Posted: March 5th, 2024

A “what-if” technique that examines how a result will change

1) A "what-if" technique that examines how a result will change if the original predicteddata are NOT achieved or if an underlying assumption changes is called ________.adjusted rate-of-returnanalysisnet present valueanalysissensitivity analysisinternal rate-of-returnanalysis2)The standard costs and actual costs for direct materials for the manufacture of 2,500 actualunits of product are as follows:Standard CostsDirect materials2,500 kilograms @$8Actual CostsDirect materials2,600 kilograms @$8.753) The amount of the direct materials quantity variance is:$875 favorable$800 unfavorable$800 favorable$875 unfavorable4) The difference between the current sales revenue and the sales at the break-even point is calledthe:contribution marginmargin of safetyprice factoroperating leverage5) Corporation sells product G for $150 per unit, the variable cost per unit is $105, the fixedcosts are $720,000, and the Corporation is in the 25% corporate tax bracket. What are therounded sales (dollars) required to earn a net income (after tax) of $40,000?$2,533,350$2,577,750$2,933,400$2,400,0006) If sales are $400,000, variable costs are 75% of sales, and operating income is $50,000, whatis the operating leverage?01.252.227) The Martin Company had a finished goods inventory of 55,000 units on January 1. Itsprojected sales for the next four months were: January - 200,000 units; February - 180,000 units;March - 210,000 units; and April - 230,000 units. The Martin Company wishes to maintain adesired ending finished goods inventory of 20% of the following months sales.What should the budgeted production be for January?236,000181,000200,000219,0008) The standard costs and actual costs for direct labor for the manufacture of 2,500 units ofproduct are as follows:Standard CostsDirect labor7,500hours @$12Actual CostsDirect labor7,400hours @$11.40The amount of the direct labor efficiency variance is:$1,140 favorable$1,140 unfavorable$1,200 favorable$1,200 unfavorable9) The Company has the following operating data for its manufacturing operations:Unit selling priceUnit variable costTotal fixed costs$250100$840,000The company has decided to increase the wages of hourly workers which will increase the unitvariable cost by 10%. Increases in the salaries of factory supervisors and property taxes for thefactory will increase fixed costs by 4%. If these changes are made and the sales prices are heldconstant, the break-even point in units will be:increased by 640 unitsincreased by 400 unitsdecreased by 640 unitsincreased by 800 units10) All of the following qualitative considerations may impact upon long-term (capital)investments analysis except:time value of moneyemployee moralethe impact on product qualitymanufacturing flexibility11) Company manufactures three different product lines, Model X, Model Y, and Model Z.Each model has considerable marketplace demand. The following per unit data apply:Model XModelModel ZSelling price$50$60Direct materials66Direct labor ($12 per hour)1212Variable support costs ($4 per machine-hour)48Fixed support costs1010If there is excess capacity, which model is the most profitable to produce?YModel Z$70624810Both Model X and Model Y have same and highestprofitabilityModel YModel X12) Which of the following is not a reason for a direct materials quantity variance?Malfunctioning equipmentPurchasing of inferior raw materialsMaterial requiring reworkSpoilage of materials13) Corporation began its operations on September 1 of the current year. Budgeted sales for thefirst three months of business are $240,000, $300,000, and $420,000, respectively, forSeptember, October, and November. The company expects to sell 20% of its merchandise forcash. Of sales on account, 70% are expected to be collected in the month of the sale, 25% in themonth following the sale, and the remainder in the following month.The cash collections in September from accounts receivable are:$240,000$134,400$192,000$168,00014) Company is considering replacing equipment. Company would sell its existingequipment. At the end of four years, the new equipment would be worth nothing.Information on the proposal is provided below.Initial investment:AssetWorking capitalOperations (per year for four years):Cash receiptsCash expendituresDisinvestment:Salvage value existing equipmentDiscount rateIgnoring income taxes, what is the net present valuerecovery of working capital.$82,724$149,40$600,000$ 128,000$450,000$ 190,000$ 50,00018%of the investment? Assume there is no0$21,400$(124,280)15) An unfavorable production-volume variance ________.indicates that the company had reduced its per unit fixed overheadcost to improve salestakes into account the effect of additional revenues due tomaintaining higher pricesmeasures the amount of extra fixed costs planned for but not usedis not a good measure of a lost production opportunity16) If breakeven point is 1,000 units, each unit sells for $30, and fixed costsare $10,000, then on a graph the ________.total cost line will be zero at zero units soldrevenue line will start at $10,000total revenue line and the total cost line will intersect at $40,000 of revenuetotal revenue line and the total cost line will intersect at $30,000 of revenue17) A Company has a current production level of 20,000 units per month. Unit costs at thislevel are:Direct materialsDirect laborVariable overheadFixed overheadMarketing - fixedMarketing/distribution - variable$0.250.400.150.200.200.40Current monthly sales are 18,000 units. X has contacted Company about purchasing 1,500units at $2.00 each. Current sales would NOT be affected by the one-time-only special order,and variable marketing/distribution costs would NOT be incurred on the special order. Whatis Company's change in net operating income if the special order is accepted?$400 increase in NOI$400 decrease inNOI$1,800 increase inNOI$1,800 decrease in NOI18) The standard costs and actual costs for direct labor for the manufacture of 2,500 actual unitsof product are as follows:Standard CostsDirect labor7,500 hours @ $12Actual CostsDirect labor7,400 hours @$11.40The amount of the direct labor rate variance is:$4,440 favorable$4,440 unfavorable$4,500 favorable$4,500 unfavorable19) Which of the following is true of relevant information?All fixed costs are relevant.All future revenues and expensesare relevant.All past costs are never relevant.All fixed costs are not relevant.20) The AARR method is similar to the IRR method as ________.both consider the time value of moneyboth calculate the return using operating-income numbers afterconsidering accruals and taxesboth calculate the return using after-tax cash flowsboth calculate the result in terms of percentage21) Company is considering a new capital investment. The following information is availableon the investment. The cost of the machine will be $330,000. The annual cost savings if thenew machine is acquired will be $85,000. The machine will have a 5-year life, at which timethe terminal disposal value is expected to be $32,000. Company is assuming no taxconsequences. If Company has a required rate of return of 11%, which of the following isclosest to the present value of the project?$24,836$15,840$8,245$3,13622) Which of the following is true of flexible budget?It calculates total fixed cost by multiplying actual units by budgeted fixed costper unit.It calculates contribution margin by multiplying budgeted units by actualcontribution margin per unit.It calculates revenues by multiplying budgeted units by actual selling price perunit.It calculates total variable cost by multiplying actual units by budgeted variablecost per unit.23) Below is a table for the present value of $1 at Compound interest.Year123456%.943.890.840.792.74710%.909.826.751.683.62112%.893.797.712.636.567Below is a table for the present value of an annuity of $1 at compound interest.Year1236%.9431.8332.67310%.9091.7362.48712%.8931.692.402453.4654.2123.173.7913.0373.605Using the tables above, what would be the internal rate of return of an investment that requiredan investment of $250,000, and would generate an annual cash inflow of $65,946 for the next 5years?6%10%12%cannot be determined from the data given.24) If fixed costs are $200,000 and the unit contribution margin is $20, what amount of unitsmust be sold in order to have a zero net income?25,00020,000200,00010,00025) Company currently manufactures parts for its main product. The costs per unit are asfollows:Direct materialsDirect laborVariable overheadFixed overheadTotal$ 45.0035.0033.0030.00$143.00Vendor has contacted Company with an offer to supply 5,000 of these parts for $135.00each. If the parts were purchased, Company will eliminate $85,000 of fixed overhead if itaccepts the proposal.Should Company make or buy the parts? What is the difference between the twoalternatives?Buy; savings =$85,000Buy; savings =$50,000Make; savings =$25,000Make; savings =$120,00026) Which of the following budgets is not directly associated with the production budget?Direct materials purchases budgetFactory overhead cost budgetCapital Expenditures budgetDirect labor cost budget27) One-time-only special orders should only be accepted if ________.incremental revenues exceedincremental costsdifferential revenues exceed variablecostsincremental revenues exceed fixedcostsincremental revenues exceed total costs28) Which of the following is the correct mathematical expression to calculate the fixedoverhead spending variance?Static-budget amount — Fixed overhead allocated foractual outputFlexible-budget amount — Actual costs incurredFlexible-budget amount — Fixed overhead allocated foractual outputStatic-budget amount — Flexible-budget amount29) The standard costs and actual costs for direct materials for the manufacture of 2,500 actualunits of product are as follows:Standard CostsDirect materials (per completed1.04 kilogramsunit)@$8.75Actual CostsDirect materials2,500 kilograms@ $8The amount of direct materials price variance is:$1,950 unfavorable$1,875 unfavorable$1,950 favorable$1,875 favorable30) An anticipated purchase of equipment for $400,000, with a useful life of 8 years and noresidual value, is expected to yield the following annual net incomes and net cash flows:Year12345678Net Income$60,00050,00050,00040,00040,00040,00040,00040,000Net Cash Flow$110,000100,000100,00090,00090,00090,00090,00090,000What is the cash payback period?5 years4 years6 years3 years31) The first budget customarily prepared as part of an entity's master budget is the:production budgetcash budgetsales budgetdirect materials purchases32) A Company manufactures and sells commercial air conditioners. Because of current trends, itexpects to increase sales by 15 percent next year. If this expected level of production and salesoccurs and plant expansion is not needed, how should this increase affect next year’s totalamounts for the following costs.Variable CostsincreaseFixed CostsincreaseMixed Costsincreaseincreaseno changeincreaseno changeno changeincreasedecreaseincreaseincrease33) Cost behavior refers to the manner in which:a cost changes as the related activity changesa cost is allocated to productsa cost is used in setting selling pricesa cost is estimated34) Company manufactures three different product lines, Model X, Model Y, and ModelZ. Each model has considerable marketplace demand. The following per unit dataapply:Model XModel YModelZSelling price$70Direct materials$5066Direct labor ($12 per hour)1212Variable support costs ($4 per machine-hour)488Fixed support costs1010If there is a machine breakdown, which model is the most profitable to produce?$6062410Model XModel ZModel YBoth Model X and Model Y have same and highestprofitability35) Assume that a company sold 8,000 units of Product A and 2,000 units of Product B duringthe past year. The unit contribution margins for Products A and B are $20 and $45 respectively.The company has fixed costs of $350,000. The break-even point in total units (including A andB) sold is:14,000 units25,278 units8,000 units10,769 units36) Corporation currently produces products and is heavily automated. Expected productionper month is 15,000 units, direct material costs are $0.50 per unit, and manufacturingoverhead costs are $15,000 per month. Manufacturing overhead is all fixed costs. What arethe total flexible budget amounts for these costs for 10,000 and 15,000 units, respectively?$15,000;$22,500$20,000;$17,500$15,000;$17,500$20,000;$22,50037) Company began its operations on March 31 of the current year. Projected manufacturingcosts for the first three months of business are $156,800, $195,200, and $217,600, respectively,for April, May, and June. Depreciation, insurance, and property taxes represent $28,800 of theestimated monthly manufacturing costs. Insurance was paid on March 31, and property taxes willbe paid in November. Three-fourths of the remainder of the manufacturing costs are expected tobe paid in the month in which they are incurred, with the balance to be paid in the followingmonth.The cash payments for manufacturing in the month of May are:$195,200$146,400$156,800$166,40038) The net present value method assumes that project cash flows can be reinvested at thecompany's ________.internal rate ofreturnaccounting rate ofreturnrequired rate ofreturngrowth rate39) As production increases, what should happen to the fixed costs per unit?Stay the same.Increase.Decrease.Either increase or decrease, depending on the variable costs.40) A Company's OH variances are shown as follows:SpendingVarianceEfficiencyVarianceProductionVolume VarianceVariableoverhead$6,500 F$12,000 UN/AFixed overhead??N/A$46,000 UIf the Company has a net unfavorable OH spending variance of $2,300, what is the fixedoverhead spending variance?$8,800favorable$4,200unfavorable$4,200favorable$8,800unfavorable41) A profitable is approached by a potential customer to fulfill a one-time-only special orderfor its regular product (as a try-out). The company has excess capacity. The following perunit data apply for sales to regular customers:Variable costs:Direct materialsDirect laborManufacturing supportAdvertising costs$1206010545Fixed costs:Manufacturing supportAdvertising costsTotal costsMarkup (50%)13545510255Regular Sales Price$765The company is considering the new customer's request. It's only requirement as to salesprice is that this special order must increase the company's net operating income.What is the minimum acceptable sales price for the special order?$331$341$511$2862.5 points2.5 points

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