1) Shelby Manufacturing produces car parts. The company has a variable cost per unit of $150 and fixed costs of $200,000. The company sells each car part for about $200. Recently, the company is considering increasing its advertising by $75,000 in order to sell more car parts. How many additional parts must the company sell in order to justify the increased advertising costs?A) 4,500 unitsB) 1,500 unitsC) 6,000 unitsD) Cannot be determined from the information provided.2) Which of the following is least likely to be a variable cost?A) depreciation of factory equipmentB) direct materialsC) direct laborD) sale commissions3) A company has a cost that is $54,000 in total at a volume of 9,000 units and $6.00 per unit at a volume of 12,000 units. The cost is:A) fixedB) variableC) mixedD) incremental4) The â€œmanagement by exceptionâ€ principle advises investigating:A) any deviation between the budgeted and actual costs,B) only deviation between the budgeted variable costs and the actual ones,C) any significant departure of a cost item from its budgeted amount.D) only significant departures of actual fixed costs from their budgeted amounts.. 5) For a company, the cost is $5 per unit at a volume of 12,000 and $6 per unit at a volume of 10,000. The companyâ€™s cost is exclusively:A) incremental,B) fixed.C) mixed,D) sunk.6) A Customer Relationship Management (CRM) system is likely to:A) facilitate preparation of a master production schedule,B) link the companyâ€™s suppliers electronically to its databases,C) help with the management of companyâ€™s human resources,D) enable customers to do shopping online.7) On July 26, 2012, Radio Shack announced disappointing 2nd quarter earnings that caused the stock to plummet 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 Shackâ€™s store count and fixed costs were the same in the 2nd quarter of 2011 and 2012, which of the following statements is the best explanation for Radio Shackâ€™s decreased profitability?A) Opportunity costs decreased.B) Margin of safety decreased.C) Contribution margin decreased.D) Selling price decreased.8) Radio Shack CEO Jim Gooch is trying to figure out how to improve his companyâ€™s financial performance. He decides to evaluate each of his 4,700 stores to see if any of them should be closed. His Controller shows him the following information about each store region:Store Average Northeast Midwest West SoutheastSelling Price Per Unit $99.99 $19.50 $79.38 $59.25Variable Cost Per Unit $30.00 $2.93 $35.72 $23.70Rent $10,790 $2,800 $6,500 $8,900Store Clerks $6,400 $3,200 $4,800 $3,840Maintenance $2,000 $500 $1,750 $1,250Utilities $500 $100 $500 $350Based upon this information, which is the best region for Gooch to investigate further?A) Northeast stores because they have the highest fixed costs.B) Midwest stores because they have the lowest selling price per unit.C) West stores because they have the lowest contribution margin per unit.D) Southeast stores because they have the highest break-even point.9) In order to boost profitability of Radio Shack, CEO Jim Gooch is considering adding new employees to stores to improve customer service. He notices that Best Buy has a Geek Squad and Apple Stores have a Genius Bar, so he decides to launch Shack Hacks at his stores. Shack Hack employees will be on duty during store hours to troubleshoot computers, fix broken phones, and provide technical assistance. The introduction of Shack Hacks is an example of:A) A fixed cost.B) A variable cost.C) A step cost.D) A sunk cost.10) When the level of activity increases, the fixed cost per unitA) decreases.B) remains the same.C) increases.D) fluctuates, depending on the amount of the increase in activity.11) Which of the following is not a method that is used to estimate variable and fixed costs?A) account analysisB) high low methodC) east-west methodD) regression analysis12) During 2007, Bonzai Corporation reported total revenues of $891,640 and profit 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 2008, and Bonzai expects to sell 45,000 units, what will be the companyâ€™s budgeted profit?A) $142,957B) $525,000C) $667,957D) $95,45713) If company A has lower operating leverage than company B, then:A) A has lower variable expenses.B) A is more profitable.C) A is more risky.D) A’s profits are less responsive to percentage changes in sales.14) Zerox Corporation sells two products, A and B. Zerox expects the following operating results next year for each product:Sales:A $75,000 Contribution margin ratio: A 45%B $135,000 B 35% Zerox expects to have $20,000 in fixed costs next year. What would Zerox’s total dollar sales have to be next year in order to generate a profit of $100,000?A) $356,667B) $250,125C) $311,123D) $274,87615) The controller of Smart TV Co. has asked you for an estimate of the total manufacturing supplies needed for September when production is expected to be 500,000 units. Actual data from the prior three months are as follows:Production Manufacturing(units) SuppliesMay 460,000 $675,000June 550,000 $790,000July 495,000 $713,000Using the high-low method and assuming production is within the relevant range, what is the best estimate of the total cost of manufacturing supplies that would be needed for September?A) $875,345B) $726,110C) $705,830D) $792,29016) XYZ Company produces Models X, Y, and Z. Model X incurs $50,000 in labor costs and $60,000 in direct material costs. XYZ Company also incurs fixed costs for rent in the amount of $500,000, quality control in the amount of $1 million, and human resources in the amount of $600,000.The company allocates rent based on the space allocated to each product line. The total amount of occupied space is 500,000 square feet of which Model X occupies 50,000 square feet. The company allocates quality control expenses based upon the number of inspections. The company had a total of 200,000 inspections of which Model X has had 10,000 inspections. The company allocates human resource expenses based upon the number of employees in each department. The company has 30 employees of which 5 employees are employed for the Model X product line. The company expects to produce 100,000 units of Model X. What is the cost per unit to produce Model X given the companyâ€™s variable and fixed costs?A) $31B) $32C) $35D) $4017) A computer company has received a special order. Unfortunately, the computer companyâ€™s factory is running at full capacity. In order to satisfy this special order, the computer company will have to remove some orders from its factory line. In analyzing whether to fulfill the special order, which of the following should the company review (choose the best answer) in pricing the order:A) Incremental RevenueB) Incremental CostC) Sunk CostD) Opportunity Cost18) A law firm is attempting to determine whether it should drop its corporate practice and focus on litigation, family law, and real estate law. In determining whether to drop its corporate practice, the law firm will eliminate several partner and associate positions at the firm. The law firm should not include the following cost in its analysis:A) Associateâ€™s salaryB) Office SuppliesC) Depreciation of the law firmâ€™s office buildingD) Computer Costs19) When a production resource is in short supply, an important consideration for production managers in choosing which products to manufacture is:A) The selling price of each productB) The contribution margin ratio of each productC) The contribution margin per unit of the scarce resourceD) The distance between the factory and the market for each product20) Salome’s Tutu Factory makes ballet tutu’s for The New York City Ballet. The cost breakdown for the 10,000 tutu’s that she sells is as follows:Direct Material $40,000Direct Labor $120,000Variable Overhead $40,000Fixed Overhead $35,000Shen’s Clothing, a company based in Shenzen, China, offers to sell tutu’s of equal quality to Salome. Salome figures that if she buys from Shen, she can avoid $28,000 in fixed overhead. At what price (for 10,000 tutus) would Salome be indifferent between manufacturing the tutu’s herself and buying them from Shen?A) $235,000B) $200,000C) $228,000D) $207,00021) When activity based costing is implemented, the initial outcome is normally that:A) The cost of all products will be higher.B) The cost of all products will be lowerC) The cost of low volume products will be higher and the cost of high volume products will be lowerD) The cost of low volume products will be lower and the cost of high volume products will be higher.22) The most difficult decision that a manager will face is making decisions about:A) SalesB) AccountingC) PricingD) Human Resources23) When using the cost plus pricing approach to pricing the markup is calculated by:A) Determination of appropriate markup requires considerate judge and experimentation may be necessary.B) The markup is calculated by dividing sales by the Economic Order Quantity.C) The markup is calculated by adding the fixed and variable costs and then multiplying it the incremental revenue.D) The markup is calculated by adding the fixed and variable costs and then multiplying it the gross margin.24) The primary difference between target costing and traditional cost-based pricing isA) Traditional cost-based pricing is designed to appeal to all customers, but target costing targets specific customers.B) Traditional cost-based pricing considers the market that is available for the product at the end of the process, whereas target costing considers the market at the beginning of the process.C) Product costs are irrelevant under both traditional cost-based pricing and target costing.D) Product costs are irrelevant under target costing, but are very important under traditional cost-based pricing.25) The most difficult part of determining a profit maximizing price is:A) Sales people may suggest less than what they can sellB) Determining the products demand functionC) Managers of product lines lack details of individual productsD) Market conditions may change over time26) A skimming strategy involves:A) A cost minus pricing strategyB) A variable cost plus pricing strategyC) A cost plus maximum margin strategyD) A target costing pricing strategy27) A special order pricing requires we accept the order if:A) Incremental revenues are more than normal revenuesB) Incremental revenues are less than incremental costC) Incremental revenues are more than variable costD) Incremental revenues are more than incremental cost28) A company using activity based pricing marks up the direct cost of goods by 50%plus charges customers for indirect costs based on the activities utilized by the customer.Indirect costs are charged as follows: $10.00 per order placed; $2.00 per separate item ordered;$15.00 per return. A customer places 15 orders with a total direct cost of $5,000, orders500 separate items, and makes 10 returns. What will the customer be charged?A) $5,000B) $2,500C) $8,825D) $1,32529) JBoyles Inc. uses cost-plus pricing with a 60% mark-up. The company is currently selling 500,000 units at $25 per unit.Each unit has a variable cost of $20. In addition, the company incurs $300,000 in fixed costs annually. If demand falls to 300,000 units and the company wants to continue to earn a 60% return, what price should the company charge?A) $31.50B) $21.00C) $12.60D) $33.60 30) PSL Manufacturing Corporation produces a single product: Male Jammer Swim Suit. Budgeted amounts for the coming year are as follows:Revenues (50,000 units at $20 each) $1,000,000Direct material $50,000Direct labor $60,000Variable manufacturing overhead $70,000Fixed manufacturing overhead $700,000Total Cost $880,000Net income $120,000Speedo has offered to purchase 5,000 units of a special Olympic edition of the PSL Jammer Suit at a price of $5.00 per unit.This special edition will have additional variable costs of $1.00 per unit. PSL has the capacity to produce this order and it will not affect any of its other operations.What is the incremental profit (loss) associated with the special order?A) $2,000B) -$2,000C) $7,000D) -$68,000E) -$63,000
1) Shelby Manufacturing produces car parts. The company has a variable cost per unit of $150 and…
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