MGMT640
Section 1121
Final Exam
Summer 2014

Name: __________________________ Date: ___________________

The Final Exam
is individual work. All work on the exam should be from your own efforts, with
no assistance from classmates, family, friends or others. By proceeding with this exam, you are
agreeing not to share the exam content or your responses with anyone, including
future students of MGMT640. Your completed
exam is due by 7:00 PM on Sunday, August 10, 2014
(upload to your Assignments Folder).

Please
refer to the Syllabus for the policy regarding late submissions. There will be no make-up exams except for
documented emergencies.

You
are not required to submit your working.
However, complete working showing formulas and calculations may be
considered for partial credit for incorrect answers.

Identify the letter of the choice that best completes the
statement or answers the question.

1.

Joan Merton, a college
student is contemplating the following options for her 3-month summer break:
(1) Take a summer
course which will cost $700 and work half-time making $1,000 per month.
(2) Work full time at the local dinner making $2,000 per
month.
(3) Take the summer class at a cost of $700 and not work
during the summer.

Joans incremental profit or loss if she chooses option 1
over option 2 would be:

A)

($4,100)

B)

($3,700)

C)

($5,300)

D)

($2,500)

2.

Sybarix, Inc., a
manufacturing company produces 80,000 units of product X at a total cost of
$2.4 million. Total fixed costs are
$1.4 million. If the company increases
production by 25% and uses a 19% markup, the price per unit will be:

A)

$30.80

B)

$37.10

C)

$31.54

D)

$51.80

Use the following to answer
questions 3-4:

XTZ Company’s market for the
Model 55 has changed significantly, and XTZ has had to drop the price per unit
from $265 to $125. There are some units
in the work in process inventory that have costs of $150 per unit associated
with them. XTZ could sell these units in
their current state for $100 each. It
will cost XTZ $10 per unit to complete these units so that they can be sold for
$125 each.

3.

A new employee looks at
the analysis and exclaims, We’ll lose money with either of these
alternatives! Let’s just throw these units in the trash! Suppose the
alternative to trashing is choosing the more profitable of the two
alternatives (that the new employee looked at and did not like). What effect
will the trashing option (that the new employee
wants) have on net
income?

A)

Net income will
increase by $35 per unit for each unit discarded.

B)

Net income will
decrease by $100 per unit for each unit discarded.

C)

Net income will
decrease by $115 per unit for each unit discarded.

D)

It will have no effect
on net income.

4.

When the incremental
revenues and expenses are analyzed, the company is better off by

A)

$125 per unit if they
complete the units.

B)

$25 per unit if they
sell the units in their current state.

C)

$10 per unit if they
sell the units in their current state.

D)

$15 per unit if they
complete the units.

5.

A company using
activity based pricing marks up the direct cost of goods by 40% plus charges
customers for indirect costs based on the activities utilized by the
customer. Indirect costs are charged
as follows: $6.00 per order placed; $3.00
per separate item ordered; $28.00 per return.
A customer places 10 orders with a total direct cost of $2,000, orders
300 separate items, and makes 5 returns.
What will the customer be charged?

A)

$3,000

B)

$3,900

C)

$5,330

D)

$5,750

6.

Manufacturing overhead
is allocated to products based on the number of machine hours required. In a year when 20,000 machine hours were
anticipated, costs were budgeted at $125,000.
If a product requires 8,000 machine hours, how much manufacturing
overhead will be allocated to this product?

A)

$41,667

B)

$43,750

C)

$50,000

D)

$53,560

Use the following information to
answer questions 7-8:
The Sunrise Hotel has 200
rooms. Each room rents at $110 per night and variable costs total $27 per room
per night of occupancy. Fixed costs total $76,000 per month.

7.

If the hotel spends an
additional $20,000 in the month of February on advertising they feel that
they can expect occupancy rate to increase by 10%. What would be the
financial impact of spending this additional money on advertising for the
month of February (28 days)?

A)

Total fixed costs will
increase by $10,500.

B)

Net income will
increase by $26,480.

C)

Net income will
increase by $16,320.

D)

Total fixed costs will
remain the same.

8.

If 75% of the rooms are
occupied each night in the month of February (28 days) what will total costs
be for the month?

A)

$155,680

B)

$173,600.

C)

$197,400.

D)

$189,400.

9.

Jones Company
manufactures widgets. Old Ham Company has
approached Jones with a proposal to sell the company one of the components
used to make widgets at a price of $100,000 for 50,000 units. Jones is currently making these components
in its own factory. The following
costs are associated with this part of the process when 50,000 units are
produced:

Direct material

$44,000

Direct labor

20,000

Manufacturing overhead

60,000

Total

$124,000

The manufacturing overhead
consists of $32,000 of costs that will be eliminated if the components are no
longer produced by Jones. The
remaining manufacturing overhead will continue whether or not Jones makes the
components.
What is the amount of
avoidable costs if Jones buys rather than makes the components?

A)

$60,000

B)

$96,000

C)

$124,000

D)

$100,000

10. Below is a performance report that compares budgeted
and actual profit of Boyles Beer
for the month
of April:

Budget

Actual

Difference

Sales

$200,000

$202,000

$2,000

Less:

Cost of
ingredients

$162,000

$166,000

$4,000

Salaries

$31,000

$31,200

$200

Controllable Profit

$47,000

$44,800

-$2,200

In evaluating the department in terms of its increase
in sales and expenses, what will be
most important
to investigate?

A)
Sales
B)
Cost of ingredients
C)
Salaries
D)
All three components have equal importance.

11.

K-Henry’s Dull Diner
has a contribution margin ratio of 17%.
If fixed costs are $176,800, how many dollars of revenue must
K-Henry’s generate in order to reach the break-even point?

A)

$1,040,000

B)

$ 262,880

C)

$1,060,800

D)

$1,105,000

12.

New Insights, Inc. is
looking to achieve a net income of 15 percent of sales. Heres the firms profile: Unit sales price
is $10; variable cost per unit is $6; total fixed costs are $40,000. What is the level of sales in units
required to achieve a net income of 15 percent of sales?

A)

12,000 units

B)

16,000 units

C)

21,000 units

D)

25,000 units

13.

At Joshuas Apparel, the
break-even point is 2,400 units. If
fixed costs total $300,000 and variable costs are $25 per unit, what is the
selling price per unit?

A)

$210

B)

$180

C)

$5

D)

$150

14.
Which of the following situations will most likely violate
cost-volume-profit
assumptions about fixed costs?

A)

When production volume increases beyond the capacity of
the plant, a second shift will be added instead of building a new plant.

B)

The companys raw material supplier typically allows
volume discounts when larger amounts of the raw material are purchased.

C)

Fixed costs per unit decrease as volume increases.

D)

As volume increases, per unit fixed manufacturing
overhead remain constant.

15.
One Small Grill Company is a start up with the following profile:

Unit selling price = $220; Variable cost per unit = $140; Fixed Costs =
$38,000;
Tax rate = 40%. How many units should Small Grill sell to achieve
an after-tax target
income of $6,000?

A)

200

B)

460

C)

230

D)

600

16.

Western Apparel Company
owns two stores and management is considering eliminating the East store due
to declining sales. Segmented
contribution income statements are as follows and common fixed costs are
allocated on the basis of sales.

West

East

Total

Sales

$525,000

90,000

$615,000

Variable costs

262,500

45,000

307,500

Direct fixed costs

62,500

25,000

87,500

Segment margin

200,000

20,000

220,000

Allocated fixed costs

137,500

35,000

172,500

Net Income

$62,500

($15,000)

$47,500

Western feels that if
they eliminate the East store that sales in the West store will decline by
25%. If they close the East store,
overall company net income will:

A)

decline by $90,000.

B)

decline by $62,000.

C)

decline by $85,625.

D)

decline by $20,000.

17.

JungleGym, a
best-selling toy has a selling price of $15.
If the contribution margin ratio is 40% and if the fixed costs are
$60,000, how many JungleGyms must the company sell to realize a profit of
$450,000?

A)

30,000

B)

34,000

C)

85,000

D)

100,000

Information for Questions 18

Anderson Manufacturing makes a
single product. Budget information
regarding the current period is given below:

Revenue (100,000 units
at $8.00)

$800,000

Direct materials

150,000

Direct labor

125,000

Variable manufacturing
overhead

235,000

Fixed manufacturing
overhead

110,000

Net income

$180,000

Dye Company approaches Anderson
with a special order for 15,000 units at a price of $7.50 per unit. Variable
costs will be the same as the current production and accepting the special
order will not have any impact on the rest of the company’s orders. However, Anderson is operating at capacity
and will incur an additional $50,000 in fixed manufacturing overhead if the
order is accepted.

18.

What is the incremental
income (loss) associated with accepting the special order?

A)

($14,000)

B)

$36,000

C)

($23,500)

D)

$27,000

19.

Auto Zone believes it can
sell 3,750,000 of a new vehicle charger for $10 each. There will be $3,850,000 in fixed costs
associated with the charger. If the
company desires to make a profit of $2,000,000 on the charger, what is the
target variable cost per charger?

A)

$7.25

B)

$9.00

C)

$6.57

D)

$8.44

20.

On July 26, 2012, radio
Shack announced disappointing 2nd quarter earnings that caused the
stock to fall 29% to all time lows.
Although sales were up 1.2% to $953.2 million gross profit fell 16.6%
to $360.3 million. Assuming Radio Shacks
store count and fixed costs were the same in the 2nd quarter of
2011 and 2012, which of the following statements is the best explanation for
the decrease in the firms profitability?

A)

Opportunity costs
decreased.

B)

Margin of safety
decreased.

C)

Contribution margin
decreased.

D)

Selling price decreased.

21

Paul’s Pizza produced
and sold 2,000 pizzas last month and had fixed costs of $6,000. If production and sales are expected to
increase by 10% next month, which of the following statements is true?

A)

Total fixed costs will
decrease.

B)

Fixed cost per unit
will decrease.

C)

Total fixed costs will
increase.

D)

Fixed cost per unit
will increase.

22.

The Dynamics Company
uses cost-plus pricing with a 50% mark-up.
The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in
fixed costs annually. If demand falls
to 80,000 units and the company wants to continue to earn a 50% return, what
price should the company charge?

A)

$13.50

B)

$14.55

C)

$12.75

D)

$10.95

Use the following to answer
question 23:
Taylor’s Treasures has
collected the following information over the last six months.

Month

Units
produced

Total
costs

March

10,000

$25,600

April

12,000

26,200

May

18,000

27,600

June

13,000

26,450

July

12,000

26,000

August

15,000

26,500

23.

Using the high-low
method, what is the variable cost per unit?

A)

$0.25

B)

$2.56

C)

$0.22

D)

$2.00

24.

During 2013, Teko Inc. reported
revenues of $925,400 and profits of $88,500.
Fixed costs were $456,250 and 37,016 units were sold. If costs and prices are expected to stay
the same in 2014, and Teko Inc. expects to sell 40,000 units, what will be
the companys budgeted profit?

A)

$95,457

B)

$525,000

C)

$132,414

D)

$667,957

25.

Visit finance.yahoo.com
and determine which of the following statements is incorrect:

A)

The current market cap
of Microsoft is more than double that of Facebook.

B)

The current price per
share of Apple is over two times the price per share of Microsoft.

C)

The current ratio of
Facebook in the most current quarter is over two times greater than the
current ratio of Google.

D)

Return on equity for
the most recent quarter for Microsoft is greater than return on equity for
Google.

MGMT640
Section 1121Final ExamSummer 2014
Name: __________________________ Date: ___________________The Final Exam
is individual work. All work on the exam should be from your own efforts, with
no assistance from classmates, family, friends or others. By proceeding with this exam, you are
agreeing not to share the exam content or your responses with anyone, including
future students of MGMT640. Your completed
exam is due by 7:00 PM on Sunday, August 10, 2014
(upload to your Assignments Folder). Please
refer to the Syllabus for the policy regarding late submissions. There will be no make-up exams except for
documented emergencies. You
are not required to submit your working.
However, complete working showing formulas and calculations may be
considered for partial credit for incorrect answers.Identify the letter of the choice that best completes the
statement or answers the question.1.Joan Merton, a college
student is contemplating the following options for her 3-month summer break:(1) Take a summer
course which will cost $700 and work half-time making $1,000 per month.(2) Work full time at the local dinner making $2,000 per
month.(3) Take the summer class at a cost of $700 and not work
during the summer.Joans incremental profit or loss if she chooses option 1
over option 2 would be:A)($4,100)B)($3,700)C)($5,300)D)($2,500) 2.Sybarix, Inc., a
manufacturing company produces 80,000 units of product X at a total cost of
$2.4 million. Total fixed costs are
$1.4 million. If the company increases
production by 25% and uses a 19% markup, the price per unit will be:A)$30.80B)$37.10C)$31.54D)$51.80Use the following to answer
questions 3-4:XTZ Company’s market for the
Model 55 has changed significantly, and XTZ has had to drop the price per unit
from $265 to $125. There are some units
in the work in process inventory that have costs of $150 per unit associated
with them. XTZ could sell these units in
their current state for $100 each. It
will cost XTZ $10 per unit to complete these units so that they can be sold for
$125 each.3.A new employee looks at
the analysis and exclaims, We’ll lose money with either of these
alternatives! Let’s just throw these units in the trash! Suppose the
alternative to trashing is choosing the more profitable of the two
alternatives (that the new employee looked at and did not like). What effect
will the trashing option (that the new employeewants) have on net
income?A)Net income will
increase by $35 per unit for each unit discarded.B)Net income will
decrease by $100 per unit for each unit discarded.C)Net income will
decrease by $115 per unit for each unit discarded.D)It will have no effect
on net income.4.When the incremental
revenues and expenses are analyzed, the company is better off byA)$125 per unit if they
complete the units.B)$25 per unit if they
sell the units in their current state.C)$10 per unit if they
sell the units in their current state.D)$15 per unit if they
complete the units.5.A company using
activity based pricing marks up the direct cost of goods by 40% plus charges
customers for indirect costs based on the activities utilized by the
customer. Indirect costs are charged
as follows: $6.00 per order placed; $3.00
per separate item ordered; $28.00 per return.
A customer places 10 orders with a total direct cost of $2,000, orders
300 separate items, and makes 5 returns.
What will the customer be charged?A)$3,000B)$3,900C)$5,330D)$5,7506.Manufacturing overhead
is allocated to products based on the number of machine hours required. In a year when 20,000 machine hours were
anticipated, costs were budgeted at $125,000.
If a product requires 8,000 machine hours, how much manufacturing
overhead will be allocated to this product?A)$41,667B)$43,750C)$50,000D)$53,560Use the following information to
answer questions 7-8:The Sunrise Hotel has 200
rooms. Each room rents at $110 per night and variable costs total $27 per room
per night of occupancy. Fixed costs total $76,000 per month.7.If the hotel spends an
additional $20,000 in the month of February on advertising they feel that
they can expect occupancy rate to increase by 10%. What would be the
financial impact of spending this additional money on advertising for the
month of February (28 days)?A)Total fixed costs will
increase by $10,500.B)Net income will
increase by $26,480.C)Net income will
increase by $16,320.D)Total fixed costs will
remain the same.8.If 75% of the rooms are
occupied each night in the month of February (28 days) what will total costs
be for the month?A)$155,680B)$173,600.C)$197,400.D)$189,400. 9.Jones Company
manufactures widgets. Old Ham Company has
approached Jones with a proposal to sell the company one of the components
used to make widgets at a price of $100,000 for 50,000 units. Jones is currently making these components
in its own factory. The following
costs are associated with this part of the process when 50,000 units are
produced:Direct material$44,000Direct labor20,000Manufacturing overhead 60,000Total$124,000The manufacturing overhead
consists of $32,000 of costs that will be eliminated if the components are no
longer produced by Jones. The
remaining manufacturing overhead will continue whether or not Jones makes the
components. What is the amount of
avoidable costs if Jones buys rather than makes the components?A)$60,000B)$96,000C)$124,000D)$100,000 10. Below is a performance report that compares budgeted
and actual profit of Boyles Beer for the month
of April:BudgetActualDifferenceSales$200,000$202,000$2,000Less: Cost of
ingredients$162,000$166,000$4,000 Salaries$31,000$31,200$200Controllable Profit$47,000$44,800-$2,200In evaluating the department in terms of its increase
in sales and expenses, what will be most important
to investigate?A)
SalesB)
Cost of ingredientsC)
SalariesD)
All three components have equal importance.11.K-Henry’s Dull Diner
has a contribution margin ratio of 17%.
If fixed costs are $176,800, how many dollars of revenue must
K-Henry’s generate in order to reach the break-even point?A)$1,040,000B)$ 262,880C)$1,060,800D)$1,105,00012.New Insights, Inc. is
looking to achieve a net income of 15 percent of sales. Heres the firms profile: Unit sales price
is $10; variable cost per unit is $6; total fixed costs are $40,000. What is the level of sales in units
required to achieve a net income of 15 percent of sales?A)12,000 unitsB)16,000 unitsC)21,000 unitsD)25,000 units13.At Joshuas Apparel, the
break-even point is 2,400 units. If
fixed costs total $300,000 and variable costs are $25 per unit, what is the
selling price per unit?A)$210B)$180C)$5D)$150 14.
Which of the following situations will most likely violate
cost-volume-profit assumptions about fixed costs? A)When production volume increases beyond the capacity of
the plant, a second shift will be added instead of building a new plant.B)The companys raw material supplier typically allows
volume discounts when larger amounts of the raw material are purchased.C)Fixed costs per unit decrease as volume increases.D)As volume increases, per unit fixed manufacturing
overhead remain constant. 15.
One Small Grill Company is a start up with the following profile:
Unit selling price = $220; Variable cost per unit = $140; Fixed Costs =
$38,000; Tax rate = 40%. How many units should Small Grill sell to achieve
an after-tax target income of $6,000?A)200B)460C)230D)60016.Western Apparel Company
owns two stores and management is considering eliminating the East store due
to declining sales. Segmented
contribution income statements are as follows and common fixed costs are
allocated on the basis of sales.WestEastTotalSales$525,00090,000$615,000Variable costs262,50045,000307,500Direct fixed costs62,50025,00087,500Segment margin200,00020,000220,000Allocated fixed costs137,50035,000172,500Net Income$62,500($15,000)$47,500Western feels that if
they eliminate the East store that sales in the West store will decline by
25%. If they close the East store,
overall company net income will:A)decline by $90,000.B)decline by $62,000.C)decline by $85,625.D)decline by $20,000.17.JungleGym, a
best-selling toy has a selling price of $15.
If the contribution margin ratio is 40% and if the fixed costs are
$60,000, how many JungleGyms must the company sell to realize a profit of
$450,000?A) 30,000B) 34,000C) 85,000D)100,000Information for Questions 18Anderson Manufacturing makes a
single product. Budget information
regarding the current period is given below: Revenue (100,000 units
at $8.00)$800,000Direct materials150,000Direct labor125,000Variable manufacturing
overhead235,000Fixed manufacturing
overhead110,000Net income$180,000Dye Company approaches Anderson
with a special order for 15,000 units at a price of $7.50 per unit. Variable
costs will be the same as the current production and accepting the special
order will not have any impact on the rest of the company’s orders. However, Anderson is operating at capacity
and will incur an additional $50,000 in fixed manufacturing overhead if the
order is accepted.18.What is the incremental
income (loss) associated with accepting the special order?A)($14,000)B)$36,000C)($23,500)D)$27,00019.Auto Zone believes it can
sell 3,750,000 of a new vehicle charger for $10 each. There will be $3,850,000 in fixed costs
associated with the charger. If the
company desires to make a profit of $2,000,000 on the charger, what is the
target variable cost per charger?A)$7.25B)$9.00C)$6.57D)$8.4420.On July 26, 2012, radio
Shack announced disappointing 2nd quarter earnings that caused the
stock to fall 29% to all time lows.
Although sales were up 1.2% to $953.2 million gross profit fell 16.6%
to $360.3 million. Assuming Radio Shacks
store count and fixed costs were the same in the 2nd quarter of
2011 and 2012, which of the following statements is the best explanation for
the decrease in the firms profitability?A)Opportunity costs
decreased.B)Margin of safety
decreased.C)Contribution margin
decreased.D)Selling price decreased.21Paul’s Pizza produced
and sold 2,000 pizzas last month and had fixed costs of $6,000. If production and sales are expected to
increase by 10% next month, which of the following statements is true?A)Total fixed costs will
decrease.B)Fixed cost per unit
will decrease.C)Total fixed costs will
increase.D)Fixed cost per unit
will increase.22.The Dynamics Company
uses cost-plus pricing with a 50% mark-up.
The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $6. In addition, the company incurs $200,000 in
fixed costs annually. If demand falls
to 80,000 units and the company wants to continue to earn a 50% return, what
price should the company charge?A)$13.50B)$14.55C)$12.75D)$10.95Use the following to answer
question 23:Taylor’s Treasures has
collected the following information over the last six months.MonthUnits
producedTotal
costsMarch10,000$25,600April12,00026,200May18,00027,600June13,00026,450July12,00026,000August15,00026,50023.Using the high-low
method, what is the variable cost per unit?A)$0.25B)$2.56C)$0.22D)$2.0024.During 2013, Teko Inc. reported
revenues of $925,400 and profits of $88,500.
Fixed costs were $456,250 and 37,016 units were sold. If costs and prices are expected to stay
the same in 2014, and Teko Inc. expects to sell 40,000 units, what will be
the companys budgeted profit? A)$95,457B)$525,000C)$132,414D)$667,95725.Visit finance.yahoo.com
and determine which of the following statements is incorrect:A)The current market cap
of Microsoft is more than double that of Facebook.B)The current price per
share of Apple is over two times the price per share of Microsoft. C)The current ratio of
Facebook in the most current quarter is over two times greater than the
current ratio of Google.D)Return on equity for
the most recent quarter for Microsoft is greater than return on equity for
Google.