Simple rate of return; payback; internal rate of return
Simple rate of return; payback; internal rate of return
Simple rate of return; payback
Make or Buy Decision
Shutting Down or Continuing to Operate a Plant – Hallas Company
Hallas Company manufactures fast-bonding glue in its Northwest plant. The company normally produces and sells 40,000 gallons of the glue each month. This glue, which is known as MJ-7, is used in the wood industry to manufacture plywood. The selling price of MJ-7 is $35 per gallon, variable costs are $21 per gallon, fixed manufacturing overhead costs in the plant total $230,000 per month, and the fixed selling costs total $310,000 per month.
Strikes in the mills that purchase the bulk of the MJ-7 glue have caused Hallas Company’s sales to temporarily drop to only 11,000 gallons per month. Hallas Company’s management estimates that the strike will last for two months, after which sales of MJ-7 should return to normal. Due to the current low level of sales, Hallas Company’s management is thinking about closing down the Northwest plant during the strike.
If Hallas Company does close down the Northwest plant, fixed manufacturing overhead costs can be reduced by $60,000 per month and fixed selling costs can be reduced by 10%. Start-up costs at the end of the shutdown period would total $14,000. Because Hallas Company uses lean production methods, no inventories are on hand.
1. Assuming that the strikes continue for two months, would you recommend that Hallas Company close the Northwest plant? Explain. Show computations to support your answer.
2. At what level of sales (in gallons) for the two-month period should Hallas Company be indifferent between closing the plant or keeping it open? Show computations.
Hint: This is a type of break-even analysis, except that the fixed cost portion of your break-even computation should include only those fixed costs that are relevant (i.e. avoidable) over the two-month period.
Sell or Process Further
Devry BUSN319 Final Exam
Question 1. (TCO 4) Three commonly used methods of evaluating marketing programs are marketing metrics, marketing dashboards, and (Points : 5)
marketing control boards.
Question 2. (TCO 1) Ideally in effective marketing planning, goals should be _____ in terms of what is to be accomplished and when. (Points : 5)
loose and vague
as general as possible
flexible or elastic
quantified and measurable
None of the above
Question 3. (TCO 3) Which marketing strategy focuses on a single market segment but adds additional product lines? (Points : 5)
Question 4. (TCO 1) Based on relative competitive scope (broad target to narrow target) and source of competitive advantage (lower cost to differentiation), Porter’s four generic business strategies are differentiation, cost focus, differentiation focus, and (Points : 5)
Question 5. (TCO 1) Step 3 in the planning phase of the strategic marketing process is (Points : 5)
the situation analysis.
the market-product focus and goal setting.
the marketing program.
Question 6. (TCO 1) The consumer products industry is one with several large competitors, soaring raw materials prices, and strong demands from powerful retailers for lower prices. As a result, Colgate-Palmolive Co. and Unilever Group, the makers of products such as Colgate toothpaste and Ben & Jerry’s ice cream, both reduced their earnings forecasts. Yet Procter & Gamble, another consumer products company, did not. At P & G, innovation is a key attribute, allowing the company to update all 200 of its brands and to invent products, such as Crest Whitestrips, that consumers crave. P & G has also used its marketing know-how to develop unique product placements on television shows that highlight its brands. A SWOT analysis of this information for P & G would indicate that the overall industry situation is a _____, whereas the invention taking place at P & G is a _____. (Points : 5)
Question 7. (TCO 3) All of the following steps are part of the planning process used to develop an organization’s advertising program, except (Points : 5)
identify the target audience.
specify the advertising objectives.
write the advertising copy.
calculate the marketing ROI.
schedule the advertising program.
Question 8. (TCO 2) The proper blend of elements in the promotional mix depends on the type of product. The three specific characteristics to be considered are complexity, _____, and ancillary services. (Points : 5)
Question 9. (TCO 4) At which stage in the product life cycle would your promotional objective be to persuade the consumer to buy the product rather than substitutes? (Points : 5)
Question 10. (TCO 2) The _____ can be used to inform prospective buyers about the benefits of the product. (Points : 5)
Question 11. (TCO 7) Which of the following statements about the terms used for marketing intermediaries is true? (Points : 5)
The most precise terms used to describe marketing intermediaries are dealer and distributor.
A retailer sells to consumers.
An agent has no legal authority to act on behalf of a manufacturer.
A wholesaler is an intermediary who sells to consumers.
Broker is a synonym for a dealer.
Question 12. (TCO 7) Which of the following statements about the legal and regulatory aspect of pricing is true? (Points : 5)
The Robinson-Patman Act deals with predatory pricing.
The Consumer Goods Pricing Act is the only federal legislation that deals directly with pricing issues.
The Sherman Act deals only with vertical price fixing.
The Federal Trade Commission Act deals with predatory pricing, deceptive pricing, and geographical pricing issues.
The Consumer Goods Pricing Act and the Robinson-Patman Act deal with price discrimination.
Question 13. (TCO 2) Which of the following is not one of the six major pricing objectives? (Points : 5)
Question 14. (TCO 3) The ratio of _____ to price is called value. (Points : 5)
Question 15. (TCO 6) Market segmentation involves aggregating prospective buyers into groups that will respond similarly to a marketing action and (Points : 5)
will pay attention to marketing messages.
have common needs.
be responsive to marketing research.
use the same payment methods.
go shopping on a regular basis.
Question 16. (TCO 5) Which of the following statements about environmental scanning is true? (Points : 5)
Environmental scanning changes the marketing environment.
Environmental scanning identifies and interprets potential trends.
Environmental scanning is an annual event.
Environmental scanning focuses primarily on geographical factors.
All of the above
Question 17. (TCO 1) The marketing department helps keep the organization focused on creating value both for it and for customers. This is accomplished by (Points : 5)
listening to customers.
implementing marketing program activities.
All of the above
Question 18. (TCO 1) Which of the following acts as a barrier to the development of relationship marketing? (Points : 5)
The large number of one-to-one relationships that customers are asked to sustain
The large number of products on the market
The increasing number of retail stores that are closing
The changing regulatory environment
Diluted cultural diversity
Question 19. (TCO 1) A local university in Lynchburg, VA offers an outstanding business school education. Cali pays the tuition to attend Daniels and earns her MBA with a concentration in supply chain management. Upon graduating, she is offered a high-paying, fulfilling position. Was this a marketing exchange? (Points : 5)
No, because the university is a private one.
Yes, because the university is profitable.
Yes, because paying tuition was exchanged for knowledge that directly led to Cali’s fulfilling new job.
No, because money was exchanged.
No, because the school did not provide Cali with a product.
Question 20. (TCO 6) Which of the following is the best description of the target market for the latest Disney animated movie? (Points : 5)
Everyone who can afford to buy a movie ticket
Everyone who likes movies
Professionals who are parents of children between the ages of 6 and 12
People who collect movie memorabilia
People who live near a movie theater
Question 21. (TCO 3) The owners of Old School Brand Authentic Antique Foods researched Civil War records to come up with recipes for the old-fashioned products it markets. Concern about the _____ element of the marketing mix would make it eager to be featured in an upcoming edition of Taste of Home magazine. (Points : 5)
Question 22. (TCO 5) The Lemon Tree is a high-fashion boutique selling top-of-the-line women’s clothing and accessories. The keys to its success include knowing the customers’ changing tastes and providing something different from other retailers. In addition, because of the high value of the merchandise, The Lemon Tree’s management is exploring the use of computerized inventory controls and sales order processing. From this description, one can infer that the environmental category of least importance to The Lemon Tree is (Points : 5)
Question 23. (TCO 7) Recently, a federal appeals court rendered a unanimous decision that Microsoft Corp. does not have an automatic right to put whatever features it wants into its Windows operating system; rather, each new feature needs to be evaluated separately. Many of these features are also made by much smaller companies. This ruling grew out of the power that Microsoft holds in the software market, because it owns a major share of the marketplace. What purpose did this ruling have? (Points : 5)
Protecting companies from one another
Protecting consumers from unfair trade practices
Protecting the future interests of society from dangerous business practices
Protecting consumers from one another
Protecting businesses from unfair consumer practices
Question 24. (TCO 6) Archer Daniels Midland (ADM) Co. is the world’s largest cocoa bean processor. It buys cocoa beans and converts the beans into cocoa powder and cocoa butter, which it sells to companies that manufacture consumer products that contain chocolate. The cocoa bean processor is operating in a(n) _____ market. (Points : 5)
Question 25. (TCO 1) Several years ago, SwissAir made some unwise investments to pay for a planned expansion. As a result, the company had to make some cost-cutting moves that alienated its customers. Eventually the company declared bankruptcy, regrouped, and found itself able to resume business. Its board of directors recently announced that the company would like to resume flying. Before resuming flying, SwissAir needed to determine what percentage of its former customers it could expect to return to the airline. If not enough former customers were willing to use SwissAir again, the resumption of flights would not be profitable. The determination of the percentage of returning patrons that would be needed to resume operation is an example of a (Points : 5)
Question 26. (TCO 3) Direct Protect is an insurance provider that uses telemarketers rather than insurance agents to sell its insurance and to deal with claims. It wants to introduce its product into new markets, but before it does so, it wants to have a prediction of how successful its sales efforts will be. One of the first things researchers did was to invite a group of eight people with insurance to talk about home and auto insurance with a moderator. One of the purposes of this exploratory research was to gather information about the group members’ attitudes toward insurance and their awareness of Direct Protect. Although additional research still needs to be done, the marketing researchers were able to use a focus group to gather _____ data. (Points : 5)
Question 27. (TCO 4) Sara Burns is the owner of a company called Spice and was looking for a new product to go with her company’s line of food condiments when a customer suggested combining spices with tea. This is an example of (Points : 5)
Question 28. (TCO 4) In the 1960s, television westerns were extremely popular. The shows were adventure shows with settings and costumes that were very unlike what really existed. There were Bonanza, Wagon Train, The Virginian, Laramie, and so on. When viewers gradually stopped watching this category of programs, production companies found that the networks no longer wanted to televise such shows. The television western as a product category entered the _____ stage. (Points : 5)
Question 29. (TCO 7) When an Avon representative sells cosmetics door-to-door, it is an example of which type of marketing channel? (Points : 5)
Strategic channel alliances
Dual distributive channel
Question 30. (TCO 2) Disney is using an integrated marketing communications program (IMC) to promote group travel to its theme parks, because (Points : 5)
its strategy includes using all types of promotional activities that deliver a consistent message.
it does not want to reach any member of its target audience more than once.
IMC is less expensive than other forms of promotion, such as public service announcements.
if it didn’t, Disney would have to use indirect personal selling.
it is more concerned about frequency than reach.
Question 31. (TCO 2) When a news story covers a terrible disaster and viewers are asked to send donations to the American Red Cross, the American Red Cross is receiving (Points : 5)
a public service announcement.
Question 32. (TCO 7) For several years, advertisements for Arm & Hammer Baking Soda have prompted consumers to place an opened box of the product in the refrigerator to lessen food odor and to replace that box monthly. The same ads advise customers to pour the used box down their kitchen sinks to freshen drains. Arm & Hammer employed a _____ strategy in its attempt to sell more baking soda. (Points : 5)
Question 1. (TCO 1) In China, many people are removing their money from the state banks and lending it out themselves. The interest rate earned in a state bank account is about one half the rate of inflation. On the other hand, loaning money to friends, relatives, and even unrelated entrepreneurs can often earn the investor double or more over the inflation rate. The gray market, an underground network of investors and private businesses, moves the cash from lenders to businesses. Judge whether marketing occurred in this situation, and justify your conclusions. Appraise the effectiveness of government regulation in controlling markets. (Points : 30)
Question 2. (TCO 3) Imagine that you are creating a marketing plan for a company that will sell motor scooters. As you consider the marketing program, what types of strategy should you consider including in the plan? Propose one specific example of each type of strategy that you are considering, and present your rationale (reasoning) for your strategy selections. (Points: 30)
Question 3. (TCO 4) You are the product manager responsible for a horrible product failure, but in your wisdom, you are evaluating why the product failed. What factors would you consider in your evaluation? What actions could you have taken to prevent the failure? Does product innovation need a willingness to accept failure? (Points: 30)
POST IBA301 FINAL EXAM
Which of the following is not characteristic of globalization?
National economies are turning into independent economic systems.
Material culture is starting to look similar the world over.
Perceived distance is shrinking due to advances in transportation and telecommunications.
Barriers to cross-border trade and investment are declining.
Globalization has _____ the opportunities for a firm to expand its revenues by selling around the world and _____ its costs by producing in nations where key inputs are cheap.
Since the collapse of communism at the end of the 1980s, the erstwhile communist nations have transformed their economies by encouraging all of the following except:
privatizing state-owned enterprises.
welcoming investment by foreign businesses.
Identify the incorrect statement concerning globalization.
It has been blamed for unemployment in developed nations, environmental degradation and the Americanization of popular culture.
It has created new threats for businesses accustomed to dominating their domestic markets.
It is transforming industries and is highly welcomed by those who believed their jobs were protected from foreign competition.
According to most economists it is a very beneficial process where gains outweigh the losses by a wide margin.
In the U.S., _____ percent of firms that export are small companies employing fewer than 100 people.
Interdependent political, economic, and legal systems of a country make up its:
_____ is consistent with the notion that an individual’s right to do something may be restricted because it runs counter to “the good of society” or “the common good.”
According to _____, socialism can only be achieved through violent revolution.
_____ is/are best defined as shared assumptions about how things ought to be.
_____ are social conventions concerning things such as the appropriate dress code in a particular situation, good social manners, eating with the correct utensils, neighborly behavior, and the like.
the norms that are seen as central to the functioning of a society and its social life.
the routine conventions of everyday life.
abstract ideas about what a group believes to be right, good, and desirable.
the social rules and guidelines that prescribe appropriate behavior in particular situations.
The theory of _____, developed by Michael Porter, focuses on the importance of country factors, in addition to factor endowments, such as domestic demand and domestic rivalry in explaining a nation’s dominance in the production and export of particular products.
national competitive advantage
The theory of _____ makes a crude case for government involvement in promoting exports and limiting imports.
By lowering production costs, _____ help domestic producers compete against foreign imports.
In the United States, the only firms allowed to import cheese are certain trading companies, each of which is allocated the right to import a maximum number of pounds of cheese each year. Identify the trade restriction being imposed by the United States.
Ad valorem tariff
A quota rent is:
a quota on trade imposed by the exporting country.
levied as a fixed charge for each unit of a good imported.
levied as a proportion of the value of the imported good.
the extra profit producers make when supply is artificially limited by an import quota.
Which of the following is not a reason why firms prefer to acquire existing assets rather than undertake green field investments?
Foreign firms are acquired because those firms have valuable strategic assets.
Firms make acquisitions because they believe they can increase the efficiency of the acquired unit by transferring capital, technology, or management skills.
Even though green field investments are comparatively less risky for a firm, acquisitions always yield higher profits.
Mergers and acquisitions are quicker to execute than green field investments.
The rise in FDI in the services sector is a result of all of the following except:
the general move in many developed countries away from manufacturing and toward services.
accelerating regulations of services.
many services cannot be traded internationally.
many countries have liberalized their regimes governing FDI in services.
Identify the theory that seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for
entering foreign markets.
Perfect markets theory
Small markets theory
An agreement between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other is referred to as:
regional economic integration.
In 1991, Argentina, Brazil, Paraguay, and Uruguay implemented an agreement known as:
Which of the following is true of a common market?
All barriers to the trade of goods and services among member countries are removed and each country maintains its own policy toward nonmember countries.
It involves the free flow of products and factors of production between member countries and adoption of individual external trade policies.
It has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members.
It eliminates trade barriers between member countries and adopts a common external trade policy and a common currency.
The rate at which one currency is converted into another is the:
The _____ helps us to compare the relative prices of goods and services in different countries.
When two parties agree to exchange currency and execute the deal immediately, the transaction is a:
If lots of people want euros and euros are in short supply, and a few people want Japanese yen and yen are in plentiful supply, the euro is likely to _____ against the yen.
If the demand for dollars outstrips its supply and if the supply of Japanese yen is greater than the demand for it, what will happen?
The dollar will appreciate against the yen
The dollar will depreciate against the yen
The exchange rates will remain the same
The yen will appreciate against the dollar
A _____ means the value of the currency is fixed relative to a reference currency.
pegged exchange rate
dynamic exchange rate
floating exchange rate
fixed exchange rate
The gold standard had its origin in the use of _____ as a medium of exchange, unit
of account, and store of value.
the U.S. dollar
the British pound
The great strength claimed for the gold standard was that it contained a powerful mechanism for achieving _____ by all countries.
interest rate parity
equal tariff levels
Market makers are:
financial service companies that connect investors and borrowers.
those who want to borrow money including individuals, companies, and governments.
nonbank financial institutions who want to invest money.
high net worth individuals with surplus cash to reinvest.
All of the following are benefits of global capital markets, except:
they increase the supply of funds available to borrowers.
that the risk to the investment portfolio is reduced to below what could be achieved in a purely domestic capital market.
they provide a wider range of investment opportunities to investors.
they have higher cost of capital as compared to purely domestic capital markets.
Which of the following statements is not true?
The way to increase the profitability of a firm is to create more value.
The amount of value a firm creates is measured by the difference between its costs of production and the value that consumers perceive in its products.
The more value customers place on a firm’s products, the higher the price the firm is able to charge for those products.
The price a firm charges for a good or service is typically more than the value the customer places on that good or service.
The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because:
the customer’s disposable income is significantly higher than what the market demands.
the customer captures some of that value in the form of a consumer surplus.
regulatory mechanisms ensure that the customer is not overcharged for products/services.
marketers implement psychological pricing tactics to ensure that customers perceive the prices to be low.
Which of the following is an example of a primary activity in a firm’s value chain?
Research and development
When companies disperse different stages of the value chain to those locations around the world where perceived value is maximized or where the costs of value creation are minimized, companies create:
a differentiated organization.
a location economy curve.
economies of scale.
a global web of value creation activities.
For U.S. firms, the most comprehensive source of export opportunities information is the:
Small Business Administration.
U.S. Department of Commerce.
Federal Trade Commission.
A “best prospects” list:
gives the names and addresses of potential distributors in the domestic market.
is provided by the United States and Foreign Commercial Service Agency.
can provide a firm free, customized market research survey on any product.
provides information gathering, technical assistance, and export subsidies.
According to Levitt, which of the following statements is true?
Technology drives the world toward a converging commonalty.
There are accustomed differences in national preferences.
The multinational corporation operates in a number of countries at low relative costs.
The global corporation operates with resolute consistency at high relative costs.
Which of the following statements is false?
Product reliability may be a more important attribute in most advanced countries.
Consumers in highly developed countries tend to build a lot of extra performance attributes into their products.
Consumers in the most developed countries are often not willing to sacrifice their preferred attributes for lower prices.
Consumers in the most advanced countries often shun globally standardized products that have been developed with the lowest common denominator in mind.
DeVry ACCT 504 Week 4 Midterm Exam
1. (TCO A, B, C) External users want answers to all of the following questions except: (Points : 3)
Is the company earning satisfactory income?
Will the company be able to pay its debts as they come due?
Did the company use a budget to plan its expenses?
How does the company compare in profitability with competitors?
2. (TCO C) Debt securities sold to investors that must be repaid at a particular date some years in the future are called: (Points : 3)
3. (TCO C) The statement of cash flows would disclose the payment of a dividend: (Points : 3)
nowhere on the statement.
in the operating activities section.
in the investing activities section.
in the financing activities section.
4. (TCO A) The cost of assets consumed or services used is also known as: (Points : 3)
5. (TCO C) Edwards Company recorded the following cash transactions for the year:
Paid $45,000 for salaries.
Paid $20,000 to purchase office equipment.
Paid $5,000 for utilities.
Paid $2,000 in dividends.
Collected $75,000 from customers.
What was Edwards’ net cash provided by operating activities? (Points : 3)
6. (TCO A) On a classified balance sheet, prepaid insurance is classified as: (Points : 3)
an intangible asset.
property, plant, and equipment.
a current asset.
a long-term investment.
7. (TCO A) Which of the following should not be classified as a current asset? (Points : 3)
Short-term Marketable securities
Prepaid insurance that will expire next year.
A Note Receivable that will mature after 21 months.
8. (TCO A) These are selected account balances on December 31, 2010.
-Land (location of the corporation’s office building) $100,000
-Land (held for future use) 150,000
-Corporate Office Building 600,000
-Office Furniture 100,000
-Accumulated Depreciation 300,000
What is the total NET amount of property, plant, and equipment that will appear on the balance sheet? (Points : 3)
9. (TCO B) For 2010, Landford Corporation reported net income of $30,000; net sales $400,000; and average share outstanding 6,000. There were no preferred stock dividends. What was the 2010 earnings per share? (Points : 3)
10. (TCO B) Morten Corporation had beginning retained earnings of $764,000 and ending retained earnings of $833,000. During the year they issued common stock totaling $47,000. There were no dividends issued. What was their net income for the year? (Points : 3)
11. (TCO D) On March 1, 2010, Dillon Company hires a new employee who will start the work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not? (Points : 3)
Yes, the company is now obligated to pay the employee, thus that event must be recorded on March 6.
No, hiring an employee is an important event; however, it is not an economic event that should be recorded on March 6.
Yes, failure to record the event on March 6 would cause the financial statements to be misleading.
No, the journal entry should be made on March 1 which is the date of hiring.
12. (TCO D) Which one of the following is not a part of an account? (Points : 3)
13. (TCO D) Which of the following describes the classification and normal balance of the retained earnings account? (Points : 3)
Stockholders’ equity, credit
14. (TCO D) In recording an accounting transaction in a double-entry system: (Points : 3)
the number of debit accounts must equal the number of credit accounts.
there must always be entries made on both sides of the accounting equation.
the amount of the debits must equal the amount of the credits.
there must only be two accounts affected by any transaction.
15. (TCO D) Which of the following accounts follows the rules of debit and credit in relation to increases and decreases in the opposite manner? (Points : 3)
Prepaid insurance and dividends
Dividends and medical fees earned
Interest payable and common stock
Advertising expense and land
1. (TCO E) The time period assumption states that: (Points : 3)
a transaction can only affect one period of time.
estimates should not be made if a transaction affects more than one time period.
adjustments to the enterprise’s accounts can only be made in the time period when the business terminates its operations.
the economic life of a business can be divided into artificial time periods.
2. (TCO E) In a merchandising business, revenue may be considered earned when: (Points : 3)
cash is received from the customers
a product is delivered to a customer.
an order is received from a customer
a customer shows interest in a product
3. (TCO E) Expenses sometimes make their contribution to revenue in a different period than when the expense is paid. When wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the first period? (Points : 3)
Due from Employees
Due to Employer
4. (TCO E) The following is selected information from J Corporation for the fiscal year ending October 31, 2010.
Cash received from customers $75,000
Revenue earned 87,500
Cash paid for expenses 42,500
Expenses incurred 50,000
Based on the accrual basis of accounting, what is J Corporation’s net income for the year ending October 31, 2007? (Points : 3)
5. (TCO E) The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is: (Points : 3)
6. (TCO A, B) Which of the following expressions is incorrect? (Points : 3)
Gross profit – operating expenses = net income
Sales – cost of goods sold – operating expenses = net income
Net income + operating expenses = gross profit
Operating expenses – cost of goods sold = gross profit
7. (TCO B) Hunter Company purchased merchandise inventory with an invoice price of $12,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Hunter Company pays within the discount period? (Points : 3)
8. (TCO A, B) Zach’s Market recorded the following events involving a recent purchase of merchandise:
Received goods for $50,000, terms 2/10, n/30.
Returned $1,000 of the shipment for credit.
Paid $250 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company’s merchandise inventory: (Points : 3)
increased by $48,020.
increased by $49,250.
increased by $48,265.
increased by $48,270.
9. (TCO A) If goods in transit are shipped FOB destination (Points : 3)
the seller has legal title to the goods until they are delivered.
the buyer has legal title to the goods until they are delivered.
the transportation company has legal title to the goods while the goods are in transit.
no one has legal title to the goods until they are delivered.
10. (TCO A) When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory? (Points : 3)
To check the accuracy of the perpetual inventory records
To determine cost of goods sold for the accounting period
To compute inventory ratios
All are a purpose of taking a physical inventory when a perpetual inventory system is used.
11. (TCO A) A problem with the specific identification method is that: (Points : 3)
inventories can be reported at actual costs.
management can manipulate income.
matching is not achieved.
the lower of cost or market basis cannot be applied
12. (TCO A) Which of the following statements is true regarding inventory cost flow assumptions? (Points : 3)
A company may use more than one cost-flow assumption concurrently for different product lines.
A company must comply with the method specified by industry standards.
A company must use the same method for domestic and foreign operations.
A company may never change its inventory costing method once it has chosen a method.
13. (TCO A) In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure? (Points : 3)
Average Cost Method
Need more information to answer
14. (TCO B) Which of the following is a true statement about inventory systems? (Points : 3)
Periodic inventory systems require more detailed inventory records.
Perpetual inventory systems require more detailed inventory records.
A periodic system requires cost of goods sold be determined after each sale.
A perpetual system determines cost of goods sold only at the end of the accounting period.
15. (TCO B) The primary source of revenue for a retailer is: (Points : 3)
the sale of merchandise.
the sale of plant assets the company owns.
Break-Even and Target Profit Analysis
Reveen Products sells camping equipment. One of the company’s products, a camp lantern, sells for $90 per unit. Variable expenses are $63 per lantern, and fixed expenses associated with the lantern total $135,000 per month.
1. Compute the company’s break even point in number of lanterns and in total dollars.
2. If the variable expenses per lantern increase as a percentage of the selling price, will it result in a higher or lower break-even point? Why? (Assume that the fixed expenses remain unchanged).
3. At present, the company is selling 8,000 lanterns per month. The sales manger is convinced that a 10% reduction in the selling price will result in a 25% increase in the number of lanterns sold each month. Prepare two contribution income statements, one under present operating conditions and one as operations would appear after the proposed changes. Show both total and per unit data on your statements.
4. Refer to the data in (e) above. How many lanterns would have to be sold at the new selling price to yield a minimum net operating income (profit) of $72,000 per month.