ACCT 526 Final

D

Contribution margin is the difference between: a.variable expenses and fixed expense. b.sales and fixed expense. c.variable expense and operating income. d.sales and variable expense.

True

If a company has sales of $80,000, operating income of $5,000, and assets of $20,000, it's ROI is 25%.

False

If price is $10, unit variable cost is $2.50, and total fixed cost is 3,000, 240 units must be sold to breakeven.

False

If the gym's monthly unlimited plan cost $100 and the daily plan cost $12, Lacy would need to go to the gym at least 10 times per month for the monthly plan to be the better deal.

True

If the gym's monthly unlimited plan cost $50 and the daily plan cost $8, Lacy should use the daily plan if she only intends to go to the gym 6 times per month.

False

If the variable cost ratio is known, it can be subtracted from 100 to yield the contribution margin ratio.

B

If there is a competitive outside market for the transferred product, then the best transfer price is the _____. a. negotiated price b. market price c. variable cost price d. value based price

True

Managerial accountants need to understand their company's strategy and key business processes for accurate analysis of data which will result in smooth strategy execution by business executives.

False

Managerial accounting follows the same rules as financial accounting.

False

Managerial accounting is the provision of accounting for a company's external users.

B

Marc Company sells a product for $20, incurs a variable cost of $12 per unit, and has total fixed costs of $6,000. What is the per-unit contribution margin? a. $6 b. $8 c. $7 d. $9

False

Margin is sales divided by assets, and turnover is operating income divided by sales.

C

Whittier Company plans to produce and sell 2,000 units next month. The following data is given. Per unitTotal Selling price $50 Variable cost $24 Fixed costs $28,000 Calculate the break-even point in units. a. 1,000 units b. 560 units c. 1,077 units d. 1,028 units

B

Young Manufacturing Company plans to sell 600 units at $500 each in the following year. The data on costs is as follows: Variable cost$400 Total fixed cost$30,000 Operating Income$30,000 Calculate the degree of operating leverage. a. 3 b. 2 c. 4 d. 1

D

A company manufactures two products. Information about the two product lines for the current year is as follows: Product AProduct B Selling price per unit $90 $120 Variable costs per unit $50 $60 The company expects fixed costs to be $70,000. Calculate the break-even quantity of each product when the sales mix is 2:1. a. 1,145 units, 572 units b. 1,250 units, 625 units c. 1,110 units, 555 units d. 1,000 units, 500 units

B

A manufacturing company furnishes the following data for one of its manufacturing cells. Maximum units produced in a quarter (3-month period): 250,000 units and time available in a quarter is 50,000 hours. But only 180,000 units were actually manufactured. Calculate the theoretical cycle time (in minutes) and theoretical velocity in units per hour. a. 20 minutes per unit, 10 units per hour b. 12 minutes per unit, 5 units per hour c. 15 minutes per unit, 7 units per hour d. 24 minutes per unit, 12 units per hour

C

A manufacturing company has 30,000 productive hours in a quarter. The company can produce 100,000 units but actually produced 140,000 units. The theoretical cycle time was recorded as 10 minutes, actual time was 14 minutes, and nonprocessing time was 4 minutes. Calculate manufacturing cycle efficiency (MCE). a. 65% b. 59% c. 71% d. 77%

D

A profit center is a responsibility center in which a manager is responsible for: a. only revenues. b. only investments. c. investments and costs. d. revenues and costs.

A

A responsibility center in which a manager is responsible for revenues, costs, and investments is a(n): a. investment center. b. revenue center. c. profit center. d. cost center.

D

A responsibility center in which a manager is responsible only for costs is a(n) a. investment center. b. revenue center. c. profit center. d. cost center.

B

Alma Inc. has a number of divisions, including the Beta Division, a producer of circuit boards, and the Gamma Division, a heating and air-conditioning manufacturer. Beta Division produces the TX-100 model that can be used by the Gamma Division in production of thermostats. The market price of TX-100 is $16, and the full cost of a circuit board is $11. The Beta Division can avoid $4 of selling expenses by selling to the Gamma Division. Which of the following statements is true if top management allows negotiated transfer pricing between two divisions? a.The maximum transfer price would be set by the company at $15. b.The minimum transfer price would be set by the Beta Division at $12. c.The maximum transfer price would be set by the Gamma Division at $11. d.The minimum transfer price would be set by the Beta Division at $16.

D

AquaShine Inc. has a number of divisions, including the Beige Division, a producer of fabric, and the Purple Division, a fabric painting division. The cost per yard of the cloth manufactured by Beige Division of the AquaShine Inc. is as follows: Direct material$20 Direct labor$5 Variable overhead$2 Fixed overhead$3 Calculate the transfer price if the company allows transfer pricing at cost plus 10%. a.$27 b.$30 c.$35 d.$33

B

Assuming that fixed costs remain the same, the change in operating income from a change in revenues is calculated by. a. multiplying the variable cost ratio and the change in sales. b. multiplying the contribution margin ratio and the change in sales. c. multiplying the variable cost ratio and the break-even sales. d. multiplying the contribution margin ratio and the break-even sales.

D

Burlywood Company sells two products that are expected to produce total revenue of $198,385 and total variable cost of $128,950 next year. Total fixed cost is expected to equal $42,450. Determine the break-even point in sales dollars for Burlywood. Round all ratios to two decimal places. a.$42,450 b.$242,572 c.$220,520 d.$121,286

B

Consider the following information for the manufacturing cell of Stripes Company: Maximum units produced in a quarter215,000 units Actual units produced in a quarter172,000 units Productive hours in a quarter43,000 hours Compute the theoretical velocity and the actual velocity in units per hour. a.Theoretical velocity is 4 units per hour, and actual velocity is 3 units per hour. b.Theoretical velocity is 5 units per hour, and actual velocity is 4 units per hour. c.Theoretical velocity is 4 units per hour, and actual velocity is 5 units per hour. d.Theoretical velocity is 5 units per hour, and actual velocity is 3 units per hour.

Cost Investment Revenue Profit Investment

For each of the below independent scenarios, indicate the type of responsibility center involved (cost, revenue, profit, or investment). 1- Terrin Belson, plant manager for the laser printer factory of Compugear Inc., brushed his hair back and sighed. December had been a bad month. Two machines had broken down, and some factory production workers (all on salary) were idled for part of the month. Materials prices increased, and insurance premiums on the factory increased. No way out of it; costs were going up. He hoped that the marketing vice president would be able to push through some price increases, but that really wasn't his department. 2- Joanna Pauly was delighted to see that her ROI figures had increased for the third straight year. She was sure that her campaign to lower costs and use machinery more efficiently (enabling her factories to sell several older machines) was the reason why. Joanna planned to take full credit for the improvements at her semiannual performance review. 3- Gil Rodriguez, sales manager for ComputerWorks, was not pleased with a memo from headquarters detailing the recent cost increases for the laser printer line. Headquarters suggested raising prices. "Great," thought Gil, "an increase in price will kill sales and revenue will go down. Why can't the plant shape up and cut costs like every other company in America is doing? Why turn this into my problem?" 4- Susan Whitehorse looked at the quarterly profit and loss statement with disgust. Revenue was down, and cost was up—what a combination! Then she had an idea. If she cut back on maintenance of equipment and let a product engineer go, expenses would decrease—perhaps enough to reverse the trend in income. 5- Shonna Lowry had just been hired to improve the fortunes of the Southern Division of ABC Inc. She met with top staff and hammered out a 3-year plan to improve the situation. A centerpiece of the plan is the retiring of obsolete equipment and the purchasing of state of-the-art, computer-assisted machinery. The new machinery would take time for the workers to learn to use, but once that was done, waste would be virtually eliminated.

a. managerial b. financial c. managerial d. financial e. managerial

Determine whether each request is relatively more managerial accounting oriented or financial accounting oriented. a. Ben Heald, head of production, wondered whether it would be more cost effective to buy parts partially assembled or to buy individual parts and assemble them at the Arben factory. b. The president of Arben reminded Jenna that the stockholders' meeting was coming up, and he needed her to prepare a PowerPoint® presentation showing the income statement and balance sheet information for last year. c. Ellen Johnson, vice president of sales, has decided to expand the sales offices for next year. She sent Jenna the information on next year's rent and depreciation information for budgeting purposes. d. Jenna's assistant, Mike, received the information from Ellen on depreciation and added it to depreciation expenses and accumulated depreciation on office equipment. e. Jenna compared the budgeted spending on materials used in production with the actual spending on materials used in production. Materials spending was significantly higher than expected. She set up a meeting to discuss this outcome with Ben Heald so that he could explain it.

True

Graphically, the breakeven point is where the contribution margin crosses the fixed cost line.

B

Division A manufactures an aircraft engine component with unit variable product cost of $38 and market price of $50. Division A incurs shipping costs of $3 per unit for sales to outside parties only. Division B uses this component in the manufacture of its own engine production activities. Top management allows negotiated transfer pricing. If Division A is operating at full capacity, the maximum transfer price (the ceiling of the bargaining range) is: a. $38. b. $50. c. $44. d. $47. e. There is no bargaining range.

True

Ethical behavior involves choosing actions that are right, proper, and just.

False

Ethical failures no longer occur in businesses across the globe.

A

Following is the financial information of Azure Company for the last financial year: Operating Income$86,000 Less: income taxes @35%$30,100 Net Income$55,900 Total capital employed$400,000 Actual cost of capital10% Minimum expected rate of return11% Calculate economic value added (EVA) of Azure. a.$15,900 b.$19,900 c.$17,400 d.$18,400

C

Following is the financial information of Curly Company's Southern Division for the last financial year: Operating Income$175,000 Beginning Assets$930,000 Ending Assets$1,240,000 Calculate its return on investment (ROI). a.14.00% b.15.00% c.16.00% d.17.00% Feedback Area

A

In a cost-volume-profit graph, the break-even point lies at the point: a. where the total revenue line and the total cost line intersect. b. where the operating income line meets the variable costs line. c. where the total cost line crosses the x-axis. d. where the total cost line and operating income line intersect.

D

In cost-volume-profit analysis, a multiple-product problem is converted into a single-product problem by: a.determining the sales prices. b.determining the unit variable cost. c.defining the features of the products. d.defining a particular sales mix in units.

D

In cost-volume-profit analysis, assuming price and unit variable cost remain the same, any increase in fixed costs will mean: a.a higher contribution margin. b.a lower contribution margin. c.a lower break-even point. d.a higher break-even point.

C

In financial terms, operating leverage is concerned: a.only with fixed costs of an organization. b.only with the variable costs of an organization. c.with the relative mix of fixed costs and variable costs of an organization. d.with the relative mix of contribution margin and variable costs of an organization.

B

In general, assuming that fixed costs remain unchanged, the contribution margin ratio can be used to find the: a.profit of the next five reporting periods. b.profit impact of a change in sales revenue. c.profit impact of a change in customer specifications. d.number of units sold in the previous period.

D

Information for Noble Company is as follows: Sales$400,000 Variable costs100,000 Fixed costs150,000 Calculate the break-even point in sales dollars. a. $157,000 b. $175,000 c. $250,000 d. $200,000

D

Lauren Company plans to sell 3,000 units of a product at $500 each. For the product, unit variable cost is $380 and break-even units are 700. Calculate the margin of safety for Lauren in terms of the number of units. a. 2,000 units b. 2,100 units c. 2,200 units d. 2,300 units

A

Paule Company manufactures computers. The budgeted sales are $300,000, budgeted variable costs are $153,000, and budgeted fixed costs are $270,000. Calculate the variable cost ratio. a. 51% b. 60% c. 45% d. 48%

D

Platanus Inc. was one of the largest manufacturers of automobile engines and fixtures. Platanus Inc.'s management created an automated process of improving efficiency and minimizing human error in its production process so that the company produced zero-defect engines. Employees were monetarily rewarded when their units were free from defects. It also maintained relevant managerial accounting information regarding the cost of existing poor quality and efforts to improve future quality. Based on the information, which of the following is the most likely conclusion? a. The management of Platanus Inc. has adopted the philosophy of strategic positioning. b. The management of Platanus Inc. has adopted the philosophy of customer orientation. c. The management of Platanus Inc. has adopted the philosophy of value chain management. d. The management of Platanus Inc. has adopted the philosophy of total quality management.

True

Providing an analysis for a company regarding adding a particular product line, retracting sales markets, or dealing with risks or opportunities are some of the responsibilities of managerial accountants.

D

Question Content Area Sigma Company sells its only product for $190 per unit. It has variable costs of $130 per unit. Annual fixed operating costs amount to $9,800,000. How many units must Sigma sell to earn $1,000,000 of operating income? a.104,000 units b.127,000 units c.120,000 units d.180,000 units

C

Question Content Area The objective of profit maximization should be constrained by the requirement that profits be achieved through a.ethical means only b.legal means only c.both legal and ethical means d.any means possible e.None of these.

B

Question Content Area The process of choosing among competing alternatives is called a.planning. b.decision making. c.controlling. d.performance evaluation. e.None of these choices are correct.

True

Tacos-2-Go could reduce their variable costs by shopping at wholesale supplies over local groceries.

A

The Northern Co. manufactures office chairs. The following information for the month of June is available: Selling price per chair$150 Variable cost per chair70 Total fixed cost110,000 The company's break-even point in units is: a.1,375 chairs. b.1,573 chairs. c.1,238 chairs. d.1,469 chairs.

D

The Statement of Ethical Professional Practice is issued by the: a. U.S. Congress. b. Securities and Exchange Commission. c. New York Stock Exchange. d. Institute of Management Accountants.

B

The _____ perspective of the Balanced Scorecard management system defines and selects the market segments in which the company chooses to compete. a.financial b.customer c.learning and growth d.internal

True

The breakeven in sales dollars equation is total fixed expenses divided by the contribution margin ratio.

True

The contribution margin is the difference between sales and variables expenses.

C

The set of activities required to design, develop, produce, market, and deliver products and services, as well as provide support services to customers is termed as a: a. strategic positioning. b. supply chain. c. value chain. d. product differentiation.

B

The transfer price that would leave the selling division no worse off if the good were sold to an internal division than if the good were sold to an external party is known as _____. a. external transfer pricing b. minimum transfer pricing c. cost-based transfer pricing d. value-based transfer pricing

False

The length of time it takes to produce a unit of output from the time raw materials are received (starting point) until the product is delivered to finished goods inventory (finishing point) is called responsiveness time.

B

The length of time it takes to produce a unit of output from the time raw materials are received until the good is delivered to finished goods inventory is called a. velocity. b. cycle time. c. manufacturing cycle efficiency. d. theoretical cycle time. e. theoretical MCE.

A

The management activity called _____ is detailed formulation of action to achieve a particular end. a. planning b. controlling c. decision making d. none of the above

C

The margin of safety in dollars is calculated by. a. subtracting total cost from the actual sales. b. subtracting the contribution margin from the actual sales. c. subtracting the break-even sales from the actual sales. d. subtracting the fixed cost from the actual sales.

A

The practice of delegating authority to division-level managers by top management is: a. decentralization. b. good business practice. c. centralization. d. autonomy. e. never done in business today.

C

The provision of accounting information for internal users is known as a.information provision. b.inventory accounting. c.managerial accounting. d.accounting for planning and control. e.accounting.

True

Total fixed costs, price, and unit variable costs all have an impact on the breakeven point.

True

Transfer price is the price paid on sales between two divisions of the same company.

True

Transfer pricing policies are set by the overall company based on market price, full cost, or negotiation.

True

Velocity is the number of units of output that can be produced in a given period of time.

B

Which of the following can be defined as set of linked objectives aimed at an overall goal? a. A budget manual b. A testable strategy c. A double-loop feedback d. A prospectus

A

Which of the following differentiates direct fixed expenses from common fixed expenses? a. The direct fixed expenses are those fixed costs that can be traced to a segment, whereas the common fixed expenses are not traceable to the segments. b. The direct fixed expenses are linear revenue and linear cost functions that remain constant, whereas the common fixed expenses are profits and sales unit functions that change over a relevant range. c. The direct fixed expenses are fixed costs that are the measures of profit, whereas the common fixed expenses are fixed costs that are the measures of revenue. d. The direct fixed expenses are fixed costs which remain even if one of the segments is eliminated, whereas the common fixed expenses are fixed costs that would be avoided if a segment is eliminated.

C

Which of the following equations can be used to determine the number of units to be sold to earn a target income? a.Number of Units to Earn Target Income = Target Income / Contribution Margin per Unit b.Number of Units to Earn Target Income = Target Income / Variable Cost per Unit c.Number of Units to Earn Target Income = (Total Fixed Cost + Target Income) / Contribution Margin per Unit d.Number of Units to Earn Target Income = (Total Variable Cost + Target Income) / Contribution Margin per Unit

C

Which of the following equations is used to calculate the break-even units? a.Break-Even Units = Total Fixed Cost / Variable Cost per Unit b.Break-Even Units = Total Fixed Cost / Price per Unit c.Break-Even Units = Total Fixed Cost / (Price - Variable Cost per Unit) d.Break-Even Units = Total Variable Cost / (Price - Fixed Cost per Unit)

D

Which of the following equations is used to calculate the degree of operating leverage? a.Degree of Operating Leverage = Total Fixed Cost / Operating Income b.Degree of Operating Leverage = Operating Income / Total Contribution Margin c.Degree of Operating Leverage = Operating Income / Total Fixed Cost d.Degree of Operating Leverage = Total Contribution Margin / Operating Income

E

Which of the following is a characteristic of managerial accounting? a.It reports financial information that is useful for internal planning decisions. b.It measures nonfinancial information that is useful for controlling costs. c.Subjective information may be used. d.There is an internal focus. e.All of these.

A

Which of the following is a difference between economic value added (EVA) and residual income? a.Economic value added (EVA) lays emphasis on after-tax operating profit and the actual cost of capital, whereas residual income uses minimum expected rate of return. b.Economic value added (EVA) lays emphasis on minimum expected rate of return, whereas residual income uses before-tax operating profit and the actual cost of capital. c.Economic value added (EVA) lays emphasis on minimum expected rate of return, whereas residual income uses after-tax operating profit and the actual cost of capital. d.Economic value added (EVA) lays emphasis on before-tax operating profit and the actual cost of capital, whereas residual income uses minimum expected rate of return.

B

Which of the following is a difference between financial accounting and managerial accounting? a. Financial accounting focuses on providing information for internal users, while managerial accounting focuses on providing information for external users. b. Financial accounting has a historical orientation, while managerial accounting emphasizes on the future. c. Financial accounting includes various disciplines and is broad in scope, while managerial accounting is more self-containing. d. Financial accounting does not follow externally imposed rules, while managerial accounting must follow externally imposed rules.

D

Which of the following is a disadvantage of the return on investment (ROI) measure? a.It encourages managers to mask inefficiencies within the various subdivisions with the overall profit margins. b.It encourages managers to focus on the overall profitability of the firm at the expense of divisional profitability. c.It encourages top management to evaluate local managers' capabilities based on their profit targets. d.It encourages managers to focus on the short run at the expense of the long run.

E

Which of the following is a perspective of the Balanced Scorecard? a. Learning and growth (infrastructure) b. Internal business process c. Customer d. Financial e. All of these.

A

Which of the following is a reason for decentralization? a. It makes it easy to gather and use local information more effectively. b. It helps top management to make proper decisions as top management generates all information. c. It protects segments of a company from competitive pressures. d. It segregates functions, where top management makes all decisions and local unit generates all information.

A

Which of the following is a standard of ethical conduct for managerial accountants as per the Institute of Management Accountants? a. Competence b. Confidence c. Performance d. Respect for others

A

Which of the following is affected by transfer price? a. Cost of the buying division b. Conversion cost of the buying division c. Market prices of the product of the selling division d. Manufacturing cost of the selling division

D

Which of the following is an advantage of residual income? a.It is an absolute measure of profitability as different investment centers have a constant level of investment. b.It is easy to compare performance of different investment centers as the level of investment differs. c.It encourages a short-run orientation like return on investment (ROI) resulting in long-run survival of a firm. d.It encourages managers to accept any project that earns a return that is above the minimum rate.

C

Which of the following is an advantage of the return on investment (ROI) measure? a.It is easy to manipulate the results using different inputs for computing ROI. b.It is the best measure to compare the financial results of companies with similar capital structures. c.It encourages managers to focus on operating asset efficiency. d.It encourages focus on divisional profitability at the expense of profitability for the overall firm.

B

Which of the following is an assumption of CVP analysis? a. Selling prices and costs are known with uncertainty. b. Linear revenue and cost functions remain constant over the relevant range. c. Units produced are sold but finished goods inventories retained. d. Sales mix is known with uncertainty for single product break-even settings.

D

Which of the following is an assumption of cost-volume-profit analysis? a.The units manufactured are always more than units sold. b.Cost and revenue functions are curved functions. c.Sales mix is unknown for multiple-product break-even settings. d.Selling prices and costs are known with certainty.

D

Which of the following is not a reason for decentralizing? a. Training and motivating managers. b. Unmasking inefficiencies in subdivisions of an overall profitable company. c. Allowing top management to focus on strategic decision making. d. Allowing top management to make all key operating decisions throughout the company. e. All of these.

C

Which of the following is referred to as controlling? a. The provision of accounting information for a company's internal users. b. The process of choosing among competing alternatives. c. The managerial activity of monitoring a plan's implementation and taking corrective action as needed. d. The detailed formulation of action to achieve a particular end.

A

Which of the following is the mathematical expression for calculating number of units to earn target income? a. Number of Units to Earn Target Income = (Total Fixed Cost + Target Income) ÷ Contribution Margin per Unit b. Number of Units to Earn Target Income = (Price - Variable Cost per Unit) ÷ Target Income c. Number of Units to Earn Target Income = (Contribution Margin ratio × Target Income) ÷ Variable Cost Ratio d. Number of Units to Earn Target Income = (Total Fixed Cost - Sales) ÷ Contribution Margin Ratio

A

Which of the following is true of a double-loop feedback? a.It occurs when managers receive information about both the effectiveness of strategy and validity of assumptions underlying the strategy. b.It is typically provided only in a functional-based responsibility accounting system. c.It emphasizes only the effectiveness of implementation of a strategy. d.It questions only the validity of assumptions underlying a strategy.

A

Which of the following is true of common fixed expenses? a.These costs will continue to exist even if one segment or product is eliminated. b.These costs change in accordance with the number of units produced. c.These costs change with changes in sales price. d.These costs can be traced to an individual segment or product.

A

Which of the following is true of decentralization? a.In a decentralized firm, top management evaluates local managers' capabilities based on the decisions taken. b.In a decentralized firm, overall profit margins mask inefficiencies within the various subdivisions. c.In a decentralized firm, top-level management carries out the day-to-day operations of the company. d.In a decentralized firm, divisions are organized only on the basis of geographical lines.

D

Which of the following is true of financial accounting? a. It is primarily concerned with producing information for internal users. b. It does not follow any externally imposed rules. c. It strongly emphasizes providing information about future events. d. It focuses on overall firm performance, providing a more aggregated viewpoint.

A

Which of the following is true of lean accounting? a. It organizes costs according to the value chain and collects both financial and nonfinancial information. b. It is the accounting process in which all business transactions are recorded when cash is exchanged. c. It is the accounting process in which business transactions are recorded when expenses are incurred and revenue is generated. d. It records all financial and nonfinancial business transactions in accordance with US GAAP.

D

Which of the following is true of line positions? a. Line positions account for less than 40% of the workforce for any corporations. b. Line positions include critical business functions such as auditing and supply chain. c. Line positions are supportive in nature. d. Line positions have direct responsibility for the basic objectives of an organization.

A

Which of the following is true of the break-even point? a. It is the point where total revenue equals total cost. b. It is the point where total fixed cost equals total revenue. c. It is the point where total contribution margin equals total variable cost. d. It is the point where total revenue equals total variable cost.

A

Which of the following is true of the financial perspective in a Balanced Scorecard? a. It describes the economic consequences of actions taken in the other three perspectives. b. It describes the customer and market segments in which the business unit will compete. c. It describes the internal processes needed to provide value for customers and owners. d. It describes the capabilities that an organization needs to create long-term growth and improvement.

B

Which of the following officers is responsible for the finance function? a. Chief operating officer b. Treasurer c. Controller d. Chief accounting officer

A

Which of the following processes does the process value chain comprise? a. Innovation, operations, and postsales service b. Design, manufacture, and sales c. Invention, satisfaction, and postsales service d. Conception, satisfaction, and value

D

Which of the following represents the greatest degree of decentralization? a. Profit centers b. Revenue centers c. Cost centers d. Investment centers

D

Which of the following should be focused on by the central management in a decentralized company? a.The laying off of high-level managers b.Masking inefficiencies with the help of overall profit margin c.Day-to-day operations of the organization d.The long-run survival of the organization

C

Which of the following specifies management's desired relationships among the four perspectives? a. Vision documents b. Objectives c. Strategy d. Balanced Scorecard

D

Which of the following statements is true of a negotiated transfer price? a.A negotiated transfer price is useful in case an in-house division has to incur additional selling and distribution costs than external market participants. b.A negotiated transfer price results from the negotiation between the buying department and the top management. c.A negotiated transfer price results from the negotiation between the selling department and the top management. d.A negotiated transfer price allows the selling and buying divisions to share any cost savings resulting from avoided costs.

B

Which of the following statements is true of relationship of fixed cost to contribution margin affect operating income? a. If fixed cost is greater than contribution margin and operating income is zero, the company makes a profit. b. If fixed cost equals contribution margin and operating income is zero, the company breaks even. c. If fixed cost is less than contribution margin and operating income is less than zero, the company makes a profit. d. If fixed cost is greater than contribution margin and operating income is greater than zero, the company makes a loss.

B

Which of the following statements is true of sales mix? a. It is the relative combination of inputs being purchased by a firm. b. It is the relative combination of products being sold by a firm. c. It is the relative combination of products being produced by a firm. d. It is the relative combination of inputs being used by a firm.