A manager should always reject a special order ifA. t.docx

A manager should always reject a special order if:
A. the special order price is less than the variable costs of the
order.
B. there is available excess capacity.
C. the special order price is less than the regular sales price.
D. the special order will require variable nonmanufacturing
expenses.
To find the breakeven point using the shortcut formulas, you
use:
A. zero for the contribution margin per unit.
B. zero for the fixed expenses.
C. zero for the contribution margin ratio.

D. zero for the operating income.
A product is sold at $60.00 per unit, the variable expense per
unit is $30, and total fixed expenses are $200,000, what are the
breakeven sales in dollars?
A. $3,333
B. $100,000
C. $133,333
D. $400,000
Sky High Seats manufactures seats for airplanes. The company
has the capacity to produce 100,000 seats per year, but is
currently producing and selling 75,000 seats per year. The
following information relates to current production:
Sale price per unit
$400
Variable costs per unit:
$220

Manufacturing
$50
Marketing and administrative
Total fixed costs:
Manufacturing
$750,000
$200,000
If a special sales order is accepted for 3,000 seats at a price of
$300 per unit, and fixed costs increase by $10,000, how would
operating income be affected? (NOTE: Assume regular sales are
not affected by the special order.)
A. Decrease by $80,000
B. Increase by $230,000
C. Increase by $90,000
D. Increase by $80,000

The breakeven point may be defined as the number of units a
company must sell to do which of the following?
A. Generate a net loss
B. Generate a zero profit
C. Earn more net income than the previous accounting period
D. Generate a net income
Question 6 of 40
2.5 Points
The area to the right of the breakeven point and between the
total revenue line and the total expense line represents:
A. expected profits.
B. expected losses.

C. variable expenses.
D. fixed expenses.
Question 7 of 40
2.5 Points
The horizontal line intersecting the vertical y-axis at the level
of total cost on a CVP graph represents:
A. total costs.
B. total variable costs.
C. total fixed costs.
D. breakeven point.
Question 8 of 40
2.5 Points

The Muffin House produces and sells a variety of muffins. The
selling price per dozen is $15, variable costs are $9 per dozen,
and total fixed costs are $4,200. How many dozen muffins must
The Muffin House sell to breakeven?
A. 10,500
B. 700
C. 280
D. 175
Question 9 of 40
2.5 Points
Corny and Sweet grows and sells sweet corn at its roadside
produce stand. The selling price per dozen is $3.75, variable
costs are $1.25 per dozen, and total fixed costs are $750.00.
What are breakeven sales in dollars?
A. $563

B. $300
C. $375
D. $1,125
Question 10 of 40
2.5 Points
Pluto Incorporated provided the following information
regarding its single product:
Direct materials used
$240,000
Direct labor incurred
$420,000
Variable manufacturing overhead
$160,000
Fixed manufacturing overhead
$100,000
Variable selling and administrative expenses
$60,000
Fixed selling and administrative expenses
$20,000
The regular selling price for the product is $80. The annual
quantity of units produced and sold is 40,000 units (the costs

above relate to the 40,000 units production level). The company
has excess capacity and regular sales will not be affected by this
special order. There was no beginning inventory. What would
be the effect on operating income of accepting a special order
for 3,500 units at a sale price of $55 per product?
A. Increase by $115,500
C. Decrease by $115,500
D. Decrease by $269,500
Question 11 of 40
2.5 Points
Sale price per unit
$400

$220
Manufacturing
$50
Total fixed costs:
Manufacturing
$750,000
$200,000
$350 per unit, and fixed costs remain unchanged, how would
B. Decrease by $560,000
C. Increase by $2,450,000
D. Increase by $8,000,000

Question 12 of 40
2.5 Points
The effect of a plant closing on employee morale is an example
of which of the following?
A. A qualitative factor
B. A quantitative factor
C. A sunk cost
D. A variable cost
Question 13 of 40
2.5 Points
If total fixed costs are $455,000, the contribution margin per
unit is $25.00, and targeted operating income is $25,000, how
many units must be sold to breakeven?

A. 11,375,000
B. 19,200
C. 18,200
D. 625,000
Question 14 of 40
2.5 Points
In a special sales order decision, incremental fixed costs that
will be incurred if the special order is accepted are considered
to be:
A. opportunity costs.
B. irrelevant to the decision.
C. relevant to the decision.

D. sunk costs.
Question 14 of 40
2.5 Points
to be:
D. sunk costs.
Question 15 of 40
2.5 Points
Samson Incorporated provided the following information
regarding its only product:

Sale price per unit
$50.00
$160,000
$185,000
$120,000
$70,000
$65,000
$12,000
Units produced and sold
20,000
Assume no beginning inventory
Assuming there is excess capacity, what would be the effect on
operating income of accepting a special order for 1,200 units at
a sale price of $47 per product? The 1,200 units would not
require any variable selling and administrative expenses.
(NOTE: Assume regular sales are not affected by the special
order.)

Question 16 of 40
2.5 Points
To find the number of units that need to be sold in order to
breakeven or generate a target profit, the formula used is:
A. (fixed expenses + operating income) ÷ contribution margin
per unit.
B. (fixed expenses + operating income) ÷ contribution margin
ratio.
C. (fixed expenses - operating income) ÷ contribution margin
ratio.
D. (fixed expenses - operating income) ÷ contribution margin

per unit.
Question 17 of 40
2.5 Points
Assume the following amounts:
Total fixed costs
$24,000
Selling price per unit
$20
Variable costs per unit
$15
If sales revenue per unit increases to $22 and 12,000 units are
sold, what is the operating income?
A. $264,000
B. $60,000
C. $108,000
D. $84,000

Question 18 of 40
2.5 Points
Blue Technologies manufactures and sells DVD players. Great
Products Company has offered Blue Technologies $22 per DVD
player for 10,000 DVD players. Blue Technologies' normal
selling price is $30 per DVD player. The total manufacturing
cost per DVD player is $18 and consists of variable costs of $14
per DVD player and fixed overhead costs of $4 per DVD player.
(NOTE: Assume excess capacity and no effect on regular sales.)
How much are the expected increase (decrease) in revenues and
expenses from the special sales order?
A. Expected increase in revenues $220,000; expected increase
in expenses $140,000
B. Expected increase in revenues $220,000; expected increase in
expenses $40,000
C. Expected increase in revenues $300,000; expected increase in
expenses $140,000

D. Expected increase in revenues $220,000; expected increase
Question 19 of 40
2.5 Points
"Contribution margin per unit" is best described by which of the
following?
A. Sales price per unit minus fixed cost per unit
B. Sales price per unit minus variable cost unit
C. Sales price per unit minus fixed and variable costs per unit
D. Units sold time contribution margin ratio
Question 20 of 40
2.5 Points
Which of the following best describes a "sunk cost"?

A. Costs that were incurred in the past and cannot be changed
B. Benefits foregone by choosing a particular alternative course
of action
C. A factor that restricts the production or sale of a product
D. Expected future data that differ among alternatives
Question 21 of 40
2.5 Points
Assume Cucumber Company expects each division to earn an
8% target rate of return. Assume the Company’s Pickle Division
had the following results.
Sales $24,500,000
Operating income $1,250,000
Total assets $15,500,000
The Division’s RI is:

A. ($10,000).
B. $10,000.
C. ($710,000).
D. $710,000.
Question 22 of 40
2.5 Points
If a company must decrease its selling price while all of the
company's expenses remain constant, what will happen to return
on investment (ROI)?
A. ROI will decrease.
B. ROI will increase.

C. ROI will not be affected.
D. We cannot determine the effect from the information
provided.
Question 23 of 40
2.5 Points
All of the following are responsibility centers EXCEPT:
A. profit centers.
B. investment centers.
C. customer centers.
D. cost centers.
Question 24 of 40
2.5 Points
Brockman Company is preparing its cash budget for the

upcoming month. The budgeted beginning cash balance is
expected to be $35,000. Budgeted cash disbursements are
$123,000, while budgeted cash receipts are $130,000. Brockman
Company wants to have an ending cash balance of $48,000.
How much would Brockman Company need to borrow to
achieve its desired ending cash balance?
A. $6,000
B. $90,000
C. $42,000
D. $55,000
Question 25 of 40
2.5 Points
Forty Winks Corporation manufactures nightstands. The
production budget shows that Forty Winks Corporation plans to
produce 1,200 nightstands in March and 1,050 nightstands in
April. Each nightstand requires .50 direct labor hours in its
production. Forty Winks Corporation has a direct labor rate of
$12 per direct labor hour. What is the total combined direct
labor cost that should be budgeted for March and April?

A. 6,300
B. 7,200
C. 27,000
D. 13,500
Question 26 of 40
2.5 Points
Budget committees most often would include all of the
following people EXCEPT:
A. CEO.
B. research and development manager.
C. shareholder.

marketing manager.
Question 27 of 40
2.5 Points
For the most recent year, Robin Company reports operating
income of $650,000. Robin's sales margin is 10%, and capital
turnover is 2.0. What is Robin's return on investment (ROI)?
A. 5%
B. 1%
C. 100%
D. 20%
Question 28 of 40
2.5 Points
Kotrick Company has beginning inventory of 15,000 units and
expected sales of 23,000 units. If the desired ending inventory
is 18,000 units, how many units should be produced?

A. 20,000
B. 56,500
C. 10,000
D. 26,000
Question 29 of 40
2.5 Points
The performance evaluation of a profit center is typically based
on its:
A. flexible budget variance.
B. static budget variance.
C. return on investment.

D. return on assets.
Question 30 of 40
2.5 Points
Regarding the budgeting process, which of the following
statements is true?
A. The budget should always be designed by top corporate
management.
B. The budget should be approved by the company's external
auditors.
C. The budget should be designed from the bottom up, with
input from employees at all levels.
D. All of the listed statements are true regarding the budgeting
process.
Question 31 of 40
2.5 Points

Beginning inventory is $120,000 and ending inventory is 60%
of beginning inventory. Compute cost of goods sold for the
period if purchases are $400,000.
A. $72,000
B. $448,000
C. $520,000
D. $592,000
Question 32 of 40
2.5 Points
The difference between actual and budgeted figures is known
as:
A. fluctuations.

B. variances.
C. overages.
D. underages.
Question 33 of 40
2.5 Points
The ________ budget is the only budget stated ONLY in units,
not dollars.
A. production
B. sales
C. direct materials
D. manufacturing overhead
Question 34 of 40
2.5 Points

In a(n) ________ center, managers are accountable for both
revenues and costs.
A. cost
B. profit
C. equity
D. investment
Question 35 of 40
2.5 Points
The results of a customer survey about customer experiences
with the company's services would be an example of measuring
which perspective?
A. Financial

B. Customer
C. Internal business
D. Learning and growth
Question 36 of 40
2.5 Points
Sales $24,500,000
The Division’s ROI is:

A. 8.1%.
B. 15.8%.
C. 5.1%.
D. 7.0%.
Question 37 of 40
2.5 Points
Green Company has budgeted sales of 23,000 units for June and
25,000 units for July. Green's policy is to maintain its finished
goods inventory at 25% of the following month's sales.
Accordingly, at the end of May, Green had 5,750 units on hand.
How many units must it produce in June in order to support the
sales goal and maintain its policy regarding finished goods
inventory?
A. 6,250 units
B. 23,000 units
C. 23,500 units

D. 29,250 units
Question 38 of 40
2.5 Points
Feeney Furniture prepared the following sales budget.
Month
Cash Sales
Credit Sales
March
$20,000
$10,000
April
$36,000
$16,000
May
$42,000
$40,000
June
$54,000
$48,000
Credit collections are 15% two months following the sale, 50%
in the month following the sale, and 30% in the month of sale.
The remaining 5% is expected to be uncollectible. What are the
total cash collections in June?

A. $36,800
B. $90,800
C. $86,000
D. $96,600
Question 39 of 40
2.5 Points
Selected financial data for The Portland Porcelain Works Coffee
Mug Division is as follows.
Sales
$2,300,000
Operating income
$414,000
Total assets
$718,750
Current liabilities
$180,000
Target rate of return
10%
Weighted average cost of capital
8%

What is The Portland Porcelain Works Coffee Mug Division
capital turnover?
A. 5.6
B. 12.8
C. 3.2
D. 1.7
Question 40 of 40
2.5 Points
Which of the following types of cash outlays has its own
budget?
A. Capital expenditures

B. Dividends
C. Income taxes
D. All of the above
A manager should always reject a special order if:
A. the special order price is less than the variable costs of the
order.
B. there is available excess capacity.
C. the special order price is less than the regular sales price.
D. the special order will require variable nonmanufacturing
expenses.
To find the breakeven point using the shortcut formulas, you
use:

A. zero for the contribution margin per unit.
B. zero for the fixed expenses.
C. zero for the contribution margin ratio.
D. zero for the operating income.
A product is sold at $60.00 per unit, the variable expense per
unit is $30, and total fixed expenses are $200,000, what are the
breakeven sales in dollars?
A. $3,333
B. $100,000
C. $133,333
D. $400,000

Sale price per unit
$400
$220
Manufacturing
$50
Total fixed costs:
Manufacturing
$750,000
$200,000
$300 per unit, and fixed costs increase by $10,000, how would
A. Decrease by $80,000

The breakeven point may be defined as the number of units a
company must sell to do which of the following?
A. Generate a net loss
B. Generate a zero profit
C. Earn more net income than the previous accounting period
D. Generate a net income
Question 6 of 40
2.5 Points
The area to the right of the breakeven point and between the
total revenue line and the total expense line represents:

A. expected profits.
B. expected losses.
C. variable expenses.
D. fixed expenses.
Question 7 of 40
2.5 Points
The horizontal line intersecting the vertical y-axis at the level
of total cost on a CVP graph represents:
A. total costs.
B. total variable costs.
C. total fixed costs.

D. breakeven point.
Question 8 of 40
2.5 Points
The Muffin House produces and sells a variety of muffins. The
selling price per dozen is $15, variable costs are $9 per dozen,
and total fixed costs are $4,200. How many dozen muffins must
The Muffin House sell to breakeven?
A. 10,500
B. 700
C. 280
D. 175
Question 9 of 40
2.5 Points
Corny and Sweet grows and sells sweet corn at its roadside
produce stand. The selling price per dozen is $3.75, variable

costs are $1.25 per dozen, and total fixed costs are $750.00.
What are breakeven sales in dollars?
A. $563
B. $300
C. $375
D. $1,125
Question 10 of 40
2.5 Points
Pluto Incorporated provided the following information
regarding its single product:
$240,000
$420,000
$160,000
$100,000

$60,000
$20,000
The regular selling price for the product is $80. The annual
quantity of units produced and sold is 40,000 units (the costs
above relate to the 40,000 units production level). The company
has excess capacity and regular sales will not be affected by this
special order. There was no beginning inventory. What would
be the effect on operating income of accepting a special order
for 3,500 units at a sale price of $55 per product?
C. Decrease by $115,500
D. Decrease by $269,500
Question 11 of 40
2.5 Points

Sale price per unit
$400
$220
Manufacturing
$50
Total fixed costs:
Manufacturing
$750,000
$200,000
$350 per unit, and fixed costs remain unchanged, how would

C. Increase by $2,450,000
D. Increase by $8,000,000
Question 12 of 40
2.5 Points
The effect of a plant closing on employee morale is an example
of which of the following?
A. A qualitative factor
B. A quantitative factor
C. A sunk cost
D. A variable cost
Question 13 of 40
2.5 Points

If total fixed costs are $455,000, the contribution margin per
unit is $25.00, and targeted operating income is $25,000, how
many units must be sold to breakeven?
A. 11,375,000
B. 19,200
C. 18,200
D. 625,000
Question 14 of 40
2.5 Points
to be:

D. sunk costs.
Question 14 of 40
2.5 Points
to be:
D. sunk costs.

Question 15 of 40
2.5 Points
Samson Incorporated provided the following information
regarding its only product:
Sale price per unit
$50.00
$160,000
$185,000
$120,000
$70,000
$65,000
$12,000
Units produced and sold
20,000
Assume no beginning inventory
Assuming there is excess capacity, what would be the effect on
operating income of accepting a special order for 1,200 units at
a sale price of $47 per product? The 1,200 units would not
require any variable selling and administrative expenses.

(NOTE: Assume regular sales are not affected by the special
order.)
Question 16 of 40
2.5 Points
To find the number of units that need to be sold in order to
breakeven or generate a target profit, the formula used is:
A. (fixed expenses + operating income) ÷ contribution margin
per unit.
B. (fixed expenses + operating income) ÷ contribution margin

ratio.
C. (fixed expenses - operating income) ÷ contribution margin
ratio.
D. (fixed expenses - operating income) ÷ contribution margin
per unit.
Question 17 of 40
2.5 Points
Assume the following amounts:
Total fixed costs
$24,000
Selling price per unit
$20
Variable costs per unit
$15
If sales revenue per unit increases to $22 and 12,000 units are
sold, what is the operating income?
A. $264,000

B. $60,000
C. $108,000
D. $84,000
Question 18 of 40
2.5 Points
Blue Technologies manufactures and sells DVD players. Great
Products Company has offered Blue Technologies $22 per DVD
player for 10,000 DVD players. Blue Technologies' normal
selling price is $30 per DVD player. The total manufacturing
cost per DVD player is $18 and consists of variable costs of $14
per DVD player and fixed overhead costs of $4 per DVD player.
(NOTE: Assume excess capacity and no effect on regular sales.)
How much are the expected increase (decrease) in revenues and
expenses from the special sales order?
A. Expected increase in revenues $220,000; expected increase

B. Expected increase in revenues $220,000; expected increase in
expenses $40,000
C. Expected increase in revenues $300,000; expected increase in
expenses $140,000
D. Expected increase in revenues $220,000; expected increase
Question 19 of 40
2.5 Points
"Contribution margin per unit" is best described by which of the
following?
A. Sales price per unit minus fixed cost per unit
B. Sales price per unit minus variable cost unit
C. Sales price per unit minus fixed and variable costs per unit
D. Units sold time contribution margin ratio
Question 20 of 40

2.5 Points
Which of the following best describes a "sunk cost"?
A. Costs that were incurred in the past and cannot be changed
B. Benefits foregone by choosing a particular alternative course
of action
C. A factor that restricts the production or sale of a product
D. Expected future data that differ among alternatives
Question 21 of 40
2.5 Points
Sales $24,500,000

The Division’s RI is:
A. ($10,000).
B. $10,000.
C. ($710,000).
D. $710,000.
Question 22 of 40
2.5 Points
If a company must decrease its selling price while all of the
company's expenses remain constant, what will happen to return
on investment (ROI)?

A. ROI will decrease.
B. ROI will increase.
C. ROI will not be affected.
D. We cannot determine the effect from the information
provided.
Question 23 of 40
2.5 Points
All of the following are responsibility centers EXCEPT:
A. profit centers.
B. investment centers.
C. customer centers.
D. cost centers.

Question 24 of 40
2.5 Points
Brockman Company is preparing its cash budget for the
upcoming month. The budgeted beginning cash balance is
expected to be $35,000. Budgeted cash disbursements are
$123,000, while budgeted cash receipts are $130,000. Brockman
Company wants to have an ending cash balance of $48,000.
How much would Brockman Company need to borrow to
achieve its desired ending cash balance?
A. $6,000
B. $90,000
C. $42,000
D. $55,000
Question 25 of 40
2.5 Points

Forty Winks Corporation manufactures nightstands. The
production budget shows that Forty Winks Corporation plans to
produce 1,200 nightstands in March and 1,050 nightstands in
April. Each nightstand requires .50 direct labor hours in its
production. Forty Winks Corporation has a direct labor rate of
$12 per direct labor hour. What is the total combined direct
labor cost that should be budgeted for March and April?
A. 6,300
B. 7,200
C. 27,000
D. 13,500
Question 26 of 40
2.5 Points
Budget committees most often would include all of the
following people EXCEPT:

A. CEO.
B. research and development manager.
C. shareholder.
marketing manager.
Question 27 of 40
2.5 Points
For the most recent year, Robin Company reports operating
income of $650,000. Robin's sales margin is 10%, and capital
turnover is 2.0. What is Robin's return on investment (ROI)?
A. 5%
B. 1%
C. 100%
D. 20%
Question 28 of 40

2.5 Points
Kotrick Company has beginning inventory of 15,000 units and
expected sales of 23,000 units. If the desired ending inventory
is 18,000 units, how many units should be produced?
A. 20,000
B. 56,500
C. 10,000
D. 26,000
Question 29 of 40
2.5 Points
The performance evaluation of a profit center is typically based
on its:

A. flexible budget variance.
B. static budget variance.
C. return on investment.
D. return on assets.
Question 30 of 40
2.5 Points
Regarding the budgeting process, which of the following
statements is true?
A. The budget should always be designed by top corporate
management.
B. The budget should be approved by the company's external
auditors.
C. The budget should be designed from the bottom up, with
input from employees at all levels.

D. All of the listed statements are true regarding the budgeting
process.
Question 31 of 40
2.5 Points
Beginning inventory is $120,000 and ending inventory is 60%
of beginning inventory. Compute cost of goods sold for the
period if purchases are $400,000.
A. $72,000
B. $448,000
C. $520,000
D. $592,000
Question 32 of 40
2.5 Points
The difference between actual and budgeted figures is known

as:
A. fluctuations.
B. variances.
C. overages.
D. underages.
Question 33 of 40
2.5 Points
The ________ budget is the only budget stated ONLY in units,
not dollars.
A. production
B. sales

C. direct materials
D. manufacturing overhead
Question 34 of 40
2.5 Points
In a(n) ________ center, managers are accountable for both
revenues and costs.
A. cost
B. profit
C. equity
D. investment
Question 35 of 40
2.5 Points
The results of a customer survey about customer experiences

with the company's services would be an example of measuring
which perspective?
A. Financial
B. Customer
C. Internal business
D. Learning and growth
Question 36 of 40
2.5 Points
Sales $24,500,000

The Division’s ROI is:
A. 8.1%.
B. 15.8%.
C. 5.1%.
D. 7.0%.
Question 37 of 40
2.5 Points
Green Company has budgeted sales of 23,000 units for June and
25,000 units for July. Green's policy is to maintain its finished
goods inventory at 25% of the following month's sales.
Accordingly, at the end of May, Green had 5,750 units on hand.
How many units must it produce in June in order to support the
sales goal and maintain its policy regarding finished goods
inventory?

A. 6,250 units
B. 23,000 units
C. 23,500 units
D. 29,250 units
Question 38 of 40
2.5 Points
Feeney Furniture prepared the following sales budget.
Month
Cash Sales
Credit Sales
March
$20,000
$10,000
April
$36,000
$16,000
May
$42,000
$40,000
June
$54,000
$48,000

Credit collections are 15% two months following the sale, 50%
in the month following the sale, and 30% in the month of sale.
The remaining 5% is expected to be uncollectible. What are the
total cash collections in June?
A. $36,800
B. $90,800
C. $86,000
D. $96,600
Question 39 of 40
2.5 Points
Selected financial data for The Portland Porcelain Works Coffee
Mug Division is as follows.
Sales
$2,300,000
Operating income
$414,000
Total assets

$718,750
Current liabilities
$180,000
Target rate of return
10%
Weighted average cost of capital
8%
What is The Portland Porcelain Works Coffee Mug Division
capital turnover?
A. 5.6
B. 12.8
C. 3.2
D. 1.7
Question 40 of 40
2.5 Points
Which of the following types of cash outlays has its own
budget?

A. Capital expenditures
B. Dividends
C. Income taxes
D. All of the above

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