Question 1

The following information about Morgantown Avionics' two Altimeter models is provided:
  Budgeted unit sales for the entire Avionics industry were 2,500,000 of all model types and actual unit sales for the industry were 2,550,000.
Calculate: 
a. Market share variance (take percentages out to 4 significant digits)
b. Market size variance

Accepted Answer

The answer of The following information about Morgantown Avionics' two...

Question 2

Division B earns a contribution margin of $200,000 and has a divisional margin of $70,000. If Division B is closed, all of the direct divisional expenses and $110,000 of common expenses can be eliminated. These facts indicate that closing the division will cause the firm's operating income to

Accepted Answer

A)  increase by $90,000. 
B)  decrease by $90,000. 
C)  increase by $40,000. 
D)  decrease by $40,000.

Question 3

Monopolistic competition is best defined as

Accepted Answer

A)  a structure that has many buyers and sellers, but the products are differentiated on some basis. 
B)  a structure where customers are willing to pay a little more for the unique feature that appeals to them. 
C)  a structure that combines perfect competition and monopoly, but is closer to a competitive situation. 
D)  all of the above.

Question 4

The markup is pure profit, it does not include all costs not included in the base cost.

Accepted Answer

A) True 
 B)False

Question 5

Bernardo Company reported the following units of production and sales for August and September 2016: Units
 Net income under absorption costing for August was $40,000; net income under variable costing for September was $50,000. Fixed manufacturing costs were $600,000 for each month.
How much was net income for September using absorption costing?

Accepted Answer

A)  $50,000 
B) $80,000 
C) $20,000 
D) $40,000

Question 6

Lorillard Corporation has the following information for April, May, and June 2016:  Production costs per unit (based on 12,500 units) are as follows:
 There were no beginning inventories for April 2016, and all units were sold for $50. Costs are stable over the three
Months.
What is the April ending inventory for Lorillard Corporation using the variable costing method?

Accepted Answer

A)  $312,500 
B)  $187,500 
C)  $121,875 
D)  $140,000

Question 7

Kasawaki Company incurred the following costs in manufacturing digital cameras:  During the period, the company produced and sold 1,000 units.
What is the inventory cost per unit using variable costing?

Accepted Answer

A)  $52 
B)  $62 
C)  $42 
D)  $70

Question 8

There are three types of market structure: monopoly, oligopoly, and perfect competition.

Accepted Answer

A) True 
 B)False

Question 9

The market size variance is the difference between actual and budgeted industry sales in units, multiplied by the budgeted market share percentage, times the:

Accepted Answer

A)  actual market share percentage 
B)  budgeted market share percentage 
C)  actual average unit contribution margin 
D)  budgeted average unit contribution margin

Question 10

An alternative to the limitation of focusing on profits would be

Accepted Answer

A)  communicating other measures are important but continue to base rewards on profits. 
B)  overstate the value of ending inventory in order to reduce cost of goods sold and improve operating income performance. 
C)  focus on long-term objectives and appropriate emphasis on profit. 
D)  analyze the product mix.

Question 11

The following information pertains to Guillotine Corporation:  How much greater or less than variable costing net income is the absorption costing net income?

Accepted Answer

A)  $150,000 less than 
B)  $150,000 greater than 
C)  $240,000 less than 
D)  $240,000 greater than

Question 12

Franklin Company's expected sales were 2,000 units at $100 per unit. During 2016, it had actual sales of 1,800 units at $110 per unit. Budgeted variable costs were $60 per unit. What is Franklin's total sales variance?

Accepted Answer

A)  $8,000 (U) 
B)  $20,000 (U) 
C)  $18,000 (F) 
D)  $2,000 (U)

Question 13

The relationship between supply and demand helps set pricing.

Accepted Answer

A) True 
 B)False

Question 14

A successful firm

Accepted Answer

A)  places appropriate emphasis on profit, is aware of economic and environmental trends outside the company, and measures impact on the community and employees. 
B)  values numeric profit and encourage employees to do what is in their power to increase profits. 
C)  ensures there are always monthly, quarterly, and annual profit and lost statements as the sole measure of success so that all employees are aware of the success or failure of a period. 
D)  none of the above

Question 15

Normandy Company has the following information pertaining to its two divisions for 2016:

Accepted Answer

The answer of Normandy Company has the following information pertaining...

Question 16

Which of the following could be considered a segment?

Accepted Answer

A)  division 
B)  product-line 
C)  sales territory 
D)  all of the above

Question 17

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 sales price variance is

Accepted Answer

A)  $92,000 (F). 
B)  $100,000 (U). 
C)  $8,000 (U). 
D)  $68,000 (U).

Question 18

In order for an effect of changing sales mix on profit to exist, a company must produce:

Accepted Answer

A)  one product 
B)  more than one product 
C)  more than one location 
D)  even number of products

Question 19

Scottish Company manufactures a variety of toys and games. John Chisholm, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in 2016 when 30,000 were projected. Sales for 2017 look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. What is the profit (loss) from Option Two?

Accepted Answer

A)  ($100,000) 
B)  $600,000 
C)  $100,000 
D)  $40,000

Question 20

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

Accepted Answer

A)  $100,000 (U). 
B)  $68,000 (U). 
C)  $4,000 (U). 
D)  $92,000 (U).

Exam 18: Pricing and Profitability Analysis

Division B earns a contribution margin of $200,000 and has a divisional margin of $70,000. If Division B is closed, all of the direct divisional expenses and $110,000 of common expenses can be eliminated. These facts indicate that closing the division will cause the firm's operating income to

Monopolistic competition is best defined as

The markup is pure profit, it does not include all costs not included in the base cost.

Kasawaki Company incurred the following costs in manufacturing digital cameras: During the period, the company produced and sold 1,000 units. What is the inventory cost per unit using variable costing?

There are three types of market structure: monopoly, oligopoly, and perfect competition.

The market size variance is the difference between actual and budgeted industry sales in units, multiplied by the budgeted market share percentage, times the:

An alternative to the limitation of focusing on profits would be

The following information pertains to Guillotine Corporation: How much greater or less than variable costing net income is the absorption costing net income?

Franklin Company's expected sales were 2,000 units at $100 per unit. During 2016, it had actual sales of 1,800 units at $110 per unit. Budgeted variable costs were $60 per unit. What is Franklin's total sales variance?

The relationship between supply and demand helps set pricing.

A successful firm

Normandy Company has the following information pertaining to its two divisions for 2016:

Which of the following could be considered a segment?

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 sales price variance is

In order for an effect of changing sales mix on profit to exist, a company must produce:

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