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
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
Accelerated cost recovery and investment taxed credits
Encourage business investment
Which of these is likely to have the most elastic demand curve
Sara Lee low sodium ham
The firm's right to make a profit is given by
Satisfying a consumer need
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 business vision statement, the strategic plan , the implementation of the strategic plan
are the three parts of strategic management
corporations
have the greatest access to capital
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%
The payback method is flawed because
it does not consider time value of money
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
Autonomous profit centers (business units) offer all of the following benefits except
slow feedback on performance
The discount rate used by the firm for evaluating projects is called the:
weighted average of cost capital
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
To calculate your firm's market potential using the consumption approach, you need the total market size. (T/F)
True
The movement from A to B on the graph below represents what concept of consumer demand
a change in the quantity demanded
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 margin in break-even analysis is derived by subtracting
variable cost per unit from output price
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
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 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
The contribution per unit is made to
-Profits -Paying off fixed costs
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
Compounding is
-the opposite of discounting -finding the value of something in the future
From the following table, determine the marginal product of labor when the firm increases from three to four units of labor input
10
If 25 workers can pick 100 flats of strawberries per hour, then average product is
4 flats per hour
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
Management is:
Accomplishing tasks through people
Which type of budget may best model the seasonality of a firm's revenue in a given year.
Cash flow budget
The most complex legal structure is
Corporation
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
Adjusting for population is not applied in forecasting
False
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
The grades and Standards function is used to overcome value separation. (T/F)
False
The principle of equi-marginal allocation always leads to production in the third stage. (T/F)
False
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
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
In the long run, a firm will produce even if price does not cover all costs so long contribution per unit is positive
Flase
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
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
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
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
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
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
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
What is the basic accounting equation?
Total Assets= Total liabilities+ Owner's equity
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
Economic states which include consumption, retailing, wholesaling, processing, assembly, and production describe:
a marketing system
_________ 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.
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
Economists assume that producers try to maximize
profit
Double taxation involves
profits being taxed and then dividends received by shareholders being taxed
Net working capital can be changed by
selling a piece of equipment for cash
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 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
Which of these is not one of the five factors that influence forecast selection
the objective of the firm
Place utility means that:
the product must be available where the consumer wants it
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
The matrix approach to organizing work is where employees are responsible to two or more bosses
true
