Quiz Submissions – Final Exam Part 1
A typical use of managerial accounting is to:
help investors and creditors assess the financial position of the company.
help management get a clean audit report
help the marketing manager decide which product promotion to implement
help the SEC decide whether management is in compliance of its policies.
Three costs incurred by Pitt Company are summarized below:
1,000 units 2,000 units
Cost A $10,000 $15,000
Cost B $21,000 $21,000
Cost C $16,000 $32,000
Which of these costs are variable?
A, B, and C
A and B
Bubba’s Steakhouse has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,590; depreciation, $650; and other fixed costs, $400. Each steak dinner sells for $13.60 each. How much would Shula’s profit increase if 10 more dinners were sold?
Bellfont Company produces door stoppers. August production costs are below:
Door Stoppers produced 77,000
Direct material (variable) $20,000
Direct labor (variable) 40,000
Supplies (variable) 20,000
Supervision (fixed) 29,200
Depreciation (fixed) 20,000
Other (fixed) 5,600
In September, Bellfont expects to produce 100,000 door stoppers. Assuming no structural changes, what is Bellfont’s production cost per door stopper for September?
Aaron’s chairs is in the process of preparing a production cost budget for August. Actual costs in July for 120 chairs were:
Materials cost $4,820
Labor cost 2,630
Other fixed costs 3,200
Materials and labor are the only variable costs. If production and sales are budgeted to change to 110 chairs in August, how much is the expected total variable cost on the August budget?
Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $24,600 to buy 710 units from Carry-ALL. Total fixed costs are $7,000 per year. This offer does not affect Carry-ALL’s other planned operations. The incremental revenues for this situation are
Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by $10,000 then their profit increases/decreases by how much?
Variable Costs $7,200
Fixed Costs $30,000
Susan is trying to decide whether or not to attend college during the next 12-week session. She has the following options:
1. Attend college full-time at a cost of $1,200.
2. Attend college part-time at a cost of $700 and work part-time earning $2,000.
3. Work full-time earning $4,800.
What is Susan’s incremental profit if she chooses option 3 over option 2?
Total costs were $71,100 when 28,000 units were produced and $92,100 when 35,000 units were produced. Use the high-low method to find the estimated total costs for a production level of 32,000 units.
Professional University teaches a large range of undergraduate courses. It is interested in determining the cost equation for the facilities cost as a function of student credit hours so that it an more accurately budget its facilities costs as enrollment grows. Information for the high and low cost semesters and volumes for last 5 years appears below
Semester Student Credit Hours Facilities Cost
Spring 2007 250,000 $500,000
Fall 2004 300,000 $530,000
Using the high low method, with student credit hours as the activity driver, what is the equation for facilities cost (FC) as a function of student credit hours?
FC = $350,000 + $0.60 / student credit hour
FC = -$585,100 + $1.67 / student credit hour
FC = $1.77 / student credit hour
FC = $2 / student credit hour
Randy’s tireland makes a product that sells for $74 per unit and has $42 per unit in variable costs. Annual fixed costs are $24,000. If Rambles sells 10 units less than breakeven, how much loss would the company recognize on its income statement? (As the question asks “how much loss” you don’t have to put the negative sign. For example, suppose the loss is 100, then write the answer as 100 rather than -100.)
Ritz Furniture has a contribution margin ratio of 0.16. If fixed costs are $173,400, how many dollars of revenue must the company generate in order to reach the break-even point?
U.S. Telephone Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10% (based on the unit sales price per phone). Fixed manufacturing costs total $1,190 per month, while fixed selling and administrative costs total $2,250. How many phones must be sold to achieve the breakeven point?
Swimkids is a swimsuit manufacturer. They sell swim suits at a selling price is $30 per unit. Swimkids variable costs are $18 per unit. Fixed costs are $70,900. Swimkids expects sales of $281,900 next year. What is Swimkids’s margin of safety (in dollars)?
Lambardi Company sells 3 types of bags. Bag A sells for $17 and has variable cost of $9.00 per unit. Bag B sells for $12 and has variable cost of $12.00 per unit. Bag C sells for $8 and has variable costs of $6.00 per unit. Lambardi sells in a mix of 2 units of A, 3 units of B and 5 units of C. What is the weighted average contribution margin per unit for Lambardi?
Product A has a contribution margin per unit of $500 and required 2 hours of machine time. Product B has a contribution margin per unit of $1,000 and requires 5 hours of machine time. How much of each product should be produced given there are 100 hours of available machine time?
50 units of A and 25 units of B.
25 units of B.
50 units of A.
None of the above
Question 17 0 / 1 point
Delfi Company produces two models of seats, Toro and Prep. Information regarding these products for May follows:
Number of units 3,000 7,000
Sales revenue $120,000 $140,000
Variable costs 60,000 42,000
Fixed costs 24,000 50,000
Net Income $36,000 $48,000
Pounds of plastic to produce one bucket 4.0 1.6
Contribution margin per unit $20 $14
Due to increased demand of plastic in the market, Delfi Company can obtain only 9,000 pounds of plastic per month. Delfi can sell as many seats as it can produce of either model. How many of each model should Delfi produce to maximize profit in May considering the constraint?
Abagail Corp. uses activity-based costing system with three activity cost pools. The following information is provided:
Costs: Wages and salaries $ 213,000
Activity Cost Pools
Assembly Setting Up Other
Wages and salaries 0.52 30% 10%
Depreciation 0.40 45% 20%
Utilities 0.28 40% 30%
How much total cost would be allocated to the Assembly activity cost pool?
Which of the following is not a goal of Managerial Accounting?
Provide information managers need for planning.
Provide information managers need for market wide interest rates.
Provide information managers need for control.
Provide information managers need for decision making.
Which one of the following is least likely to be a fixed cost?
Rent for buildings
Rent for land
Cost of commodity inputs
Cost of property, plant and equipment
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1) A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the:
A. more inelastic the demand for the product.
B. more elastic the supply curve.
C. larger the elasticity of demand coefficient.
D. more elastic the demand for the product.
2) In a competitive market economy firms will select the least-cost production technique because:
A. “dollar voting” by consumers mandates such a choice.
B. such choices will result in the full employment of available resources.
C. to do so will maximize the firms’ profits.
D. this will prevent new firms from entering the industry.
3) If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:
C. either increase or decrease, depending on what happens to supply.
D. be unchanged.
4) Camille’s Creations and Julia’s Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can’t keep up with the quantity demanded at that price), then we would expect both Camille’s and Julia’s to:
A. raise their price and increase their quantity supplied.
B. raise their price and reduce their quantity supplied.
C. lower their price and increase their quantity supplied.
D. lower their price and reduce their quantity supplied.
5) Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement:
A. suggests that the demand for DVD players has increased.
B. suggests that the supply of DVD players has increased.
C. constitutes an exception to the law of supply in that they suggest a downward sloping supply curve.
D. constitutes an exception to the law of demand in that they suggest an upward sloping demand curve.
6) If price is above the equilibrium level, competition among sellers to reduce the resulting:
A. shortage will decrease quantity demanded and increase quantity supplied.
B. surplus will increase quantity demanded and decrease quantity supplied.
C. shortage will increase quantity demanded and decrease quantity supplied.
D. surplus will decrease quantity demanded and increase quantity supplied.
7) A firm that is motivated by self interest should:
A. hire each input so the productivity of each is equal at the margin.
B. employ the combination of resources that will produce the profit-maximizing output at the minimum cost.
C. always use large amounts of cheap inputs and small amounts of expensive inputs in producing its output.
D. always use large amounts of the most productive inputs and small amounts of the least productive inputs in producing its output.
8) If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use:
A. more labor as a consequence of the output effect.
B. more labor as a consequence of the substitution effect.
C. less labor as a consequence of the output effect.
D. less labor as a consequence of the substitution effect.
9) If a firm is selling in an imperfectly competitive product market, then:
A. the marginal products of successive workers can be sold at a constant price.
B. A. average product will be less than marginal product for any number of workers hired.
C. the marginal products of successive workers must be sold at lower prices.
D. the marginal products of successive workers can be sold at higher prices.
10) Which of the following represents a long-run adjustment?
A. a supermarket hires four additional clerks
B. a farmer uses an extra dose of fertilizer on his corn crop
C. unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants
D. a steel manufacturer cuts back on its purchases of coke and iron ore
11) In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm’s total costs:
A. are $1,100.
B. are $2.50.
C. are $1,250.
D. are $750.
12) In which of the following industries are economies of scale exhausted at relatively low levels of output?
A. newspaper printing
B. aircraft production
C. automobile manufacturing
D. concrete mixing
13) A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is:
14) Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason they do this is to:
A. increase the price of substitute inputs.
B. restrict the supply of construction workers.
C. increase the elasticity of demand for construction worker
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Question 1. (TCO A) In the United States, which of the following types of organization has the greatest revenue in total? (Points : 5)
a. Sole proprietorship
b. C corporation
c. S corporation
d. Limited partnership
Question 2. (TCO A) Sole proprietorships have all of the following advantages except (Points : 5)
a. easy to set up.
b. single taxation of income.
c. limited liability.
d. ownership and control are not separated.
Question 3. (TCO B) Which of the following would cause the present value of an annuity to decrease? (Points : 5)
a. Reducing the number of payments.
b. Increasing the number of payments.
c. Decreasing the interest rate.
d. Decreasing the liquidity of the payments.
Question 4. (TCO B) In a TVM calculation, if incoming cash flows are positive, outgoing cash flows must be (Points : 5)
c. either positive or negative. It really doesn’t matter.
d. stated in time units that are different from the time units in which the interest rates are stated.
5. If you were a manager of a company, which of the three right side components of the DuPont Identity would you want to increase and which would you want to decrease, other things being equal? Give a specific example for how to do that for each of the three. (Points : 20)
6. A stock pays an annual dividend of $2.50 and that dividend is not expected to change. Similar stocks pay a return of 10%. What is P0? (Points : 20)
7. A stock has just paid a dividend and has declared an annual dividend of $2.00 to be paid one year from today. The dividend is expected to grow at a 5% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20)
8. A bond has 5 years to maturity and has a YTM of 8%. Its par value is $1,000. Its semiannual coupons are $50. What is the bonds current market price? (Points : 10)
9. A bond currently sells for $1,000 and has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10)
10. A company has 10 million shares outstanding trading for $7 per share. It also has $300 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30)
11. Name and describe the three functions of managerial finance. For each, give an example other than those used in the text and lecture. (Points : 25)
12. Explain thoroughly how stock portfolios affect the risk to an investor. (Points : 30)
13. What is the Cash Conversion Cycle (CCC)? Name the components of the CCC and explain why the CCC is important to business.
14. A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work.
Year A B C
0 -300 -100 -300
1 100 -50 100
2 100 100 100
3 100 100 100
4 100 100 100
5 100 100 100
6 100 100 100
7 -100 -200 0
(Points : 40)
Week 8 : Final Exam – Final Exam
Question 1. 1. (TCO A) In the United States, which of the following types of organization has the greatest revenue in total? (Points : 5)
Question 2. 2. (TCO A) A sole proprietorship is owned by (Points : 5)
one or two people, but if there are two owners, they must be married to each other.
up to 100 owners.
up to 64 owners.
Question 3. 3. (TCO B) Which of the following would cause the present value of an annuity to increase? (Points : 5)
Reducing the number of payments.
Increasing the interest rate.
Decreasing the interest rate.
Decreasing the liquidity of the payments.
Question 4. 4. (TCO B) Which of the following is an annuity due? (Points : 5)
A typical car loan.
A typical mortgage.
A typical apartment rental agreement.
A credit card balance.
Question 5. 5. (TCO G) If net income, total assets, and book value of equity stayed the same, what would be the effect on the DuPont Identity of an increase in sales? (Points : 20)
Question 6. 6. (TCO D) A stock has just paid a dividend and will pay a dividend of $3.00 in a year. The dividend will stay constant for the rest of time. The return on equity for similar stocks is 14%. What is P0? (Points : 20)
Question 7. 7. (TCO D) A stock has just declared an annual dividend of $2.25 to be paid one year from today. The dividend is expected to grow at a 7% annual rate. The return on equity for similar stocks is 12%. What is P0? (Points : 20)
Question 8. 8. (TCO D) A bond has 5 years to maturity and has a YTM of 8%. Its par value is $1,000. Its semiannual coupons are $50. What is the bonds current market price? (Points : 10)
Question 9. 9. (TCO D) A bond currently sells for $1,030 even though it has a par of $1,000. It was issued two years ago and had a maturity of 10 years. The coupon rate is 7% and the interest payments are made semiannually. What is its YTM? (Points : 10)
Question 10. 10. (TCO D) Explain thoroughly how stock portfolios affect the risk to an investor. (Points : 30)
Question 11. 11. (TCO E) A company has 30 million shares outstanding trading for $8 per share. It also has $90 million in outstanding debt. If its equity cost of capital is 15%, and its debt cost of capital is 9%, and its effective corporate tax rate is 40%, what is its weighted average cost of capital? (Points : 30)
Question 12. 12. (TCO A) Name and describe the three functions of managerial finance. For each, give an example other than those used in the text and lecture. (Points : 25)
Question 13. 13. (TCO H) What is the difference between the cash cycle and the operating cycle? Under what condition would they be the same? (Points : 30)
Question 14. 14. (TCO F) A company has the opportunity to do any of the projects for which the net cash flows per year are shown below. The company has a cost of capital of 12%. Which should the company do and why? You must use at least two capital budgeting methods. Show your work.
Year A B C
0 -300 -100 -300
1 100 -50 100
2 100 100 100
3 100 100 100
4 100 100 100
5 100 100 100
6 100 100 100
7 -100 -200 0
(Points : 40)