Reference no: EM132523794

Noreaster Company produces a product that has a regular selling price of $360 per unit. At a typical monthly production volume of 2,000 units, the product's average unit cost of goods sold amounts to $270. Included in this average is $120,000 of fixed manufacturing costs. All selling and administrative costs are fixed and amount to $30,000 per month. Noreaster Company has just received a special order for 1,000 units at $240 per unit. The buyer will pay transportation, and the regular selling price will not be affected if Noreaster accepts the order.

Question 1: Assuming Noreaster Company is operating at capacity and accepting the order would require an offsetting reduction in regular sales, the effect on profits of accepting the order would be a

a. $240,000 decrease.

b. $120,000 decrease.

c. $150,000 decrease.

d. $30,000 increase.

Question 2: Biscuit Company sells its product for $50. In addition, it has a variable cost ratio of 45 percent and total fixed costs of $6,875. What is the break-even point in units for Biscuit Company?

a. 250 units

b. 3,600 units

c. 375 units

d. 2,400 units

Question 3: Nonesuch Company sells only one product at a regular price of $7.50 per unit. Variable expenses are 60 percent of sales and fixed expenses are $30,000. Management has decided to decrease the selling price to $6.00 in hopes of increasing its volume of sales. What sales dollar level is needed to obtain a before-tax profit of $60,000 when the selling price is $6.00 per unit?

a. $90,000

b. $120,000

c. $72,000

d. $360,000

Question 4: Taylor Company's budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. Taylor's total sales variance is a. $100,000 (U).

b. $68,000 (U).

c. $4,000 (U).

d. $92,000 (U).

Question 5: The U.S. government has set up foreign trade zones (FTZ) that a. are located on U.S. soil but are considered to be outside of U.S. commerce for tariff purposes. b. are located in foreign countries and designed to export to the United States. c. are located in foreign countries and are designed to import from the United States. d. are located in the United States and are considered part of the United States for tariff purposes.

Question 6: The steps in the tactical decision making process are:

I. Comparing relevant costs and relating to strategic goals

II. Identifying feasible alternatives

III. Identifying costs and benefits and eliminating irrelevant costs

IV. Selecting best alternative

V. Defining the problem

Question 7: What is the proper sequence of steps? a. I, II, V, III, IV

b. II, I, V, III, IV

c. V, II, III, I, IV

d. V, III, II, IV, I

Question 8: Which of the following is NOT a way that companies might reduce tariffs?

a. Alter materials to increase the domestic content.

b. Restrict the amount of imported materials.

c. Increase the amount of imported materials.

d. Utilize foreign trade zones.

Question 9: Biscuit Company sells its product for $50. In addition, it has a variable cost ratio of 55 percent and total fixed costs of $6,875. How many units must be sold in order to obtain a before-tax profit of $12,000?

a. 480 units

b. 240 units

c. 600 units

d. 839 units

Question 10: Which of the following costs is relevant to a make-or-buy decision?

a. original cost of the production equipment

b. annual depreciation of the equipment

c. the amount that would be received if the production equipment were sold d. the cost of direct materials purchased last month and used to manufacture the component

Question 11: The processing department can produce one unit every 5 minutes and is the last department before the finishing department. Under traditional manufacturing where a batch equals 10 units, how long will it be before the first unit in the batch can move from the processing department to the finishing department?

a. 5 minutes

b. 50 minutes

c. 10 minutes

d. not enough information is given

Question 12: Which of the following statements is TRUE when making a decision between two alternatives?

a. Variable costs may not be relevant when the decision alternatives have the same activity levels.

b. Variable costs are not relevant when the decision alternatives have different activity levels.

c. Sunk costs are always relevant.

d. Fixed costs are never relevant.

Question 13: In 2018, Samantha's Bath and Body Shop had variable costs of $27,000, fixed costs of $18,000, and a net loss of $4,500.

Samantha's 2018 break-even sales volume was

a. $36,000.

b. $54,000.

c. $49,500.

d. $37,500

Question 14: Which of the following statements is true of tactical decisions?

a. Tactical decisions are often large-scale actions that serve a smaller purpose.

b. Tactical decisions do not have an immediate or limited end in view.

c. Tactical decisions should support alternatives that result in long-term competitive advantage. d. Tactical decisions are long run in nature and will have short-run consequences.

Question 15: Which of the following items would be classified as committed resources (long-term)?

a. salaried employees

b. depreciation on building

c. lease on machinery

d. both b and c

Question 16: Which item is NOT an example of a sunk cost?

a. materials needed for production

b. purchase cost of machinery

c. depreciation

d. all are sunk costs

Question 17: A decision that focuses on whether a specially priced order should be accepted or rejected is a

a. special-order decision.

b. keep-or-drop a product-line decision.

c. make-or-buy decision.

d. both a and c.