1.

Bates Corp, has the following information for its candy line: Selling Price per unit: $15 Unit Sales 100,000 Variable Costs $800,000 Fixed Costs $200,000 Based on market study, Bates estimates that it could increase the unit selling price by 15% and increase the unit sales volume by 10% if $100,000 was spent on advertising. Based on the analysis, what would Bates' operating income be from selling the candy if the decision is made to advertise? A. $337,500 B. $417,500 C. $717,500 D. $497,500 2. Which of the following methods would be most helpful in identifying outliers? A. Account Analysis B. Multiple Regression C. Scattergraph D. Simple Regression 3. Which of the following costs are relevant to decisions making? A. Sunk Costs B. Oppurtunity Costs C. Both of the Above D. None of the Above 4. You purchased baseball tickets last month when your team was well. You paid $100 for the non refundable tickets. The team is doing poorly and a friend offered you $40 for the tickets. The opportunity cost of going to the game is: A. $140 B. $60 C. $40 D. $100 5. The cost for a salesperson that is paid a flat salary of $2,000 per month plus a 3% commission on all sales is an example of what type of cost? A. Variable Costs B. Fixed Costs C. Mixed Costs D. Step Cost

6. Which of the following costs would most likely be classified as variable assuming the account analysis approach to cost estimation is used? A. Rent B. Supervisory Salaries C. Indirect Material D. Property Taxes 7. The first step in decision making process is to A. Determine the consequences of outcomes B. Determine the Decision Rule C. Define the goals and objectives D. All of the above 8. In differential cost analysis, changes in the cost of direct materials among alternatives is an example of: A. Price discrimination B. Relevant Data C. Batch-Level Costs D. None of the Above 9. Valdez and Sons has fixed costs of $100,000. Its contribution margin ratio is 40% of sales and its one product sells for $100 per unit. What is the break-even point in sales dollars? A. $100,000 B. $250,000 C. $80,000 D. $166,667 10. The product that Menorah Corp. currently sells, candles, has fixed costs of $20,000, a sales price of $10 per candle and a variable cost of $4 per candle. To earn a profit of $10,000, the company must sell how many candles. (Remember they cannot sell partial candles)

A. 2,500 B. 3,333 C. 5,000 D. 4,000 11. A high level of operating leverage indicates a company has:

A. High fixed costs and high variable costs B. High levels of fixed costs relative to the contribution margin C. Low levels of fixed costs relative to the contribution margin D. Low levels of fixed costs relative to variable costs

The following information has been accumulated to be used in preparing the 2011 annual budget for the Salem Corporation. The cost behavior pattern of the maintenance costs must be determined for this budget. The accounting staff has suggested that linear regression be employed to derive a cost estimation equation in the form of TC=VX+F for the total maintenance costs. In the table below, the a-coefficient represents the intercept and the b-coefficient represents the coefficient on maintenance hours (i.e. the independent variable). Information regarding the maintenance hours and costs for 2010 and the partial results of the regression are as follows. Month January 480 February 320 March 400 April 300 May 500 June 310 July 320 August 520 September 490 October 470 November 350 December 340 A-coefficient B-Coefficient Standard error of the a-coefficient Standard error of the b-coefficient Standard error of the estimate

12.

Hours of Activity $4,200 3,000 3,600 2,820 4,350 2,960 3,030 4,470 4,260 4,050 3,300 3,160 684.65 7.2884 49.515 .12126 34.469

Maintenance Costs

January February March April May June July August September October November December A-coefficient B-Coefficient Standard error of the a-coefficient Standard error of the b-coefficient Standard error of the estimate R-square (unadjusted) T-value for a-coefficient T-value for b-coefficient

480 320 400 300 500 310 320 520 490 470 350 340

$4,200 3,000 3,600 2,820 4,350 2,960 3,030 4,470 4,260 4,050 3,300 3,160 684.65 7.2884 49.515 .12126 34.469 .99724 13.827 60.105

12. The percent of the change in the maintenance costs that can be explained by a change in the activity hours is: A. 68.46% B. 34.47% C. 12.12% D. 99.72% 13. If this company uses the high-low method of estimating the cost equation, the relationship between the hours of activity and the total maintenance costs would be:

A. TC= $7.50 per hour + $570 B. TC= $9.00 per hour + $570 C. TC= $7.50 per hour + $3,600 D. TC= $7.29 per hour + $685 14. The contribution margin at the breakeven point

A. Must be zero B. Is less than total fixed costs C. Is greater than variable costs D. Equal total fixed costs Hoffman Corp. currently sells 40,000 dental tools to its normal customers, but it has a capacity to produce 50,000 tools. Its product sells for $30 per tool and the variable costs incurred in manufacturing and selling the product are as follows on a per tool basis: Direct Materials- $8; Direct Labor- $4; Sales Commission- $2 A customer has proposed a special order to purchase 10,000 tools at a price of $20 per unit. If Hoffman accepts the order, the company would not have to pay its sales people their normal commission of $2 per unit, but the company would incur an addition shipping cost of $3 per unit. If Hoffman accepts the special order, how would operating income be affected? A. Decrease by $120,000 B. Increase by $50,000 C. Increase by $30,000 D. Decrease by $80,000 16. Hoffman should reject the special order if the quoted price per unit is below what ammount? 15.

A. $33 B. $12 C. $15 D. $31 17. A. F B. X C. TC D. V In the cost equation TC= VX + F, the slope is represented by which of the following?

18.

An increase in the production volume within the relevant range will result in:

A. A decrease in the fixed cost per unit B. An increase in the fixed cost per unit C. No change in the fixed cost per unit D. A proportionate increase in total fixed costs

Vicky Menendez, the controller, would like to predict the costs of producing chocolate candy bars for October. She reviews the costs for the last 9 months and reports the results below. BARS Produced 1500 1487 1493 1583 1400 1479 1422 1555 1600

Month January February March April May June July August September 19. Using the High-Low Method, the fixed cost (rounded to the nearest dollar) she should expect for October is:

Cost $4,269.00 $4,256.00 $4,262.00 $4,444.00 $4,005.00 $4,248.00 $4,191.00 $4,500.00 $4,375.00

A. $(466) B. $603 C. $1,415 D. $540

Melnick Enterprises manufactures two products, boat wax and car wax, in two departments, the Mixing Department and Packaging Department. The Mixing Department has 800 hours per month available, and the Packaging Department has 1,200 hours per month available. Production of the two products cannot exceed 36,000 pounds. Data on the two products follow: Contribution Margin (Per 100 pounds) Boat Wax (B) $200 Car Wax (C) 150 20. The objective function for the linear program Melnick would use to determine the optimal monthly production of each wax would be: A. 2B + 1.5C is greater than or equal to 36,000 (M) 5.0 2.4 (P) 3.6 6.0 Hours Per 100 Pounds Mixing Packaging

B. Maximize CM = 200B + 150C C. Maximize CM = 150B +200C D. Maximize CM = 7.4M + 9.6P

XYZ Corp manufactures three products A, B, and C. The annual fixed manufacturing cost is $1,500,000 and the annual fixed selling and administrative cost is $700,000. Data on the three products follow: A. Unit Sales Unit Selling Price Variable Cost Per Unit 40,000 $60 $35 20,000 $80 $50 B. 40,000 $90 $60 C.

Required: (1)What is the operating income for XYZ Corp.? (2)What is the weighted-average unit contribution margin (WAUCM) for the three products? (3)What is the break-even volume in units for each product (A, B, and C) and in total (rounded to the nearest unit)? (4)What is the break-even volume in sales dollars for each product (A, B, and C) and in total (rounded to the nearest dollar)?

ANSWERS 1. C 2. C 3. B 4. C 5. C 6. C 7. C 8. B 9. B 10. C 11. B 12. D 13. A 14. D 15. B 16. C 17. D 18. A 19. C 20. B