Acc334F2010-MT#2B-solution

Acc334F2010-MT#2B-solution - ACCOUNTING 3334 - Fall 2010...

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ACCOUNTING 3334 - Fall 2010 MID-TERM EXAM # 2B Dr. Jeff Power Suggested Solutions NOTES: ANSWER ALL QUESTIONS IN THE SPACE PROVIDED (Back of page if necessary) DO NOT SEPARATE THE PAGES OF THE EXAM. YOU HAVE 75 MINUTES TO COMPLETE THE EXAM SHOW ALL OF YOUR CALCULATIONS FOR POSSIBLE PART MARKS PART I: Multiple Choice (Circle the most correct response) {2 points each} 1. Absorption costing enables managers to increase operating income in the short run by changing production schedules. Which statement is true regarding such action? a. The reason for increased operating income is the deferral of fixed manufacturing overhead contained in unsold inventory. b. A desirable effect of these changes in production is “cherry picking” the production line. c. This is done through decreases in the production schedule as customer demand for product falls. d. None of the above statements are true regarding manager’s action to increase operating income through changes in the production schedule. 2. A company may experience the downward demand spiral when a. the use of theoretical capacity as a denominator-level has contributed to budgets that project sales to be higher than actually attainable. b. the production-volume variance is unfavorable each time period during a year. c. engaged in a cyclical business and after experiencing an upturn. d. spreading capacity costs over a small number of units and setting selling prices even higher to recover those costs. Use the following information for questions 3 and 4. Song Company sells three products, Do, Ra, and Mi, for prices of $8, $7, and $5, respectively. They also offer combinations of the products for reduced overall prices. The following packages are available: (1) a package containing Do and Ra sells for $13.50, (2) a package of Do and Mi sells for $11.50, (3) a package containing Ra and Mi sells for $10.50, and (4) a package of all three products, Do, Ra, and Mi, sells for $17.00. 3. If Song Company uses the stand-alone method (based on selling prices) to allocate revenues to products, the amount of revenues to be allocated to Do from a package of all three products, as described in (4) above, sold would be a. $4.25. b. $5.95. c. $6.80. d. $8.00. 4. If Song Company uses the incremental-revenues allocation method and has designated Ra as the primary product, the amount of revenues from a bundled package of all three products to be allocated to Ra would be a. $5.95. b. $6.50. c. $6,80. d. $7.00.
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5. Under an absorption costing system, the breakeven point is a function of Sales Volume Production Volume a. Yes Yes b. No Yes c. No No d. Yes No 6. Under a variable costing system, the breakeven point is a function of Sales Volume Production Volume a. Yes Yes b. No Yes c. Yes No d. No No 7. A mixed cost function has a constant component of $20,000. If the total cost is $60,000 and the independent variable has the value 200, what is the value of the slope coefficient?
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This note was uploaded on 03/30/2011 for the course ACG 333 taught by Professor Farrington during the Summer '10 term at Texas State.

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Acc334F2010-MT#2B-solution - ACCOUNTING 3334 - Fall 2010...

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