Module 5

Sales mix refers to
Select one:
A. the portion of unit variable costs that are consumed by each product.
B. the absolute portion of total variable costs consumed by each product.
C. the relative portion of unit or dollar sales that are derived from each product.
D. none of the above.
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Terms in this set (39)
Sales mix refers to
Select one:
A. the portion of unit variable costs that are consumed by each product.
B. the absolute portion of total variable costs consumed by each product.
C. the relative portion of unit or dollar sales that are derived from each product.
D. none of the above.
the relative portion of unit or dollar sales that are derived from each product.
Karen Company has sales of 1,500 units at $35 per unit. Variable expenses are 40% of the selling price. If total fixed expenses are $27,000, the degree of operating leverage is:
Select one:
A. 1.75
B. 3.00
C. 3.50
D. 7.00
7
The total contribution margin at the break-even point
Select one:
A. is zero.
B. plus total fixed costs equal total revenues.
C. equals total fixed costs.
D. is greater than total variable costs.
Equals total fixed costs
Which of the following would be classified as a variable manufacturing cost?
Select one:
A. Sales commissions
B. Property taxes
C. Lubricants for machinery
D. Depreciation
Lubricants for machinery
Dwight Company sells its product for $10 a unit. Next year, fixed expenses are expected to be $200,000 and variable expenses are estimated at $6 per unit. How many units must Dwight sell to generate net operating income of $50,000?
Select one:
A. 60,000 units
B. 62,500 units
C. 50,000 units
D. 120,000 units
62500
Determine the unit break-even point, assuming fixed costs are $30,000 per period, variable costs are $19.00 per unit, and the sales price is $25.00 per unit.
Select one:
A. 5,000
B. 12,000
C. 6,000
D. 6,667
5000
Barrington Corporation reported the following on their contribution format income statement:
Sales (12,000 units)
$175,000
Less: Variable expenses
100,000
Contribution margin
75,000
Less: Fixed expenses
62,500
Net operating income
$ 12,500
What is the contribution margin ratio?
Select one:
A. 43.30%
B. 38.57%
C. 42.86%
D. 57.14%
42.86%
Lorri's income statement is as follows:
Sales (5,000 units)
$75,000
Less variable costs
- 24,000
Contribution margin
$51,000
Less fixed costs
- 12,000
Net income
$ 39,000
What is the contribution margin ratio?
Select one:
A. 167 percent
B. 60 percent
C. 40 percent
D. 68 percent
68%
If a trucking company were operating at capacity, but had an opportunity to fill a one-time high volume special order, which of the following ramifications could occur?
Select one:
A. Lost revenues from regular customers
B. Long-term revenue loss from customers who change service to competitors
C. Questions from regular customers about commitment to service
D. All of the above
all of the above
An outlay cost is not relevant if it
Select one:
A. sunk.
B. not an opportunity cost.
C. is under $5,000 or if it is less than 2% of sales.
D. does not differ under the decision alternatives at hand
does not differ under the decision alternatives at hand
Minnie's Soup plant is running at 52% of its monthly capacity. Minnie's Soup plant has just received a special order to produce 400 cases of creamy potato soup for a statewide supermarket. The supermarket will sell the soup under its own private brand label. The soup will be the same in all respects, except for the label, which will cost Minnie's Soup plant an extra $500 in total to design. The supermarket has offered to pay only $19.00 per case, which is well under Minnie's normal sales price.Costs at the current production level (450 cases) are as follows: Manufacturing Costs Total Cost Cost per Case Direct materials $4,500 $10.00 Direct labor 1,350 3.00 Variable MOH 900 2.00 Fixed MOH 2,700 6.00 Total $9,450 $21.00 If Minnie's Soup plant accepts the offer, profits will:Increase by $1,100 (19x400)-(15vcx400) set up costThe Rug Weaving Company manufactures an intermediate product identified as Y3. Variable manufacturing costs per unit of Y3 are as follows: Direct materials $2 Direct labor $7 Variable manufacturing overhead $5 Purple Company has offered to sell Rug Weaving 5,000 units of Y3 for $20 per unit. If Rug Weaving accepts the offer, $25,000 of fixed manufacturing overhead will be eliminated. Applying differential analysis to the situation, Rug Weaving should Select one: A. make Y3; the savings is $50,000. B. make Y3; the savings is $5,000. C. buy Y3; the savings is $5,000. D. buy Y3; the savings is $50,000.make y3 save 5000A(n) ____________ cost is the net cash inflow that could be obtained if the resources committed to one action were used in the most desirable other alternative. Select one: A. avoidable B. contribution margin C. outlay D. opportunityopportunitySales revenue minus the costs of direct materials is known as Select one: A. conversion costs. B. outlay costs. C. throughput. D. contribution margin.ThroughputThe external acquisition of services or components is called Select one: A. downsizing. B. outsourcing. C. profit maximization. D. total cost analysis.OutsourcingIn deciding whether to sell a joint product or to process it further, management should consider Select one: A. all joint costs and separately identifiable costs. B. only joint costs that vary with production volume. C. variable joint and variable separately available costs. D. the separately identifiable costs of the product under consideration.the separately identifiable costs of the product under considerationThe Northern Ring Company manufactures 2,000 telephones per year. The full manufacturing costs per telephone are as follows: Direct materials $ 2 Direct labor 8 Variable manufacturing overhead 6 Average fixed manufacturing overhead 6 Total $22 The Texas Ring Company has offered to sell Northern Ring Company 2,000 telephones for $15 per unit. If Northern Ring Company accepts the offer, $10,000 of fixed overhead will be eliminated. Northern Ring should:12000 profit___________ are costs that require future expenditures of cash or other resources. Select one: A. Outlay costs B. Sunk costs C. Opportunity costs D. Committed costsoutlayDelaware Company's break-even point in sales is $950,000, and its variable expenses are 60% of sales. If the company lost $34,000 last year, sales must have amounted to: Select one: A. $772,000 B. $628,000 C. $814,000 D. $865,000772000A basic assumption of the cost-volume-profit model is that Select one: A. the mix of products changes over time. B. cost drivers can be organized into unit-level, batch level, product-level and facility-level factors. C. higher volumes of product require lower prices. D. all costs can be accurately classified as either fixed or variableall costs can be accurately classified as either fixed or variableAll else being equal, this is true about a firm with high operating leverage relative to a firm with low operating leverage: Select one: A. A higher percentage of the high operating leverage firm's costs are fixed. B. The high operating leverage firm has more debt. C. The debt payments limit the high operating leverage firm's opportunities to turn a big profit. D. The high operating leverage firm is exposed to less risk.A higher percentage of the high operating leverage firms cost are fixedA firm can reduce is operating leverage by substituting Select one: A. direct labor for robotic equipment. B. direct materials for direct labor. C. debt for equity. D. equity for debt.direct labor for robotic equipmentSoil Company sells a single product. If the selling price per unit and the variable expense per unit both increase by 10% and fixed expenses do not change, then Select one: A. breakeven-even in units increase. B. contribution margin decreases. C. contribution margin per unit increases. D. contribution margin per unit decreases.contribution margin per unit increasesThe following costs related to Summertime Company for a relevant range of up to 20,000 units annually: Variable Costs: Direct materials $2.50 Direct labor 0.75 Manufacturing Overhead 1.25 Selling and administrative 1.50 Fixed Costs: Manufacturing overhead $10,000 Selling and Administrative 5,000 The selling price per unit of product is $15.00. At a sales volume of 15,000 units, what is the total profit for Summertime Company? Select one: A. $225,000 B. $120,000 C. $130,000 D. $150,000120000Lorri's income statement is as follows: Sales (5,000 units) $75,000 Less variable costs - 24,000 Contribution margin $51,000 Less fixed costs - 12,000 Net income $ 39,000 If sales increase by 1,000 units, profits will: Select one: A. Increase by $10,200 B. Increase by $12,000 C. Increase by $2,400 D. Increase by $5,00010200Dippin Cookie Corporation had the following income statement for 2020: Sales $25,000 Less variable costs - 15,000 Contribution margin $10,000 Less fixed costs - 8,000 Net income $ 2,000 Dippin Cookie's 2020 operating leverage is: Select one: A. 3.667 B. 0.333 C. 2.500 D. 5.0005Point Company sells three different products that are similar, but are differentiated by various product features. Budgeted sales by product and in total for the coming year are shown below: Product Standard Deluxe Premium Total Percentage of total sales 48% 20% 32% 100% Sales $120,000 $50,000 $80,000 $250,000 Less: Variable costs 36,000 40,000 44,000 120,000 Contribution margin $ 84,000 $10,000 $36,000 $130,000 Less: Fixed expenses $117,000 Net operating income $ 13,000 The break-even point in sales dollars for Point Company is: Select one: A. $225,000 B. $250,000 C. $449,231 D. $500,000225000If a cost is identical under each alternative under consideration within a given decision context, the cost is considered Select one: A. an opportunity cost. B. an outlay cost. C. an irrelevant cost. D. a sunk cost.irrelevant costLeap Company has collected the following information: Cost to buy one unit $24 Production costs per unit: Direct materials $10 Direct labor $8 Variable manufacturing overhead $1 Total fixed manufacturing overhead $95,000 What level of production is needed for Leap to be indifferent between making or buying the part, assuming it can eliminate $75,000 of fixed costs? Select one: A. 13,000 units B. 12,500 units C. 15,000 units D. 16,250 units15000Firms are more likely to accept a special order for one of their products at a reduced price if Select one: A. excess capacity exists. B. the order is small. C. all costs are variable. D. the buyer plans to compete in the markets of the firm's regular customers.excess capacity existsThis theory states: "Every process has a bottleneck and production cannot take place faster than it is processed through the bottleneck." Select one: A. Porter's Four Forces B. The Theory of Integrated Workflow C. The Theory of Constraints D. Eaves Theory of Manufacturingthe theory of constraintsRelevant costs are best described as Select one: A. future costs that differ between competing decision alternatives. B. opportunity costs. C. out-of-pocket costs. D. future costs.future costs that differ between competing decisions alternativesSunny Corporation sells 1,000 units of product A per day at $1.00 per unit. Sunny has the option of processing the product further for additional costs of $400 per day to produce product B, which sells for $1.45 per unit. If Sunny processes product A further to produce product B, the company's net income will: Select one: A. Decrease by $50 per day B. Decrease by $450 per day C. Increase by $450 per day D. Increase by $50 per dayincrease 50 a dayA company loses revenues from regular customers by accepting a special order when operating at capacity. The loss of revenue just described is an example of which of the following? Select one: A. A sunk cost B. An unavoidable cost C. An opportunity cost D. A revenue costopportunity costIn an effort to achieve short-run profit maximization, limited resources should first be allocated to the product with Select one: A. the highest selling price per unit of constraining factor. B. the lowest cost per unit of constraining factor. C. the highest contribution margin per unit. D. the highest contribution per unit of constraining factorthe highest contribution per unit of constraining factorPink Bunny Corporation manufactures a product with the following full unit costs at a volume of 2,000 units: Direct materials $ 100 Direct labor 40 Manufacturing overhead (30% variable) 75 Selling expenses (50% variable) 25 Administrative expenses (10% variable) 40 Total per unit $280 A company recently approached Pink Bunny's management with an offer to purchase 225 units for $275 each. Pink Bunny currently sells the product to dealers for $400 each. Pink Bunny's capacity is sufficient to produce the extra 225 units. No selling expenses would be incurred on the special order. If Pink Bunny's management accepts the offer, profits will: Select one: A. Decrease by $60,000 B. Decrease by $24,412.50 C. Increase by $24,412.50. D. Increase by $33,40.24412 increaseOrganizations may manufacture products or provide services they can obtain at lower costs elsewhere in order to Select one: A. control quality. B. have an assured source of supply. C. maintain a core competency. D. all of the above.all of the aboveRelevant costs are best described as Select one: A. future costs that differ between competing decision alternatives. B. opportunity costs. C. out-of-pocket costs. D. future costs.future costs that differ between competing decision alternativesThe following information pertains to Springfield Inc: Selling price per unit $50 Variable costs per unit $30 Total fixed costs $212,500 Tax rate 40% The pretax break-even point in sales dollars is: Select one: A. $600,000 B. $427,000 C. $531,250 D. $700,000531,250