship between an independent variable (cost driver) and overhead cost. Assume that the following equation is being used:

y = A + Bx
What is the symbol for the independent variable?

Answer 23

X

Linear regression with two variables takes the form y = Bx + A.

A is the y intercept.
B is the slope of the line. (Linear means a straight line, so the slope of the line is the same at any point on the line.)
y is the dependent variable since it is determined based on the other three terms.
x is the independent variable since it is an input to the equation, not based on the other terms.

Question 24

Linear regression with two variables takes the form

y = Bx + A.

A is the y intercept.
B is the ___of the line. (Linear means a straight line, so the slope of the line is the same at any point on the line.)
y is the ____variable since it is determined based on the other three terms.
x is the ____variable since it is an input to the equation, not based on the other terms.

Answer 24

True
Slope
DEPENDENT
INDEPENDENT

Question 25

The cash budget is divided into four main sections: cash receipts, cash disbursements , cash surplus or deficit, cash financing.

Answer 25

YEP

Question 26

The cash budget is divided into four main sections: cash ___, cash ___ , cash __ or __, cash ___.

Answer 26

Receipt Disbursement Surplus/deficit Financing

Question 27

___is the range of production over which cost relationships are valid, i.e., fixed costs remain constant in total and variable costs are constant per unit.

Answer 27

Relevant range

Question 28

Which of the following costs would decrease if production levels were increased within the relevant range? Total fixed costs Variable costs per unit Total variable costs Fixed costs per unit

Answer 28

Fixed cost per runit Relevant Range is the range of production over which cost relationships are valid, i.e., fixed costs remain constant in total and variable costs are constant per unit.

Question 29

____: A method that iteratively calculates a weighted average by applying weights to the most recent data observation and to prior-period smoothed weighted averages. It weights older data heavier than current data. It is used to smooth forecast variation. T/f

Answer 29

Exponential smoothing False -it weighs current data heavier than old data

Question 30

There are four components that contribute to patterns over time. Each time series of data may be influenced by any or all of the components. 1. ___: This is the long-term movement of the dependent variable over years or decades 2. ___variation: This is movement within the year, such as peak sales periods from selling ski equipment during the winter and Christmas or back-to-school sales. 3. ___variation: This is movement upward and downward over periods longer than a year, such as the business cycle of prosperity, recession, and recovery. 4. ___: This is unpredictable or random movement of the dependent variable.

Answer 30

Trend Seasonal Variation Cyclical Variation Irregular

Question 31

Asta, Inc., is a medical laboratory that performs tests for physicians. Asta anticipates performing between 5,000 and 12,000 tests during the month of April. Compared to industry averages, at the low range of activity Asta has a lower sales price per test, higher fixed costs, and the same breakeven point in number of tests performed. At the high range of activity, Asta’s sales price per test and fixed costs are the same as industry averages, and Asta’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000. Sales price per test $60 Variable costs per test 20 How is the office manager’s salary categorized? Variable cost Direct labor cost Overhead cost for testing General and administrative cost

Answer 31

G&A

Question 32

Sensitivity analysis in an investment project proposal: calculates the change in the result due to a potential change in the project's cash flows. provides management with a linear equation of trend information from the projected cash flows. develops probabilities for a variety of results. develops the discount rate to be used in project evaluation.

Answer 32

calculates the change in the result due to a potential change in the project's cash flows Sensitivity analysis is a “what if?” technique that asks how a result will change if the original predicted data changes or if an underlying assumption changes. Estimates and predictions are subject to varying degrees of uncertainty (defined here as the possibility that an actual amount will deviate from an expected amount).

Question 33

Various methods are available to adjust for the levels of risk in different types of projects. The procedures include the following: 1. Different discount rates 2. Shorten Payback period 3. Reduce cash flow estimate 4. ___: which evaluates how outcomes are expected to vary with changes in assumptions. Should focus on areas having the greatest uncertainty and/or largest expected impact. 5/ Probability Distributions 6. Certainty equivalent: The certain amount that would be acceptable in lieu of the uncertain payoffs from the capital project. To compensate for risk, the certainty equivalent should be ___than the expected value of the capital budget payoffs.

Answer 33

``` T T T Sensitivity analysis greater ```

Question 34

WHEN LEARNING CURVE ANLYSIS APPLIES 1. Bid Preparation 2. Financial Planning 3. PRojection of Labor Requirements 4. Managerial Considerations.

Answer 34

yeah buddy

Question 35

Asta, Inc., is a medical laboratory that performs tests for physicians. Asta anticipates performing between 5,000 and 12,000 tests during the month of April. Compared to industry averages, at the low range of activity Asta has a lower sales price per test, higher fixed costs, and the same breakeven point in number of tests performed. At the high range of activity, Asta’s sales price per test and fixed costs are the same as industry averages, and Asta’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000. Sales price per test $60 Variable costs per test 20 Are Asta’s contribution margin and variable costs greater or lower than the industry average at the low activity range?

Answer 35

Compared to industry averages, at the low range of activity Asta has a lower sales price per test, higher fixed costs, and the same breakeven point in number of tests performed. If Asta has the same breakeven point as the averages but with higher fixed costs, it must have a greater contribution margin per unit to cover those higher fixed costs. If Asta has the same breakeven point as the averages but with a lower sales price per test, it must have lower variable costs to generate that higher contribution margin to cover the higher fixed costs.

Question 36

401322 Graph question

Answer 36

f

Question 37

Johnson Co. is preparing its master budget for the first quarter of next year. Budgeted sales and production for one of the company's products are as follows: Month Sales Production -------- ------- ---------- January 10,000 12,000 February 12,000 11,000 March 15,000 16,000 Each unit of this product requires 4 pounds of raw materials. Johnson's policy is to have sufficient raw materials on hand at the end of each month for 40% of the following month's production requirements. The January 1 raw materials inventory is expected to conform with this policy. How many pounds of raw materials should Johnson budget to purchase for January?

Answer 37

Johnson must budget for purchases to cover (1) 60% of the units produced in January (since 40% was left from December) and (2) 40% of units produced in February. Raw materials needed for January's production = 12,000 × 4 lbs. of materials per unit × 60% = 28,800 pounds Raw materials to cover 40% of February's needs = 11,000 × 4 lbs. of materials per unit × 40% = 17,600 pounds Total materials to be purchased in January = 28,800 + 17,600 = 46,400 pounds

Question 38

The master budget is a budget that consolidates all the entity's budgets into an overall planning and control document, typically for one year T/F

Answer 38

true

Question 39

State College is using cost-volume-profit analysis to determine tuition rates for the upcoming school year. Projected costs for the year are as follows: Contribution margin per student $ 1,800 Variable expenses per student 1,000 Total fixed expenses 360,000 Based on these estimates, what is the approximate breakeven point in number of students?

Answer 39

200 Breakeven in units is fixed costs ($360,000) divided by contribution margin per unit ($1,800) for a breakeven point of 200 students. The amount of variable cost is irrelevant for this solution because it has already been taken into account in calculating contribution margin per student.

Question 40

Integrating mechanisms connect the information, tasks, and resources with the work groups in the organization. The major integrating mechanisms include: general ___systems, increasing ___potential, and reducing the need for ___.

Answer 40

management coordination coordination

Question 41

Which of the following is not an integrating mechanism? General personnel systems General management systems Increasing coordination potential Reducing the need for coordination

Answer 41

General Personnel Systems Integrating mechanisms connect the information, tasks, and resources with the work groups in the organization. The major integrating mechanisms include: general management systems, increasing coordination potential, and reducing the need for coordination.

Question 42

Through the use of decision models, managers thoroughly analyze many alternatives and decide on the “best” alternative for the company. Often the actual results achieved from a particular decision are not what were expected when the decision was made. In addition, an alternative that was not selected may have actually been the best decision for the company. The appropriate technique to analyze the alternatives by using expected inputs and then altering them before a decision is made is: expected value analysis. Program Evaluation Review Technique (PERT). sensitivity analysis. regression analysis.

Answer 42

sensitivity analysis. Sensitivity analysis is any process that measures the impact of a change in a single variable or a combination of variables on profits or on some other decision variable. That is, it is a technique to analyze the alternatives before the decision is made by measuring how changes in the critical assumptions will influence the results.

Question 43

Augusta, Inc., expects manufacturing and sales of 70,000 units of product Maggie, its only product, to occur evenly over a 10-week period. Augusta pays for materials in the week following use. The balance of accounts payable for materials at the beginning of the 10-week period is $40,000. There are no beginning inventories. The fol­lowing information pertains to product Maggie for the 10-week period: Sales price $11 per unit Materials $3 per unit Manufacturing conversion costs—Fixed $210,000 Variable $2 per unit Selling and administrative costs—Fixed $45,000 Variable $1 per unit A special order for 4,000 units would cause a loss of 1,000 regular sales. All cost relationships are unchanged . If the special order is accepted, what minimum amount of revenue must be generated from the special order so that net income is not reduced?

Answer 43

Variable cost per unit is $3 for materials, $2 for other manufacturing costs, and $1 for selling and administrative, for a total of $6. Since the sales price is $11, the unit contribution margin ($11 − $6) is $5 per unit. The loss of 1,000 units of regular sales would decrease total contribution margin by 1,000 × $5, or $5,000. The special order would need to generate $5,000 of contribution margin to replace the contribution of the regular units. If we let P equal the price per new unit, this equation is true, where P − 6 is the contribution margin per new unit: 4,000(P − 6) = 5,000 4,000P − 24,000 = 5,000 4,000P = 29,000 P = 29 ÷ 4 = $7.25 If the new units are sold for $7.25 each, and there are 4,000 units, the revenue from the new order will be 4,000 × $7.25, or $29,000.

Question 44

To determine the best cost driver of warranty costs relating to glass breakage during shipments, Wymer Co. used simple linear regression analysis to study the relationship between warranty costs and each of the following variables: type of packaging, quantity shipped, type of carrier, and distance shipped. The analysis yielded the following statistics: _______________________________ Standard ____________________Coefficient of Error of Independent Variable Determination Estimate -------------------- -------------- -------- Type of packaging 0.60 1.524 Quantity shipped 0.48 1.875 Type of carrier 0.45 2.149 Distance shipped 0.20 4.867 Based on these analyses, the best driver of warranty costs for glass breakage is:

Answer 44

type of packaging. The independent variable, type of packaging, has the highest coefficient of determination (0.60) and the lowest standard error of estimate (1.524), thus it is the best driver for the dependent variable, warranty costs for glass breaka

Question 45

Which of the following is a technique for assessing the potential effect of risk in a capital budgeting project? Sensitivity analysis Adjusting required rate of return Adjusting estimated future cash inflows All of the answer choices are correct.

Answer 45

All Sensitivity analysis involves testing the effects of various assumptions . Adjusting the required rate of return involves increasing the rate for more risky projects Similarly, adjusting estimated future cash flows is to make them more conservative for more risky projects. Thus, all of these are techniques for dealing with risk in capital budgeting projects.

Question 46

____budgeting is where Each year you must start at zero and justify the appropriateness of the item and its cost.

Answer 46

Zero base

Question 47

Budgets may be classified in length as follows: Long-term budget: approximately____ years Intermediate budget: approximately __ years Short-term budget: __years (annual budget)

Answer 47

5-6 2-4 1 year

Question 48

___budgeting is a bottom-up budgeting process where budgets are developed after lower-level managers have provided input in the development of the numbers. Some of the disadvantages are the fact that the numbers provided by the lower-level managers often contain budgetary slack, leading to negative motivation and the fact that it is more time consuming

Answer 48

Participative

Question 49

Sales price per test $60 Variable costs per test 20 What is Asta’s contribution margin per test?

Answer 49

40

Question 50

A company forecast first-quarter sales of 10,000 units, second-quarter sales of 15,000 units, third-quarter sales of 12,000 units, and fourth-quarter sales of 9,000 units at $2 per unit. Past experience has shown that 60% of the sales will be in cash and 40% will be on credit. All credit sales are collected in the following quarter, and none are uncollectible. What amount of cash is forecasted to be collected in the second quarter?

Answer 50

26000 econd-quarter cash sales are projected at 15,000 units × 0.60 × $2 per unit, for total collections from cash sales of $18,000. First-quarter credit sales of 10,000 units × 0.40 at $2 per unit, a total of $8,000, will also be collected in the second quarter. Combining $8,000 collections of receivables with cash sales of $18,000 gives $26,000 total cash receipts in the second quarter.

Question 51

A delivery company is implementing a system to compare the costs of purchasing and operating different vehicles in its fleet. Truck 415 is driven 125,000 miles per year at a variable cost of $0.13 per mile. Truck 415 has a capacity of 28,000 pounds and delivers 250 full loads per year. What amount is the truck’s delivery cost per pound?

Answer 51

The truck has a variable cost of $0.13 per mile × 125,000 miles, or $16,250 per year. It delivers 28,000 pounds × 250 loads, or 7,000,000 pounds a year. Dividing the annual cost of $16,250 by 7,000,000 pounds delivered each year gives a cost of $0.00232 per pound delivered.

Question 52

A ceramics manufacturer sold cups last year for $7.50 each. Variable costs of manufacturing were $2.25 per unit. The company needed to sell 20,000 cups to break even. Net income was $5,040. This year, the company expects the following changes: sales price per cup to be $9.00; variable manufacturing costs to increase 33.3%; fixed costs to increase 10%; and the income tax rate to remain at 40%. Sales in the coming year are expected to exceed last year's sales by 1,000 units. How many units does the company expect to sell this year?

Answer 52

22,600 Last year the company had a contribution margin of $5.25 (price of $7.50 less variable costs of $2.25). Breakeven in units (20,000) equals fixed costs divided by the unit contribution margin ($5.25), so fixed costs must have been 20,000 × $5.25, or $105,000. Net income last year was $5,040. Before-tax income must have been $8,400 ($5,040 ÷ 0.60, the part of income that is not tax). If pre-tax income was $8,400 and fixed costs were $105,000, then the sum, $113,400, was the contribution margin last year. If the contribution margin per unit was $5.25, then 21,600 units were sold last year. Sales this year are expected to increase by 1,000 units to 22,600 units. The information given about changes to the sales and cost structure for this year is not relevant since the problem states that sales exceed last year's sales by 1,000 units.

Question 53

Correlation is a term frequently used in conjunction with regression analysis, and is measured by the value of the coefficient of correlation, r. The best explanation of the value r is that it: interprets variances in terms of the independent variable. ranges in size from negative infinity to positive infinity. is a measure of the relative relationship between two variables. is positive only for downward sloping regression lines.

Answer 53

is a measure of the relative relationship between two variables

Question 54

Correlation refers to the existence of a reliable relationship between two variables: The dependent variable, the values that we would like to predict The independent variable, the values that we would like to use in the prediction process ___correlation must exist for regression analysis to be valid.

Answer 54

True Reliable

Question 55

Which of the following may be used to estimate how inventory warehouse costs are affected by both the number of shipments and the weight of materials handled? Economic order quantity analysis Probability analysis Correlation analysis Multiple regression analysis

Answer 55

Multiple Regression Analysis The purpose of regression analysis is to use an independent variable to predict the value of another variable. Multiple regression involves the analysis of more than two variables. In this situation, we can use multiple regression analysis with the number of shipments and the weight of materials as the independent variables to predict inventory warehouse costs.

Question 56

The purpose of regression analysis is to use an independent variable to predict the value of another variable. ____involves the analysis of more than two variables. In this situation, we can use multiple regression analysis with the number of shipments and the weight of materials as the independent variables to predict inventory warehouse costs.

Answer 56

Multiple regression

Question 57

In business information systems, the term "stakeholder" refers to which of the following parties? The management team responsible for the security of the documents and data stored on the computers or networks Information technology personnel responsible for creating the documents and data stored on the computers or networks Authorized users who are granted access rights to the documents and data stored on the computers or networks Anyone in the organization who has a role in creating or using the documents and data stored on the computers or networks

Answer 57

Anyone in the organization who has a role in creating or using the documents and data stored on the computers or networks A "stakeholder" is a broad term, encompassing all those with an interest in preparing or using the information. The other answer choices describe specific stakeholders, but there are other stakeholders as well.

Question 58

The following information for a company is given: Fixed cost per month $2,500 Unit selling price 100 Variable cost as a percentage of sales 60% What amount of annual sales must the company achieve to break even?

Answer 58

75k The contribution margin is sales price minus variable cost, or $100 less $60. So the unit contribution margin is $40. Breakeven units equal annual fixed costs divided by the contribution margin or ($2,500 × 12) ÷ 40, which equals $30,000 ÷ 40, or 750 units. At a selling price of $100 per unit the annual sales revenue must be $75,000.

Question 59

The relevance of a particular cost to a decision is determined by the: riskiness of the decision. number of decision variables. amount of the cost. potential effect on the decision.

Answer 59

potential effect on the decision. Relevant costs are the only costs considered in decision making. Relevant costs are those costs that are affected by the decision being made. All other costs are considered constant and consequently have no effect on the decision. Therefore, the relevance of a particular cost to a decision is determined by the potential effect on the decision.

Question 60

___costs are the only costs considered in decision making. Relevant costs are those costs that are affected by the decision being made. All other costs are considered constant and consequently have no effect on the decision.

Answer 60

Relevant T T

Question 61

A company has had the following production experience over the last 10 quarters for product P1: ``` Quarterly Production Frequency -------------------- --------- 1,000 units 2 1,500 units 3 2,000 units 4 2,500 units 1 -- 10 Additional information for P1: ``` Unit variable costs $ 7 Quarterly unavoidable allocated fixed costs 40,000 A unit of P1 can be purchased from an outside supplier for $8.75. If P1 is purchased the plant facilities now used for its manufacture can be used to produce another product that will generate a quarterly contribution margin of $5,500. Assuming that P1 is to be produced internally, what is the expected quarterly production?

Answer 61

The correct expected sales is 1,700 units, computed as follows: ``` Sales Probability Expected Value (Units) ----- ----------- ---------------------- 1,000 .2 200 1,500 .3 450 2,000 .4 800 2,500 .1 250 ----- 1,700 ```

Question 62

Midwest Fabricators is building a corporate planning model to predict cash flows. The company maintains end-of-month inventories that cover 20% of the following month's sales. Merchandise costs average 55% of selling prices, and payment is made at the time of purchase. If S(n) = Sales in month(n), an appropriate notation for total monthly cash payments for merchandise purchases in month(n) would be: 0. 11S(n+1). 0. 11S(n-1). 0. 44S(n) + 0.11S(n+1). 0. 44S(n) + 0.11S(n-1).

Answer 62

0.44S(n) + 0.11S(n+1). (COG% x Required Purchases) + (COG% x EOM Inventory) = (0.55 x 0.80S(n)) + (0.55 x 0.20S(n+1)) = 0.44S(n) + 0.11S(n+1)

Question 63

The following information pertains to Clove Co. for the year ending December 31: Budgeted sales $1,000,000 Breakeven sales 700,000 Budgeted contribution margin 600,000 Cashflow breakeven 200,000 Clove's margin of safety is:

Answer 63

300k Margin of safety = Budgeted sales - Breakeven sales = $1,000,000 - $700,000 = $300,000

Question 64

Margin of safety = ?? - ???

Answer 64

Margin of safety = Budgeted sales - Breakeven sale

Question 65

The assumptions of breakeven analysis include over the relevant range: unit revenues are linear (prices do not change). unit variable costs are unchanged (i.e., linear). total costs increase as number of units increase. fixed costs are constant (straight-line).

Answer 65

YEP

Question 66

Asta, Inc., is a medical laboratory that performs tests for physicians. Asta anticipates performing between 5,000 and 12,000 tests during the month of April. Compared to industry averages, at the low range of activity Asta has a lower sales price per test, higher fixed costs, and the same breakeven point in number of tests performed. At the high range of activity, Asta’s sales price per test and fixed costs are the same as industry averages, and Asta’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000. Sales price per test $60 Variable costs per test 20 How is the cost of lubricant used on laboratory equipment categorized? Direct material cost Fixed cost Overhead cost for testing General and administrative cost

Answer 66

Overhead cost for testing Lubricant used to maintain production equipment is not material used directly in production, and it is not a labor cost. Since it is a production cost and it is not direct material or direct labor, it must be a manufacturing overhead cost.

Question 67

Company management would like to calculate the breakeven point in sales dollars of its lone product, a farm combine-planter. The following cost information is available: Combine-planter unit selling price $ 1,000 Variable manufacturing expenses per unit 800 Other variable expenses 100 Fixed manufacturing expenses 15,000 Marketing expense (fixed) 7,000 What amount is the company's breakeven point in sales?

Answer 67

220k

Question 68

A company is considering outsourcing one of the component parts for its product. The company currently makes 10,000 parts per month. Current costs are as follows: Per Unit Total Direct materials $4 $40,000 Direct labor 3 30,000 Fixed plant facility cost 2 20,000 The company decides to purchase the part for $8 per unit from another supplier and rents its idle capacity for $5,000/month. How will the company's monthly costs change?

Answer 68

Since the fixed plant charge will not change due to this decision, it is irrelevant and should not be considered. The direct materials and direct labor costs ($40,000 + $30,000 = $70,000) are relevant costs. These incremental costs total $70,000 per month to make the product, while they can buy the part for $80,000 per month, an increase in monthly costs of $10,000. However, the rental income from renting the idle capacity of $5,000 reduces the monthly cost of purchasing the parts, for a net increase in monthly costs of $5,000.

Question 69

If the average age of inventory is 90 days, the average age of accounts payable is 60 days, and the average age of accounts receivable is 65 days, the number of days in the cash flow cycle is:

Answer 69

95 days The cash flow cycle is the full cycle of cash inflows adjusted for outflows, calculated as 90 + 65 - 60 = 95 days

Question 70

401372

Answer 70

graph problem

Question 71

Brewster Co. has the following financial information: Fixed costs $20,000 Variable costs 60% Sales price $50 What amount of sales is required for Brewster to achieve a 15% return on sales?

Answer 71

80k Sales - VC - FC = NI Sales - .6S - 20k = .15S sales - .6S - .15S = 20k .25S=20k S=80k

Question 72

A company is considering two projects, which have the following details: Project A Project B Expected sales $1,000 $1,500 Cash operating expense 400 700 Depreciation 150 250 Tax rate 30% 30% Which project would provide the largest after-tax cash inflow? Project A because after-tax cash inflow equals $465 Project A because after-tax cash inflow equals $315 Project B because after-tax cash inflow equals $635 Project B because after-tax cash inflow equals $385

Answer 72

Project A produces taxable income of $450 ($1,000 less $400 less $150). Multiplying taxable income of $450 by a 30% tax rate gives income tax of $135. After-tax cash inflow for Project A is $1,000 sales less cash expenses of $400 and income tax of $135, or $465. Project B produces taxable income of $550 ($1,500 less $700 less $250). Multiplying taxable income of $550 by a 30% tax rate gives income tax of $165. After-tax cash inflow for Project B is $1,500 sales less cash expenses of $700 and income tax of $165, or $635.

Question 73

In a regression analysis, the coefficient of determination measures: economic plausibility. goodness of fit. independence of residuals. independence of variables.

Answer 73

Goodness of fit The coefficient of determination (called R-squared or R2) is a statistical measure of how close the data are to the fitted regression line (i.e., how “good” or well the line fits between the data points).

Question 74

A company is considering replacing a piece of equipment with a more efficient model. Which of the following is not a consideration in that decision? Cost of the equipment to be replaced Cost of capital Tax implications Cost of the new model

Answer 74

Cost of equipment to be replaced When preparing an analysis to assist in the decision making, the cost of the equipment to be replaced is not a consideration since it is a past cost and is considered in both the “keep” and “replace” scenarios (making the cost irrelevant).

Question 75

A company with limited production resources that is currently using strategy C provides the following production information: ``` Strategy Units Produced Product X Units Produced Product Y A 0 200 B 100 180 C 200 150 D 300 100 E 400 0 ``` The company would encounter what opportunity cost if it doubled its production of Product X? The cost of Product X would decrease by 50%. Production of Product Y would double. Production of Product Y would be eliminated. Production of Product Y would not be affected.

Answer 75

Production of Product Y would be eliminated. "Production of Product Y would be eliminated" is correct because strategy C allows for the production of 200 units of Product X. Doubling the 200 units to 400 units would result in the use of strategy E, with production of zero units of Product Y.

Question 76

Trendy Co. produced and sold 30,000 backpacks during the last year at an average price of $25 per unit. Unit variable costs were the following: Variable manufacturing costs $ 9 Variable selling and administrative costs 6 --- Total $15 Total fixed costs were $250,000 . There was no year-end work-in-process inventory. If Trendy had spent an additional $15,000 on advertising, then sales would have increased by $30,000 . If Trendy had made this investment, what change would have occurred in Trendy's pretax profit?

Answer 76

Contribution margin per unit was $10 ($25 sales price less variable costs of $9 and $6). The contribution margin ratio was 40% ($10 contribution per unit divided by $25 sales revenue per unit). Additional sales of $30,000 would have increased the contribution margin by $12,000 ($30,000 × 0.40). The increased contribution margin of $12,000 fails to cover the advertising costs of $15,000, leaving a decrease of $3,000 in pretax profit.

Question 77

Service organizations typically use a time and materials pricing strategy. Which of the following is a method for calculating a time and material rate? A rate for time is developed by estimating all of the costs associated with the time component of the service. A rate of time is based on the market rate. A rate of time is developed based on time to complete a service. A rate of time is developed based on minimum wage.

Answer 77

A rate for time is developed by estimating all of the costs associated with the time component of the service. There are two rates utilized for service pricing: time and materials loading charge. Time is calculated by estimating all the costs associated with time component of the business, adding a desired amount for profit, and dividing the estimated number of hours expected to be worked during the time period.

Question 78

PRICING STRATEGY Organizations like these typically use a time and materials pricing strategy. Two rates are used—one for time and a second for materials. ___A rate for time can be developed by estimating all the costs associated with the time component of the business, adding a desired amount for profit, and dividing by the estimated number of hours expected to be worked during the time period. ____ A material loading charge is developed by estimating the costs associated with purchasing, handling, and storing the materials for the time period, adding a desired profit on the materials provided, and dividing by the total cost of the materials for the time period.

Answer 78

Time: Material loading charge:

Question 79

A company manufactures a product using one material per unit. The following information for the upcoming budget year is available: Number of units sold 14,500 Budgeted beginning finished goods inventory units 1,500 Budgeted ending finished goods inventory units 3,000 Budgeted beginning direct materials inventory units 2,000 Budgeted ending direct materials inventory units 1,500 Direct manufacturing material cost per unit $5 What amount is the total direct materials purchasing budget?

Answer 79

$77,500 The company would produce 16,000 finished units, 14,500 to sell and 1,500 more to increase the finished goods inventory from 1,500 to 3,000 units. They would have to purchase 16,000 units of material, except that the raw material inventory declines by 500 units, from 2,000 units to 1,500 units; therefore, they will only purchase 15,500 units . At a cost of $5 per unit, the 15,500 units will cost $77,500.

Question 80

An investor uses risk analysis to measure the probability of the variability of future returns from a proposed investment. What is the approach that is based upon utility theory and compels the decision maker to choose at what point he or she is indifferent to the choice between a certain amount of money and the expected value of a risky amount? Capital Asset Pricing Model Certainty equivalent adjustments Risk-adjusted discount rates Sensitivity analysis

Answer 80

Certainty equivalent adjustments Certainty equivalent adjustments is a risk analysis technique that is based upon utility theory. A certainty equivalent represents the maximum amount one is willing to pay for some gamble. It is also the minimum premium one is willing to pay to insure against some risk.

Question 81

Product Cott has sales of $200,000, a contribution margin of 20%, and a margin of safety of $80,000. What is Cott's fixed cost?

Answer 81

24k At sales of $200,000, Cott has a margin of safety of $80,000. Sales would be $120,000 at breakeven. With sales of $120,000, the contribution margin toward fixed costs and profit is 20% of $120,000, or $24,000. However, there is zero profit at breakeven, so the contribution margin exactly equals fixed costs, which must be $24,000.

Question 82

Which of the following is a characteristic of a flexible budget? Provides budgeted numbers for various activity levels Allows for modification during the budgeted period Isolates the impact of variable costs on the overall budget Can be utilized by several product divisions

Answer 82

Provides budgeted numbers for various activity levels A flexible budget is developed using the static budget standards for any activity level within the relevant range. Amounts are calculated using the actual output level based on the standard cost and usage per unit for variable items, and the identical dollar amounts for the fixed costs in the static budget are used in the flexible budget

Question 83

A ___budget is a budget prepared for several possible levels of production or adjusted for the level of production actually achieved. It is also referred to as an incremental budget.

Answer 83

flexible

Question 84

Central Winery manufactures two products, A and B. When it was previously computed, estimated demand for Product A was 10,000 bottles and for Product B was 30,000 bottles. The estimated sales price per bottle for A was $6.00 and for B was $8.00. When it was realized, actual demand for Product A was 8,000 bottles and for Product B was 33,000 bottles. The actual price per bottle for A was $6.20 and for B was $7.70. What amount would be the total selling price variance for Central Winery?

Answer 84

8300 unfavorable Selling price variance for each product = Quantity sold × (Selling price - Estimated price) Selling price variance for Product A = 8,000 × ($6.20 - $6.00) = $1,600 Selling price variance for Product B = 33,000 × ($7.70 - $8.00) = ($9,900) Total selling price variance = Selling price variance for Product A + Selling price variance for Product B Total selling price variance = $1,600 + ($9,900) = ($8,300)

Question 85

A company had a choice between project X and project Y. The net present value of project X is $1,000,000, and the net present value of project Y is $750,000. The company chose project X. What is the opportunity cost of that decision?

Answer 85

750k The opportunity cost is $750,000, the net present value of project Y that will be lost due to choosing project X. An opportunity cost is the amount that will be lost (project Y) if the course of action under consideration (project X) is pursued.

Question 86

Which one of the following is a sales forecasting technique? Linear programming Exponential smoothing Queuing theory Cost-volume-profit analysis

Answer 86

Exponetial Smoothing Exponential smoothing is a statistical method that is useful as a sales forecasting technique. Linear programming is a model for the allocation of scarce resources. Queuing theory relates to the balancing of the cost of waiting with the cost of service; for example, the cost of lost sales resulting from long lines at the cash register versus the cost of opening another cash register. Cost-volume-profit analysis is a model used to aid decision making relating to product lines, pricing of products, marketing strategy, and utilization of production facilities.

Question 87

401298

Answer 87

d

Question 88

Given that demand exceeds capacity, that there is no spoilage or waste, and that there is full utilization of a constant number of assembly hours, the number of components needed for an assembly operation with an 80% learning curve should: increase for successive periods. decrease per unit of output.

Answer 88

I only Since demand exceeds supply, the company will keep increasing production with a constant number of assembly hours. Increased production requires more units of raw material (components).

Question 89

Milo Corp. sells washers for $350 per unit and incurs product costs of $300. Prime costs for the washers are $150 and the fixed portion of the overhead is $90. Milo receives a special order for 2,000 washers from Adobe. Additional variable manufacturing costs to meet Adobe specifications are $40 per unit. Milo has sufficient excess capacity and has determined that this sale will not interfere with regular business . What price must Milo charge Adobe to obtain a 20% markup on variable manufacturing costs?

Answer 89

$300 The relevant costs associated with the special order are the prime costs of $150 (direct material and direct labor), variable overhead of $60 ($300 − $150 − $90 fixed overhead), and the additional variable manufacturing cost of $40, for a total cost of $250. Including a 20% markup would set the sales price of $300 ($250 × 1.20).

Question 90

The controller of Gray, Inc., has decided to use ratio analysis to analyze business cycles for the past two years in an effort to identify seasonal patterns. Which of the following formulas should be used to compute percentage changes for account balances for Year 1 to Year 2? (Prior balance - Current balance) / Current balance (Prior balance - Current balance) / Prior balance (Current balance - Prior balance) / Current balance (Current balance - Prior balance) / Prior balance

Answer 90

(Current balance - Prior balance) / Prior balance

Question 91

The coefficient of determination, r squared, in a multiple regression equation is the: percentage of variation in the independent variables explained by the variation in the dependent variable. percentage of variation in the dependent variable explained by the variation in the independent variables. measure of the proximity of actual data points to the estimated data points. coefficient of the independent variable divided by the standard error of regression coefficient.

Answer 91

percentage of variation in the dependent variable explained by the variation in the independent variables.

Question 92

In statistical analysis, a weighted average using probabilities as weights is the: objective function. coefficient of variation. expected value. standard deviation.

Answer 92

Expected Value Expected value is the mean or average value of a random variable over the possible outcomes. It is calculated by weighting the value of each possible outcome by its probability and summing over all values. An objective function is an equation to be minimized or maximized subject to certain constraints. It is not an average. The coefficient of variation and standard deviation are measures of dispersion, not a weighted average of several amounts.

Question 93

Under what circumstances would a manufacturer accept a special order with special pricing? There is excess capacity. The special-order price per unit exceeds the variable costs. Sales commissions are not being paid. It will encroach on existing sales.

Answer 93

The special-order price per unit exceeds the variable costs. Assuming that the special order does not encroach on existing sales, the order will be accepted as long as the special-order pricing exceeds the variable costs. It is assumed that fixed costs have already been allocated to the existing production quantities.

Question 94

Which of the following would be most impacted by the use of the percentage of sales forecasting method for budgeting purposes? Accounts payable Mortgages payable Bonds payable Common stock

Answer 94

AP Other financial statement accounts would then be forecasted as a percentage of sales. Of the answers given, only accounts payable would fluctuate in proportion to sales (as sales increase, the trade accounts payable necessary to support inventory and overhead costs would increase also).

Question 95

Wren Co. manufactures and sells two products with selling prices and variable costs as follows: A B ------ ------ Selling price $18.00 $22.00 Variable costs 12.00 14.00 Wren's total annual fixed costs are $38,400. Wren sells four units of A for every unit of B. If operating income last year was $28,800, what was the number of units Wren sold?

Answer 95

10,500 Product A Product B Total --------- --------- ----- Selling price $18 $22 Variable costs 12 14 --- --- Contribution Marg $ 6 $ 8 Mix in units 4 1 --- --- Total CM of mix $24 $ 8 $32 Therefore, the contribution margin of a “bundle” (4 units of Product A and 1 unit of Product B) is $32. Number of bundles to produce a particular profit = (FC + NI) / Contribution margin = ($38,400 + $28,800) / $32 = 2,100 bundles Every bundle = 4 units of A sold. 2100 x 4 = 8400. 8400 + 2100 = 10,500

Question 96

Mien Co. is budgeting sales of 53,000 units of product Nous for October. The manufacture of one unit of Nous requires four kilos of chemical Loire. During October, Mien plans to reduce the inventory of Loire by 50,000 kilos and increase the finished goods inventory of Nous by 6,000 units. There is no Nous work-in-process inventory. How many kilos of Loire is Mien budgeting to purchase in October?

Answer 96

Units produced = Unit sales + Increase in inventory = 53,000 + 6,000 = 59,000 units of Nous Purchases of Loire = Production requirement - Decrease in inventory = (59,000 x 4) - 50,000 = 236,000 - 50,000 = 186,000 kilos of Loire

Question 97

At annual sales of $900,000, the Ebo product has the following unit sales price and costs: Sales price $20 --- Prime cost 6 Manufacturing overhead Variable 1 Fixed 7 Selling and admin. costs Variable 1 Fixed 3 --- 18 --- Profit $ 2 === What is Ebo's breakeven point in units?

Answer 97

Prime cost consists of direct material and direct labor. Both of these are variable costs, so total variable cost is $8 per unit ($6 + $1 + $1). Current unit sales = $900,000 / $20 per unit = 45,000 Total fixed costs = (45,000 x $7) + (45,000 x $3) = $315,000 + $135,000 = $450,000 Breakeven units = Total fixed costs / (Selling price - Variable cost) = $450,000 / ($20 - $8) = $450,000 / $12 = 37,500 units

Question 98

There are three levels of interdependence in integrated planning: Pooled Sequential Reciprocal

Answer 98

yeah

Question 99

JacKue Co. plans to produce 200,000 pairs of roller skates during January of next year. Planned production for February is 250,000 pairs. Sales are forecasted at 180,000 pairs for January and 240,000 pairs for February. Each pair of roller skates has eight wheels. JacKue's policy is to maintain 10% of the next month's production in inventory at the end of a month. How many wheels should JacKue purchase during January?

Answer 99

The general inventory reconciliation formula is useful here: Beginning inventory + Purchases - Uses = Ending inventory Beginning inventory = 10% of January's planned production = 0.10 x (200,000 pairs of skates x 8 wheels per pair) = 160,000 wheels Ending inventory = 10% of February's planned production = 0.10 x (250,000 pairs of skates x 8 wheels per pair) = 200,000 wheels Production uses for January = 200,000 pairs of skates x 8 wheels per pair = 1,600,000 wheels The necessary January purchases can then be calculated: Purchases = Ending inventory - Beginning inventory + Uses = 200,000 wheels - 160,000 wheels + 1,600,000 wheels = 1,640,000 wheels

Question 100

On June 30, 20X1, a company is preparing the cash budget for the third quarter. The collection pattern for credit sales has been 60% in the month of sale, 30% in the first month after sale, and the rest in the second month after sales. Uncollectible accounts are negligible. There are cash sales each month equal to 25% of total sales. The total sales for the quarter are estimated as follows: July, $30,000; August, $15,000; and September, $35,000. Accounts receivable on June 30, 20X1, were $10,000. What amount would be the projected cash collections for September?

Answer 100

30,125 Credit Sales: July: $30,000 x 0.75 = $22,500 Aug.: $15,000 x 0.75 = 11,250 Sept.: $35,000 x 0.75 = 26,250 September Cash Collection: Sept. Cash Sales $35,000 x 0.25 = $ 8,750 Sept. Credit Sales $26,250 x 0.60 = 15,750 Aug. Credit Sales $11,250 x 0.30 = 3,375 July Credit Sales $22,500 x 0.10 = 2,250 Total Collection $30,125

Question 101

Sago Co. uses regression analysis to develop a model for predicting overhead costs. Two different cost drivers (machine hours and direct materials weight) are under consideration as the independent variable. Relevant data were run on a computer using one of the standard regression programs, with the following results: Machine Direct Materials Hours Weight Y intercept coefficient 2,500 4,600 B coefficient 5.0 2.6 R2 0.70 0.50 Which regression equation should be used? ``` Y = 2,500 + 5.0X Y = 2,500 + 3.5X Y = 4,600 + 2.6X Y = 4,600 + 1.3X ```

Answer 101

Since the coefficient of determination (R2) is greater for machine hours than for direct materials weight (0.7 instead of 0.5), there is a stronger relationship between machine hours (the independent variable) and the resulting cost than there is between the resulting cost and direct materials weight. Thus, the resulting cost can be best estimated by substituting machine hours for X in the equation Y = 2,500 + 5.0X.

Question 102

Fargo Mfg., a small business, is developing a budget for next year. Which of the following steps should Fargo perform first? Compute the dollar amount of Fargo's forecasted sales Identify costs of Fargo's forecasted sales volume Forecast Fargo's sales volume Determine the price of Fargo's products

Answer 102

Forecast Fargo's sales volume The development of the budget begins with the forecasting of sales, since for most companies sales is a limiting factor—a combination of capacity and potential market share

Question 103

A ___is a formal quantitative expression of an enterprise's plans. When the budget is broken down on a unit basis, it is called a____.

Answer 103

budget standard

Question 104

The____approach to budgeting starts with the activities and costs of the prior year and adds an incremental layer for growth and/or inflation ____budgeting is intended to challenge the incremental approach by considering nothing sacrosanct about the current year as a base for next year's estimates. Each year you must start at zero and justify the appropriateness of the item and its cost

Answer 104

traditional or incremental Zero base

Question 105

The purpose of a budget is to help plan, coordinate, implement, and control ___activities. A complete budget for a company is called a ___

Answer 105

enterprise master budget

Question 106

Budgets may be classified in length as follows: a. Long-term budget: approximately __ years b. Intermediate budget: approximately ___ years c. Short-term budget: _ years

Answer 106

5-6 2-4 1

Question 107

Which of the following topics is the focus of managerial accounting? The needs of creditors Historical cost principles Financial statements and other financial reports The needs of the organization's internal parties

Answer 107

The needs of the organization's internal parties Financial accounting is primarily focused upon providing information to external users of financial information such as stockholders, creditors, and government agencie

Question 108

In the process of strategic planning, the organization must consider ___ ___ensures communication between all stakeholders and affected departments

Answer 108

integrated planning Integrated planning

Question 109

The main goal of integrated planning is to evaluate all __ and __affiliated with the project. The integrated planning process helps link strategic planning and operations management with financial planning. t/F

Answer 109

costs and benefits true

Question 110

There are three levels of interdependence to take into consideration: ____interdependence: There is a common source of resource, but no interrelationship between the work groups. ___interdependence: The work groups coordinate the flow of information, tasks, or resources from one group to another. __interdependence: Information, tasks, and resources are passed back and forth between the groups.

Answer 110

Pooled Sequential Reciprocal

Question 111

There are three major integrating mechanisms to process/coordinate resources of interdependnet work grps _____include managerial hierarchy, rules and procedures, and plans and goals for the organization. _____: Information systems and lateral relationships are the most common ways to increase coordinating potential. ____: To accomplish this, the organization must create only pooled interdependence.

Answer 111

General Management System Increase Coordination Potential Reduce need for coordination

Question 112

``` July -- 775k Aug -- 750k Sept -- 825k Oct -- 800k Nov -- 850k December -- 900k __Type of sales: Cash = 20% &&& Credit = 80% ``` Collection pattern for Credit Sales Month of Sale: 40% First month following sale: 57% Uncollectible: 3% The cost of merchandise averages 40% of its selling price. The company's policy is to maintain an inventory equal to 25% of the next month's forecasted sales. The inventory balance at cost is $80,000 as of June 30. The company's total cash receipts from sales and collections on account that would be budgeted for the month of September would be:

Answer 112

Sept cash sales = 825k x .2 = 165k Sept Credit Sales = 825k x .8 x .4 = 264k Aug Cred Sales = 750k x .8 x .57 = 342k Budget Cash Receipt: 771k The company's total cash receipts from sales and collections on account that would be budgeted for the month of September would be $771,000. This response recognizes that 20% of the September sales are cash sales that would be collected in the month and 40% of the September credit sales (80% of the total sales) would be collected in the month, and 57% of the August credit sales (80% of the total sales) would be collected in September

Question 113

Salary exp - 250k Health cost - 100k Dep exp - 65k Interest Expense (10 yr fixed note) - 37,750 After adjusting for the 5% inflation rate, what is the company's total budget for the selected items before taxes for next year?

Answer 113

Salary exp - 250k x 1.05=262,500 Health Cost: 100k x 1.05 = 105k Dep Exp: 65k Interest exp: 37,750 BudgetT: 470,250 The expected inflation rate of 5% will affect items where the costs are being incurred due to activities taking place during the year, as opposed to being related to past actions or decisions.

Question 114

The____ is the projection of both volume and dollar value of sales for a future period. Sales forecasts for each division and each product within each division provide a less realistic total Sales forecasts for various marketing regions—foreign, domestic, regional—provide superior total estimates t/f. Exchange rates do not have be projected if some portion of projected sales will be in foreign markets.

Answer 114

sales forecast False -more realistic True False - yes they do

Question 115

A company has a static budget at 10,000 units of production, which shows direct material cost of $80,000, direct labor cost of $60,000, and factory overhead costs of $37,000. Factory overhead costs are 40% fixed. At 6,000 units of production, a flexible budget would include which of the following amounts as total production costs? $112,120 $106,200 $121,000 $115,080

Answer 115

A flexible budget would include $112,000 DM 80k____8_____48k DL: 60k____6_____36k VOH:22.2k__2.22__13,320 FOH: 14.8k__NA___14.8k Overhead costs are 40% fixed ($37,000 × 40% = $14,800). Flex Budget: 112,120

Question 116

In a ___, standard costs are developed for all inputs per unit of production. Standard costs are often used to develop a master budget and flexible budget, and variances from standard costs are then analyzed. t/f

Answer 116

Standard costing system, True

Question 117

STANDARD COSTS ___standards: These are standards that can be attained only under perfect conditions ____ standards: Practical standards are tight, but attainable. They can be achieved by normal workers working with reasonable, efficient effort, with a reasonable allowance for breakdowns,

Answer 117

Ideal Attainable

Question 118

A company has budgeted sales for January and February of 20,000 and 25,000 units, respectively. The selling price is $5 per unit and the purchase price is $3 per unit. Budgeted ending inventory is 10% of the next month's sales. What is the budgeted cost of purchases for January? $54,000 $75,000 $61,500 $60,000

Answer 118

Purchases = Cost of goods sold + Ending inventory – Beginning inventory. Since ending inventory is 10% of next month’s sales, the unit purchases for January are: 20k units + (.1 x 25k units) - (.1 x 20k units) = 20,500 units 20,500 units x 3/unit = 61,500

Question 119

Which of the following types of budgets is the last budget to be produced during the budgeting process? Capital Cost of goods sold Marketing Cash

Answer 119

Cash A cash budget is the last budget to be prepared in the budgeting process because the other steps must be completed before the effects of each part on cash can be estimated.

Question 120

The steps to prepare a master budget are: develop a __, determine the desired level of ___inventory, prepare a purchases or production ___, estimate selling, administrative, and other general expenses, organize the preceding information into an income statement, and prepare a ___forecast.

Answer 120

``` sales forecast finished goods budget true true Cash ```

Question 121

Rolling Wheels purchases bicycle components in the month prior to assembling them into bicycles. Assembly is scheduled one month prior to budgeted sales. Rolling pays 75% of component costs in the month of purchase and 25% of the costs in the following month. Component costs included in budgeted cost of sales are as follows: ``` April: 5k May: 6k June: 7k July: 8k Aug: 8k ``` What is Rolling’s budgeted cash payments for components in May?

Answer 121

Components for July sales ($8,000) would have been purchased in May and assembled in June; 75% of that $8,000 would have been paid in May, the month of purchase. This is a May payment of $6,000. Components for June sales ($7,000) would have been purchased in April and assembled in May; 25% of that $7,000 would have been paid in May, the month following the month of purchase. This is a May payment of $1,750. Combining the $6,000 paid in May for July sales and the $1,750 paid in May for June sales gives total May cash payments of $7,750.

Question 122

Berol Company plans to sell 200,000 units of finished product in July 20X1 and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales. There are 150,000 finished units in inventory on June 30, 20X1. Each unit of finished product requires four pounds of direct material at a cost of $1.20 per pound. There are 800,000 pounds of direct material in inventory on June 30, 20X1. Berol Company's production requirement in units of finished product for the three-month period ending September 30, 20X1, is: 630,500 units. 664,000 units. 665,720 units. 712,025 units.

Answer 122

401068

Question 123

A budget is defined as: a formal plan of operations of an enterprise. an informal document utilized by an enterprise. a plan that only includes the expenses of an enterprise. a formal quantitative expression of an enterprise’s plans.

Answer 123

a formal quantitative expression of an enterprise’s plans.

Question 124

400884

Answer 124

k

Question 125

Which of the following listings correctly describes the order in which the four types of budgets must be prepared? Cash disbursements, direct materials purchases, production, sales Sales, direct materials purchases, production, cash disbursements Production, direct materials purchases, sales, cash disbursements Sales, production, direct materials purchases, cash disbursements

Answer 125

Sales, production, direct materials purchases, cash disbursements The order of the master budget would be as follows: ``` Sales budget Production budget Direct materials, direct labor, and manufacturing overhead budgets Selling and administrative budgets Budgeted income statement Cash budget Budgeted balance sheet ```

Question 126

What is the cost of ending inventory given the following factors? Beginning inventory $ 5,000 Total production costs 60,000 Cost of goods sold 55,000 Direct labor 40,000

Answer 126

Ending inventory = Production costs + Beginning inventory COGS (Cost of goods sold) = $60,000 + $5,000 - $55,000 = $10,000 Note: Direct labor would have already been included in the total production costs.

Question 127

Objectives that must be balanced in selecting a transfer price, especially when the company operates in several different countries, include all of the following except: reduce exposure to exchange rate risks by moving funds out of weak currencies into strong currencies. fairly and accurately measure the performance of a segment and its management. move cash from countries that lack exchange controls that restrict the repatriation of dividends and capital. minimize global taxes by moving products at cost out of countries with high corporate taxes and generate profits in countries with low corporate taxes.

Answer 127

move cash from countries that lack exchange controls that restrict the repatriation of dividends and capital. All of the answer choices are objectives of transfer pricing except that cash is moved from countries with (not without) exchange controls to countries without exchange controls.

Question 128

Objectives in transfer pricing: There are several objectives that must be balanced in selecting a transfer price, especially when the company operates in several different countries. 1. Evaluate__ 2. Minimize ___ & ___ 3. Hedge ___ 4. Move ___ 5. Improve ___ position

Answer 128

``` Performance taxation & tariffs Exchange rates cash competitive ```

Question 129

Which of the following options lists the correct sequence for preparing budgets? Cost of goods sold budget, sales budget, budgeted income statement, budgeted balance sheet Material purchases budget, production budget, cost of goods sold budget, cash receipts budget Sales budget, production budget, budgeted balance sheet, budgeted income statement Production budget, material purchases budget, budgeted income statement, budgeted balance sheet

Answer 129

Production budget, material purchases budget, budgeted income statement, budgeted balance sheet The sequence "production budget, material purchases budget, budgeted income statement, budgeted balance sheet" is correct because you cannot budget material purchases until you know the expected production.

Question 130

What is the required unit production level given the following factors? projected sales: 1k Beg inv: 85 Desired Ending Inv: 100 PY beg inventory: 200 1,015 1,215 915 1,100

Answer 130

Units needed for sales: 1000 Plus: Units needed for end inv: 100 Less: units already in inventory at Beg of yr: (85) 1,015

Question 131

All of the following are transfer pricing methods except: profit-based price. market-based price. cost-based price. negotiated price.

Answer 131

profit-based price A transfer price is the internal price charged by a selling department, division, or subsidiary of a company for a raw material, component, finished good, or service to a buying department, division, or subsidiary of the same company.

Question 132

Crisper, Inc., plans to sell 80,000 bags of potato chips in June, and each of these bags requires five potatoes. Pertinent data includes the following: Bags of potato chips___Potatoes Actual June 1 inventory: 15k bags___27k Desired June 30 Inv: 18k_____23k What number of units of raw material should Crisper plan to purchase?

Answer 132

Chips: Sales + desired end inv - beg inv =80k+18k-15k =83k Potato: production need + desired end inv - beg inv =(83k x 5) + 23k - 27k =411k potatoes

Question 133

Two types of special budgets:

Answer 133

Performance & capital

Question 134

Asta, Inc., is a medical laboratory that performs tests for physicians. Asta anticipates performing between 5,000 and 12,000 tests during the month of April. Compared to industry averages, at the low range of activity Asta has a lower sales price per test, higher fixed costs, and the same breakeven point in number of tests performed. At the high range of activity, Asta’s sales price per test and fixed costs are the same as industry averages, and Asta’s variable costs are lower. At the low range of activity (0 to 4,999 tests performed) fixed costs are $160,000. At the high range of activity (5,000 to 14,999 tests performed) fixed costs are $200,000. sales price per test: 60 Variable cost per test: 20 What is Asta’s breakeven point in number of tests at the high activity range?

Answer 134

The contribution margin per test is sales price less variable cost, or $40 ($60 - $20). The breakeven point is fixed costs divided by unit contribution margin. At the high activity range, breakeven is $200,000 ÷ $40 = 5,000 tests. 5k is the answer

Question 135

Breakeven (also called cost-volume-profit (CVP) analysis is a technique to evaluate the relationship between ____ The key factors in cost-volume-profit analysis are revenues, fixed costs, and variable costs. T/F

Answer 135

costs, volume of activity, and profit.

Question 136

arter Co. paid $1,000,000 for land three years ago. Carter estimates it can sell the land for $1,200,000, net of selling costs. If the land is not sold, Carter plans to develop the land at a cost of $1,500,000. Carter estimates net cash flow from the development in the first year of operations would be $500,000. What is Carter’s opportunity cost of the development? $1,000,000 $1,200,000 $1,500,000 $500,000

Answer 136

Opportunity cost is the cost of a foregone alternative, the result of scarcity and choice. Whenever a choice is made to use scarce resources in one way, other uses are “foregone”; opportunity cost is the benefit given up by not using resources in the alternative way.

Question 137

An increase in production levels within a relevant range most likely would result in: decreasing the total fixed cost. increasing the total cost. increasing the variable cost per unit. decreasing the variable cost per unit.

Answer 137

increasing the total cost. The relevant range is the production range within which fixed costs are unchanged and variable costs are constant on a per-unit basis. Since additional variable costs will be incurred for each additional unit, with no change in total fixed costs, the total costs will increase.

Question 138

Snyder Co. manufactures fans with direct material costs of $10 per unit and direct labor of $7 per unit. A local carrier charges Snyder $5 per unit to make deliveries. Sales commissions are paid at 10% of the selling price. Fans are sold for $100 each. Indirect factory costs and administrative costs are $6,800 and $37,200 per month, respectively. How many fans must Snyder produce to break even? 564 1,375 647 530

Answer 138

Revenue per unit is given in the problem as $100 per unit. ``` Direct material costs per unit $10 Direct labor costs per unit 7 Delivery costs per unit 5 Sales commissions at 10% of sales 10 Total variable costs per unit $32 ``` Indirect factory costs $ 6,800 Administrative costs 37,200 ------- Total fixed costs $44,000 Breakeven in units = FC ÷ (P - V) = $44,000 ÷ ($100 - $32) = 647 units

Question 139

When using a flexible budget, a decrease in production levels within a relevant range: decreases variable cost per unit. increases total fixed costs. increases variable cost per unit. decreases total costs.

Answer 139

decreases total costs. In a normal flexible budget situation (where both variable and fixed costs are present), a decrease in the level of production would be accompanied by a decrease in total costs.

Question 140

The difference between the actual overhead cost and the amount of cost that should be incurred at the earned or standard volume is the __ The difference between the cost that should have been incurred at the earned volume and the cost allocated to work-in-process is uncontrollable because it results from a difference between the normal volume and the earned or standard volume. This uncontrollable variance is often called a ___

Answer 140

controllable or budget variance. volume variance.

Question 141

Chairs___Tables Sales: 180k__48k VC: (96k)____(30k) CM: 84k_____18K ``` Fixed Cost: Avoidable:(36k)___(12k) Unavoidable: (18k)___(10.8k) Operating Income(Loss): 30k__(4.8k) ``` Assuming Tackler discontinues the tables line and does not replace it, the company's operating income will: increase by $4,800. increase by $6,000. decrease by $6,000. decrease by $10,800.

Answer 141

The company's operating income will decrease by $6,000 if they discontinue the tables line and do not replace it. Op income from chairs: 30k FC: Unavoidable: (10.8k) Op Income: Chairs: 19.2k Op Loss: T&C: (30k-4800) = 25.2k Decrease by 6k (19.2k - 25.2k)

Question 142

Learning curve analysis involves applying a mathematical formula to estimate: the time value of production. future time to produce units. future costs to produce units. present time to produce units.

Answer 142

future time to produce units. Learning curve analysis applies a mathematical formula to estimate future time to produce units.

Question 143

____were developed as a result of the reduced time to produce subsequent units—labor becomes more efficient.

Answer 143

Learning curves

Question 144

Clay Co. has considerable excess manufacturing capacity. A special job order’s cost sheet includes the following applied manufacturing overhead costs: Fixed costs: $21,000 Variable costs: $33,000 The fixed costs include a normal $3,700 allocation for in-house design costs, although no in-house design will be done. Instead, the job will require the use of external designers costing $7,750. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job? $54,000 $58,050 $40,750 $36,700

Answer 144

In this question, the fixed costs are a sunk cost that cannot be changed whether this special order is accepted or not. The relevant costs for this job include the variable costs of $33,000 plus the external design cost of $7,750 for a total of $40,750. Historical or past (sunk) costs are irrelevant to the actual decision because the past costs will not be changed (recovered) by future action. Relevant costs are expected future costs that are important or pertinent to the decision under consideration and will be affected by the decision.

Question 145

Spring Co. had two divisions, A and B. Division A created Product X, which could be sold on the outside market for $25 and used variable costs of $15. Division B could take Product X and apply additional variable costs of $40 to create Product Y, which could be sold for $100. Division B received a special order for a large amount of Product Y. If Division A were operating at full capacity, which of the following prices should Division A charge Division B for the Product X needed to fill the special order? $15 $25 $20 $40

Answer 145

At full operating capacity, Division A would be losing sales to the outside market if it chose to sell Product X to Division B. Therefore, the transfer pricing should be equal to Product X's market price of $25.

Question 146

Cyclical fluctuations, random variations, seasonal variations, and secular trend are all components of: learning curve analysis. time series analysis. sales forecasting. exponential smoothing.

Answer 146

time series analysis. Time series analysis focuses on evaluation of trends over time. It may entail several components including seasonal variation and secular trends.

Question 147

Comel, Inc., has two major product lines: stoves and dryers. Comel's management wants to evaluate whether discontinuing dryers will increase profits. Which of the following is best for evaluating the discontinuance of the dryer product line? Variable cost Throughput cost Absorption cost Relevant cost

Answer 147

Relevant cost Relevant cost is best for decision making because relevant cost includes only future costs that differ between alternatives being considered.

Question 148

Jago Co. has two products that use the same manufacturing facilities and cannot be subcontracted. Each product has sufficient orders to utilize the entire manufacturing capacity. For short-run profit maximization, Jago should manufacture the product with the: lower total variable manufacturing costs for the manufacturing capacity. lower total manufacturing costs for the manufacturing capacity. greater contribution margin per hour of manufacturing capacity. greater gross profit per hour of manufacturing capacity.

Answer 148

Contribution margin (price minus variable cost) indicates profitability potential per unit of product. When this value is multiplied times the number of units that can be produced per hour, we can determine profit potential per hour for various products that might be produced. Thus, contribution margin per hour of manufacturing capacity is very relevant in a short-run situation in which the entire manufacturing capacity is expected to be utilized.

Question 149

Which one of the following costs would be relevant in short-term decision making? Incremental fixed costs Costs of fixed assets to be used in the alternatives Total variable costs that will not change with either alternative Opportunity costs that are the same in the considered alternatives

Answer 149

Only incremental costs, whether fixed or variable, are relevant in decision making. Incremental costs represent the difference in the total cost between two alternatives. It is these future incremental costs that are important (“relevant”) to the decision-making process, the act of choosing between/among alternative courses of action

Question 150

``` Sell price: 15 DM Cost: 3 DL Cost: 3 VOH: 3 FOH -2 Fixed S&A: 1 ``` ``` The company received a special one-time order for 1,000 components. Rodder has an alternative use for production capacity for the 1,000 components that would produce a contribution margin of $5,000. What amount is the lowest unit price Rodder should accept for the component? $14 $24 $9 $12 ```

Answer 150

14 The contribution margin is the difference between the revenue for the components and the variable cost of the components. The variable cost to produce these components is $9 per unit ($3 direct material + $3 direct labor + $3 variable overhead), or $9,000 total ($9 per unit × 1,000 units). $5,000 (Contribution margin) = Revenue - $9,000 Revenue = $5,000 + $9,000 = $14,000 $14,000 revenue for $1,000 units = $14 per unit

Question 151

Which of the following limitations is common to the calculations of payback period, discounted cash flow, internal rate of return, and net present value? They rely on the forecasting of future data. They do not consider the time value of money. They require knowledge of a company's cost of capital. They require multiple trial-and-error calculations.

Answer 151

They rely on the forecasting of future data.

Question 152

In using regression analysis, which measure indicates the extent to which a change in the independent variable explains a change in the dependent variable? t-statistic r-squared Standard error p-value

Answer 152

The coefficient of determination (r2) is a ratio that indicates the proportion of variance in the dependent variable determined by the independent variable using the regression equation. r-squared

Question 153

___analysis, often utilizing the least-squares method, is used to estimate the relationship between a dependent variable and one or more independent variables. Caution about predicting the future: Regression analysis typically relies on historical data from events that have already occurred. One hazard regarding regression analysis is that it requires an assumption that the relationships will continue into the future.

Answer 153

Regression True

Question 154

____regression analysis indicates that the dependent variable is predicted on the basis of one independent variable. ____regression analysis is concerned with predicting the dependent variable on the basis of two or more independent variables.

Answer 154

Simple Multiple

Question 155

There are four assumptions that need to be met to produce valid results with regression analysis using the least squares method: 1. ___: The relationship between dependent and independent variables must be linear 2. Constant variance of the ___: ___represent the differences between estimated and actual values. 3. ___of the residuals: 4. ___of the residuals

Answer 155

___Linearity residuals, residuals Independence Normal Distribution

Question 156

The forecasting technique most relevant for analyzing data prior to creation of a flexible budget is: time series analysis. learning curves. exponential smoothing. regression analysis.

Answer 156

regression analysis. Regression analysis can be used to develop simple regression equations of the type y = a + b(x), where a represents the constant (i.e., fixed) cost and b represents the variable rate. This is what is needed for preparation of flexible budgets.

Question 157

A company is offered a one-time special order for its product and has the capacity to take this order with­out losing current business. Variable costs per unit and fixed costs in total will be the same. The gross profit for the special order will be 10%, which is 15% less than the usual gross profit. What impact will this order have on total fixed costs and operating income? Total fixed costs do not change, and operating income increases. Total fixed costs do not change, and operating income does not change. Total fixed costs increase, and operating income increases. Total fixed costs increase, and operating income decreases.

Answer 157

Total fixed costs do not change, and operating income increases. In this question, the fixed costs are a sunk cost that cannot be changed whether this special order is accepted or not. Since the special order will produce a gross profit of 10%, the price received for the order is more than the additional variable costs (the relevant costs) associated with the order. The price received for the order less additional variable costs that would not otherwise be incurred will equal the increase in pretax operating income.

Question 158

Sum hours of activity: 4,480 Sum Maintenance Cost: 43,200 Avg Hrs of activity: 400 Average Maintenance Costs: 3600 Average cost per hour = $9.00; a = 684.65; b = 7.2884; Standard error of a = 49.515; Standard error of b = .12126; Standard error of the estimate = 34.469; r2 = .99724. Based upon the data derived from the regression analysis, 420 maintenance hours in a month would mean the maintenance costs (rounded to the nearest dollar) would be budgeted at:

Answer 158

y=mx + b If maintenance activity (x) in a month is 420 hours, then maintenance costs for the month would be: y = 684.65 + 7.2884(420) = 684.65 + 3061.13 = 3745.78

Question 159

When comparing strategic planning with operational planning, which one of the following statements is most appropriate? Strategic planning is performed at all levels of management. Operational planning is long-range in focus. Operational planning results in budget data. Strategic planning focuses on authority and responsibility.

Answer 159

Operational planning results in budget data. Operational planning results in budget data to be used in planning day-to-day operations Operational planning is long-range in focus. is FALSE bc operational are only on an annual basis -not long range.

Question 160

The ___of an organization is its central purpose, the reason for its existence. The process of translating long-range plans into short-term action is important under operational planning

Answer 160

mission False -strategic planning

Question 161

A company produces and sells two products. The first product accounts for 75% of units sold and the second product accounts for the remaining 25% of units sold. The first product has a selling price of $10 per unit, variable costs of $6 per unit, and allocated fixed costs of $100,000. The second product has a selling price of $25 per unit, variable costs of $13 per unit, and allocated fixed costs of $212,000. At the breakeven point, what number of units of the first product will have been sold? 39,000 25,000 52,000 14,625

Answer 161

39,000 Breakeven package units = Fixed costs ÷ Contribution margin per package = $312,000 ÷ $24 = 13,000 package units Since there are 3 units of Product 1 in each package, sales of Product 1 will be 3 × 13,000 packages, or 39,000 units of Product 1.

Question 162

Which of the following statements is true regarding outsourcing? It works equally well for services as well as goods. It can only be done abroad. It is usually cost-prohibitive. It is difficult to do.

Answer 162

It works equally well for services as well as goods. Outsourcing is the purchasing of goods and services as opposed to producing them in-house. Often it is a cost-saving decision, is easily done, can be either be domestic or international, and relates to services as well as component goods.

Question 163

Under time series analysis, there are four components that contribute to patterns over time. Which of the following is not one of the components? Trends Regular intervals Seasonal variation Cyclical variation

Answer 163

Regular intervals Regular intervals are not a time series analysis. The trick to time series analysis is to determine how much of each component influences the series. The four components are: trend, seasonal variation, cyclical variation, and irregular.

Question 164

There are four components that contribute to patterns over time.

Answer 164

trend Seasonal Variation Cyclical Variation Irregular

Question 165

he formula for computing the economic order quantity is Q = the square root of 2DS/Ci, where D is: demand per year in units. difference between variable and fixed costs. average cost distribution. average shipping distance.

Answer 165

demand per year in units. In the economic order quantity formula, D signifies the demand per year in units; S is the setup or ordering cost per order; C is the cost per unit; and i is the carrying cost, expressed as a percentage of inventory cost (C times i is the carrying cost per unit).

Question 166

Q = the square root of 2DS/Ci, In the economic order quantity formula, ___signifies the demand per year in units; __ is the setup or ordering cost per order; __ is the cost per unit; and i is the carrying cost, expressed as a percentage of inventory cost (C times i is the carrying cost per unit).

Answer 166

D S C

Question 167

When determining the optimum level of cash, management must consider all of the following, except: keeping idle cash to a minimum. whether there is enough cash on hand to meet the disbursal needs that arise in the course of doing business. how to maximize cash balances. the timing of cash flows as determined in the cash flow budget.

Answer 167

Cash management objectives include the following: Having enough cash on hand to meet the needs of the company Investing idle cash to maximize the wealth of the stockholders

Question 168

Having enough cash on hand to meet the needs of the company Investing idle cash to maximize the wealth of the stockholders these are objectives of what?

Answer 168

Cash management

Question 169

A company that produces 10,000 units has fixed costs of $300,000, variable costs of $50 per unit, and a sales price of $85 per unit. After learning that its variable costs will increase by 20%, the company is considering an increase in production to 12,000 units. Which of the following statements is correct regarding the company’s next steps? If production remains at 10,000 units, profits will decrease by $50,000. If production is increased to 12,000 units, profits will increase by $100,000. If production is increased to 12,000 units, profits will increase by $50,000. If production remains at 10,000 units, profits will decrease by $100,000.

Answer 169

If production remains at 10,000 units, profits will decrease by $100,000. The new contribution margin will be sales price less variable cost, or $85 − (120% × $50) = $25 per unit. If production remains at 10,000 units, the contribution margin will be 10,000 × $25, or $250,000. Before the increase in variable costs, the contribution margin was 10,000 × $35 ($85 − $50), or $350,000. With no change in fixed costs, a decrease in the contribution margin from $350,000 to $250,000 will reduce profits by $100,000.

Question 170

Direct materials $1 per unit Direct labor $100 per hour Fixed cost $55,000 The marketing manager decided to spend $2 per unit for the first 5,000 items sold with no additional costs after that. The marketing manager confirmed that the current market price for the new product was $4,000 per 1,000 units. The plant manager told the CFO that the employees would be able to produce 500 units per hour. Approximately how many units would Green have to sell to break even?

Answer 170

First convert all information into cost per unit. Direct material is already given at $1 per unit. Direct labor per unit would be $100 per hour divided by 500 units, or $0.20 per unit. No variable overhead is provided. Fixed cost is generally not relevant and should be ignored in the breakeven calculation unless there is an incremental increase due to the new product. In this example, fixed costs increase by $10,000 ($2 per unit × 5,000). Selling price per unit is $4 per unit ($4,000 ÷ 1,000). The breakeven formula is Fixed cost ÷ (Price per unit – Variable cost per unit) = ($55,000 + $10,000) ÷ [$4 − ($1 + $0.20)] = 23,215 units (rounded).

Question 171

In which of the following scenarios would a company not drop an existing product line? Eliminating the product line will increase overall profitability. The product is no longer marketable. The product line, while not profitable, is covering some fixed costs. A better use of the capacity can be found.

Answer 171

Many managers overlook the fact that, while not profitable, a segment that is covering costs that will need to be reallocated to other product lines should be retained. Segments should not be discontinued immediately as long as the segment’s margin over direct division costs is positive; however, a more productive use of this capacity could be found in the future.

Question 172

Day Mail Order Co. applied the high-low method of cost estimation to customer order data for the first four months of the current year. What is the estimated variable order filling cost component per order? ``` Orders__Cost Jan : 1200 __ 3120 Feb: 1300__ 3185 Mar: 1800 __ 4320 April: 1700 __ 3895 Total: 6000__14,520 ```

Answer 172

Variable Rate per order = Change in cost / Change in orders (4320 - 3120) / (1800 - 1200) 2 per order

Question 173

In calculating the breakeven point for a multiproduct company, which of the following assumptions are commonly made when variable costing is used? I Sales volume equals production volume. II Variable costs are constant per unit. III A given sales mix is maintained for all volume changes.

Answer 173

II and III

Question 174

Jones Corp. had an opportunity to use its capacity to produce an extra 5,000 units with a contribution margin of $5 per unit, or to rent out the space for $10,000. What was the opportunity cost of using the capacity? $10,000 $15,000 $25,000 $35,000

Answer 174

Opportunity costs are the earnings that could have been received had the storage been used in their best alternative use, such as foregone rental income. The company could have earned $10,000 renting out the space, and they have lost that opportunity by using the space for production. It may have been the correct decision, however, because they could earn more by producing in the space than by renting the space. Even if it is the correct decision, they have still lost the opportunity to earn the $10,000 from rental.

Question 175

Kane Corp. estimates that it would incur a $100,000 cost to prepare a bid proposal. Kane estimates also that there would be an 80% chance of being awarded the contract if the bid is low enough to result in a net profit of $250,000. What is the expected value of the payoff? $150,000 $180,000 $0 $220,000

Answer 175

180k Here there are two possible outcomes: $250,000 profit with an 80% probability gives an expected value of 0.8 × $250,000, or $200,000. Zero profit with a 20% probability gives an expected value of -$100,000 (the cost of preparing the bid) for an expected value of -$20,000. Summing an expected value of $200,000 with an expected loss of $20,000 gives a net expected value of $180,000.

Question 176

Multiple regression differs from simple regression in that it: has more independent variables. provides an estimated constant term. has more dependent variables. allows the computation of the coefficient of determination.

Answer 176

has more independent variables. Regression analysis seeks to identify change in a dependent variable (such as cost) related to change in an independent variable (such as a cost driver). Simple regression estimates a relationship between one dependent variable and one independent variable. On the other hand, multiple regression estimates a relationship between one dependent variable and two or more independent variables. Thus, multiple regression has more independent variables than does simple regression.

Question 177

A ceramics manufacturer sold cups last year for $7.50 each. Variable costs of manufacturing were $2.25 per unit. The company needed to sell 20,000 cups to break even. Net income was $5,040. This year, the company expects the price per cup to be $9.00, variable manufacturing costs to increase 33.3%, and fixed costs to increase 10%. How many cups (rounded) does the company need to sell this year to break even? 17,111 17,500 25,667 19,250

Answer 177

19,250 Prior variable cost per unit x (1 + 33.33)% = $2.25 per unit x 1.3333 = $3.00 per unit Last year's fixed costs = 20,000 units x ($7.50 - $2.25) = $105,000 The projected fixed costs are 10% more than the prior year. Projected fixed costs = $105,000 x 1.10 = $115,500 Breakeven in units = FC ÷ (P - V) = $115,500 ÷ ($9 - $3) = 19,250 units

Question 178

Jackson Co. is considering a project that will use 2,000 square feet of storage space at one of its facilities to store used equipment. What will determine Jackson's opportunity cost? The net present value of the project The internal rate of return of the project The value of the next best use of the space The depreciation expense on the space

Answer 178

The value of the next best use of the space Opportunity costs are the earnings that could have been received had the storage been used in their best alternative use, such as rental income that is forgone.

Question 179

What does integrated planning accomplish? Electronic commerce Participation of stakeholders and affected departments Business process design The creation of strategic planning

Answer 179

Participation of stakeholders and affected departments Integrated planning provides for the participation of stakeholders with affected departments within an organization. This participation helps the organization to examine costs and benefits of a plan of action.

Question 180

How is the straight-line depreciation on the laboratory building categorized? Direct material cost Variable cost Overhead cost for testing General and administrative cost

Answer 180

Overhead cost for testing

Question 181

Del Co. has fixed costs of $100,000 and breakeven sales of $800,000. What is its projected profit at $1,200,000 sales? $150,000 $200,000 $400,000 $50,000

Answer 181

$50,000 Variable costs = Breakeven sales - Fixed costs = $800,000- $100,000 = $700,000 Variable cost rate = Variable Costs / Breakeven Sales = $700,000 / $800,000 = .875 Projected profit = Sales - Variable costs - Fixed costs = $1,200,000 - .875(1,200,000) - $100,000 = $1,200,000 - $1,050,000 - $100,000 = $50,000

Question 182

alternative use for the factory is: zero. the total manufacturing cost of the component. the variable manufacturing cost of the component. the fixed manufacturing cost of the component.

Answer 182

zero. Opportunity cost is the net benefit lost or given up when a resource is used for one purpose rather than an alternative. However, if there is no alternative use, the opportunity cost is zero because there is no benefit to be lost if the factory is used in making a component part.

Question 183

The correlation coefficient that indicates the weakest linear association between two variables is: 0. 35. - 0.73. 0. 12. - 0.11.

Answer 183

- 0.11. The correlation coefficient is a measure of the closeness of data points to the regression line. The closer to zero, the poorer the fit. Hence, - 0.11 is the closest to zero and thus the weakest association to the regression line

Question 184

In a lean accounting environment, a company accepts a special order to make 200 units of a product each month for the next two months for $130 per unit. The company normally sells the unit for $170 per unit with variable costs per unit at $80. The company plans to use excess capacity. By what amount would this special order increase profit? $20,000 $16,000 $36,000 $52,000

Answer 184

$20,000 The special order would increase profit by $50 a unit ($130 − $80) times 200 units for two months, or $20,000.

Question 185

The opportunity cost of making a component part in a factory with no excess capacity is the: variable manufacturing cost of the component. cost of the production given up in order to manufacture the component. fixed manufacturing cost of the component. net benefit given up from the best alternative use of the capacity.

Answer 185

net benefit given up from the best alternative use of the capacity. Opportunity cost is the “lost opportunity” or benefit foregone by using a resource for one purpose rather than using it for alternative use. Thus, the opportunity cost of making a component part in a factory with no excess capacity would be the net benefit given up by using the capacity to make the component part.

Question 186

The following information is taken from Wampler Co.'s contribution income statement: ``` Sales $200,000 Contribution margin 120,000 Fixed costs 90,000 Income taxes 12,000 What was Wampler's margin of safety? ```

Answer 186

The margin of safety is the current sales ($200,000) less breakeven sales ($150,000), or $50,000.

Question 187

Pinecrest Co. had variable costs of 25% of sales and fixed costs of $30,000. Pinecrest's breakeven point in sales dollars was: $40,000. $120,000. $30,000. $24,000.

Answer 187

Contribution margin ratio = Gross profit ÷ Sales = 75% (0.75) Breakeven point in dollars = Fixed costs ÷ CM ratio = $30,000 ÷ 0.75 = $40,000

Question 188

Which of the following is not a ratio utilized in the planning and forecasting process? Free cash flow Capital intensity ratio Additional funds needed formula Capital asset ratio

Answer 188

Capital asset ratio All of the answer choices (free cash flow, additional funds needed formula, and capital intensity ratio) are ratios used in the planning process, except for the capital asset ratio, which does not exist.