Question

1.

Managerial accounting is most concerned with:

Select one:

a. projecting profit levels for new advertising campaigns

b. preparing financial statements to be audited

c. using GAAP to properly value and classify transactions

d. summarizing the financial history of a business

2.

Shelton, Inc. manufactures and sells guitar strings. In this past year, they sold 150,000 feet of guitar strings at $ 10 / foot. On average, they incurred $2.75 of variable costs per foot of guitar strings and incurred $60,000 of fixed costs every month. They pay income tax of 25% annually. They are trying to project profit in the coming year. If sales decrease to 135,000 feet, total variable costs will:

Select one:

a. Increase

b. Decrease

c. Remain Constant

d. Cannot Determine

3.

Shelton, Inc. manufactures and sells guitar strings. In this past year, they sold 150,000 feet of guitar strings at $ 10 / foot. On average, they incurred $2.75 of variable costs per foot of guitar strings and incurred $60,000 of fixed costs every month. They pay income tax of 25% annually. They are trying to project profit in the coming year. If executive salaries increase and sales decrease to 145,000 feet, after-tax profit will:

Select one:

a. Increase

b. Decrease

c. Remain Constant

d. Cannot Determine

4.

Shelton, Inc. manufactures and sells guitar strings. In this past year, they sold 150,000 feet of guitar strings at $ 10 / foot. On average, they incurred $2.75 of variable costs per foot of guitar strings and incurred $60,000 of fixed costs every month. They pay income tax of 25% annually. They are trying to project profit in the coming year. If sales decrease to 140,000 feet, in comparison to last year, the fixed costs per foot will:

Select one:

a. Increase

b. Decrease

c. Remain Constant

d. Cannot Determine

5. Shelton, Inc. manufactures and sells guitar strings. In this past year, they sold 150,000 feet of guitar strings at $ 10 / foot. On average, they incurred $2.75 of variable costs per foot of guitar strings and incurred $60,000 of fixed costs every month. They pay income tax of 25% annually. They are trying to project profit in the coming year.  If variable costs increase to $2.85 / foot, in comparison to last year, the break-even point in units will

Select one:

a. Increase

b. Decrease

c. Remain Constant

d. Cannot Determine

Answer 1

Q1.
Answer is a. Projecting profits level for the new advertising campaign
Q2.
Answer is b. Decrease.
Q3.
Answer is b. Decrease.
As sales decreases, contribution margin decreases and fixed cost increases, resulting in a decrease in profits.
Q4.
Answer is a. Increase
With the decrease in sales, total fixed cost remains constant, the average fixed cost per foot will rise.
Q5.
Answer is a. Increase.
With increase in variance cost per unit, CM per unit decreases resulting in an increase in Break-even point.