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activity based questions




Question;61. The;following information relates to Day Company;Sales revenue;$12,000,000;Contribution margin;4,800,000;Net income;800,000;Day's;operating leverage factor is;A. 0.067.;B. 0.167.;C. 0.400.;D. 2.500.;E. 6.000.;62. The following information relates to Paterno;Company;Sales revenue;$10,000,000;Contribution margin;4,000,000;Net income;1,000,000;If;a manager at Paterno desired to determine the percentage impact on net income;of a given percentage change in sales, the manager would multiply the;percentage increase/decrease in sales revenue by;A. 0.25.;B. 0.40.;C. 2.50.;D. 4.00.;E. 10.00.;Use the;following to answer questions 63-64;Edco Company;produced and sold 45,000 units of a single product last year, with the;following results;Sales revenue;$1,350,000;Manufacturing;costs;Variable;585,000;Fixed;270,000;Selling;costs;Variable;40,500;Fixed;54,000;Administrative;costs;Variable;184,500;Fixed;108,000;63. Edco's operating leverage factor was;A. 4.;B. 5.;C. 6.;D. 7.;E. 8.;64. If Edco's sales revenues increase 15%, what;will be the percentage increase in income before income taxes?;A. 15%.;B. 45%.;C. 60%.;D. 75%.;E. An amount other than those above.;65. When advanced manufacturing systems are;installed, what effect does such installation usually have on fixed costs and;the break-even point?;Fixed Costs;Break-even Point;A.;Increase;Increase;B.;Increase;Decrease;C.;Decrease;Increase;D.;Decrease;Decrease;E.;Do not change;Does not;change;66. Which of the following statements is (are);true regarding a company that has implemented flexible manufacturing systems;and activity-based costing?;I.;The;company has erred, as these two practices used in conjunction with one another;will severely limit the firm's ability to analyze costs over the relevant;range.;II.;Costs;formerly viewed as fixed under traditional-costing systems may now be;considered variable with respect to changes in cost drivers such as number of;setups, number of material moves, and so forth.;III.;As;compared with the results obtained under a traditional-costing system, the;concept of break-even analysis loses meaning.;A. I only.;B. II only.;C. III only.;D. I and II.;E. II and III.;67. A company, subject to a 40% tax rate, desires;to earn $500,000 of after-tax income.;How much should the firm add to fixed costs when figuring the sales;revenues necessary to produce this income level?;A. $200,000.;B. $300,000.;C. $500,000.;D. $833,333.;E. $1,250,000.;68. Barney, Inc., is subject to a 40% income tax;rate. The following data pertain to the;period just ended when the company produced and sold 45,000 units;Sales revenue;$1,350,000;Variable costs;810,000;Fixed costs;432,000;How;many units must Barney sell to earn an after-tax profit of $180,000?;A. 42,000.;B. 45,000.;C. 51,000.;D. 61,000.;E. An amount other than those above.;EXERCISES;Basic CVP;Relationships;69. Vince's Pizza delivers pizzas to dormitories;and apartments near a major state university.;The company's annual fixed costs are $48,000. The sales price averages $9, and it costs the;company $3 to make and deliver each pizza.;Required;A.;How;many pizzas must Vince's sell to break even?;B.;How;many pizzas must the company sell to earn a target net profit of $54,000?;C.;If;budgeted sales total 9,900 pizzas, how much is the company's safety margin?;D.;Vince's;assistant manager, an accounting major, has suggested that the firm should try;to increase the contribution margin per pizza.;Explain the meaning of "contribution margin" in layman's;terms.;Basic CVP;Relationships;70. Seventh Heaven takes tourists on helicopter;tours of Hawaii. Each tourist buys a $150;ticket, the variable costs average $60 per person. Seventh Heaven has annual fixed costs of $702,000.;Required;A.;How;many tours must the company conduct in a month to break even?;B.;Compute;the sales revenue needed to produce a target net profit of $36,000 per month.;C.;Calculate;the contribution margin ratio.;D.;Determine;whether the actions that follow will increase, decrease, or not affect the;company's break-even point.;1.;A decrease;in tour prices.;2.;The;termination of a salaried clerk (no replacement is planned).;3.;A;decrease in the number of tours sold.;CVP;Analysis of Operations;71.;Thompson;Company is considering the development of two products: no. 65 or no. 66. Manufacturing cost information follows.;No. 65;No. 66;Annual fixed costs;$220,000;$340,000;Variable cost;per unit;33;25;Regardless;of which product is introduced, the anticipated selling price will be $50 and;the company will pay a 10% sales commission on gross dollar sales. Thompson will not carry an inventory of these;items.;Required;A.;What;is the break-even sales volume (in dollars) on product no. 66?;B.;Which;of the two products will be more profitable at a sales level of 25,000 units?;C.;At;what unit-volume level will the profit/loss on product no. 65 equal the;profit/loss on product no. 66?;Break-Even Analysis;Decision Making;72. The Bruggs & Strutton Company;manufactures an engine for carpet cleaners called the "Snooper." Budgeted cost and revenue data for the;Snooper" are given below, based on sales of 40,000 units.;Sales;$1,600,000;Less;Cost of goods sold;1,120,000;Gross;margin;$ 480,000;Less;Operating expenses;100,000;Net;income;$ 380,000;Cost;of goods sold consists of $800,000 of variable costs and $320,000 of fixed;costs. Operating expenses consist of;$40,000 of variable costs and $60,000 of fixed costs.;Required;A.;Calculate;the break-even point in units and sales dollars.;B.;Calculate;the safety margin.;C.;Bruggs;Strutton received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but;variable costs will be reduced by $0.54 per unit because of cheaper;packaging. Determine the projected;increase or decrease in profit from the order.;Impact of Operating;Changes;73. Oakmark recently sold 70,000 units;generating sales revenue of $4,900,000.;The company's variable cost per unit and total fixed cost amounted to;$20 and $2,800,000, respectively.;Management is in the process of studying the dollar impact of various;transactions and events, and desires answers to the following independent;cases;Case no. 1: Management wants to lower the firm's;break-even point to 52,000 units. All;other things being equal, what must happen to fixed costs to achieve this;objective?;Case no. 2: The company anticipates a $2 hike in the;variable cost per unit. All other things;being equal, if management desires to keep the firm's current break-even point;what must happen to Oakmark's selling price?;If selling price remains constant, what must happen to the firm's total;fixed costs?;Required;A.;Answer;the two cases raised by management.;B.;Determine;the impact (increase, decrease, or no effect) of the following operating;changes on the items cited;1.;An;increase in variable selling costs on net income.;2.;A;decrease in direct material cost on the unit contribution margin.;3.;A decrease;in the number of units sold on the break-even point.;Impact of;Operating Changes;74. Wilcox Company is studying the impact of the;following;1. An increase in sales price.;2. An increase in the variable cost per unit.;3.;An;increase in the number of units sold (note: each unit produces a $6;contribution margin).;4.;A;decrease in fixed costs.;5.;A;proposed change in the method of compensation for salespeople, away from;commissions based on gross sales dollars and toward higher monthly salaries.;Required;Determine;the impact of each of these operating changes on Wilcox's per-unit contribution;margin and break-even point by completing the chart that follows. Your responses should be Increase (INC);Decrease (DEC), No Effect (NE), or Insufficient Information to Judge (II).;Per-Unit;Contribution;Margin;Break-Even;Point;1.;2.;3.;4.;5.;Impact of;Operating Changes;75.;Gladstone;Company is studying the impact of the following;1. An increase in sales price on the break-even point.;2. A decrease in fixed costs on the contribution;margin.;3. An increase in the contribution margin on the;break-even point.;4. A decrease in the variable;cost per unit on the sales volume needed to achieve Gladstone's $68,000 target;net profit.;5. An increase in sales commissions on the break-even point and the;contribution margin.;6. A decrease in anticipated advertising outlays;on fixed cost and the break-even point.;Required;Determine the impact of these operating changes (increase;decrease, no effect) on the item(s) noted.


Paper#44969 | Written in 18-Jul-2015

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