Agribusiness Ventures Dr. Chen Test 2

Miller Manufacturing, Inc., produces electronic components for television circuitry. Variable costs comprise 67 percent of the product's selling price. The variable costs of producing a component include: Direct material $1.83/unit Direct labor $6.72/unit Variable factory overhead $ .86/unit Vicki Miller, President, expects to produce 80,000 electronic components and to incur $280,000 of fixed costs. 22) What is Miller Manufacturing's break-even price?

$12.91

Miller Manufacturing, Inc., produces electronic components for television circuitry. Variable costs comprise 67 percent of the product's selling price. The variable costs of producing a component include: Direct material $1.83/unit Direct labor $6.72/unit Variable factory overhead $ .86/unit Vicki Miller, President, expects to produce 80,000 electronic components and to incur $280,000 of fixed costs. 21) If Miller desires a profit of $120,000, what price should she set?

$14.41

1) The ________ shows what assets the business owns and what claims creditors and owners have against those assets, and is built on the basic accounting equation: Assets = Liabilities + Owner's Equity.

A

1) Which of the following measures a company's liquidity and its ability to pay its bills and other financial obligations on time? A) Cash budget B) Cash flow C) Cash management D) All of the above

A

1) ________ value is the price customers would be willing to pay if they perfectly understood the benefits offered, while ________ value is what determines the price they are willing to pay. A) Objective; perceived B) Perceived; objective C) Objective; quantitative D) Perceived; real

A

10) A pricing technique that sets prices that always end in numbers like "99" for prices such as $9.99 and $19.99 is an example of ________ pricing. A) odd B) price C) customized D) zone

A

12) A checking account that never has idle funds (because it draws funds from an interest-bearing master account to cover checks written) is called a ________ account. A) zero-balance B) money market C) deficit D) sweep

A

12) ________ pricing is a technique that involves marking down the normal price of a popular item in an attempt to attract more customers who make incidental purchases of other items at regular prices. A) Leader B) Markup C) Markdown D) Multiple unit

A

14) A technique in which a company uses the revenues from the sale of those products that were once considered as waste to be more competitive in pricing their main product is ________ pricing. A) by-product B) optional-product C) bundling D) captive-product

A

15) ________ is the difference between the cost of a product or service and its selling price. A) Markup B) Break-even price C) Contribution margin D) Absorption costing

A

18) The ________ ratio measures the percentage of total assets financed by a small company's creditors compared to its owners. A) debt B) times-interest-earned C) net sales to total assets D) total asset turnover

A

19) A reliable cost accounting system is necessary for accurate pricing. The traditional method of product costing, where the costs of direct materials, direct labor, and factory overhead are included in a finished product's total cost is called ________. A) absorption costing B) break-even pricing C) direct costing D) absorption pricing

A

20) Pandecker, Inc., estimates the variable costs of producing one unit to be $11.26. The company plans to produce 26,500 units. The fixed costs the company expects to incur are $82,770. What is Pandecker's break-even selling price? A) $14.38 B) $35.17 C) $11.26 D) $3.12

A

23) The fee that banks collect from retailers whenever customers use a credit or a debit card to pay for a purchase is known as the ________ fee. A) interchange B) chargeback C) processing D) installment

A

24) The ________ ratio shows the portion of each sales dollar remaining after deducting all expenses. A) net profit on sales B) net profit to equity C) net sales to total assets D) net sales to working capital

A

28) The ________ ratio measures the owner's rate of return on the investment in the business. A) net profit to equity B) net profit on sales C) quick profit D) net sales to working capital

A

32) The area labeled ________ is the "loss area." A) W B) X C) Y D) Z

A

4) Tools that measure a Web site's ability to attract customers, generate sales, and keep customers coming back are ________. A) Web analytics B) recency C) cost per acquisition tools D) conversion tools

A

6) A measurement of the cost a company incurs to generate each purchase or customer registration is the ________. A) cost per acquisition (CPA) B) bounce rate C) conversion ratio D) browser-to-buy ratio

A

8) Once a company has invested time and money developing a unique new product, to recoup some of the high R&D costs, they will likely use a ________ pricing strategy. A) skimming B) penetration C) sliding-down-the-demand-curve D) discount

A

9) ________ is a short-term strategy that assumes that competition will eventually emerge. A) Life cycle pricing B) Odd pricing C) Price lining D) Penetration pricing

A

Anita Lupino is planning to open her own toy and game shop. She has conducted a great deal of research at the local library, contacted the industry trade association, and has set up a meeting with a consultant at the SBDC next week. Before she goes to the SBDC, she wants to sketch out an estimated income statement. She reviews the following data from RMA's Annual Statement Studies: Costs of Goods Sold 57.3 percent of net sales Operating Expenses 32.9 percent of net sales Gross Profit 42.7 percent of net sales 11) If Anita's net profit target is $32,000, what level of net sales must she achieve? A) $74,941 B) $97,264 C) $326,531 D) $219,178

A

Refer to the following information to answer the question(s) regarding Port Royal: Net Sales $927,641 Gross Profit $301,483 Net Profit $48,457 Total Assets $203,869 Total Liabilities $74,325 26) Port Royal's profit margin on sales is ________ percent. A) 5.2 B) 32.5 C) 16.1 D) 8.0

A

3) The first section of a balance sheet lists ________.

Assets

5) ________ are those items of value the business owns; ________ are those things the business owes.

Assets; Liabilities

12) Which of the following is not a liquidity ratio? A) Current ratio B) Total asset turnover ratio C) Quick ratio D) None of the above

B

13) Although many retailers must match competitors' prices on identical items, maintaining a ________ pricing policy may not be healthy for a small business because it robs the company of the opportunity to create a distinctive image in its customers' eyes. A) markup B) follow-the-leader C) below-market D) matching

B

15) Financial analysts suggest that a small business should maintain a current ratio of at least ________. A) 1:1 B) 2:1 C) 3:1 D) 4:1

B

16) The ________ ratio is a conservative measure of a firm's liquidity and shows the extent to which a firm's most liquid assets cover its current liabilities. A) current B) quick C) turnover D) net profit

B

18) The Sound Shop buys a popular programmable telephone from a supplier for $12.19. If the desired markup of retail price on the telephone is 35 percent, the retail price should be ________. A) $34.83 B) $18.75 C) $16.46 D) $20.11

B

20) If the accounting period is one year with credit sales totaling $2,500,000 and accounts receivable totaling $200,000, the average collection period ratio is ________. A) 29.2 days B) 365 days C) 119.3 days D) Cannot be determined from the information provided

B

22) The ________ ratio measures a company's ability to generate sales in relation to its assets. A) net sales-to-working capital B) net sales to total assets C) average collection period D) average inventory turnover

B

24) Small companies have the following three options for selling to customers on credit ________. A) credit cards, manufacturer credit, and trade credit B) credit cards, installment credit, and trade credit C) credit cards, installment credit, and poor credit D) debit cards, installment credit, and trade credit

B

29) Line T is the ________ line, while line S is the ________ line. A) total revenue; total expense B) total expense; total revenue C) fixed cost; variable cost D) variable cost; fixed cost

B

30) The area labeled ________ represents the firm's fixed expenses, while ________ represents its variable expenses. A) Z; W B) X; Y C) Y; X D) W; Z

B

4) A pricing technique that sets different prices on the same products and services for different customers using the information that a company collects about its customers is called ________. A) market penetration B) customized or dynamic pricing C) predatory pricing D) price skimming

B

7) Exchanging goods and services for other goods and services, or ________, is an effective way for a small business to conserve cash. A) leasing B) bartering C) arbitrating D) credit sales

B

7) The percentage of shoppers who place at least one item in a shopping cart but never complete the transaction is called the ________. A) bounce rate B) cart abandonment rate C) conversion rate D) cost per acquisition

B

8) Gaither Mack is preparing projected financial statements to include in the business plan he is preparing for the launch of a specialty retail store. Using published financial statistics, Mack finds that the typical net profit margin for a store like his is 7.3 percent. If Mack's target income for his first year of operation is $32,000, what level of sales must he achieve to reach it? A) $233,600 B) $438,356 C) $2,966,400 D) Cannot be determined from the information provided.

B

9) Michelle Becker's target income in her business for the upcoming year is $78,500. The company's gross profit margin averages 32.6 percent of sales, and its total operating expenses run 24.7 percent of sales. To achieve her target income, sales of Michelle's company should be ________.A) $148,773 B) $993,671 C) $317,814 D) $1,271,348

B

Anita Lupino is planning to open her own toy and game shop. She has conducted a great deal of research at the local library, contacted the industry trade association, and has set up a meeting with a consultant at the SBDC next week. Before she goes to the SBDC, she wants to sketch out an estimated income statement. She reviews the following data from RMA's Annual Statement Studies: Costs of Goods Sold 57.3 percent of net sales Operating Expenses 32.9 percent of net sales Gross Profit 42.7 percent of net sales 10) If Anita's research suggests that she can expect net sales of $475,000, what net profit could she expect? A) $202,825 B) $46,550 C) $69,350 D) $156,275

B

Refer to the following information to answer the question(s) regarding Port Royal: Net Sales $927,641 Gross Profit $301,483 Net Profit $48,457 Total Assets $203,869 Total Liabilities $74,325 27) Port Royal's net profit-to-equity ratio is ________ percent. A) 23.8 B) 37.4 C) 16.1 D) 232.7

B

A pricing method that involves grouping together several products or services, or both, into a package that offers customers extra value at a special price.

Bundling

This technique uses the revenue from the sale of byproducts to be more competitive in pricing the main product.

By Product Pricing

11) CD Connection sells popular CDs at three price levels: $11, $14, and $17. This illustrates which of the following pricing techniques? A) Odd pricing B) Leader pricing C) Price lining D) Suggested retail pricing

C

13) The ________ ratio is a measure of the small company's ability to pay current debts from current assets and is the liquidity ratio most commonly used as a measure of short-term solvency. A) quick B) debt-to-net worth C) current D) debt-to-assets

C

14) ________ ratios tell whether or not the small company will be able to meet its short-term obligations. A) Leverage B) Profitability C) Liquidity D) Operating

C

17) Bettina has just calculated her company's current ratio. To calculate the quick ratio, she should ________. A) subtract current liabilities from current assets before dividing by total liabilities B) subtract total liabilities from current assets before dividing by current liabilities C) subtract inventory from current assets before dividing by current liabilities D) subtract depreciation expense from current assets before dividing by current liabilities

C

17) Macy's buys white, pinpoint oxford blouses at $14 each and sells them at $30 each. Macy's percentage (of retail price) markup is ________ percent. A) 46.7 B) 87.5 C) 53.3 D) 114.3

C

19) The ________ ratio tells how many times the company's earnings cover the interest payments on the debt it is carrying. A) debt B) debt-to-net worth C) times-interest-earned D) net sales-to-working capital

C

2) Ultimately, the "right" price for a product or service depends on one factor — ________. A) the lowest price possible B) premium prices C) the value that it provides for a customer D) the most effective advertising campaign

C

21) A business with a payables turnover ratio of 10.4 times a year would have an average payable period of about ________ days. A) 3 B) 30 C) 35 D) 62

C

23) Which ratio would be most helpful to a business owner to measure the profit per dollar of sales? A) Net sales to total assets B) Net sales to working capital C) Net profit on sales D) Net profit to equity

C

25) A customer who purchases a television from Ace Appliance Store and pays for it in 36 monthly payments is most likely using ________ credit. A) trade B) charge account C) installment D) debit card

C

3) In general, entrepreneurs should ________ head-to-head price competition with firms that can more easily achieve lower prices through lower cost structures. A) avoid B) take on C) meet D) exit the market when faced with

C

4) The "big three" of cash management include ________. A) accounts receivable, overhead, and inventory B) accounts payable, accounts receivable, and taxes C) accounts receivable, accounts payable, and inventory D) accounts receivable, prices, and expenses

C

6) Once a credit account becomes past due, a small business owner should ________. A) wait patiently; the customer will most likely pay the bill eventually B) turn the account over to a collection agency the day it becomes past due C) send a "second notice" letter requesting immediate payment D) call the "deadbeat" in the middle of the night and make harassing and threatening remarks until he pays

C

This technique involves selling a product for a low price and charging a higher price for the accessories that accompany it.

Captive product pricing

1) Which of the following is an important issue that business owners should consider before launching an e-commerce effort? A) How to develop long-term relationships with customers. B) How to exploit the interconnectivity and the opportunities it creates to transform relationships with its suppliers, customers, and external stakeholders. C) How to measure the success of its Web-based sales effort. D) All of the above

D

10) A contract in which a business selling an asset on credit gets a security interest in that asset (the collateral), protecting its legal rights in case the buyer fails to pay, is a ________. A) lockbox B) classic collection blunder C) way to protect the buyer D) security agreement

D

13) Which of the following inventory management techniques would help a business owner make the best use of his company's cash? A) Avoid overbuying inventory. B) Schedule inventory deliveries at the latest possible date. C) Purchase goods from the fastest suppliers who can meet quality standards to keep inventory levels low. D) All of the above

D

16) Macy's buys white, pinpoint oxford blouses at $14 each and sells them at $30 each. Macy's percentage (of cost) markup is ________ percent. A) 46.7 B) 87.5 C) 53.3 D) 114.3

D

2) A cash budget is only as accurate as the ________ forecast from which it is derived. A) profit B) receivables C) income D) sales

D

2) Entrepreneurs should make sure they do not fall victim to any of the e-commerce myths. Which of the following is not an e-commerce myth? A) Setting up a business on the Web is easy and inexpensive. B) If I launch a site, customers will flock to it. C) Making money on the Web is easy. D) Privacy and site security is an important issue on the Web.

D

3) Strategies for successful e-commerce efforts should include all of the following except ________. A) focusing on a niche market B) developing a community of customers C) attracting visitors by giving away "freebies" D) adding value to recipients by sending spam e-mail

D

31) The area labeled ________ is the "profit area." A) W B) X C) Y D) Z

D

5) The number of visitors to a company's Web site who view a single page and leave without viewing other pages is referred to as the ________. A) stickiness of the site B) click-stream C) conversion ratio D) bounce rate

D

5) To encourage credit customers to pay invoices promptly, a business owner should ________. A) ensure that all invoices are clear, accurate, and timely B) state clearly a description of the goods or services purchased and an account number C) include a telephone number and a contact person in case the customer has a question or a dispute D) All of the above

D

7) ________ pricing strategies work best in markets where no "elite" segments exist or in highly competitive markets where similar products are trying to gain a foothold. A) Skimming B) Sliding-down-the-demand-curve C) Odd D) Penetration

D

Refer to the following information to answer the question(s) regarding Port Royal: Net Sales $927,641 Gross Profit $301,483 Net Profit $48,457 Total Assets $203,869 Total Liabilities $74,325 25) Port Royal's debt-to-net worth ratio is ________. A) 0.36:1 B) 0.08:1 C) 1.57:1 D) 0.57:1

D

Some suggest it should be at least one-fourth of a firm's current debts. Be sure to account for seasonal fluctuations and add extra for "cushion." The most reliable method involves past operating records.

Determining an Adequate Minimum Cash Balance

This is determined by adding total cash receipts to and subtracting total cash disbursements from the beginning cash balance for the month. The cash balance at the end of a month becomes the beginning balance for the following month. The heart of the cash budget is the sales forecast. As mentioned above, a cash budget is only as accurate as the sales forecast from which it was derived.

Determining end of the month cash balance

When products make reductions from normal list prices to move stale, outdated, damaged, or slow-moving merchandise. This includes multiple unit pricing.

Discounts

Setting different prices for the same products and services for different customers based on information collected.

Dynamic Pricing

3) (TRUE/FALSE) The first step in preparing a cash budget is to forecast sales.

FALSE

4) Which of the following items would not be listed as a current asset in a company's financial reports?

Fixtures

Many cash payments are fixed amounts due on specified dates. The key is to record them in the month in which they will be paid, not when the obligation is incurred.

Forecasting Cash Disbursements

Include accounting for the delay between the sale and the actual collection of the proceeds. To predict accurately the firm's cash receipts, the owner must analyze the accounts receivable to determine the collection pattern

Forecasting Cash Receipts

These are ultimately transformed into cash receipts and cash disbursements. Be careful not to be excessively optimistic — consider economic swings, increased competition, fluctuations in demand, normal seasonal variations, and other factors that can have a dramatic effect on sales. A cash budget is only as accurate as the sales forecast from which it is derived.

Forecasting Sales

Pricing based on the geographic area also referred to as zone pricing

Geographic pricing

6) Cost of goods sold is located on which financial statement?

Income Statement

This statement compares expenses against revenue over a certain period of time to show the firm's net profit (or loss). It is a "moving picture" of the firm's profit over a period of time and provides "the bottom line" figure for the small business owner. It is also known as the profit and loss statement or P & L

Income Statement

Small retailer marks down the customary price of a popular item in an attempt to attract more customers.

Leader Pricing

Set product price high, but with technological advancement, the firm can lower costs quickly and reduce the product's price sooner than the competition can. Pricing strategies for established products:

Life Cycle Pricing

Set price just above total unit cost to develop a wedge in the market and quickly achieve a high volume of sales.

Market Penetration

Establish prices that end in odd numbers with the belief that merchandise selling with an odd ending number ($12.95) is cheaper than an item evenly priced ($13.00).

Odd Pricing

This is a technique that involves selling the base product for one price but selling the options or accessories for it at a much higher markup.

Optional Product Pricing

Manager stocks merchandise in several different price ranges, or price lines. Each category of merchandise contains items that are similar in appearance, quality, cost, performance, or other features making it less complicated for the customer.

Price Lining

Set a higher-than-normal price in an effort to quickly recover the initial developmental and promotional costs of the product.

Price Skimming

Accepting the manufacturer's suggested price does not take into consideration the small firm's cost structure, image, or competitive situation. This approach does simplify pricing.

Suggested Retail Pricing

11) (TRUE/FALSE) A security agreement is a contract in which a business selling an asset on credit gets a security interest in that asset, protecting its legal rights in case the buyer fails to pay.

TRUE

5) (TRUE/FALSE)Entrepreneurs have three basic strategies to choose from when establishing a new product's price: a penetration pricing strategy; a skimming pricing strategy; and life cycle pricing strategy.

TRUE

8) (TRUE/FALSE) The longer an accounts receivable is outstanding, the lower its probability of collection.

TRUE

9) (TRUE/FALSE) Some businesses use cycle billing, in which a company bills a portion of its credit customers each day of the month to smooth out uneven cash receipts.

TRUE

This statement takes a "snapshot" of a business, providing owners with an estimate of its worth on a given date. It is built on this fundamental accounting equation: Assets = Liabilities + Owner's Equity.

The Balance Sheet

This statement shows the changes in the firm's working capital since the beginning of the year by listing the sources of funds and the use of these funds. Although many small business owners never create them, the IRS, creditors, investors, and new owners may require them when investigating the changes in a firm's working capital.

The Statement of Cash Flows

The ________ represents a "snapshot" of a business, showing an estimate of its value on a given date, while the ________ is a "moving picture" of the firm's profitability over time.

balance sheet;income statement

Basing prices on competitor's price points.

follow the leader pricing

7) The statement of cash flows ________.

shows changes in working capital by listing sources and uses of funds