Month Cash Sales Credit Sales September 100, ,000 October 125, ,000 November 130, ,000 December 135, ,000

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1 1. A company that desires to lower its break-even point should strive to: A. decrease selling prices B. reduce variable costs C. increase fixed costs D. sell more units E. pursue more than one of the above actions Use the following Phillip co. sales budget to answer questions 3 and 4: Month Cash Sales Credit Sales September 100, ,000 October 125, ,000 November 130, ,000 December 135, ,000 Collections on credit sales are 50 percent in the month of sale, 40 percent in the month following the sale, and 10 percent two months following the sale. 2. Total cash collections in December are expected to be: A. 325,000 B. 197,000 C. 135,000 D. 332,000 E. None of the above 3. Total cash received in October on October sales will be : A. 215,000 B. 125,000 C. 295,000 D. 300,000 E. None of the Above 4. Chrisco has the following information Month Budgeted Sales May 115,000 June 125,000 July 130,000 August 120,000 The cost of goods sold percentage is 65%, and the desired ending inventory level is 25% of the next month s sales

2 The total purchases budgeted for June should be : A. 102,275 B. 82, C. 81,250 D. 43,750 E. None of the above 5. Wesco has budgeted production for next year as follows: Quarter First Second Third Fourth Production in Units 10,000 12,000 16,000 14,000 Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year totals 4,000 lbs. The raw materials inventor at the end of each quarter should equal 10% of the next quarter s production needs. Budgeted equal 10% of the next quarter s production needs. Budgeted purchases of raw materials in the third quarter would be: A. 63,200 lbs. B. 62,400 lbs. C. 56,800 lbs. D. 50,400 lbs. E. None of the Above Maxie and Co. makes and sells two types of shoes, Plain and Fancy. Data concerning these products are as follows: Plain Fancy Unit Selling Price Variable Cost Per unit Sixty percent of the unit sales are Plain, and annual fixed expenses are 45,000 dollars. 6. Assuming that the sales mix remains constant, the number of units of Plain that the company must sell to break even is: A. 3,000 B. 3,375 C. 5,000 D. 5,625 E. 9,375

3 7. Garth Company sells a single product. If the sales price per unit and the variable cost per unit both increase 10% and the fixed costs do not change then: Unit Contribution Margin Contribution Margin Ratio Breakeven in Units A. Increases Increases Decreases B. no change no change no change C. no change increases no change D. increases no change decreases Given the following information about Marianneco, answer questions 26 Hats Mittens Scarves Sales 20,000 30,000 8,000 Variable Costs 12,000 16,000 5,000 Fixed Costs: Avoidable (traceable) 3,000 6,000 2,000 Unavoidable (common) 2,000 3,000 1, Assuming that Scarves are discontinued and nothing replaces it, Marianneco s operating income will: A. increase by 800 B. increase by 1,000 C. decrease by 1,000 D. decrease by 1,800 E. None of these 9. Jeanineco produces three products using a joint process which costs 350,000. The products, X, Y, and Z, can be sold at split-off or processed further and then sold. Jeanineco sells 5,000 units of each product. The following unit information is also available: Product Value Sales Value at split off Separable Processing costs Sales at completion X Y Z To maximize profits, which products should jeanineco process further? A. Products X only B. Products Y only C. Products Z only D. Product X, Y, Z E. No product should be processed further

4 10. Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter. The past three months of information for Model AE2 are summarized below: Sales (1,000 Units) 300,000 Direct Materials 150,000 Direct Labor (15 per hour) 60,000 Overhead 100,000 Overhead costs are 70% variable and the remaining 30% is depreciation of special equipment for model AE2 and has no resale value. If Model AE2 is dropped from the product line, income will: A. increase by 10,000 B. decrease by 20,000 C. increase by 30,000 D. decrease by 10,000 Use the following information to answer the next three questions Total Product W Product X Product Y Product Z Revenues 62,600 10,000 18,000 12,600 22,000 Cost of Goods Sold 44,274 4,750 7,056 13,968 18,500 Gross Margin 18,326 5,250 10,944 (1,368) 3,500 Operating Costs 12,012 1,990 2,976 2,826 4,220 Operating Income 6,314 3,260 7,968 (4,194) (720) Units Sold 1,000 1,200 1,800 2,000 Selling Price Variable cost of goods Sold Per unit Variable operating cost per unit Each of the following proposals is to be considered independently. Consider only the product changes stated in each proposal; the production and sales levels of the other products remain the same. a. Compute the effect on operating income if Y is dropped.

5 b. Compute the total effect on operating income if Y is dropped and a resulting loss of customers causes a decrease of 20 units in production and sales of X. c. Assume the area of the plant in which W is manufactured can easily be adapted to the production of Z, but changes in quantities produced necessitate changes in selling prices. Compute the total effect on operating income if production of W is reduced to 500 units (to be sold at $12 each) and production of Z is increased to 2,500 units (to be sold at $10.50 each).