Rno company''s market for the model 55

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Reference no: EM13886395

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

Halifax Inc. 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, Halifax expects to produce 130,000 pens. Assuming no structural changes, what is Halifax's budgeted production cost per pen for December?

$1.67

$1.72

$1.85

$1.93

Use the cost information in (1) above. In October, the actual direct labor costs were $46,000 and Halifax produced and sold 90,000 pens. The direct labor performance variance (difference) from October to November was:

$5,000 unfavorable.

$5,000 favorable.

$1,000 unfavorable.

$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.	Pluralix, a manufacturing company produces 80,000 units of product A at a total cost of $2.4 million. Total fixed costs are $1.4 million. If the company increases production by 25% and uses a 19% 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 30% plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $8.00 per order placed; $4.00 per separate item ordered; $30.00 per return. A customer places 10 orders with a total direct cost of $3,000, orders 300 separate items, and makes 5 returns. What will the customer be charged?
	A)	$3,000
	B)	$4,290
	C)	$5,330
	D)	$5,750

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 $20,000 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)	$86,560.
	B)	$173,600.
	C)	$217,200.
	D)	$155,680.

11.	At Nommy's Tights, the break-even point is 2,400 units. If fixed costs total $300,000 and variable costs are $25 per unit, what is the selling price per unit?
	A)	$210
	B)	$180
	C)	$5
	D)	$150

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.	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)	$67.50
	D)	There is not enough information in the problem to answer.

14.	Jeff'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

15. If a company is currently operating at its breakeven point, which of the following

statements is true? (Income tax considerations are ignored.)

A)	If fixed costs increase, net income will decrease by the contribution margin ratio times the amount of the increase in fixed costs.
B)	If sales increase by 20%, net income will also increase by 20%, assuming fixed costs are not equal to zero.
C)	If variable costs double, net income will decrease by 50%.
D)	Net income will decrease by the decrease in number of units sold times the contribution margin per unit.

16. 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

17.	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

18.	After a good year in 2014, Howell Inc. decides it needs to increase sales by 12% in 2015. Which of the following is most likely to stay the same in 2015?
	A)	Total sales revenue.
	B)	Total variable costs
	C)	Total fixed costs
	D)	Total contribution margin

Information for Questions 19-20

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.

19.	What is the incremental income (loss) associated with accepting the special order?
	A)	($14,000)
	B)	$36,000
	C)	($23,500)
	D)	$27,000

20.	What is the incremental revenue associated with accepting the special order?
	A)	$70,000.
	B)	$112,500.
	C)	$120,000.
	D)	$170,000.

21.	On July 26, 2012, Radio Shack announced disappointing 2^nd 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 2^nd 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.

22.	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)	Total fixed costs will increase.
	C)	Fixed cost per unit will decrease.
	D)	Fixed cost per unit will increase.

23.	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)	$10.95.
	B)	$12.75.
	C)	$13.50.
	D)	$14.55.

24. 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

25.	During 2014, 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 2015, 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

Reference no: EM13886395

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