Test #2

Cost of salaries for workers who actually manufacture the product

direct labor

Life-cycle pricing: a.) attempts to establish a price that can be maintained throughout the life of the product b.) sets the price high to begin with and then lowers it later on in the life of the product c.) sets the price low to begin with and then raises it later on in the life of the product d.) is the same as target pricing

a.) attempts to establish a price that can be maintained throughout the life of the product

Delivery of goods is associated with which of the following processes? a.) revenue process b.) expenditure process c.) conversion process d.) evaluation process

a.) revenue process

True Fruit, Inc. sells frozen raspberry fruit bars for $2.50 each. The variable cost per bar is $1.35. Total fixed costs are $25,645. The contribution margin ratio is: a.) .54 b.) .46 c.) .22 d.) .19

b.) .46 (C.M. ratio is C.M./S.P., and C.M. is S.P. - V.C.; 2.50-1.35/2.50 = .46)

Meadow Glow Company desires an after-tax profit of $140,000. Its sales price and variable costs are $100 and $40 per unit, respectively. Fixed costs total $340,000. Assuming a 30% tax rate, how many units must Meadow Glow sell to achieve its desired profit? a.) 14,000 b.) 9,000 c.) 8,000 d.) 5,667

b.) 9,000 (see Carson for explanation if needed)

Shipping document that describes agreement between business and common carrier

bill of lading

True Fruit, Inc. sells frozen raspberry fruit bars for $2.50 each. The variable cost per bar is $1.35. Total fixed costs are $25,645. The breakeven point in sales dollars is: a.) $25,645 b.) $47,490 c.) $55,750 d.) $63,150

c.) $55,750 (breakeven point in sales dollars is F.C./C.M. ratio; 25,645/.46 = 55,750)

Goods shipped from a seller's warehouse on Nov 10, 2010, arrived at the buyer's warehouse on Nov 16, 2010. The invoice for the goods arrived at the buyer's accounting department on Nov 13, 2010, and was paid on Nov 20, 2010. If the goods were sold FOB shipping point, the buyer took legal title on: a.) Nov 20, 2010 b.) Nov 13, 2010 c.) Nov 20, 2010 d.) Nov 16, 2010

c.) Nov 20, 2010

If variable cost per unit increases, how will this affect the contribution margin and breakeven point? a.) contribution - decrease ; breakeven - decrease b.) contribution - increase ; breakeven - increase c.) contribution - decrease ; breakeven - increase d.) contribution - increase ; breakeven - decrease

c.) contribution - decrease ; breakeven - increase

If fixed costs increase, how will this affect the contribution margin and breakeven point? a.) contribution - decrease ; breakeven - decrease b.) contribution - increase ; breakeven - increase c.) contribution - no change ; breakeven - increase d.) contribution - no change ; breakeven - decrease

c.) contribution - no change ; breakeven - increase

Manufacturing products is associated with which of the following processes? a.) revenue process b.) expenditure process c.) conversion process d.) evaluation process

c.) conversion process

The purchase order originates with the: a.) vendor b.) receiving department c.) purchasing department d.) manufacturing department needing the goods or services

c.) purchasing department

A document SENT by the purchasing department to ORDER a specific quantity of goods or services is called a: a.) vendor invoice b.) purchasing report c.) purchasing order d.) purchase requisition

c.) purchasing order

The cost of employees who manufacture products

direct labor

The practice of selling products below cost in an attempt to drive out competition, control the market, and then raise prices

predatory pricing

When a group of companies agree to limit supply and charge identical prices

price fixing

The practice of setting excessively high prices

price gouging

A cost that varies with the number of product lines

product-sustaining cost

Reduction in price of goods purchased as a result of dissatisfaction by customer (buyer's books)

purchase allowances

A cost that varies with the number of products produced

unit related cost

Determining the company's needs for goods and services is associated with which of the following processes? a.) revenue process b.) expenditure process c.) conversion process d.) evaluation process

a.) revenue process

The additional cost associated with an alternative

incremental cost

A pricing strategy where the company first determines the selling price of the product and then decides whether to enter the market

target pricing

Legal title transfers to customer when goods are received

FOB destination

A cost that varies with the number of batches regardless of how many units are in each batch

batch-related cost

Legal title transfers when goods leave the seller's place of business

FOB shipping point

Determining the credit and payment policies for customers is part of the: a.) revenue process b.) collection process c.) expenditure process d.) conversion process

a.) revenue process

Which of the following is part of the conversion process? a.) storing finished manufactured goods until they are sold b.) accepting orders for manufactured goods c.) paying salaries for the sales personnel who sell the product d.) pay the freight to deliver the product to the customer

a.) storing finished manufactured goods until they are sold

FOB shipping point indicates that goods in transit belong to the: a.) seller b.) buyer c.) common carrier d.) either the buyer or seller depending upon the terms of the bill of lading

b.) buyer

The four primary influences on selling price are: a.) product, variable costs, fixed costs, and mixed costs b.) customers, competition, legal and social issues, and costs c.) competition, variable costs, fixed costs, and mixed costs d.) legal constraints, government regulations, costs and customers

b.) customers, competition, legal and social issues, and costs

Which of the following businesses is considered part of an oligopoly (few competitors)? a.) automobile manufacturers b.) oil companies c.) wheat farmer d.) insurance companies

b.) oil companies

Which of the following is not part of the conversion process? a.) machine set-ups b.) paying for the raw material used in production c.) storing the raw material used in production d.) storing finished manufactured goods until sold

b.) paying for the raw material used in production

The seller of a product is a price taker in which of the following environments? a.) monopolistic competition b.) pure competition c.) monopoly d.) oligopoly

b.) pure competition

Which of the following is NOT part of the revenue process? a.) receive and accept order for goods and services b.) receive goods and services c.) receive payments for goods and services rendered d.) provide customer support

b.) receive goods and services

True Fruit, Inc. sells frozen raspberry fruit bars for $2.50 each. The variable cost per bar is $1.35. Total fixed costs are $25,645. The breakeven point in units is: a.) 10,258 b.) 18,996 c.) 22,300 d.) 25,260

c.) 22,300

Goods shipped from a seller's warehouse on June 10, 2010, arrived at the buyer's warehouse on June 16, 2010. The invoice for the goods arrived at the buyer's accounting department on June 13, 2010 and was paid on June 20, 2010. If the goods were sold FOB destination, the buyer took legal title on: a.) June 20, 2010 b.) June 13, 2010 c.) June 10, 2010 d.) June 16, 2010

d.) June 16, 2010

Crude oil purchased to produce gasoline

direct material

Selling products below cost in a foreign market

dumping

A cost incurred to maintain the company's capacity to operate

facility-sustaining cost

The cost of production materials that either cannot be traces to the product or whose cost is not enough to warrant tracing

indirect material

A pricing strategy where the company attempts to set a selling price that will cover the costs of the product over its life

life-cycle pricing

Adjustments made to machines in preparation for new production run

machine set ups

All cost other than direct materials and direct labor that are incurred to manufacture products

manufacturing overhead

Manufacturing cost not directly associated with the production of a product

manufacturing overhead

An additional amount over cost that is added to determine selling price

markup

A pricing strategy where a company sets its initial selling price low in an attempt to gain a share of the market from competitors

penetration pricing

Discount given to buyer for paying amount due early

purchase discounts

Goods return by buyer on buyer's books

purchase returns

Discounts given to unhappy customers by seller (seller books)

sales allowances

selling price less cost

selling margin

A pricing strategy in which the company sets its initial selling price high in an attempt to appeal to those individuals who want to be the first to have the product and who are not concerned about the price

skimming pricing

Which of the following is part of the revenue process? a.) provide customer support b.) pay suppliers for inventory c.) convert raw material into inventory for sale d.) order inventory for resale

a.) provide customer support

Tri-State Corporation ordered materials from Down-State Manufacturing on October 1, 2006. Down-State shipped the materials by rail on October 5 and the railroad notified Tri-State on October 12, that the goods had arrived. Tri-State picked up the materials on October 13. The terms of the sale are FOB shipping point. On what date should Tri-State consider this a purchase? a.) October 1 b.) October 5 c.) October 12 d.) October 13

b.) October 5th

Which of the following businesses are considered part of monopolistic competition? a.) power company b.) athletic shoe company c.) oil company d.) fruit farmer

b.) athletic shoe company

Goods shipped from a seller's warehouse on April 10 using the terms FOB shipping point. On the way to the buyer's warehouse the truck hauling the goods wrecked and the goods were destroyed. Who will get the insurance check covering the loss? a.) the seller b.) the buyer c.) the seller and buyer split the loss d.) the delivery company

b.) the buyer

A sales invoice originates with the: a.) vendor b.) purchasing department c.) sales department d.) accounting department

c.) sales department

A group of machines arranged to reduce travel time of product between machines

cells

The study of how cost and profits change in response to changes in the volume of goods and services provided to customers

cost-volume-profit analysis

If selling price per unit increases, how will this affect the contribution margin and breakeven point? a.) contribution - decrease ; breakeven - decrease b.) contribution - increase ; breakeven - increase c.) contribution - decrease ; breakeven - increase d.) contribution - increase ; breakeven - decrease

d.) contribution - increase ; breakeven - decrease

The document listing the quantities of materials and parts needed by the production department is referred to as a: a.) operations list b.) bill of lading c.) production order d.) materials requisition

d.) materials requisition

The pricing strategy where a company initially sets the price of its product low and then raises it later on in the product's life cycle is called: a.) price skimming b.) target pricing c.) life-cycle pricing d.) penetration pricing

d.) penetration pricing

The type of environment where a large number of sellers produce and distribute virtually identical products and services is referred to as: a.) monopolistic competition b.) oligopolistic competition c.) price competition d.) pure competition

d.) pure competition

Which of the following is not part of the expenditure process? a.) receiving goods and services b.) paying suppliers c.) ordering goods and services d.) using equipment to manufacture products

d.) using equipment to manufacture products