Midterm 2 2016 part i

Question 1

Reducing reliance on human workers and instead investing heavily in computers and online technology will

a. reduce fixed costs and increase variable costs.
b. reduce variable costs and increase fixed costs.
c. have no effect on the relative proportion of fixed and variable costs.
d. make the company less susceptible to economic swings.

Answer 1

b. reduce variable costs and increase fixed costs

Question 2

A cost structure which relies more heavily on fixed costs makes the company

a. more sensitive to changes in sales revenue. b. less sensitive to changes in sales revenue.
c. either more or less sensitive to changes in sales revenue, depending on other factors.
d. have a lower break-even point.

Answer 2

a. more sensitive to changes in sales revenue.

Question 3

Prices are set by the competitive market when

a. the product is specially made for a customer!

b. there are no other producers capable of manufacturing a similar item. c. a company can effectively differentiate its product from others.
d. a product is not easily distinguished from competing products.

Answer 3

d. a product is not easily distinguished from competing products.

Question 4

The formula for the production budget is budgeted sales units plus:

a. Desired ending merchandise inventory less beginning merchandise inventory.
b. Beginning finished goods units less desired ending finished goods units.
c. Desired ending direct materials units less beginning direct materials units.
d. Desired ending finished goods units less beginning finished goods units.

Answer 4

d. Desired ending finished goods units less beginning finished goods units.

Question 5

Net income will be:
a. Greater if more higher-contribution margin units are sold than lower-contribution
margin units.
b. Greater if more lower-contribution margin units are sold than higher-contribution
margin units.
c. Equal as long as long as total sales remain equal, regardless of which products are
sold.
d. Unaffected by changes in the mix of products sold.

Answer 5

a. Greater if more higher-contribution margin units are sold than lower-contribution
margin units.