Question MGMT 640 Spring 2011 Final Exam 1) Management accounting plays a role in

2) Management accounting, managers are more concerned with receiving information that is:
A completely objective and verifiable.
B completely accurate and precise.
C relevant, flexible, and immediately available.
D relevant, completely accurate, and precise.

3) Which one of the following costs should NOT be considered a direct cost of serving a particular customer who orders a customized personal computer by phone directly from the manufacturer?
A the cost of the hard disk drive installed in the computer.
B the cost of shipping the computer to the customer.
C the cost of leasing a machine on a monthly basis that automatically tests hard disk drives before they are installed in computers.
D the cost of packaging the computer for shipment.

4) At its present level of operations, a small manufacturing firm has total variable costs equal to 65% of sales and total fixed costs equal to 20% of sales. If sales change by $1.00, operating income will change by
A $0.15
B $0.35
C $0.65
D An answer can’t be determined from this information.
?
5) ACME company has the following production costs for May:
units produced 2,000
Direct Material $20,000
Direct Labor 4,000 hrs @ $15 per hour
Supplies $5,000
Rent $2,000
Depreciation $3,000
Supervision $8,000
In June they plan to produce 3,000 units. What is their production cost per unit for May and total production costs for June?
A $49; $140,500
B $49; $147,000
C $43; $86,000
D $43; $129,000

6. The goal of managerial accounting is to provide information that managers need for
A. planning.
B. control.
C. decision making.
D. All of the above answers are correct.

7. Shareef’s Window Company is in the process of preparing a production cost budget for August. Actual costs in July for 120 windows were:
Materials cost $ 4,800
Labor cost 3,000
Rent 1,500
Depreciation 2,500
Other fixed costs 3,200
Total $15,000

The company is currently producing and selling 144 windows annually and each window is sold for $140.00. The company is considering lowering the price to $125.00 for which management estimates this will increase sales to 200 windows. Materials and labor are the only variable costs. Under what situation should the company lower the price of its windows?
A. If total revenue exceeds totals costs under the new pricing
B. If incremental revenue exceeds the old revenue
C. If incremental profit is a positive number
D. If incremental costs decrease

8. Which of the following is not usually a responsibility of the controller?
A. preparing budgets and performance reports
B. filing tax returns
C. managing cash and marketable securities
D. providing information for management decisions

9. A company purchases machinery costing $50,000 in October of 2006. Five years later they discover a better, more efficient machine they could purchase to replace the existing machine. The new machine costs $90,000 and the company has determined that they would be able to sell the original machine for $30,000. In making the decision about buying the new machine, how much are total sunk costs?
A. $60,000
B. $40,000
C. $50,000
D. $10,000

10. Mixed costs are the same as:
A. Semivariable costs
B. Step costs
C. Total production costs
D. Discretionary fixed costs
E. A & C only

11. The Contribution margin ratio is found by:
A. Subtracting total fixed costs from sales and dividing this by the number of units produced.
B. Adding total variable costs and fixed costs and dividing by the selling price per unit
C. Taking the selling price per unit and subtracting variable costs from it and dividing by the selling price per unit.
D. Dividing total fixed and variable costs by the selling price per unit.
E. B & C only.

12. John’s Camera is currently selling cameras at a price of $100. The cameras have a variable cost of $75 per camera and John’s Camera has a total fixed cost of $100,000. John’s Camera is currently selling 5,000 units of cameras. John’s Camera is considering changing its production process. With the change in production, John’s Camera will lower its fixed to $80,000 but raise its variable costs to $90 per unit. Should John’s Camera go forward with the change in production process?

A. Yes, because the new production process lowers fixed costs by $20,000
B. Yes, because the new production process raises the contribution margin
C. No, because the new production process leads to a decline in profits by $55,000.
D. No, because the new production process raises the variable costs by $15 per unit.

13. A company sells two products – X and Y. Product X is sold at a price of $50 and has a variable cost of $25. Product Y is sold at a price of $25 and has a variable cost of $20. Product X and Y are sold in equal amounts. How many units of Product X must be sold in order to breakeven if the company has $100,000 in fixed costs?

A. 3,333
B. 5,000
C. 6,667
D. 2,000
Sales mix: 50%:50%

14. Cost-Volume Profit analysis cannot be performed when:

a. Costs can be accurately separated into fixed and variable components.
b. Fixed and variable costs change over different activity levels.
c. Contribution margin is based on the difference between selling price and variable costs.
d. Breakeven point is calculated based upon the fixed costs divided by the contribution margin.

15. A company produces products A, B, and C. The company has excess capacity. Products A, B, and C have a contribution margin of 10, 15, and 20, respectively. Products A, B, and C have a contribution margin per hour of 10, 5, and 6.67 respectively. Assume that the scarce resource for the firm is time, that is if an hour more is spent on producing one more product, there would be an hour less spent on producing another product. The company should produce:

a. Product A because it has the highest contribution margin per hour.
b. Product C because it has the highest contribution margin.
c. Either Product A or C because they have the highest contribution margin or contribution margin per hour.
d. The answer cannot be determined because we do not know the number of available machine hours.

16. A company is using the high-low method and has determined the following production for the months of January, February, March, and April of 6,000, 5,000, 5,550, and 2,000, respectively. During the same months, the costs were $500,000, 400,000, 425,000, and 200,000. The fixed costs are:

a. 150,000
b. 450,000