Quiz 1
Vegi Juice is sold in the supermarket at $12 per case. Each case has 10 bottles of Vegi Juice. The total variable costs per case are $10. What is the $C of the Vegi Juice per bottle?
$ 0.20
ABC manufacturing company sells each of its tractors at $20,000 directly to the retailers. ABC pays each of its ten salespersons $60,000 per year. Each salesperson also receives a 5% commission for every tractor sold. The direct labor and material cost $ 8,500. What is total contribution of the tractors to the company, if they sell 1,000 tractors?
$ 10,500,000
Panda Inc. had total sales of $24,000 from bamboo bowls in 2017. The company sold 6,000 units of bamboo bowls and the total variable costs were $6,000. What is total $C of bamboo bowls?
$ 18,000
Cool Fan Company sells 10,000 units to wholesalers each year at $60 per unit. The materials cost $10 per fan and unit labor cost is $15. The total promotion and marketing costs are $100,000. The facility expenses are $80,000 per year and other overheads cost $20,000. What is the unit contribution of each fan?
$ 35
ABC mfg co has estimated breakeven volume of 50,000 units for its new widget. If fixed costs are $100,000 and unit variable cost is $18.00, what is the $ BEP?
$1,000,000
ABC mfg co sells widgets. If unit selling price is $25.00, unit variable cost is $23.00 and Total Fixed Cost is $100,000, what is $BEP?
$1,250,000
ABC manufacturing co has estimated breakeven volume of 50,000 units for its new widget. If $unit variable cost is $23.00 and unit selling price is $25.00, what is the total fixed cost?
$100,000
Adibas desires to establish the retail selling price for its new skateboard on the basis of Perceived Value. The average market price for this item is $12.50. Consumers, when asked to allocate 100 points among Adibas and four other competitors, gave Adibas an average of 18 points. Your recommended PV-based Adibas retail price?
$11.25
The table shows the likelihood of NT Inc's unit sales at different prices. At a price of $20.00, a reasonable estimate of NT's expected sales in dollars is:
$148,000
Adibas desires to establish retail selling price for its new skateboard on the basis of Perceived Value. The average market price for this item is $12.50. Consumers, when asked to allocate 100 points among Adibas and four other competitors, gave Adibas an average of 24 points. Your recommended PV-based Adibas retail price?
$15.00
In 2017, Star! Inc. had current assets of $1,500,000 and its fixed assets were evaluated at $800,000. The company had long-term debts totaled $900,000 and its accounts payable was $1,000,000. The owner's equity was worthy of $ 1,000,000. What total dollar amount would you expect to see on the liabilities side of their balance sheet?
$2,900,000
ABC mfg co has estimated breakeven volume of 50,000 units for its new widget. If fixed costs are $100,000, unit selling price is $25.00 and ABC sales force commission is 8% of selling price, what is the non-commission unit variable cost?
$21.00
In 2017, Star! Inc. had current assets of $1,500,000 and the value of its property, plant and equipments were $2,000,000. The company's other assets were valued at $800,000 and its long-term debts totaled $900,000. How much is the company's total assets?
$4,300,000
A retailer sells widgets for $15.00 after marking up 50% on wholesaler selling price. The wholesaler had sold the widgets to the retailer at a markup of 20% on the retailer's purchase price. In this instance, what is the manufacturer selling price?
$8.00
The table shows the likelihood of NT Inc's unit sales at different prices. At a price of $10.00, a reasonable estimate of NT's expected sales in dollars is:
$80,000
ABC mfg co has estimated breakeven volume of 50,000 units for its new widget. If fixed costs are $100,000, unit selling price is $25.00 and ABC sales force commission is 8% of selling price, what is their %contribution?
$C=TFC/#BEP=$100,000/50,000=$2.00. %C=$c/usp=2/25=8%.
Please advise Denton Snacks Inc on % Mark Up!. Typically......
%muc > %musp because Selling Price > Cost
Fortune! Company had the annual sales of $ 120,000 in 2015, $150,000 in 2016, and $ 190,000 in 2017. Assuming simple trend, what is the growth rate percentage of this company from 2016 to 2017?
($190,000-$150,000)/$150,000=26.67%
Apple Computer Co. typically calculates the proposed price for one of its new products two way (1) Start with an attractive retail price and then figure out whether Apple can profitably make the product if it sells at that retail price, and (2) Start with how much it costs to produce a unit, add their typical profit margin and then estimate the likely price to the consumer at the retail outlet. In other words,
(1) is bottom up markup pricing, (2) is top down markup pricing and (1) is backward markup pricing, (2) is forward markup pricing are both correct.
Topdog is a toy company, whose profit/sales percentage is 13% in 2015, 16% in 2016 and 20% in 2017. Assuming simple trend, what is the growth rate percentage of the p/s % of this company from 2016-2017?
(20.00%-16.00%)/16.00% = 25.00%
Estimating the trend-based 2018 growth rate for ABC Inc, in a growth industry. Sales for 2017 = 50,000 units; 2016 = 45,000; 2015 =40,000 units. Pick the correct expression.
(50,000 - 45,000)/45,000
It is January 2018. SIB Inc, a small manufacturer unhappy with its performance, (i) gets rid of its independent agent (and therefore, the agent's sales force), and (ii) hires its own "salary only" sales force. All other costs remaining the same, how will these changes affect SIB in 2018 versus 2017?
(i) will decrease unit variable cost, and, (ii) will increase total fixed cost
Company ABC has four different products. Based on the information in the table, what is the growth multiplier for dollar sales of product X, in forecasting 2018 based on trend?
1 + ($250-$200)/$200=1.25
Company ABC has four different products. Based on the information in the table, what is the growth multiplier for dollar sales of product S, in forecasting 2018 based on trend?
1 + ($600-$500)/$500=1.20
It is January 2018. You have the following data for ABC Inc. Sales for 2017 = 45,000 units; for 2016= 40,000; for 2015 =35,000. Assuming trend projection, based on the previous year, which of the following correctly computes the growth multiplier for 2018?
1 + [(45,000 - 40,000) / 40,000]
Advising NT Inc., you point out that weighted averaging may be done in the context of...
All the other 4 answers are correct.
Project M has a 10 year life span and you, as the consultant, are looking at its NPV worksheet. Which of these is the correct way of calculating the Discount Rate for Year 7. %CC is the Cost of Capital for the project.
1/ (1+%CC)^7
Based on the partial Balance Sheet information below, what is the rounded up index number for Account Receivables?
16
You are the sales manager for Mighty Widgets Manufacturers Inc. You are negotiating a 25% markup based on manufacturer selling price to Widget Wholesalers, a promising new prospect. However, Widget Wholesalers are used to % markup based on retail purchase price. You want to help them understand what you are offering and decide to express it in terms that the Widget Wholesalers can readily understand and relate to. Pick the correct expression:
25% / (1+25%)
Golden State Petroleum Company is running a coupon promotion to popularize its motor oil. They forecast to sell 66,000 cases of which 55% are expected to be coupon sales. When the 55% is broken down further, 75% of that is expected to be new sales. Assuming that each coupon and non-coupon transaction result in positive $C and knowing what you do about the relevant issue here, which of the following parts of the breakup of the forecast sales is (are) unlikely to cause adverse profit impact for GSPC?
29700 and 27225 are both correct.
The table shows the likelihood of NT Inc's unit sales at different prices. At a price of $10.00, a reasonable estimate of NT's expected sales in units is:
8,000
The American market for memory cards is about 10 million units a year and ABC Company sold 900,000 units last year, while one of its competitors sold 1 million units. What is ABC's market share?
ABC's 900,000/total market 10,000,000=9%. Note that this is Market Share % in Units.
Snacko! is still evaluating "Spicies", a proposed new snack for 2018. First year breakeven requirements and market share implications would naturally play a key role in their decision to go ahead or scrap the idea. In the analyses involved, Snacko! should include, i.e. consider relevant, which of the following costs?
All costs except cost of samples are all relevant and should be included.
When managers comparatively evaluate the financial health of a company (e.g., this year versus last), they would be pleased with...
All the other 4 answers would please them.
MM Inc. plans to go direct to 5,000 US retailers spread out all over the country, bypassing their 15 wholesalers. It would be reasonable for them to expect changes in.....
All the other 4 costs will change. They will go up.
It is December 31, 2017 and Jane needs to assess the difficulty of the task ahead for her gourmet sandwich shop in 2018. She is planning to introduce several new sandwiches and has a good idea of their weighted average unit selling price and weighted unit variable cost. Assuming she has a good estimate of her 2018 fixed costs, Jane is able to...
Calculate both: the 2018 # BEP AND the $BEP
You point out to I.M. Boss, your CEO, that in NPV analysis, an approximate idea of the Payback Period (based on class/M11 discussion) can be usually inferred once THIS information has been calculated and is available for each period (e.g. year) of the project. THIS=?
Cumulative Discounted Net Cash Flow
You are looking at a detailed 2018 Proforma Income Statement for Denton Snacks. Which of these is a good estimate of their contribution on every dollar of sales?
Gross Profit % i.e. Gross Profit / Sales
NT Inc has registered an impressive 40% sales growth for the just concluded calendar year 2017 and expects to repeat this for 2018. Therefore, (S=Sales)....
Growth Rate for 2018 = (S2017-S2016)/S2016 = 40%
Applet desires a 20% profit on sales of its smart phone. How will you handle this information in breakeven analysis? Assume that unit selling price, unit variable costs and fixed costs are all known.
Increase uvc by 20% of usp. Recalculate $C then #BEP=TFC/recalculated $C and $BEP=#BEP*usp OR Reduce the 20% from current %C. Then, $BEP=TFC/reduced %C and #BEP=$BEP/usp. Both approaches are correct.
Which of the following statements is correct?
In general, a company's growth rate percentage is worse than the growth rate % of its best performing division AND In general, a company's growth rate percentage is better than the growth rate % of its worst performing division. Both are correct.
Coupon promotions for consumer non-durables, such as packaged frozen foods, are often money losing propositions for manufacturers such as P&G. That is, the revenue from the promotions does not cover their costs. This results from....
Inability to prevent coupon redemption by existing as opposed to new customers
Which of the following statements about net sales is correct?
It is equal to gross sales minus sales adjustments.
It is January 1, 2018. Forecasting skills are likely to be of critical importance to NT Inc (NTI) in preparing this document.
NTI's 2018 proforma income statement
You are explaining the similarities between income statement and contribution analysis to a client. Net Contribution may be treated as approximately equivalent to:
Net Profit
A product sells 450 units at a price of $185 each. When price is increased to $200 each, sales go down to 400. Recalling Price Elasticity of Demand (see formula sheet), here...
PED equals 1.37 and demand is elastic
In this course, we did not encounter the cannibalization problem in the context of...
Price decisions and Place decisions
NT Inc sells Product A for $60, with unit variable cost of $20. They also sell Product B for $40 and its UVC is $10. Which product is relatively MORE profitable and why?
Product B. Higher %C
Two projects, A and B, have an expected life span of 5 years. For both, assume that the initial investment, % cost of capital and 5 year Net Cash Flows of $10K, $20K, $30K, $40K and $50K are all identical. There is one with a key difference: Project A starts with $10K NCF in Year 1 and ends with $50K in year 5. Project B is just the opposite: $50K NCF in Y1, $10K in Y5. NPV analysis is likely to favor which investment and why?
Project B because of the larger NCFs coming in sooner
In this course, we encountered the cannibalization problem in the context of...
Promotion decisions and Product decisions
Sunny Wonderland sells its books to the wholesalers at $8 each, which sells it to the retailers at the 10% muc. The retailer sells the books to the consumers at 15%musp. What is the retail selling price?
Retailer buys: F3 = 8*(1+10%)=$8.80. Retailer sells = F2 = 8.80/(1-15%) = $10.35
You would like to determine the profit impact of adding a new product that has similarities with an existing product (same customers, same use etc.). If you use the Incremental Approach, this information is NOT needed.
Sales forecasts for the existing product, before and after the new product
The table below provides raw score performance information on three students in a class that carries a total of 1,000 semester points. Which student has the highest grade? (Note: 90% or above =A; 80%-89% = B; 70%-79% = C; 60%-69% = D; and 59% and below = F)
Student C
If ABC company's growth multiplier is more than 1, the trend suggests:
The ABC company will perform better in next year than in this year.
Which of the following statements on growth multiplier is wrong?
The growth multiplier is always greater than 1.
In a new automobile of specific make and model, which of the following items are fixed costs?
The other 4 answers are all fixed costs.
In a new automobile of specific make and model, which of the following are likely to be variable costs?
The other 4 answers are all variable costs.
Frito Lay is concerned about likely cannibalization of their existing salty snack lines by their proposed line of veggie snacks. This problem is MORE LIKELY TO BE AGGRAVATED, if.....
The new line's $C is lower than the existing line's $C
Demand for products like a Caribbean cruise is generally considered price-elastic. This means.....
Total revenue increases when price is decreased and Total revenue decreases when price is increased are both correct
The Houston Astros discover by carrying out research on select game days that for a relatively price-elastic product such as a ball game, (up to a point, of course).....
Total revenue increases when price is decreased and Total revenue decreases when price is increased are both correct
A friend of yours rates three cars as follows: Predict the car (or cars if there is a tie) that he is MOST LIKELY to buy based only on this information.
Toyota
NT Inc's product has usp = $20 and uvc = $12. This means....
[Each dollar of sales of the product generates contribution of 40 cents] and [Each unit of the product generates $C of $8] are both correct
SIB Inc, a small company, hires salespeople whom it plans to motivate to give their best. At the same time, the company also wishes to protect the salespeople from income uncertainty and anxiety. Your advice on how the SIB salespeople should be paid?
combination of salary and % commission
For 2018, Dow Chemical would like to reach a certain $ profit goal, while comparing the alternatives of increasing the commission % paid to its field reps versus increasing their salaries. You point out that such issues can be easily investigated through.....
comparison of # and/or $ RLS to reach 2018 profit goal
Cost *(1+ %muc) calculates the same thing as which of the following?
cost/(1-%musp)
This is very likely to be strongly influenced by forces beyond the control of NT Inc. Hence, it must be carefully estimated for an accurate pro-forma income statement which is CRITICALLY dependent on this.
estimated sales forecast and hence, sales revenue
You are wondering how to explain price elasticity of demand to the management of the Houston Astros baseball team, in user-friendly language. As you know, price elasticity may be calculated using the formula in which the denominator is... [(New Quantity - Old Quantity) / Old Quantity] ---------------------------------------------------------- [(New Price - Old Price) / Old Price] relative change in price
relative change in price and % change in price are both correct
You are wondering how to explain price elasticity of demand to the management of the Houston Astros baseball team, in user-friendly language. As you know, price elasticity may be calculated using the formula in which the numerator is... [(New Quantity - Old Quantity) / Old Quantity] ---------------------------------------------------------- [(New Price - Old Price) / Old Price]
relative change in quantity and % change in quantity are both correct
Which of these items is likely to be relatively accurately estimated, when preparing the 2018 pro-forma Income statement for NT Inc., in an uncertain economy?
rent on corporate headquarters
Selling price *(1-%musp) calculates the same thing as which of the following?
sp/ (1+%muc)
Star Inc. sells the children toys to the retailers at the % musp of 10%, what is its % muc?
sp=100, mu=10, cost=90 Therefore %muc=10/90=11.11%. OR use Formula 6 to convert 10% to 11.11%.
Explain Payback Period (based on class/M11 discussion) to I.M. Boss, your CEO. It is...
that point in time when the Cumulative Discounted Net Cash Flow reaches $0
I.M. Boss, the CEO of your company asks you to explain the concept of Discount Rate. You point out, while explaining DR calculations,
the farther the future period, lower the DR for that period and the closer the future period, higher the DR for that period are both correct