Final Exam_V1_MCQs

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Description

Identify the letter of the choice that best completes the
statement or answers the question.

1.

Bexley Company produces
retractable pens. November budgeted
production costs are given below:

Pens to be produced

100,000

Direct material
(variable)

$30,000

Direct Labor
(variable)

$50,000

Supplies (variable)

$25,000

Supervision (fixed)

$40,000

Depreciation (fixed)

$30,000

Other (fixed)

$10,000

In December, Bexley expects
to produce 120,000 pens. Assuming no
structural changes, what is Bexley’s budgeted production cost per pen for
December?

A)

$1.54

B)

$1.72

C)

$1.85

D)

$1.93

2.

Use the cost
information in (1) above. In October,
the actual direct labor costs were $46,000 and Bexley produced and sold
90,000 pens. The direct material
performance variance (difference) is:

A)

$5,000 unfavorable.

B)

$5,000 favorable.

C)

$1,000 unfavorable.

D)

$1,000 favorable.

3.

A typical use of
managerial accounting is to:

A)

Help investors and
creditors to assess the financial position of the company.

B)

Help management get a
clean audit report.

C)

Help the SEC decide
whether management is in compliance with its policies.

D)

Help the marketing
manager decide which product promotion to implement.

4.

A manufacturing company
produces 80,000 units of product A at a total cost of $2.4 million. Total fixed costs are $1million. If the company increases production by 25%
and uses a 40% markup the price per unit will be:

A)

$30.80

B)

$31.54

C)

$37.10

D)

$38.50

Use the following to answer
questions 5-6:

RNO Company’s market for the
Model 55 has changed significantly, and RNO has had to drop the price per unit
from $285 to $200. There are some units
in the work in process inventory that have costs of $280 per unit associated
with them. RNO could sell these units in
their current state for $160 each. It
will cost RNO $35 per unit to complete these units so that they can be sold for
$200 each.

5.

A new employee looks at
the analysis and exclaims, “We’ll lose money with either of these
alternatives! Let’s just throw these units in the trash!” Suppose the
alternative to trashing is choosing the more profitable of the two
alternatives (that the new employee looked at and did not like). What effect
will the trashing option (that the new employee

wants) have on net
income?

A)

Net income will
increase by $35 per unit for each unit discarded.

B)

Net income will
decrease by $115 per unit for each unit discarded.

C)

It will have no effect
on net income.

D)

Net income will
decrease by $165 per unit for each unit discarded.

6.

When the incremental
revenues and expenses are analyzed, the company is better off by

A)

$5 per unit if they
complete the units.

B)

$15 per unit if they
sell the units in their current state.

C)

$25 per unit if they
sell the units in their current state.

D)

$35 per unit if they
complete the units.

7.

A company using
activity based pricing marks up the direct cost of goods by 39% plus charges
customers for indirect costs based on the activities utilized by the
customer. Indirect costs are charged
as follows: $6.00 per order placed; $3.00
per separate item ordered; $28.00 per return.
A customer places 10 orders with a total direct cost of $2,210, orders
312 separate items, and makes 8 returns. What will the customer be charged?

A)

$3,000

B)

$4,292

C)

$5,330

D)

$5,755

8.

Manufacturing overhead
is allocated to products based on the number of machine hours required. In a year when 20,000 machine hours were
anticipated, costs were budgeted at $125,000.
If a product requires 7,000 machine hours, how much manufacturing
overhead will be allocated to this product?

A)

$41,667

B)

$43,750

C)

$1,120

D)

$50,000

Use the following information to
answer questions 9-10:

The Sunrise Hotel has 200 rooms.
Each room rents at $160 per night and variable costs total $35 per room per
night of occupancy. Fixed costs total $80,000 per month.

9.

If the hotel spends an
additional $10,000 in the month of February on advertising they feel that
they can expect occupancy rate to increase by 10%. What would be the
financial impact of spending this additional money on advertising for the
month of February (28 days)?

A)

Total fixed costs will
increase by $10,500.

B)

Net income will
increase by $50,000.

C)

Net income will
increase by $26,320.

D)

Total fixed costs will
remain the same.

10.

If 70% of the rooms are
occupied each night in the month of February (28 days) what will total costs
be for the month?

A)

$118,560.

B)

$173,600.

C)

$217,200.

D)

$155,680.

11.

A company believes it
can sell 6,000,000 of its proposed optical mouse for $14 each. There will be $7,500,000 in fixed costs
associated with the mouse. If the
company desires to make a profit of $3,000,000 on the mouse, what is the
target variable cost per mouse?

A)

$10.60

B)

$11.00

C)

$12.25

D)

$9.00

12. Below is
a performance report that compares budgeted and actual profit of Boyles Beer

for the month
of April:

Budget

Actual

Difference

Sales

$200,000

$202,000

$2,000

Less:

Cost of
ingredients

$162,000

$166,000

$4,000

Salaries

$31,000

$31,200

$200

Controllable Profit

$47,000

$44,800

-$2,200

In evaluating the department in terms of its increase
in sales and expenses, what will be

most important
to investigate?

A)
Sales

B)
Cost of ingredients

C)
Salaries

D)
All three components have equal importance.

13.

K-Henry’s Dull Diner
has a contribution margin ratio of 16%.
If fixed costs are $148,952, how many dollars of revenue must
K-Henry’s generate in order to reach the break-even point?

A)

$930,950

B)

$1,060,800

C)

$208,476

D)

$1,105,000

14.

A company has a total
cost of $50.00 per unit at a volume of 100,000 units. The variable cost per unit is $20.00. What would the price be if the company
expected a volume of 120,000 units and used a markup of 50%?

A)

$75.00

B)

$62.50

C)

There is not enough
information in the problem to answer

D)

$67.50

15.

Max’s Pizza produced
and sold 1,000 pizzas last month and had total variable ingredients that cost
$4,575. If production and sales are
expected to increase by 17% next month, which of the following statements is
true?

A)

Total variable
materials costs are expected to be $4,779.50

B)

Variable material cost
per unit is expected to be $4.99.

C)

Total variable
materials costs are expected to be $4,345

D)

Total variable
materials costs are expected to be $5,352.75

16. FarnsworthCompany’s break-even point is
14,377. Each unit generates variable costs

Of $3.2, and is sold for
$4.90. What are the fixed costs?

A)

$26,845.

B)

$59,780.

C)

$24,441.

D)

$32,940.

17. One Small Grill Company is a
start up with the following profile:

Unit selling price = $230;
Variable cost per unit = $130; Fixed Costs = $36,000;

Tax
rate = 40%. How many units should Small
Grill sell to achieve an after-tax target

income of $6,000?

A)

200

B)

460

C)

230

D)

300

18.

Western Apparel Company
owns two stores and management is considering eliminating the East store due
to declining sales. Segmented
contribution income statements are as follows and common fixed costs are
allocated on the basis of sales.

West

East

Total

Sales

$500,500

90,000

$590,500

Variable costs

262,500

45,000

307,500

Direct fixed costs

62,500

25,000

87,500

Segment margin

175,500

20,000

195,500

Allocated fixed costs

137,500

35,000

172,500

Net Income

$38,000

($15,000)

$23,000

Western feels that if
they eliminate the East store that sales in the West store will decline by 15%. If they close the East store, overall
company net income will:

A)

decline by $90,000.

B)

decline by $62,000.

C)

decline by $85,625.

D)

decline by $55,700.

19.

JungleGym, a
best-selling toy has a selling price of $15.
If the contribution margin ratio is 40% and if the fixed costs are
$60,000, how many JungleGyms must the company sell to realize a profit of
$450,000?

A)

100,000

B)

30,000

C)

34,000

D)

85,000

20.

After a good year in 2012,
JungleGym decides it needs to increase sales by 12% in 2013. Which of the following is most likely to
stay the same in 2013?

A)

Total sales revenue.

B)

Total variable costs

C)

Total fixed costs

D)

Total contribution
margin

Information for Questions 21-22

Anderson Manufacturing makes a
single product. Budget information
regarding the current period is given below:

Revenue (100,000 units
at $8.00)

$800,000

Direct materials

150,000

Direct labor

125,000

Variable manufacturing
overhead

235,000

Fixed manufacturing
overhead

110,000

Net income

$180,000

Dye Company approaches Anderson with a special
order for 15,000 units at a price of $7.50 per unit. Variable costs will be the
same as the current production and accepting the special order will not have
any impact on the rest of the company’s orders.
However, Anderson
is operating at capacity and will incur an additional $50,000 in fixed
manufacturing overhead if the order is accepted.

21.

What is the incremental
income (loss) associated with accepting the special order?

A)

($14,000)

B)

$36,000

C)

($23,500)

D)

$27,000

22.

What is the incremental
revenue associated with accepting the special order?

A)

$170,000

B)

$112,500

C)

$70,000

D)

$120,000

23.

On July 26, 2012, radio
Shack announced disappointing 2nd quarter earnings that caused the
stock to fall 29% to all time lows.
Although sales were up 1.2% to $953.2 million gross profit fell 16.6%
to $360.3 million. Assuming Radio Shack’s
store count and fixed costs were the same in the 2nd quarter of
2011 and 2012, which of the following statements is the best explanation for
the decrease in the firm’s profitability?

A)

Opportunity costs
decreased.

B)

Margin of safety
decreased.

C)

Contribution margin
decreased.

D)

Selling price decreased.

24.

Innovations, Inc is
looking to achieve a net income of 15 percent of sales. Unit sales price is $10; variable cost per
unit is $6; total fixed costs are $50,000 what is the level of sales (in
units) required to achieve a net income of 15 percent of sales?

A)

12,000 units.

B)

21,000 units.

C)

16,000 units.

D)

20,000 units.

25.

Anthony’s Bakery sold 2,000
muffins last month and had fixed costs of $6,000. If production and sales are expected to
increase by 10% next month, which of the following statements is true?

A)

Total fixed costs will
decrease.

B)

Fixed cost per unit
will decrease.

C)

Total fixed costs will
increase.

D)

Fixed cost per unit
will increase.

26.

The Dynamaco Company
uses cost-plus pricing with a 50% mark-up.
The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in
fixed costs annually. If demand falls
to 80,000 units and the company wants to continue to earn a 50% return, what
price should the company charge?

A)

$12.75

B)

$14.55

C)

$13.50

D)

$10.95

27. An auto executive is considering how to price
a 2014 hybrid in order to maximize profits for

the company. Manufacturing each hybrid involves $9,500 of
materials, $12,500 of labor,

$3,800 of shipping and $4,000 of other
supplies. The facility where the car is
manufactured

has $12.5 million of fixed costs. The marketing department says that adding a
Bose sound

system would boost demand, but it would
add an additional $750 per car.

The quantity demanded at each unit price
is as follows:

Price

Quantity
Demanded (No Bose)

Quantity
Demanded (with Bose)

$31,000

8,960

10,752

$32,000

7,168

8,602

$33,000

5,734

6,881

$34,000

4,588

5,505

$35,000

3,670

4,404

$36,000

2,936

3,523

$37,000

2,349

2,819

$38,000

1,879

2,255

$39,000

1,503

1,804

What profit maximizing
price should the executive choose?

A)

$34,000 without Bose
sound system.

B)

$39,000 with Bose sound
system.

C)

$36,000 without Bose
sound system.

D)

$35,000 with Bose sound
system

Use the following to answer
question 28:

The Wall Street Journal has the
following monthly data for newspapers sold and total cost.

Month

Issues Sold

Total Cost

January

1,000,000

$20,000,000

February

950,000

$19,100,000

March

1,050,000

$21,060,000

April

1,200,000

$23,000,000

May

1,060,000

$21,075,000

June

800,000

$18,000,000

28.

Using the high-low
method, what is the total cost that the Wall Street Journal will incur if it
is expecting to sell 750,000 newspapers in July?

A)

$17,625,000

B)

$17,500,000

C)

$17,375,000

D)

$17,250,000

29.

During 2011, Bonzai
Corporation reported revenues of $891,640 and profits of $91,486. Fixed costs were $332,043 and 44,582 units
were sold. If costs and prices are
expected to stay the same in 2012, and Bonzai expects to sell 45,000 units,
what will be the company’s budgeted profit?

A)

$95,457

B)

$142,957

C)

$525,000

D)

$667,957

30.

Visit finance.yahoo.com
and determine which of the following statements is incorrect:

A)

The market cap of Microsoft
is more than double that of Google.

B)

Revenues of Microsoft
for 2011 were more than double revenues of Google.

C)

The Price per share of
Google is more than ten times that of Microsoft.

D)

Assets of Microsoft at
the end of 2011 were more than that of Google.

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