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Question 1
Company XYZ sells three products: rocks, paper, and scissors.
The rocks’ contribution margin (CM) per unit is highest and the
scissors’ CM per unit is lowest. Which one of the following
events will increase the company’s overall break-even point?
a) (^) A decrease in the cost of direct materials used in all three products b) (^) Increasing scissors’ selling price c) (^) An increase in the cost of direct materials used in all three products d) (^) An increase in the demand for rocks View Feedback Question 2
A company has provided the following data:
Sales 2,000 units Sales price $50/unit Variable cost $30/unit Fixed cost $25,
If the variable cost per unit is decreased by 10%, the total
fixed cost is increased by 20%, and all other factors remain
the same, what will be the effect on operating income?
a) (^) It will decrease by $5,000. b) (^) It will decrease by $1,000. c) (^) It will increase by $1,000.
d) (^) It will increase by $6,000. View Feedback Question 3
UCB has the following financial results for the month of June:
Sales $3,120, Variable costs 1,920, Contribution margin 1,200, Fixed costs 1,380, Profit/loss $(180,000)
A total of 200,000 units were produced and sold during the
month of June. In order to break even, how many units should
be produced and sold?
a) (^) 143,750 units b) (^) 200,000 units c) (^) 230,000 units d) (^) 3,588,000 units View Feedback Question 4
The James Company requires 22,223 units to be sold to break
even. The sales price per unit is $10 and variable costs per
unit are $5.50. How much were the total fixed costs for this
company?
a) (^) $100, b) (^) $122,
Question 7
Ringo and Paul Corp. has a line of edible straws. What is the
contribution margin per unit of the edible straws, which have
the following cost breakdown?
fixed costs of $88,
a break-even of 27,000 units
variable costs of $20,
a) (^) $3. b) (^) $4. c) (^) $5. d) (^) Indeterminable with the information provided View Feedback Question 8
Mane and Guchey Ltd. (MGL) is a watch manufacturer in
Brampton, Ontario. Its owners, Rob Mane and Celeste Guchey,
are analyzing last year’s results:
Total Per unit Sales (10,000 units) $250,000 $25. Variable costs: Direct manufacturing 90,000 9. Manufacturing overhead 20,000 2. Selling and administration 5,000 0. Contribution margin (CM) 135,000 13. Fixed costs: Selling and administration 20,000 2. Manufacturing overhead 25,000 2. Pre-tax income $ 90,000 9.
They are considering a new piece of machinery that is
estimated to increase sales by 2,000 units and will increase
variable manufacturing overhead by 0.50 per unit. To
accommodate the new machinery, they will need to expand
their operations plant to the factory next door, increasing their
lease by $20,000 fixed costs.
What is the change to pre-tax income if MGL implements this
new piece of machinery?
a) (^) Decrease by $21, b) (^) Increase by $1, c) (^) Increase by $30, d) (^) Increase by $21, View Feedback Question 9
Which one of the following is a TRUE key assumption when
using cost-volume-profit (CVP)?
a) (^) Selling price is linear. b) (^) Sales volume is constant. c) (^) In multiproduct companies, the sales mix is constant. d) (^) Only fixed costs are relevant. View Feedback Question 10
Bambi’s Parka Corp. (BPC) has two products, parka jackets and
parka snow pants, and total fixed costs of $85,000. The sales
information for each is as follows:
a) (^) Fixed period cost b) (^) Variable period cost c) (^) Variable product cost d) (^) Fixed product cost View Feedback Question 2
A product is being produced that requires manufacturing
space costing $1,000 per month and the lease of equipment
for $700 per month. The material cost will be $12 per unit and
the labour cost will be $13 per unit. Advertising and promotion
will cost $2,000 per month.
Advertising and promotion is a:
a) (^) Variable product cost b) (^) Fixed product cost c) (^) Fixed period cost d) (^) Variable period cost View Feedback Question 3
A factory manager’s salary is a:
a) (^) Variable product cost b) (^) Fixed product cost
c) (^) Variable period cost d) (^) Fixed period cost View Feedback Question 4
Matilda Ma Home Accessories has determined that for its
Floorina model of lamp, the direct materials cost is $5 per unit
and the direct labour cost is $4 per unit. Based on 20 monthly
observations, the company ran a regression that projected the
overhead associated with this model of lamp as follows:
Overhead = $16,500 + $0.75X, where X is the direct labour
cost.
The selling price for the Floorina lamp is $17 per unit. What is
the expected gross margin from sales of the Floorina lamp
next month if sales volume is estimated to be 5,000 units?
a) $8, b) $19, c) $23, d) $36, View Feedback Question 5
A company has the following machine hours and production
costs for the last six months of last year:
Month Machine hours Production cost July 15,000 $12,
Wallets Belts Selling price per unit $30 $ Cost per unit: Variable manufacturing costs $8 $ Variable marketing costs $2 $ Fixed manufacturing costs $5 $ Fixed marketing costs $6 $ Manufacturing Wallets (per unit) 15 minutes Belts (per unit) 40 minutes Quarterly direct labour hour (DLH) capacity 3,600 hours
The maximum expected sales of wallets and belts for the next
quarter are 7,500 units and 4,500 units, respectively.
Which of the following is the most important factor for ALC to
consider in determining the optimal production plan for the
next quarter?
a) (^) The selling price of wallets and belts b) (^) The unit contribution margin of wallets and belts c) (^) The contribution margin per direct labour hour of wallets and belts
d) (^) The total cost of wallets and belts View Feedback Question 3
Which of the following statements regarding special order
decisions is true?
a) When considering whether to accept a special order, you need to consider whether variable costs excee costs. b) (^) When considering whether to accept a special order, you need to consider both opportunity costs and s c) When considering whether to accept a special order, you need to consider the costs to lease an asset ver costs to buy it. d) (^) When considering whether to accept a special order, you need to consider short-term and long-term im View Feedback Question 4
A company produces three products — A, B, and C — all using
the same direct materials. The company is experiencing an
unexpected spike in the demand for these products and a
shortage in the supply of direct materials. The price of
materials is $16 per gram, and only 6,000 grams of material
are currently available each week. Per-unit data is as follows:
Product A Product B Product C Sales price $120 $180 $ Costs: Direct materials 24 64 32 Direct labour 54 28 110
Which of the following factors would be considered a potential
argument against adding lipstick as a new product?
a) (^) Scoops risks an inability to finance the moulds. b) (^) Scoops risks alienating current customers. c) (^) Scoops risks additional regulatory requirements. d) (^) Scoops risks making a profit. View Feedback Question 7
Candy Factory Inc. recently acquired new factory space and
machinery for the sole purpose of producing one of two new
products. The company needs to decide whether it should
produce hard candies (HC) or gummy candies (GC).
Information regarding these products is as follows:
expenses already incurred for retooling of GC ($30,000)
and HC ($40,000) equipment
estimated expenses to complete retooling of GC
($10,000) equipment
annual head office cost allocation to produce GC
($60,000) and HC ($100,000)
funds previously spent on market research for GC
($60,000) and HC ($50,000)
factory space for GC (1,500 square feet) and HC (1,
square feet)
Which one of the following is the MOST significant factor in
deciding which product to produce in the short term?
a) (^) Funds spent on market research
b) (^) Retooling expenses c) (^) Costs from head office allocation d) (^) Lease cost per square foot for the factory space View Feedback Question 8
The MXM Hockey Company (MXM) manufactures a line of
composite hockey sticks for professional and semi-professional
hockey teams around the world. The sales forecast for its
three main sticks for the coming year has been prepared and
is presented below.
CX-24 DR-53 JX-
Sales volume (units) 12,500 12,500 22, Unit selling price $225 $325 $ Variable manufacturing cost per unit 85 110 165 Contribution margin (CM) per unit $140 $215 $ CX-24 DR-53 JX-250 Totals Budgeted sales $2,812,500 $4,062,500 $10,260,000 $17,135, Variable costs 1,062,500 1,375,000 3,762,000 6,199, CM $1,750,000 $2,687,500 $6,498,000 $10,935, Fixed costs 4,800, Operating income $6,135,
After preparing its original estimates, management
determined that the variable manufacturing cost of JX-
would increase by 20% while fixed costs are expected to
decline by 12%.
What is the expected change in operating income from the
original budget scenario? (Round to two decimal places.)
a) 4.86% increase
Variable costs 1,368,000 1,932,000 672, Fixed costs 336,000 450,000 270,
Management is studying whether to drop the office furniture
department. If dropped, the following changes are expected to
occur:
The vacated space will be remodelled as an addition to
housewares at a cost of $148,800.
Sales of housewares are expected to increase by
$600,000; the housewares department’s contribution
margin percentage will increase by 6% on this
incremental revenue.
JS can avoid 30% of the fixed costs allocated to office
furniture.
JS will increase advertising by $100,000 to promote the
new housewares products.
Customers who purchased office furniture often
purchased electronics as well; electronics sales are
expected to fall by 15%.
The resulting income/(loss) of closing the office furniture
department would be:
a) (^) $148,600 loss b) (^) $129,000 income c) (^) $220,600 loss d) (^) $256,600 loss View Feedback Question 1
Which of the following provides a brief description of a
strategic process?
a) A process that involves all aspects of the organization in the strategic plan b) A process by which the vision, mission, and values are determined c) A process that ensures the organization is aligned with the organizational goals d) A process that determines the best competitive strategy View Feedback Question 2
Which of the following provides a brief definition of “value
proposition.”
a) The promise a business makes to price-match the competition b) The unique service or feature that is attractive to customers c) The pricing strategy designed to maximize profits d) The assurance of product quality, price, and placement. View Feedback Question 3
Joe Newbie quit his job with an accounting firm to start his
own bookkeeping business. His strategy is to provide highly
personal, low-cost, flat-rate service. His goal is to be the
largest bookkeeping firm in the city. Despite a growing
business and the addition of several assistants, his company
remains unprofitable. His employees are too slow and,
although he has tried to motivate them, they cannot deliver
the services quickly enough. Even with Joe’s careful
budgeting, significant employee time overruns are the norm.
b) A vivid description of where the organization is going. It is future oriented, meant to inspire and give d an internal audience. c) A declaration of the core beliefs, principles, and philosophies that comprise the organizational culture, internally and externally. d) (^) A declaration of an organization’s strategic direction. View Feedback
