Trial Mid-term Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best
completes the statement or answers the question.
1)
Differential cost is a synonym for
A)
accidental cost.
B)
detrimental cost.
C)
incremental cost.
D)
opportunity cost.
2)
Which of the following is NOT a major benefit
of budgeting?
A)
It provides definite expectations that are
the best framework for judging
subsequent performance.
B)
It aids managers in coordinating their
efforts, so that the objectives of the
organization as a whole match the
objectives of its parts.
C)
It allows managers to operate day to day,
reacting to current events rather than
planning for the future.
D)
It compels managers to think ahead.
3)
Fixed costs that may be avoided in the future
are
A)
sunk costs.
B)
replacement costs.
C)
relevant costs.
D)
unavoidable costs.
4)
As the level of activity decreases within the
relevant range,
A)
total fixed costs increases.
B)
variable costs per unit decreases.
C)
fixed costs per unit decreases.
D)
total variable costs decreases.
5)
If the sales price per unit is $17.00, the unit
variable cost is $13.50, and the break–even
point is 78,000 units, then the total fixed costs
are
A)
$105,300.
B)
$89,140.
C)
$273,000.
D)
$156,000.
6)
The last step in preparing the financial budget
is preparing the
A)
cash budget.
B)
sales budget.
C)
budgeted income statement.
D)
budgeted balance sheet.
7)
Given a break–even point of 44,000 units and a
contribution margin per unit of $4.80, the total
number of units that must be sold to reach a
net profit of $9,048 is
A)
1,885 units.
B)
44,000 units.
C)
45,885 units.
D)
cannot be determined with the above
information.
8)
A homeowner has paid off the mortgage on his
house and continues to live in the house. The
interest income foregone by NOT selling the
house and investing the proceeds is an
example of a(n)
A)
sunk cost.
B)
detrimental cost.
C)
outlay cost.
D)
opportunity cost.
9)
Future costs are relevant in decision making
when
A)
they are the same between alternatives.
B)
they differ between alternatives.
C)
they equal future revenues.
D)
they are not based on an estimate.
10)
In a highly leveraged company,
A)
there is a higher possibility of net income
or net loss and therefore more risk than a
low leveraged firm.
B)
large changes in sales volume result in
small changes in net income.
C)
fixed costs are low and variable costs are
high.
D)
a variation in sales leads to only a small
variability in net income.
1
11)
If total fixed costs are $62,000, contribution
margin per unit is $5.00, and targeted after–tax
net income is $12,000 with a 40 percent tax
rate, then the number of units that must be
sold is
A)
11,440.
B)
16,400.
C)
14,800.
D)
24,667.
12)
If the sales price per unit is $200.00, the unit
variable cost is $148.00, and total fixed costs
are $164,000, then the break–even volume in
dollar sales rounded to the nearest whole
dollar is
A)
$206,308.
B)
$221,622.
C)
$630,769.
D)
$1,640,000.
13)
The first step in preparing the operating
budget is preparing the
A)
sales budget.
B)
purchases budget.
C)
budgeted income statement.
D)
operating expense budget.
14)
A key factor in a make or buy decision is
A)
gain or loss on the disposal of equipment.
B)
whether or not there are idle facilities.
C)
the amount of the sunk costs.
D)
the total joint costs.
17)
Opportunity cost is
A)
never relevant to a decision.
B)
the contribution of the best alternative
that is excluded from consideration.
C)
the same as outlay cost.
D)
always an experimental cost.
18)
If the sales price per unit is $10.00, the unit
contribution margin is $4.00, and total fixed
costs are $20,000, the break–even point in units
is
A)
2,000.
B)
3,333.
C)
1,429.
D)
5,000.
19)
Costs that continue even if an operation is
halted are
A)
variable costs.
B)
unavoidable costs.
C)
sunk costs.
D)
common costs.
20)
If a company has excess capacity, the most it
would pay for buying a product that it
currently makes would be the
A)
total variable cost of producing the
product.
B)
total cost of producing the product.
C)
market value of the product.
D)
market value less usual markup on the
product.
15)
A)
B)
C)
D)
16)
A)
B)
C)
D)
21)
A)
B)
C)
D)
22)
A)
B)
C)
D)
23)
A)
B)
C)
D)
