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Today is December 10. The marketing manager has asked her division head whether she can reduce the selling price of product XYZ \$15.00/unit to...

1.Today is December 10. The marketing manager has asked her division head whether she can reduce the selling price of product XYZ \$15.00/unit to \$11.00/unit for the rest of the month of December. Cutting the price will increase sales for the rest of the month by 5,000 units from 17,000 units to 22,000 units, but will cannibalize some January sales: the December-only price cut will reduce January sales by 3,000 units. The variable costs of manufacturing and selling XYZ are \$8.00/unit. Fixed costs are \$5,000 for December, but will rise to \$6,500 in January.
The operating profit for December and January combined will be greater if
A. The division head allows the price cut.
B. The division forbids the price cut.
2.Today is December 10. The marketing manager has asked her division head whether she can reduce the selling price of product XYZ \$10.00/unit to \$9.00/unit for the rest of the month of December. Cutting the price will increase sales for the rest of the month by 12,000 units from 13,000 units to 25,000 units, but will cannibalize some January sales: the December-only price cut will reduce January sales by 2,000 units. The variable costs of manufacturing and selling XYZ are \$6.00/unit. Fixed costs are \$5,000 for December, but will rise to \$6,500 in January.
The operating profit for December and January combined will be greater if
A. The division head allows the price cut.
B. The division forbids the price cut.
3.Today is December 10. The marketing manager has asked her division head whether she can reduce the selling price of product XYZ \$16.00/unit to \$15.00/unit for the rest of the month of December. Cutting the price will increase sales for the rest of the month by 7,000 units from 10,000 units to 17,000 units, but will cannibalize some January sales: the December-only price cut will reduce January sales by 2,000 units. The variable costs of manufacturing and selling XYZ are \$6.00/unit. Fixed costs are \$5,000 for December, but will rise to \$6,500 in January.
The operating profit for December and January combined will be greater if
A. The division head allows the price cut.
B. The division forbids the price cut.
4.Belton Company currently sells its products for \$25 per unit. Management is contemplating a 20% increase in the sales price for next year. Variable costs are currently 30% of sales revenue and are not expected to change next year. Fixed expenses are \$150,000. If fixed costs were to decrease 10% during the current year, contribution margin would do what?
A. Increase 10%
B. Impossible to determine with the given data
C. Decrease 10%
D. Remain the same
5.
Per Unit Percent of sales
Selling price \$140 100%
Variable expenses 42 30%
Contribution margin \$98 70%
Houpe Corporation produces and sells a single product. Data concerning that product appear above. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of \$11 per unit. In exchange, the sales staff would accept a decrease in their salaries of \$58,000 per month. (This is the company’s savings for the entire sales staff.) Absent the commission plan, sales will be 6,000 units. The marketing manager predicts that introducing this sales incentive would increase monthly sales by 100 units. What should be the overall effect on the company’s monthly net operating income of this change?
A. Increase of \$700
B. Increase of \$56,900
C. Decrease of \$115,300
D. Increase of \$588,700
6.
Budgeted production 7,000 motors
Standard machine-hours per motor 8.6 machine-hr
Standard indirect labor \$7.10 Per machine-hr
Standard power \$1.40 per machine-hr

Actual production 7,300 motors
Actual machine-hr (total) 62,140 machine-hrs
Actual indirect labor (total) \$408,340
Actual power (total) \$94,989
The Above data have been provided by Furr corporation. The variable overhead spending variance for power is
A. \$7,097 U
B. \$7,097 F
C. \$896 F
D. \$7,993 U
7.
Variable overhead costs Original Budget Actual costs
Supplies \$9,760 \$10,200
Indirect labor 42,090 43,720
Supervision 14,500 14,350
Utilities 5,200 4,740
Factory depreciation 7,400 7,510
Mclellan Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the month appear above. The company bases its original budget on 6,100 machine-hours. The company actually worked 6,480 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 6,370 machine-hours. What was the overall fixed overhead budget variance for the month?
A. \$500 F
B. \$500 U
C. 1,570 F
D. 1,570 U
8. Fish farm grows salmon in coastal fish enclosures. When an enclosure is empties and the fish are processes, 4,000 pounds of fillets and 1,000 pounds of fish meal are produced at a cost of \$12,000. Fillets sell for \$3/pound, while fish meal sells for \$1/pound. Fish Farm can process fillets further to produce lox. Lox sell for \$10/pound. The smoking process costs \$2 per pound of lox produces. Also, 3 pounds of fillets are requires to produce one pound of lox. Should Fish farm produce lox?
A. Yes.
B. No.
C. Cannot tell
9.Simpson company sells two products, A and B. Product A has a contribution margin of \$2/unit. Product B has a contribution margin of \$3/unit. The current sales mix is 50% product A and 50% product B. If the sales mix changes to 60% product A and 40% product B then the breakeven point, in number of units,
A. Increase
B. Decreases
C. Doesn’t change
D. Either increase, decrease or remain unchanged. It’s impossible to tell.
10. Clay’s market research department has recommended an introductory unit sales price of \$30. The incremental selling expenses are estimated to be \$500,000 annually plus \$2 for each unit sold, regardless of the manufacturing method.
Capital-intensive labor-intensive
Direct materials \$5.00/unit \$5.50/unit
Direct labor \$6.00/unit \$7.20/unit
Fixed manufacturing costs \$2,440,000 \$1,390,000
Suppose the market research department concludes that it is equally likely that demand will be either 260,000 units or 310,000 units, with equal probability. Given uncertain demand, the expected operating profit is higher if the labor-intensive production method is chosen. Suppose that a special study by the market research department can determine market demand with certainty before the choice of production method must be made. What is the highest price that Clay company should consider paying for the special study?
A. 0 B. \$10,200 C. 15,000 D. 17,500 E. none of these
11. LP Design develops web sites for its customers. The firm is owned by Perl Whiz, who
employs several part-time programmers and is easily able to hire more. Ms. Whiz
nevertheless has to do some of the more complicated work herself on every job. Ms. Whiz is
constantly faced with the problem of deciding which jobs to undertake and which to turn
down.

The programmers are paid \$25 for each hour worked. A simple web site design sells for
\$1,000 and requires 30 hours of work by programmers and 5 hours of work that only Ms.
Whiz can perform. An interactive web site, which is more complicated to design, sells for
\$3,000 and requires 90 hours of work by programmers and 20 hours of work that must be
done by Ms. Whiz. Ms. Whiz has just learned that Smeal College will pay LP Design \$6,800
for a special multimedia web design to be completed by the end of the month. Smeal's web
design will require 200 hours of work by programmers and 40 hours of work that must be
completed by Ms. Whiz. Ms. Whiz is able to work at most 200 hours in a month.

Ms. Whiz expects to be asked to develop 60 simple web sites and 2 interactive web sites this month. LP Design's operating profit is greater if Ms. Whiz
A. Agrees to develop Smeal college B. turns down the Smeal college job

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