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- 1. A manager should always reject a special order if: The area to the right of the breakeven point and between the total revenue line and the total expense line represents: The horizontal line intersecting the vertical y-axis at the level of total cost on a CVP graph represents: 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? 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?
- 2. 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? 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:
- 3. Sale price per unit $400 Variable costs per unit: $220 Manufacturing $50 Marketing and administrative Total fixed costs: Manufacturing $750,000 Marketing and administrative $200,000 If a special sales order is accepted for 7,000 seats at a price of $350 per unit, and fixed costs remain unchanged, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.) The effect of a plant closing on employee morale is an example of which of the following?
- 4. 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? In a special sales order decision, incremental fixed costs that will be incurred if the special order is accepted are considered to be: In a special sales order decision, incremental fixed costs that will be incurred if the special order is accepted are considered to be: Samson Incorporated provided the following information regarding its only product: Sale price per unit $50.00 Direct materials used $160,000 Direct labor incurred $185,000 Variable manufacturing overhead $120,000 Variable selling and administrative expenses
- 5. $70,000 Fixed manufacturing overhead $65,000 Fixed selling and administrative expenses $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.) To find the number of units that need to be sold in order to breakeven or generate a target profit, the formula used is: Assume the following amounts: Total fixed costs $24,000 Selling price per unit $20
- 6. Variable costs per unit $15 If sales revenue per unit increases to $22 and 12,000 units are sold, what is the operating income? 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? "Contribution margin per unit" is best described by which of the following? Which of the following best describes a "sunk cost"?
- 7. 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: 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)? All of the following are responsibility centers EXCEPT: 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
- 8. achieve its desired ending cash balance? 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? Budget committees most often would include all of the following people EXCEPT: 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)? 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?
- 9. The performance evaluation of a profit center is typically based on its: Regarding the budgeting process, which of the following statements is true? 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. The difference between actual and budgeted figures is known as: The ________ budget is the only budget stated ONLY in units, not dollars.
- 10. In a(n) ________ center, managers are accountable for both revenues and costs. The results of a customer survey about customer experiences with the company's services would be an example of measuring which perspective? 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 ROI is: 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
- 11. 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? 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?
- 12. 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? Which of the following types of cash outlays has its own budget? [removed] A. Capital expenditures [removed] B. Dividends
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