Course materials

1. Bu330 accounting for managers set-3
Question-1In 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-2Blue 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 in expenses $120,000Question-
3The 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-4A 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. $400,000Question-5To 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-6Sky 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 Marketing
and administrative$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 $80,000Question-
7Samson 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

2. manufacturing overhead$120,000 Variable selling and administrative
expenses$70,000 Fixed manufacturing overhead$65,000 Fixed selling and
administrative expenses$12,000 Units produced and sold20,000 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.) A. Increase by $84,300 B. Decrease by
$28,500 C. Increase by $24,300 D. Increase by $28,500Question-8The 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-9The 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.
175Question-10The 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
incomeQuestion-11To 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.Question-12Assume 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. $84,000Question-13Pluto
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 B.
Increase by $269,500 C. Decrease by $115,500 D. Decrease by $269,500Question-14A
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.Question-15Which 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 alternativesQuestion-16Corny 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. $1,125Question-17If total fixed
costs are $455,000, the contribution margin per unit is $25.00, and targeted operating

3. income is $25,000, how many units must be sold to breakeven? A. 11,375,000 B. 19,200 C.
18,200 D. 625,000Question-18“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 ratioQuestion-19The 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 costQuestion-20The 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-21Brockman 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. $55,000Question-22Green 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 unitsQuestion-23The difference between actual and
budgeted figures is known as: A. fluctuations. B. variances. C. overages. D.
underages.Question-24All of the following are responsibility centers EXCEPT: A. profit
centers. B. investment centers. C. customer centers. D. cost centers.Question-25The 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 growthQuestion-26Which of the following types of cash outlays has its own
budget? A. Capital expenditures B. Dividends C. Income taxes D. All of the aboveQuestion-
27The ________ budget is the only budget stated ONLY in units, not dollars. A. production B.
sales C. direct materials D. manufacturing overheadQuestion-28In a(n) ________ center,
managers are accountable for both revenues and costs. A. cost B. profit C. equity D.
investmentQuestion-29For 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-30If 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-31Regarding 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-32Feeney Furniture
prepared the following sales budget. MonthCash SalesCredit
Sales March$20,000$10,000 April$36,000$16,000 May$42,000$40,000 June$54,000$48,00
0 Credit collections are 15% two months following the sale, 50% in the month following the

4. 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.
$96,600Question-33Assume 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: A. 8.1%. B. 15.8%. C. 5.1%. D. 7.0%.Question-34Budget committees most often would
include all of the following people EXCEPT: A. CEO. B. research and development
manager. C. shareholder. D. marketing manager.Question-35Assume 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-36Kotrick 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. 26,000Question-37Forty
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. 13,500Question-38Selected 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 return10% Weighted average
cost of capital8% What is The Portland Porcelain Works Coffee Mug Division capital
turnover? A. 5.6 B. 12.8 C. 3.2 D. 1.7Question-39Beginning 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