Accounting Homework 7Question 11. A company normally will not add a product with a negative contribution margin.TrueFalse2 pointsQuestion 21. Which of the following is true of the contribution margin income statement?A. Selling costs are never included in the calculation of contribution margin.B. The contribution margin is the amount that is available to cover fixed costs.C. Both fixed and variable manufacturing costs are deducted to calculatecontribution margin.D. All of the other answers are incorrect.2 pointsQuestion 31. When deciding to make or buy a product, the only relevant costs are differential costs.TrueFalse2 pointsQuestion 41. Differential analysis:A. is an analysis of the different costs and benefits from alternative solutions to aproblem.B. would be used to review past performance.C. compares two courses of action by determining net income for each.D. is a procedure employing the gross margin to determine the best selling price.2 pointsQuestion 51. A differential cost:A. is the same as a sunk cost.B. includes past costs.C. is equal to the difference in relevant costs between two alternatives.D. All of the other answers are incorrect.2 pointsQuestion 61. In the contribution margin statement:A. fixed costs are deducted to determine contribution margin.B. fixed costs are deducted to determine gross margin.C. variable selling costs are deducted to determine contribution margin.D. All of the other answers are correct.2 pointsQuestion 71. Relevant costs are:A. all future costs that differ between alternatives.B. all past cost.C. all costs.D. all future costs.2 pointsQuestion 81. Joint costs are:A. costs incurred after the point where joint products split off from each other.B. sunk costs in deciding whether to process a joint product further.C. Two of the other answers are correct.D. All of the other answers are incorrect.2 pointsQuestion 91. A foreign corporation has asked for bids on an order for 200,000 units of product X.Bravo Company is considering making a bid in order to use productively its idle capacity.Bravo is currently operating at 80% of its 1,000,000 unit total capacity. Bravo’s variablecosts are $50 per unit, while its fixed costs amount to $4,000,000. What is the minimumprice Bravo should bid to the foreign corporation?A. $100B. $80C. $120D. just above $502 pointsQuestion 101. When differential analysis is applied to pricing decisions, the price selected should be theprice that will result in the greatest TOTAL contribution margin.TrueFalse2 pointsQuestion 111. The Sidney Company faces a make-or-buy decision concerning a part it manufactures inhouse. The product can be manufactured internally with materials costs of $24 per unit,labor of $9, fixed overhead of $6.50, and variable overhead of $6. At what dollar amountwould Sidney be indifferent to making or buying this part if the fixed overhead costswould be unaffected?A. $39.00B. $43.50C. $24.00D. $33.002 pointsQuestion 121. If a company operating at less than full capacity receives a special order request with aprice less than total cost, the company should reject the request.TrueFalse2 pointsQuestion 131. Past costs incurred to create capacity are differential costs in future make or buydecisions.TrueFalse2 pointsQuestion 141. In the contribution margin income statement, contribution margin is equal to net revenuesless variable costs of the units sold.TrueFalse2 pointsQuestion 151. When using differential analysis to decide whether to eliminate certain products,segments, or customers, costs must be reclassified into those that would be eliminated orchanged by the elimination and those that would not.TrueFalse2 pointsQuestion 161. A budget shows how management expects to acquire and use resources to achieve itsobjectives.TrueFalse2 pointsQuestion 171. Participatory budgeting allows employees to feel that they helped prepare the budget,thus providing more incentive for them to use it effectively.TrueFalse2 pointsQuestion 181. The Schraeger Company has estimated that sales for next quarter would be 30,000 units.The company has a beginning finished goods inventory of 2,000 units and wishes to havefinished goods inventory of 5,000 units at the end of the quarter. How many units mustthe company produce in order to have its desired ending inventory?A. 30,000 unitsB. 33,000 unitsC. 27,000 unitsD. 37,000 units2 pointsQuestion 191. Although budgets are plans for the future, they are based primarily on past experienceadjusted for future expectations.TrueFalse2 pointsQuestion 201. The use of the master budget allows management to appraise new policies before they areput into effect.TrueFalse2 pointsQuestion 211. Which of the following would be a factor to be considered in formulating a sales budget?A. Economic indicatorsB. The demand for the productC. Level of advertisingD. All of the other answers are correct.2 pointsQuestion 221. Zero-based budgeting requires that managers start budgeting at point zero and:A. budget only for changes from the past period’s budget.B. justify every dollar that will appear in the budget.C. budget only for major items of expense.D. All of the other answers are incorrect.2 pointsQuestion 231. A series of budgets for differing levels of activity for the same item is called a(n):A. operating budget.B. financial budget.C. master budget.D. flexible budget.2 pointsQuestion 241. Zero-based budgeting requires that managers start budgeting at point zero.TrueFalse2 pointsQuestion 251. Financial budgets do not aid management in planning.TrueFalse2 pointsQuestion 261. The cornerstone of the budgeting process is the sales budget because:A. information about future sales is the most readily available.B. the sales force must gather their budget’s data from their customers.C. it is the most complex.D. all other budgets flow from the determination of future sales units and dollars.2 pointsQuestion 271. The goal sought in the preparation of a flexible budget is to indicate the costs expected tobe incurred at varying levels of output.TrueFalse2 pointsQuestion 281. The more uncertain the future, the less the desirability of budgeting.TrueFalse2 pointsQuestion 291. The projected income statement is typically:A. not prepared.B. prepared after the projected balance sheet.C. prepared prior to the projected balance sheet.D. All of the other answers are incorrect.2 pointsQuestion 301. Participatory budgeting:A. involves employees at various levels in the organization.B. uses information provided by employees.C. can help motivate employees to achieve the organization’s goals.D. All of the other answers are correct.
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