Reference no: EM132906031

Questions -

Q1. Johnson Company operates two plants: Plant A and Plant B. Johnson Company reported for the year just ended a contribution margin of $50,000 for Plant A. Plant B had sales of $200,000 and a contribution margin ratio of 40%. Net operating income for the company was $10,000 and traceable fixed costs for the two plants totalled $50,000. What were Johnson Company's common fixed costs for last year?

a. $70,000.

b. $90,000.

c. $40,000.

d. $50,000.

Q2. Which of the following best describes a plant operating at capacity?

a. Managers should produce those products with the highest contribution margin in order to deal with the constrained resource.

b. Every machine and person in the plant is working at the maximum possible rate.

c. Fixed costs will need to change to accommodate increased demand.

d. Only some specific machines or processes are operating at the maximum rate possible.

Q3. Which of the following is NOT an effective way of dealing with a production constraint (i.e., bottleneck)?

a. Reduce the number of defective units produced at the bottleneck.

b. Pay overtime to workers assigned to workstations located after the bottleneck in the production process.

c. Pay overtime to workers assigned to the bottleneck.

d. Subcontract work that would otherwise require the use of the bottleneck.

Q4. Why are the net present value and internal rate of return methods of capital budgeting superior to the payback method?

a. Because they reflect the effects of depreciation and income taxes.

b. Because they are easier to implement.

c. Because they require less input.

d. Because they consider the time value of money.

Q5. Which of the following statements about the evaluation of an investment having uneven cash flows using the payback method is correct?

a. It requires the use of a sophisticated calculator or computer software.

b. It will produce essentially the same results as those obtained through the use of discounted cash flow techniques.

c. It CANNOT be done.

d. It can be done only by matching cash inflows and investment outflows on a year-by-year basis.