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MGMT 640 Final Exam Spring 2013




Question;The Final Exam is individual work. All work on the exam should be from your own efforts, withno assistance from classmates, family, friends or others. By proceeding with this exam, you areagreeing not to share the exam content or your responses with anyone, including future studentsof MGMT640. Your completed exam is due by 8:00 PM on Thursday, April 25, 2013 (uploadto your Assignments Folder in WebTycho).Please refer to the Syllabus for the policy regarding late submissions. There will be nomake-up exams except for documented emergencies.You are not required to submit your working. However, complete working showingformulas and calculations may be considered for partial credit for incorrect answers.Identify the letter of the choice that best completes the statement or answers the question.A)B)C)D)1. A manufacturing company produces 80,000 units of product A at a total cost of $2.4million. Total fixed costs are $1.4 million. If the company increases production by 25%and uses a 19% markup the price per unit will be:$31.54$30.80$51.80$37.10Use the following to answer questions 2-3:RNO Company's market for the Model 55 has changed significantly, and RNO has had to dropthe price per unit from $265 to $125. There are some units in the work in process inventory thathave costs of $150 per unit associated with them. RNO could sell these units in their currentstate for $100 each. It will cost RNO $10 per unit to complete these units so that they can besold for $125 each.A)B)C)D)12. A new employee looks at the analysis and exclaims, We'll lose money with either ofthese alternatives! Let's just throw these units in the trash! Suppose the alternative totrashing is choosing the more profitable of the two alternatives (that the new employeelooked at and did not like). What effect will the trashing option (that the new employeewants) have on net income?Net income will increase by $35 per unit for each unit discarded.Net income will decrease by $115 per unit for each unit discarded.It will have no effect on net income.Net income will decrease by $265 per unit for each unit discarded.A)B)C)D)3. When the incremental revenues and expenses are analyzed, the company is better off by$10 per unit if they sell the units in their current state.$25 per unit if they sell the units in their current state.$15 per unit if they complete the units.$125 per unit if they complete the units.A)B)C)D)4. A company using activity based pricing marks up the direct cost of goods by 43% pluscharges customers for indirect costs based on the activities utilized by the customer.Indirect costs are charged as follows: $8.00 per order placed, $4.00 per separate itemordered, $30.00 per return. A customer places 10 orders with a total direct cost of$3,000, orders 300 separate items, and makes 6 returns. What will the customer becharged?$5,330$3,000$5,750$4,290A)B)C)D)5. Manufacturing overhead is allocated to products based on the number of machine hoursrequired. In a year when 20,000 machine hours were anticipated, costs were budgetedat $125,000. If a product requires 7,000 machine hours, how much manufacturingoverhead will be allocated to this product?$41,667$43,750$1,120$50,000Use the following to answer questions 6-7:The Sunrise Hotel has 200 rooms. Each room rents at $110 per night and variable costs total $16per room per night of occupancy. Fixed costs total $84,000 per month.A)B)C)D)6. If the hotel spends an additional $10,000 in the month of February on advertising theyfeel that they can expect occupancy rate to increase by 5%. What would be the financialimpact of spending this additional money on advertising for the month of February (28days)?Total fixed costs will increase by $10,500.Net income will increase by $16,320.Net income will increase by $26,320.Total fixed costs will remain the same.A)B)C)D)7. If 80% of the rooms are occupied each night in the month of February (28 days) whatwill total costs be for the month?$86,560.$173,600.$71,680.$155,680.28. Jones Company manufactures widgets. OldHam Company has approached Jones with aproposal to sell the company one of thecomponents used to make widgets at a price of$100,000 for 50,000 units. Jones is currentlymaking these components in its own factory.The following costs are associated with thispart of the process when 50,000 units areproduced:Direct materialDirect laborManufacturing overheadTotalThe manufacturing overhead consists of$32,000 of costs that will be eliminated if thecomponents are no longer produced by Jones.The remaining manufacturing overhead willcontinue whether or not Jones makes thecomponents.What is the amount of avoidable costs if Jonesbuys rather than makes the components?$60,000$96,000$124,000$100,000A)B)C)D)9. Below is a performance report that compares budgeted and actual profit of Boyles Beerfor the month of April:SalesLess:Cost of ingredientsSalariesControllable ProfitBudget$200,000Actual$202,000Difference$2,000$162,000$31,000$166,000$31,200$4,000$200$47,000$44,800-$2,200In evaluating the department in terms of its increase in sales and expenses, what will bemost important to investigate?3A)B)C)D)SalesCost of ingredientsSalariesAll three components have equal importance.10. K-Henry's Dull Diner has a contribution margin ratio of 16%. If fixed costs are$176,800, how many dollars of revenue must K-Henry's generate in order to reach thebreak-even point?A)$282,880B)$1,060,800C)$208,476D)$1,105,00011. A company has a total cost of $50.00 per unit at a volume of 100,000 units. Thevariable cost per unit is $20.00. What would the price be if the company expected avolume of 120,000 units and used a markup of 50%?A)$75.00B)$62.50C)There is not enough information in the problem to answerD)$67.5012. At Caleb's Tights, the break-even point is 2,400 units. If fixed costs total $300,000 andvariable costs are $25 per unit, what is the selling price per unit?A)$210B)$180C)$5D)$150A)B)C)D)13. If a company is currently operating at its breakeven point, which of the followingstatements is true? (Income tax considerations are ignored.)If fixed costs increase, net income will decrease by the contribution margin ratiotimes the amount of the increase in fixed costs.If sales increase by 20%, net income will also increase by 20%, assuming fixedcosts are not equal to zero.If variable costs double, net income will decrease by 50%.Net income will decrease by the decrease in number of units sold times thecontribution margin per unit.14. One Small Grill Company is a start up with the following profile:Unit selling price = $230, Variable cost per unit = $130, Fixed Costs = $36,000,Tax rate = 40%. How many units should Small Grill sell to achieve an after-tax target4income of $6,000?A)B)C)D)20046023030015. Western Apparel Company owns two storesand management is considering eliminating theEast store due to declining sales. Segmentedcontribution income statements are as followsand common fixed costs are allocated on thebasis of sales.WestSales$525,000Variable costs262,500Direct fixed costs62,500Segment margin200,000Allocated fixed costs137,500Net Income$62,500Western feels that if they eliminate the Eaststore that sales in the West store will decline by25%. If they close the East store, overallcompany net income will:decline by $90,000.decline by $62,000.decline by $85,625.decline by $20,000.A)B)C)D)16. JungleGym, a best-selling toy has a selling price of $15. If the contribution margin ratiois 40% and if the fixed costs are $60,000, how many JungleGyms must the company sellto realize a profit of $450,000?A)100,000B)30,000C)34,000D)85,000Information for Questions 17-18Anderson Manufacturing makes a single product. Budget information regarding the currentperiod is given below:Revenue (100,000 units at $8.00)Direct materialsDirect labor5$800,000150,000125,000Variable manufacturing overheadFixed manufacturing overheadNet income235,000110,000$180,000Dye Company approaches Anderson with a special order for 15,000 units at a price of $7.50 perunit. Variable costs will be the same as the current production and accepting the special orderwill not have any impact on the rest of the company's orders. However, Anderson is operating atcapacity and will incur an additional $50,000 in fixed manufacturing overhead if the order isaccepted.A)B)C)D)17. What is the incremental income (loss) associated with accepting the special order?($14,000)$36,000($23,500)$27,000A)B)C)D)18. What is the incremental revenue associated with accepting the special order?$170,000$112,500$70,000$120,00019. The Copy Department of the Cadiz Company is budgeted to incur $40,000 per month infixed costs and $0.02 per copy in variable costs. It allocates copy costs to userdepartments as follows: Fixed costs are allocated (as a lump sum) based on budgetedfixed costs and estimated peak demand for each department. Variable costs are allocatedbased on the budgeted rate per copy times the department's actual usage. Which of thefollowing is not an advantage of this allocation scheme over allocating actual costsbased on actual usage?A)The amount charged to one using department is not affected by the number of copiesused by another department.B)Managers in the using departments pay for the fixed costs that are created by theirdemands for capacity.C)Using departments are not charged for cost overruns in the copy department.D)All of the above are advantages of this allocation system.20. Which of the following is not a difference between financial accounting and managerialaccounting?A)Financial accounting must follow GAAP while managerial accounting is not required tofollow GAAP.B)Managerial accounting is primarily concerned with providing information for externalusers while financial accounting is concerned with internal users.C)Financial accounting is primarily concerned with reporting the past, while managerialaccounting is more concerned with the future.D)Managerial accounting uses more nonmonetary information than is used in financialaccounting.621. Paul's Pizza produced and sold 2,000 pizzas last month and had fixed costs of $6,000. Ifproduction and sales are expected to increase by 10% next month, which of thefollowing statements is true?A)Total fixed costs will decrease.B)Fixed cost per unit will decrease.C)Total fixed costs will increase.D)Fixed cost per unit will increase.22. The Dynamaco Company uses cost-plus pricing with a 50% mark-up. The company iscurrently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. Inaddition, the company incurs $200,000 in fixed costs annually. If demand falls to80,000 units and the company wants to continue to earn a 50% return, what price shouldthe company charge?A)$12.75B)$14.55C)$13.50D)$10.95Use the following to answer question 23:Taylor's Treasures has collected the following information over the last six months.MonthMarchAprilMayJuneJulyAugustA)B)C)D)Units produced10,00012,00018,00013,00012,00015,000Total costs$25,60026,20027,60026,45026,00026,50023. Using the high-low method, what is the variable cost per unit?$0.25$2.56$0.22$2.0024. A manufacturing company produces and sells 40,000 units of a single product. Variablecosts total $80,000 and fixed costs total $120,000. If unit is sold for $8, what markuppercentage is the company using?A)60%B)160%C)75%D)133%725. Visit and determine which of the following statements is incorrect:A) The price per share of Google is more than ten times that of Microsoft.B) Revenues of Apple for the trailing twelve months to September 30, 2012 were morethan double revenues of Microsoft.C) The market cap of Microsoft is more than double that of Google.D) The current ratio for the most current quarter for Google is higher than the current ratiofor Microsoft.


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