Chapter 8 & 9 Quizzes

Dallas Corporation had beginning inventory of 19,500 units and expects sales of 85,000 units during the year. Desired ending inventory is 18,500 units. How many units should Dallas Corporation​ produce? A. 84,000 units B. 47,000 units C. 86,000 units D. 123,000 units

A. 84,000 units Expected Sales: 85,000 - Beginning Inventory: 19,500 = Total units needed for sales: 65,500 + Ending Inventory: 18,500 =Total Production Needed: 84,000

Boots Plus has two product​ lines: Hiking boots and Fashion boots. Income statement data for the most recent year​ follow: Total Hiking Fashion Sales revenue: $480,000, $340,000, $140,000 Variable expenses: 355,000, 235,000, 120,000 Contribution margin: 125,000, 105,000, 20,000 Fixed expenses: 76,000, 39,500, 39,500 Operating income​ (loss): $49,000, $65,500, $( 19,500 ) Assuming the Fashion line is​ discontinued, total fixed costs remain​ unchanged, and the space formerly used to produce the line is rented for $30,000 per​ year, how will operating income be​ affected? A. Increase $ 10,000 B. Decrease $ 10,000 C. Increase $ 56,000 D. Increase $ 102,000

A. Increase $10,000 Sales Revenue: 340,000 + Additional Revenue: 30,000 =Total Revenue: 370,000 - Variable Expenses: (235,000) =Contribution Margin: 135,000 - Fixed Expenses: (76,000) =New Net OI: 59,000 - Original OI: (49,000) =Increase in OI: $10,000

Which of the following is a potential disadvantage of participative​ budgeting? A. Managers may build slack into the budget. B. Managers should acquire knowledge to create realistic budgets. C. Managers are more likely to be motivated by budgets they help create. D. None of the above are true.

A. Managers may build slack into the budget.

Ida Enterprises is considering replacing a machine that is presently used in its production process. The following information is​ available: Old Machine, Replacement Machine Original cost: $60,000, $35,000 Remaining useful life in years: 5, 5 Current age in years: 5, 0 Book value: $25,000 Current disposal value in cash: $8,000 Future disposal value in cash​ (in 5​ years): $0, $0 Annual cash operating costs: $7,000, $4,000 Which of the information provided in the table is irrelevant to the replacement​ decision? A. The original cost of the old machine B. The current disposal value of the old machine C. The annual operating cost of the old machine D. Both A and C

A. The original cost of the old machine

In a special sales order​ decision, the special price must exceed the variable cost of filling the order. In other​ words, the special order must have A. a positive contribution margin. B. sunk costs. C. a negative contribution margin. D. opportunity costs.

A. a positive contribution margin.

The​ ________ is a plan that shows the units to be sold and the projected selling price and is also the starting point in the budgeting process. A. sales budget B. budgeted statement of cash flows C. cash budget D. budgeted income statement

A. sales budget

DogDayz company has two products. Doggyz and Pupz. A March sales forecast projects 22,000 units of Doggys and 15,000 units of Pupz are going to be sold at prices of $17.50 and $12.00, respectively. The desired ending inventory of Doggyz is 20% higher than the beginning inventory, which was 2,000 units. How much are total March Sales for Doggyz anticipated to be? A. $180,000 B. $385,000 C. $264,000 D. $110,000

B. $385,000 March Sales = 22,000 x $17.50 = $385,000

Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement data for the most recent year follow: Total Hiking Fashion Sales revenue $480,000 $340,000 $140,000 Variable expenses 356,000 235,000 121,000 Contribution margin 124,000 105,000 19,000 Fixed expenses 76,000 38,000 38,000 Operating income (loss) $48,000 $67,000 $(19,000) Assuming fixed costs remain​ unchanged, how would discontinuing the Fashion line affect operating​ income? A. Decrease in total operating income of $ 140,000 B. Decrease in total operating income of $ 19,000 C. Increase in total operating income of $ 29,000 D. Increase in total operating income of $ 124,000

B. Decrease in total operating income of $19,000

Sky High Seats manufactures seats for airplanes. The company has the capacity to produce​ 100,000 seats per​ year, but currently produces and sells​ 75,000 seats per year. The following information relates to the current production of the​ product: Sale price per unit: $ 440 Variable costs per​ unit: Manufacturing: $ 230 Marketing and administrative: $ 50 Total fixed​ costs: Manufacturing: $800,000 Marketing and administrative: $220,000 If a special sales order is accepted for 7,000 seats at a price of $340 per​ unit, and fixed costs remain​ unchanged, how would operating income be​ affected? (NOTE: Assume regular sales are not affected by the special​ order.) A. Increase by $ 2,380,000 B. Increase by $ 420,000 C. Decrease by $ 420,000 D. Increase by $ 6,000,000

B. Increase by $420,000 Sales Price: $340 - Total Variable Cost: $280 = Contribution Margin: $60 x Units Sold: 7,000 =Additional Profit: $420,000

Which of the following is an advantage of zero-based budgeting? A. Zero-based budgeting is labor intensive. B. Zero-based budgeting forces managers to justify each dollar in the budget to ensure that some expenses are lower in a current year compared to what they were in previous years. C. Zero-based budgeting is time consuming. D. All of the above are advantages.

B. Zero-based budgeting forces managers to justify each dollar in the budget to ensure that some expenses are lower in a current year compared to what they were in previous years.

Expected future data that differs among alternative courses of action are referred to as A. historical information. B. relevant information. C. irrelevant information. D. predictable information.

B. relevant information.

The​ ________ budget begins with the number of units to be sold. A. manufacturing overhead B. sales C. capital expenditures D. direct materials

B. sales

Philadelphia Swim Club is planning for the coming year. Investors would like to earn a​ 10% return on the​ company's $30,000,000 of assets. The company primarily incurs fixed costs to maintain the swimming pools. Fixed costs are projected to be $12,500,000 for the year. About 500,000 members are expected to swim each year. Variable costs are about $10 per swimmer. Philadelphia Swim Club is a price-taker and​ won't be able to charge more than its competitors who charge $37 for a membership. What profit will it earn in terms of​ dollars? A. $ 11,000,000 B. $(12,500,000) C. $ 1,000,000 D. $(1,000,000)

C. $ 1,000,000 Market Price per Unit: 37 x Expected Volume: 500,000 =Revenue: 18,500,000 Expected Volume: 500,000 x Variable Costs per Unit: 10,000 =Total Variable Costs: 5,000,000 Total Fixed Costs: 12,500,000 + Total Variable Costs: 5,000,000 =Total Product Costs: 17,500,000 Revenue: 18,500,000 - Total Product Costs: (17,500,000) =Expected Profit: 1,000,000

Fosnight Enterprises prepared the following sales​ budget: Month Budgeted Sales March $ 6,000 April $ 13,000 May $ 12,000 June $ 14,000 The expected gross profit rate is 30% and the inventory at the end of February was $ 10,000. Desired inventory levels at the end of the month are 20% of the next​ month's cost of goods sold. What are the total purchases budgeted for​ May? A. $ 8,120 B. $ 8,960 C. $ 8,680 D. $ 10,080

C. $8,680 May Beg. Inventory: May Sales 12,000 x 70% = 8,400 x 20% = 1680 May Ending Inventory: June Sales 14,000 x 70% = 9,800 x 20% = 1960 May COGS: 12,000 x 70% = 8,400 Purchases = COGS + End. Inv. - Beg. Inv. 8,400 + 1,960 - 1,680 = 8,680

A sunk cost is described as which of the​ following? A. An outlay expected to be incurred in the future B. One that is relevant to a decision because it changes depending on the alternative course of action selected C. A historical cost that is always irrelevant D. A historical cost that may be relevant

C. A historical cost that is always irrelevant

Mockingbird Company expects to sell 4,400 bird perches in January and 9,500 in February for $4 each. What will be the total sales revenue reflected in the sales budget for those​ months? A. January $ 2,375; February $ 1,100 B. January $ 1,100; February $ 2,375 C. January $ 17,600; February $ 38,000 D. January $ 38,000; February $ 17,600

C. January $ 17,600; February $ 38,000 Jan: (4,400 x $4)= 17,600 Feb: (9,500 x $4)= 38,000

​"The comprehensive​ budget" is best described by which of the following​ terms? A. Sensitivity analysis B. Responsibility center C. Master budget D. Operating budget

C. Master budget

Which of the following is irrelevant when making a​ decision? A. The expected increase in contribution margin of one product line as a result of a decision to discontinue a separate unprofitable product line B. Fixed overhead costs that differ among alternatives C. The cost of an asset that the company is considering replacing D. The cost of further processing a product that could be sold as is

C. The cost of an asset that the company is considering replacing

Common fixed costs that are allocated between departments are generally A. direct fixed costs of the department. B. relevant to the decision of whether to discontinue the department. C. irrelevant to the decision of whether to discontinue the department. D. direct fixed costs of other departments.

C. irrelevant to the decision of whether to discontinue the department.

Fosnight Enterprises prepared the following sales​ budget: Month Budgeted Sales March $ 6,000 April $ 13,000 May $ 12,000 June $ 14,000 The expected gross profit rate is 30% and the inventory at the end of February was $ 10,000. Desired inventory levels at the end of the month are 20% of the next​ month's cost of goods sold. What is the budgeted cost of goods sold for​ May? A. $ 3,600 B. $ 4,200 C. $ 2,400 D. $ 8,400

D. $ 8,400 Total Sales: 100% - Gross Margin: 30% = Cost of Goods Sold: 70% May Sales: 12,000 x Cost of Goods Sold: 70% = Budgeted COGS: $8,400

A​ company's manager would consider which of the following in deciding whether to discontinue its electronics product​ line? A. How discontinuing the electronics product line would affect sales of its other products​ (like CDs) B. The revenues it would lose from discontinuing the product line C. The costs it could save by discontinuing the product line D. All of the above

D. All of the above

The​ ________ budget is a component in a financial budget. A. direct materials B. sales C. operating expense D. cash

D. cash

Strategic planning is beneficial because the organization can A. establish short-term goals that extend one year into the future. B. execute directives from the board of directors. C. establish goals for next month. D. establish long-term goals that extend 5-10 years into the future.

D. establish long-term goals that extend 5-10 years into the future.

On the direct materials​ budget, the total quantity of direct materials to purchase is computed as A. units to be produced​ + desired end inventory of DM - beginning inventory of DM. B. quantity needed for production - desired end inventory of DM​ + beginning inventory DM. C. units to be produced - desired end inventory of DM​ + beginning inventory of DM. D. quantity needed for production​ + desired end inventory of DM - beginning inventory of DM.

D. quantity needed for production​ + desired end inventory of DM - beginning inventory of DM.

A manager should always reject a special order if A. the special order price is less than the regular sales price. B. the special order will require variable nonmanufacturing expenses. C. there is available excess capacity. D. the special order price is less than the variable costs of the order.

D. the special order price is less than the variable costs of the order.