Question 1

What are the ways employee behavior changes in relation to a profit emphasis?

Accepted Answer

All of the choices (A, B, C) are potential changes in employee behavior in relation to a profit emphasis. When profit becomes the main priority, employees may be more likely to make short-term decisions and ignore the less measurable outcomes that could benefit the company in the long run. Additionally, if rewards or bonuses are tied to profits, employees may be tempted to engage in unethical behavior to meet those goals.

Question 2

The market size variance is the difference between actual and budgeted industry sales in units, multiplied by the budgeted market share percentage, times the:

Accepted Answer

The market size variance is calculated using the budgeted average unit contribution margin to determine the impact of the difference in market size on profitability.

Question 3

An alternative to the limitation of focusing on profits would be

Accepted Answer

By focusing on long-term objectives and appropriately emphasizing profit, a company can balance the importance of short-term gains with sustainable growth and success. This allows for strategies such as investing in research and development, employee training and development, and improving customer experience, which may not show immediate results in profits but will be beneficial in the long run. Choosing option A would not address the underlying issue of profit-centered thinking, and option B promotes unethical accounting practices. Analyzing the product mix (option D) is important but does not necessarily offer an alternative to profit focus.

Question 4

The sales mix variance tells managers what impact a difference between actual and expected percentages of products sold has on:

Accepted Answer

The sales mix variance measures the impact of the difference between the actual and expected mix of products sold on the contribution margin. It highlights how changes in the proportions of various products sold affect profitability, assuming total sales volume remains constant.

Question 5

The market size variance is favorable when the budgeted industry sales in units is:

Accepted Answer

The market size variance compares the budgeted industry sales in units with actual units sold. Therefore, a favorable variance occurs when the budgeted sales are less than actual sales. This suggests that the company has outperformed their expectations and may have gained market share, leading to higher sales than anticipated.

Question 6

Which of the following is a limitation of profit measurement of a firm?

Accepted Answer

Profit measurement of a firm is limited by the unpredictable economic environment. Factors such as changes in the market conditions and fluctuations in exchange rates may affect the profitability of a firm, leading to inaccuracies in the measurement of profits in financial statements.

Question 7

In order for an effect of changing sales mix on profit to exist, a company must produce:

Accepted Answer

In order to have a sales mix, a company must have more than one type of product to sell. Therefore, the correct choice is B.

Question 8

Which of the following product life cycle stages has revenues for the entire industry decreasing?

Accepted Answer

During the Decline stage, revenues for the entire industry decrease as the product becomes outdated and loses its appeal to customers.

Question 9

According to Hansen and Mowen, which of the following product life cycle stages comes first?

Accepted Answer

The answer of According to Hansen and Mowen, which of...

Question 10

When the market share variance is unfavorable, it means that the budgeted share of the market is:

Accepted Answer

When the market share variance is unfavorable, it means that the budgeted share of the market is less than the actual market share. Therefore, the correct choice is C, which indicates that the budgeted share is more than the actual market share.

Question 11

The sum of the change in units for each product multiplied by the difference between the budgeted contribution margin and the budgeted average unit contribution margin is called the:

Accepted Answer

The formula described in the question is that of the sales mix variance. This variance measures how changes in the mix of products sold affect overall profitability, by comparing the budgeted contribution margin with the actual contribution margin based on the actual mix of products sold. It helps to identify whether changes in sales volumes of different products are proportionate or not. Therefore, the best choice is B, sales mix variance.

Question 12

The budgeted average unit contribution margin is the budgeted total contribution margin divided by the:

Accepted Answer

The budgeted average unit contribution margin is calculated by dividing the budgeted total contribution margin by the budgeted total units. This gives the amount of contribution margin that each unit is expected to generate, on average, in order to cover fixed expenses and generate a profit. The other answer choices are incorrect because they do not involve dividing the total contribution margin by the total units.

Question 13

The market share variance is calculated by

Accepted Answer

The market share variance measures the impact of the difference between the budgeted and actual market share percentage on the budgeted contribution margin. Option B calculates this by multiplying the difference between the budgeted and actual market share percentage by the actual industry sales in units and the budgeted average unit contribution margin.

Question 14

The majority of the product cost is "locked in" during which of the following life-cycle stages?

Accepted Answer

The majority of the product cost is typically "locked in" during the development stage, when significant investments are made in research and development, design, and engineering. Once the product reaches the introduction and growth stages, the cost structure is relatively fixed, and incremental changes have less impact on the overall cost. By the time the decline stage is reached, the cost structure is already established, and there is typically less opportunity for further cost optimization.

Question 15

The budgeted quantity of Product P sold by Alpha, Inc., is 1,500 units. The actual quantity sold is 1,600 units. The budgeted average unit contribution margin is $8.50. Compute the contribution margin volume variance.

Accepted Answer

Contribution margin volume variance = (Actual quantity sold - Budgeted quantity sold) x Budgeted contribution margin per unit

= (1,600 - 1,500) x $8.50

= $850 (F)

Question 16

In activity-based costing (ABC), unit-level costs are highest in the:

Accepted Answer

Unit-level costs are the costs incurred to produce one unit of a product or service, and are typically highest during the introduction phase of a product's life cycle. This is because during this phase, the company is investing heavily in research and development, marketing, and production setup costs to bring the product to market. As the product moves into the growth and maturity phases, these costs become spread out over a greater number of units produced and sold, resulting in lower unit-level costs. In the decline phase, unit-level costs may increase again as production volumes decrease and fixed costs become spread out over a smaller number of units.

Question 17

The contribution margin volume variance is the difference between the actual and budgeted quantities sold multiplied by the:

Accepted Answer

The contribution margin volume variance is calculated by taking the difference between the budgeted and actual quantities sold multiplied by the budgeted average unit contribution margin. Therefore, the correct choice is D, which is the budgeted average unit contribution margin.

Question 18

A successful firm

Accepted Answer

A successful firm not only focuses on profit, but also considers the impact it has on the community and employees. Additionally, it should be aware of economic and environmental trends outside the company to make informed decisions. The other choices (B and C) only value numeric profit and solely rely on profit and loss statements, which limits the overall success of the company.

Question 19

The market share and market size variances allow firms to compare their performance with the:

Accepted Answer

The market share and market size variances allow firms to compare their performance with the market as a whole. Market share measures the firm's sales in relation to the total market sales, while market size measures the total sales in the market. By comparing their market share and market size with the overall market, the firm can assess its performance relative to competitors and identify areas for improvement. Comparing with previous year's results or upcoming year's projections may provide some insight, but it does not give a complete picture of the company's performance in relation to the overall market. The inner workings of the company are not relevant in this context, as the focus is on external market factors.

Question 20

Compare and contrast the various pricing policies used by companies.

Accepted Answer

The answer of Compare and contrast the various pricing policies...

Quiz 18: Pricing and Profitability Analysis