Mgmt 312 final exam (embry)


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MGMT 312 Final Review (EMBRY)

1. A company is currently operating at 80% capacity producing and 5,000 units. Current cost information relating to this production is shown in the table below. 

The company has been approached by a customer with a request for a 100-unit special order. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

2. A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to future decisions, is called a(n):

3. Alpha Co. can produce a unit of Beta for the following costs:

Direct material $8
Direct labor 24
Overhead 40
Total costs per unit $72
An outside supplier offers to provide Alpha with all the Beta units it needs at $60 per unit. If Alpha buys from the supplier, Alpha will still incur 40% of its overhead. Alpha should:
4. An opportunity cost:

5. Marcus processes four different products that can either be sold as is or processed further. 
Listed below are sales and additional cost data:


Sales value with no further processing

Additional processing cost

Sales value after further processing

















Which product(s) should not be processed further?
6. Product A requires 5 machine hours per unit to be produced, Product B requires only 3 machine hours per unit, and the company’s productive capacity is limited to 240,000 machine hours. Product A sells for $16 per unit and has variable costs of $6 per unit. Product B sells for $12 per unit and has variable costs of $5 per unit. Assuming the company can sell as many units of either product as it produces, the company should:

Produce only Product A.

7. When evaluating a special order, management should

8. Which of the following should be classified as production costs?

9.Which department is often responsible for the direct materials price variance?

10. The usual starting point for preparing a master budget is forecasting or estimating:

11. The usual budget period is:

12. The standard materials cost to produce 1 unit of Product M is 6 pounds of material at a standard price of $50 per pound. In manufacturing 8,000 units, 47,000 pounds of material were used at a cost of $51 per pound. What is the total direct material cost variance?

13. The practice of preparing budgets for each of several future periods and revising those budgets as each period is completed, adding a new budget each period so that the budgets always cover the same number of future periods, is called:

14. The most useful budget figures are developed:

15. The master budget includes:

16. The following company information is available for January: 

Direct materials used                                      2,600 feet @$52 per foot

Standard costs for direct materials for January production    2,700 feet @ $50 per foot

The direct material price variance is:

17. The difference between actual and standard cost caused by the difference between the actual quantity and the standard quantity is called the:

18. The difference between actual and standard cost caused by the difference between the actual price and the standard price is called the:

19. Operating budgets include all the following budgets except the:

20. Northern Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during June. Northern Company has an agreement with its bank to maintain a cash balance of at least $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:

21. Julia’s Candy Co. reports the following information from its sales account and sales budget:

Sales                            May                 $105,000

                                    June                 93,000

 Expected Sales           July                  $90,000

                                    August            110,000

                                    September       120,000

Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:

22. Financial budgets include all the following except the:

23. Bentels Co. desires a December 31 ending inventory of 2,840 units. Budgeted sales for December are 4,000 units. The November 30 inventory was 1,800 units. Budgeted purchases are:

24. An analytical technique used by management to focus on the most significant variances and give less attention to the areas where performance is satisfactory is known as:

25. A formal statement of future plans, usually expressed in monetary terms, is a:

26. A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise or materials to be purchased, the expense to be incurred, the long-term assets to be purchased, and the amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet, is called a:

27. Which of the following best describes costs assigned to the product under the variable costing method? 

Direct labor (DL)

Direct materials (DM)

Variable selling and administrative Variable manufacturing overhead Fixed selling and

administrative Fixed manufacturing overhead

28. Under absorption costing, a company had the following unit costs when 8,000 units were produced. 

Direct labor                                                     $8.50 per unit

Direct material                                                $9.00 per unit

Variable overhead                                           $6.75 per unit

Fixed overhead ($60,000/8,000 units)            $7.50 per unit

Total production cost                                      $31.75 per unit

Compute the total production cost per unit under absorption costing if 30,000 units had been produced.

29. Sindler Corporation sold 3,000 units of its product at a price of $13 per unit. Total variable cost per unit is $7.50, consisting of $6.80 in variable production cost and $.70 in variable selling and administrative cost. Compute contribution margin for the company.

30. Romtech Company sold 43,000 units of its product at a price of $300 per unit. Total variable cost per unit is $175, consisting of $168 in variable production cost and $7 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.

31. Capital budgeting decisions usually involve analysis of:

32. An analytical technique used by management to focus on the most significant variances and give less attention to the areas where performance is satisfactory is known as:

Controllable management

33. A company expects its three departments to yield the following income for next year.

Dept. X Dept. Y Dept. Z
Sales $94,000 $15,000 $70,000
Avoidable 71,000 2,000 52,000
Unavoidable 4,000 7,000 20,000
Total expenses 75,000 9,000 72,000
Net income (loss) $19,000 $6,000 $(2,000)
Required: Compute the following independent calculations:
34. Which one of the following methods considers the time value of money in evaluating alternative capital expenditures?

35. Which of the following is an objective of capital budgeting

36. The time value of money concept means:

37. The rate that yields a net present value of zero for an investment is the

38. The process of analyzing alternative investments and deciding which assets to acquire or sell is known as:

39. The following data concerns a proposed equipment purchase: 




Salvage value

            $ 4,000


Estimated useful life

            4 years


Annual net cash inflows



Amortization method


Assuming that net cash flows are received evenly throughout the year, the rate of return on the average investment is:

40. For purposes of applying the net present value and the internal rate of return methods, the rate chosen to measure the time adjusted value of money is known as the:

41. Daniels Corporation is considering the purchase of new equipment costing $30,000. The projected annual after-tax net income from the equipment is $1,200, after deducting $10,000 for depreciation. The revenue is to be received at the end of each year. The machine has a useful life of 3 years and no salvage value. Daniels requires a 12% return on its investments. The factors for the present value of an annuity of 1 for different periods follow: 

What is the net present value of the machine?

42. An estimate of an asset’s value to the company, calculated by discounting the future cash flows from the investment at an appropriate rate and then subtracting the initial cost of the investment, is known as:

43. Bartels Corp. produces woodcarvings. It takes 2 hours of direct labor to produce a carving. Bartels’ standard labor cost is $12 per hour. During August, Bartels produced 10,000 carvings and used 21,040 hours of direct labor at a total cost of $250,376. What is Bartels’ labor rate variance for August?

44. Which methods of evaluating a capital investment project ignore the time value of money?




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