Question : 81. Teeco Systems Inc. has a limited amount of direct : 1256747

Accounting

81. Teeco Systems Inc. has a limited amount of direct material available for products 1A1 and 2B2. Each unit of 1A1 has a contribution margin of $12 and each unit of 2B2 has a contribution margin of $30. A unit of 2B2 uses three times as much direct material as a unit of 1A1. What is Teeco’s most profitable sales mix, assuming there is unlimited demand for either product? A. Make all 2B2.B. Make all 1A1.C. Make equal number of units of 1A1 and 2B2.D. Make three times as many 1A1 as 2B2.E. Make three times as many 2B2 as 1A1.

82. Bath Company has a limited amount of direct material available for products 111 and 222. Each unit of 111 has a contribution margin of $5 and each unit of 222 has a contribution margin of $25. A unit of 222 uses four times as much direct material as a unit of 111. What is Bath’s most profitable sales mix, assuming there is unlimited demand for either product?A. Make all 222.B. Make all 111.C. Make equal number of units of 111 and 222.D. Make four times as many 111 as 222.E. Make four times as many 222 as 111.

83. What decision rule should be followed when deciding if a business segment should be eliminated?A. Segments generating a net loss should always be eliminated.B. Segments with revenues that are more than avoidable expenses should be considered for elimination.C. Segments with revenues that are more than unavoidable expenses should be considered for elimination.D. Segments with revenues that are less than avoidable expenses should be considered for elimination.E. Segments with revenues that are less than unavoidable expenses should be considered for elimination.

84. A company expects its three departments to yield the following income for next year:

Dept. Q

Dept. R

Dept. S

Sales

$6,000

$7,000

$8,000

Expenses

Avoidable

2,000

3,000

4,000

Unavoidable

1,500

2,500

4,500

Total expenses

3,500

5,500

8,500

Net income (loss)

$2,500

$1,500

$(500)

Compute the change to the company’s total net income if Dept. S is eliminated.A. $500 increaseB. $500 decreaseC. $4,000 increaseD. $4,000 decreaseE. $3,500 decrease

85. A company expects its three departments to yield the following income for next year:

Dept. A

Dept. B

Dept. C

Sales

$6,000

$5,000

6,800

Expenses

Avoidable

2,000

1,000

4,000

Unavoidable

1,500

3,000

2,500

Total expenses

3,500

4,000

6,500

Net income (loss)

$2,500

$1,000

$300

Compute the change to the company’s total net income if Dept. C is eliminated.A. $300 decreaseB. $300 increaseC. $2,800 decreaseD. $2,800 increaseE. $6,800 decrease

86. Flower Enterprises Inc. expects its three departments to yield the following income for next year:

Dept. F

Dept. G

Dept. H

Sales

$9,000

$10,000

$8,000

Expenses

Avoidable

3,000

2,000

5,000

Unavoidable

4,000

6,000

1,000

Total expenses

7,000

8,000

6,000

Net income (loss)

$2,000

Which of the following statements is true regarding Flower’s business segments?A. If Dept. F is eliminated, overall profit will decline $5,000.B. Overall profit will decline by $2,000 if any one of these segments is eliminated.C. If Dept. G is eliminated, overall profit will decline $8,000.D. If Dept. H is eliminated, overall profit will increase $3,000.E. Eliminating Dept. H will reduce overall profit more than eliminating Dept. F.

87. Barley Enterprises Inc. expects its three departments to yield the following income for next year:

Dept. D

Dept. E

Dept. F

Sales

$5,000

$10,000

$4,000

Expenses

Avoidable

3,000

2,000

5,000

Unavoidable

4,000

1,000

Total expenses

7,000

6,000

Net income (loss)

$(2,000)

$4,000

$(2,000)

Which of the following statements is true regarding Flower’s business segments?A. If Dept. F is eliminated, overall profit will increase by $2,000.B. Overall profit will decline no matter which of these segments is eliminated.C. If Dept. E is eliminated, overall profit will decline $4,000.D. If Dept. D is eliminated, overall profit will decrease by $2,000.E. Eliminating Dept. F will reduce overall profit more than eliminating Dept. D.

88. Rocko Inc. has a machine with a book value of $50,000 and a five-year remaining life. A new machine is available at a cost of $85,000 and Rocko can also receive $38,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $14,000 per year over its five-year life. Should the machine be replaced?

A. Yes, because income will increase by $14,000 per year.

B. Yes, because income will increase by $23,000 in total.

C. No, because the company will be $23,000 worse off in total.

D. No, because the income will decrease by $14,000 per year.

E. Rocko will be not be better or worse off by replacing the machine.

89. Hondo Company has a machine with a book value of $50,000 and a five-year remaining life. A new machine is available at a cost of $108,000 and Rocko can also receive $38,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $14,000 per year over its five-year life. Should the machine be replaced?

A. Yes, because income will increase by $14,000 per year.

B. Yes, because income will increase by $52,000 immediately.

C. No, because the company will be $108,000 worse off.

D. No, because the income will decrease by $14,000 per year.

E. Hondo will not be better or worse off by replacing the machine.

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July 1, 2023

Multiple Choice Questions

66.A merchandiser:

A.Earns net income by buying and selling merchandise.

B.Receives fees only in exchange for services.

C.Earns profit from commissions only.

D.Earns profit from fares only.

E.Buys products from consumers.

67.Cost of goods sold:

A.Is another term for merchandise sales.

B.Is the term used for the expense of buying and preparing merchandise for sale.

C.Is another term for revenue.

D.Is also called gross margin.

E.Is a term only used by service firms.

68.A company has sales of $695,000 and cost of goods sold of $278,000. Its gross profit equals:

A.$(417,000).

B.$695,000.

C.$278,000.

D.$417,000.

E.$973,000.

69.A company has sales of $375,000 and its gross profit is $157,500. Its cost of goods sold equals:

A.$(217,000).

B.$375,000.

C.$157,500.

D.$217,500.

E.$532,500.

70.The following statements regarding gross profit are true except:

A.Gross profit is also called gross margin.

B.Gross profit less other operating expenses equals income from operations.

C.Gross profit is not calculated on the multiple-step income statement.

D.Gross profit must cover all operating expenses to yield a return for the owner of the business.

E.Gross profit equals net sales less cost of goods sold.

71.The following statements regarding merchandise inventory are true except:

A.Merchandise inventory is reported on the balance sheet as a current asset.

B.Merchandise inventory refers to products a company owns and intends to sell.

C.Merchandise inventory may include the costs of freight in and making them ready for sale.

D.Merchandise inventory appears on the balance sheet of a service company.

E.Purchasing merchandise inventory is part of the operating cycle for a business.

72.The following statements are true regarding the operating cycle of a merchandising company except:

A.The operating cycle begins with the purchase of merchandise.

B.The operating cycle is shortened by credit sales.

C.The operating cycle ends with the collection of cash from the sale of merchandise.

D.The operating cycle can vary in length among different merchandising companies.

E.The operating cycle sometimes involves accounts receivable.

73.Merchandise inventory:

A.Is a long-term asset.

B.Is a current asset.

C.Includes supplies the company will use in future periods.

D.Is classified with investments on the balance sheet.

E.Must be sold within one month.

74.The operating cycle for a merchandiser that sells only for cash moves from:

A.Purchases of merchandise to inventory to cash sales.

B.Purchases of merchandise to inventory to accounts receivable to cash sales.

C.Inventory to purchases of merchandise to cash sales.

D.Accounts receivable to purchases of merchandise to inventory to cash sales.

E.Accounts receivable to inventory to cash sales.

75.The current period's ending inventory is:

A.The next period's beginning inventory.

B.The current period's cost of goods sold.

C.The prior period's beginning inventory.

D.The current period's net purchases.

E.The current period's beginning inventory.