AGEC 1003 Fannin Final Exam Review Questions

Detre Corp has acontribution margin percentage of 0.40. They are considering increasing their advertising expenditures by $25,000 to promote increased sales. How many additional dollars in sales must they have to cover the additional advertising costs (i.e. how much does break even sales go up)?

$62,500

Which of these is likely to have the most elastic demand curve

Sara Lee low sodium ham

Which type of legal structure is limited to 75 shareholders

Sub chapter S corporations

What is the demad relationship between the product in the previous question?

Substitutes

The payback method is flawed because

it does not consider time value of money

Choosing a legal business structure falls within which function of management?

organizing

Futures markets provide the agri-food system with a way to

reduce price risk

The contribution per unit is made to

-Profits -Paying off fixed costs

Compounding is

-the opposite of discounting -finding the value of something in the future

If 25 workers can pick 100 flats of strawberries per hour, then average product is

4 flats per hour

Management is:

Accomplishing tasks through people

Forecasts of future levels of major economic variables such as GDP are important to agribusinesses because

They are likely related to a firm's sales and costs

_________ focuses on the long-term decision-making regarding the acquisition of projects

capital budgeting

The first step in the decision making process is:

identify the problem

The controlling function within management:

involves measuring and monitoring progress.

Economists assume that producers try to maximize

profit

The grades and Standards function is used to overcome value separation. (T/F)

False

There is one single best legal structure for all firms

False

Time utility means that the product must be available where the consumer wants it. (T/F)

False

__________ involves examining revenue and expenses to determine if the company is meeting its objectives.

Financial Analysis

The profit-maximizing production area is between the minimum efficiency level of input use and the maximum efficiency level of input use.

Flase

The macroeconomic approach to measuring market potential focuses on

Gross Domestic Product (GDP) of a region

If own-price elasticity is unitary, the a price decrease will.

Have no effect on total revenue

The movement from A to B on the graph below represents what concept of consumer demand

a change in the quantity demanded

Economic states which include consumption, retailing, wholesaling, processing, assembly, and production describe:

a marketing system

What are the four principles of organization design

-Keep the organization structure simple -give critical tasks prominence and allow them to function without restriction -keep support staff to a minimum -keep working units small

The matrix approach to organizing work is where employees are responsible to two or more bosses

true

The contribution margin in break-even analysis is derived by subtracting

variable cost per unit from output price

The discount rate used by the firm for evaluating projects is called the:

weighted average of cost capital

The timing of cash that is expected to flow in and out of the business during the budgeting period should be the same as the timing of the flows in the operating budget: (T/F)

False

The best way to analyze the decision of whether to buy, borrow, or lease assets is

Net Present Value

In a SWOT Analysis, what dimensions are "external" to marketing strategy?

Opportunities and Threats

The buying function overcomes which of the five barriers to consumer satisfaction

Ownership Serparation

Double taxation involves

profits being taxed and then dividends received by shareholders being taxed

From the following table, determine the marginal product of labor when the firm increases from three to four units of labor input

10

Adjusting for population is not applied in forecasting

False

corporations

have the greatest access to capital

The principle of equi-marginal allocation always leads to production in the third stage. (T/F)

False

What is the basic accounting equation?

Total Assets= Total liabilities+ Owner's equity

What are the differences between S and C corporations?

- Rate and method taxed by the federal government -The number of shareholders -Who is allowed to be a shareholder

Methods of analyzing financial statements include

-Comparative analysis -Ratio Analysis

The Agribusiness Industry is unique because of:

-Cultural, institutional, and political aspects of food. -Uncertainty from underlying biological production processes -Differing competitive structures existing within and among sub-sectors of the food and agribusiness sector

The structure conduct performance (SCP) model evaluates marketing systems on

-How efficiently it meets consumer needs -How effectively it generates profits - How fairly it meets consumer needs

What is included in a written partnership?

-How much control each partner has in business decision -How much control each partner has over real and personal property -How are profits and losses distributed among the partners -How does the partnership plan to keep records

The fundamental principle of decision-making include:

-Make the decision making easier -Improve the quality of decisions -Reduce the time necessary to make good decisions -Improve the frequency of good decisions

What are the characteristics of a limited liability company

-all members may enjoy limited liability -all members participate freely in management -individuals are taxed as partners

Refer to the table above and using a four-month simple average, forecast price for period July.

4.85

If the cost benefit ratio is less than one, then the net present value must be

<0

The most complex legal structure is

Corporation

Which type of budget may best model the seasonality of a firm's revenue in a given year.

Cash flow budget

If you were surveying all Louisiana households about how much gumbo they consume in a single year, the data you would collect would most likely be an example of

Cross-sectional data

Managers can achieve the three E's when their firm is the first choice of their

Customers, Employees, and Investors

Suppose you operate a sandwich shop and currently have two employees. If you hire a third employee, your output of sandwiches/day rises from 75-90. If you hire a fourth employee, output rises to 110 per day. A fifth and sixth would cause output to rise to 120 and 125/day.

Decreasing marginal physical product would set in the hiring of the fifth worker

Assume that you are getting a raise, which increases disposable income by 7%. The income elasticity for a steak is 1.265. What impact would this raise have upon the demand for steak?

Demand would increase by 8.85%

Returns increase at an increasing rate, increase at a decreasing rate, reach a maximum, and then declines the economic principle of

Diminishing Marginal Returns

Accelerated cost recovery and investment taxed credits

Encourage business investment

Analysis of the course of action is the most important step in decision-making.

False

Good budgeting tales the place of good management

False

If the price of the product is greater than the break-even price, the firm should quit producing. (T/F)

False

Loss Leader pricing is focused on pricing at the "going rate"

False

The Agribusiness system is composed of the input supply sector, the production sector, and the macroeconomic sector.(T/F)

False

In the long run, a firm will produce even if price does not cover all costs so long contribution per unit is positive

Flase

Dr. Detre operates a tutoring business at LSU. He charges a price of $47 per hour (marginal revenue). The marginal cost of working the 36th hour each week is $42; the marginal cost of working the 37 hour is $44; 38 hour is $46 and 39 hour is $48. How many hours should he work each week?

He should work 38 hours per week, because this is the workload that maximizes his net revenue (profit).

Developing an effective organizational structure is important because it

Impacts financial and marketing performance

The goal of a manager:

Is to maximize the long run profits of the firm by profitably satisfying the consumer demands

In what way does average fixed cost per unit change as output rises?

It reduces average fixed cost per unit, because a given fixed cost can be spread across more units of output

These employees have the ability to make decisions

Line

Analyzing alternatives is an important step in the decision making process that managers face. Which of these is not part of the three-step process for analyzing alternatives?

Listing of the alternatives

Cyclical Patterns of prices and quantities are most often seen in

Livestock

Suppose that the own price elasticity for Andy Gator is -1.25. In order for Abita to increase total revenue, at least in the short run, it would be advisable to

Lower the price of the Andy Gator

A firm's external environment includes what

Market opportunities, market threats

Which of the following has not increased the efficiency of the marketing system?

Monopolies

General characteristics of a partnership include all but which of the following

Multiple business records for each partner

A good proxy for the opportunity cost of capital for an investor is

the market average return on investment for the industry he/she is investing in

The functions of management include:

Planning, Organizing, Controlling, and Directing

Which of these cannot cause a shift in demand

Price of the own good

Which of these is not a barrier to consumer satisfaction?

Price separation

Which does the marketing mix consist of?

Price, Product, Promotion, and Place

What group of individuals typically help a firm determine technical efficiency

Production managers

What is on the horizontal (x) axis when we draw the graphs for the total product, average product, and the marginal curves?

Quantity of the input

Assume that a retailer sells 1000 6 packs of pepsi per day at $3/6 pack. You as an economic analyst, estimate that the cross-price elasticity between Pepsi and Coca Cola is 0.6. If the retailer raises the price of Coca cola by 5%, how would sales of pepsi be affected?

Sales of Pepsi would fall by 30 units

The firm's right to make a profit is given by

Satisfying a consumer need

Being a good communicator and ability to effectively motivate people are:

Skills required of a good agribusiness manager

___________ indicates how much of a company's net worth and asset commitment is being financed with debt

Solvency ratios

Which of these is not one of the five factors that influence forecast selection

the objective of the firm

To calculate your firm's market potential using the consumption approach, you need the total market size. (T/F)

True

Place utility means that:

the product must be available where the consumer wants it

If the Net Present Values of two, mutually exclusive options are both greater than zero, which option should be selected of the firm uses the Net Present Value method?

The one with the largest net present value

Which one of these is not one of the five forces

The threat of a new business leaving a firm's existing market

A great strategic plan without flawless execution is like having no plan at all

True

Accounting documents are part of the controlling function of management.(T/F)

True

An extrapolation forecasting procedure is naive

True

An extrapolation forecasting procedure is naive (T/F)

True

Break-even analysis can be used to evaluate effectiveness of advertising. (T/F)

True

By comparing marginal revenue and marginal cost, can managers determine the optimal level of output? (T/F)

True

Once a company sells more units of a product than are required to break even, the company will make a profit

True

The marketing plan is a key part of the business plan. (T/F)

True

The quick ratio will always be less than or equal to the current ratio.(T/F)

True

The return on invested capital ration will always be less than or equal to the return on owners equity ratio. (T/F)

True

The time permitted to develop a forecast represents a factor that influences forecasts.

True

The business vision statement, the strategic plan , the implementation of the strategic plan

are the three parts of strategic management

The planning function within management:

includes all activities that determine the future direction of the organization

The organizing function within management

includes developing a structure for putting plans into action

Liquidity ratios can be obtained from information on the balance sheet, while activity ratios require information obtained from the

income statement and balance sheet

Suppose that the own price elasticity of a Rotolo's calzone is -1.38. This suggests that if the price of a rotolo's calzone declines by 5%, the quantity of Rotolo's calzones demanded will

increase by 6.9%

Graphical analysis is important in forecasting because

it provides a visual shift representation of the data

In decentralized decision making, more decision making authority is given to

lower level management

When you are measuring the quality of your forecasts, if your forecast error has a combination of both positive and negative values, you are better off using

mean square error

If average product is decreasing, the marginal product:

must be less than average product

In the question above, what type of good is steak?

normal, luxury

Profitability (net Income) is measured from the

operating budget

Which type of budget explicitly breaks out the variable expenses from the fixed expenses?

operating budget

Net working capital can be changed by

selling a piece of equipment for cash

Autonomous profit centers (business units) offer all of the following benefits except

slow feedback on performance

Attributes such as measurements of the number of competing firms and homogeneity of products refer to what dimension of the Structure-Conduct- Performance model?

structure

What a business is going to do better, faster, quicker, and cheaper than anyone else is a firm's

sustainable competitive advantage

In any production process the marginal product of an input equals:

the change in total output divided by the change in the input

John Deere (a company that sells tractors to farmers) is a part of which sector in the agri-food system?

the input supply sector

A sole proprietorship is an organizational structure where an individual owns, manages, assumes all the risk, and derives all the profit from a business

true

An effective business structure is important to accomplishing the business objectives of an agribusiness

true