MGMT 640 Final Exam Questions and Correct Answers (Graded A+) | Latest 2026/2027 Update | Guaranteed Pass.

MGMT 640 Final Exam Questions and Correct Answers (Graded A+) | Latest 2026/2027 Update | Guaranteed Pass. A company purchases machinery costing $50,000 in October of 2006. Five years later they discover a better, more efficient machine they could purchase to replace the existing machine. The new machine costs $90,000 and the company has determined that they would be able to sell the original machine for $30,000. In making the decision about buying the new machine, how much are total sunk costs? A. $60,000 B. $40,000 C. $50,000 D. $10,000 This is because the old machine cost of $50,000 has already been incurred and cannot be reversed. 10. Mixed costs are the same as: A. Semivariable costs B. Step costs C. Total production costs D. Discretionary fixed costs E. A & C only This is because mixed costs contain both fixed and variable portions and can be called as semivariable costs. 11. The Contribution margin ratio is found by: A. Subtracting total fixed costs from sales and dividing this by the number of units produced. B. Adding total variable costs and fixed costs and dividing by the selling price per unit C. Taking the selling price per unit and subtracting variable costs from it and dividing by the selling price per unit. D. Dividing total fixed and variable costs by the selling price per unit. E. B & C only. 6. The goal of managerial accounting is to provide information that managers need for A. planning. B. control. C. decision making. D. All of the above answers are correct. 7. Shareef’s Window Company is in the process of preparing a production cost budget for August. Actual costs in July for 120 windows were: Materials cost $ 4,800 Labor cost 3,000 Rent 1,500 Depreciation 2,500 Other fixed costs 3,200 Total $15,000 The company is currently producing and selling 144 windows annually and each window is sold for $140.00. The company is considering lowering the price to $125.00 for which management estimates this will increase sales to 200 windows. Materials and labor are the only variable costs. Under what situation should the company lower the price of its windows? A. If total revenue exceeds totals costs under the new pricing B. If incremental revenue exceeds the old revenue C. If incremental profit is a positive number D. If incremental costs decrease 12. John’s Camera is currently selling cameras at a price of $100. The cameras have a variable cost of $75 per camera and John’s Camera has a total fixed cost of $100,000. John’s Camera is currently selling 5,000 units of cameras. John’s Camera is considering changing its production process. With the change in production, John’s Camera will lower its fixed to $80,000 but raise its variable costs to $90 per unit. Should John’s Camera go forward with the change in production process? A. Yes, because the new production process lowers fixed costs by $20,000 B. Yes, because the new production process raises the contribution margin C. No, because the new production process leads to a decline in profits by $55,000. D. No, because the new production process raises the variable costs by $15 per unit. Old: [5,000 units x ($100 - $75) - $100,000] $25,000 New: [5,000 units x ($100 - $90) - $80,000] -$30,000 Decline in profit = $25,000 – (-$30,000) $55,000 14. Cost-Volume Profit analysis cannot be performed when: a. Costs can be accurately separated into fixed and variable components. b. Fixed and variable costs change over different activity levels. c. Contribution margin is based on the difference between selling price and variable costs. d. Breakeven point is calculated based upon the fixed costs divided by the contribution margin. This is because CVP analysis is based upon a fixed variable cost per unit and total fixed costs. When these change CVP analysis become difficult. 15. A company produces products A, B, and C. The company has excess capacity. Products A, B, and C have a contribution margin of 10, 15, and 20, respectively. Products A, B, and C have a contribution margin per hour of 10, 5, and 6.67 respectively. Assume that the scarce resource for the firm is time, that is if an hour more is spent on producing one more product, there would be an hour less spent on producing another product. The company should produce: a. Product A because it has the highest contribution margin per hour. b. Product C because it has the highest contribution margin. c. Either Product A or C because they have the highest contribution margin or contribution margin per hour. d. The answer cannot be determined because we do not know the number of available machine hours. 16. A company is using the high-low method and has determined the following production for the months of January, February, March, and April of 6,000, 5,000, 5,550, and 2,000, respectively. During the same months, the costs were $500,000, 400,000, 425,000, and 200,000. The fixed costs are: a. 150,000 b. 450,000 c. 50,000 d. 75,000 Workings: High level: January: 6000 units at a cost of $500,000 Low level: April: 2000 units at a cost of $200,000 Difference: 4000 units at a differential cost of $300,000 Variable cost per unit = $300,000/4000 units = $75 per unit Taking January’s costs, the variable costs will be 6000 units x $75 per unit = $450,000 Fixed costs = $500,000 - $450,000 = $50,000 17. Three cost incurred by the Kenyon Company are summarized below: 1,000 Units 2,000 Units Cost A $10,000 $9,000 Cost B $21,000 $21,000 Cost C $16,000 $32,000 Which of these costs are variable? A. A, B and C B. A and C C. A Only D. C Only This is because only Cost C has proportionately increased or doubled for twice the increase in number of units. Cost B is fixed and Cost C might be semi-fixed. 13. A company sells two products - X and Y. Product X is sold at a price of $50 and has a variable cost of $25. Product Y is sold at a price of $25 and has a variable cost of $20. Product X and Y are sold in equal amounts. How many units of Product X must be sold in order to breakeven if the company has $100,000 in fixed costs? A. 3,333 B. 5,000 C. 6,667 D. 2,000 Sales mix: 50%:50% X: (50% x ($50 - $25)) $12.50 Y: (50% x ($25 - $20)) $2.50 Weighted contribution margin $15.00 Units to break-even: Total fixed costs/Weighted contribution margin = $100,000/$15 6666.666 Sales mix: X: 50% of 6666.66 3333.33 units 18: Conan Company’s monthly activity level ranged from a low of 17,000 units in May to a high of 26,000 units in October. Average production was 20,000 units per month. Utilities cost was $8,250 in May and $10,500 in October. The variable utility cost per unit, to the nearest cent, is: A. $0.25 B. $0.40 C. $0.47 D. $0.49 Low level: 17000 units at $8,250 High level: 26000 units at $10,500 Difference: 9000 units at a cost difference of $2,250 Variable utility cost per unit = $2,250/9000 units $0.25 per unit. Information for questions 19 and 20: Briar Tek has fixed costs of $700,000. Selling price per unit is $180 and Variable cost per unit is $110. 19: How many units must Briar Tek Sell to earn a profit of $560,000? A. 10,000 B. 14,000 C. 18,000 D. 20,000 Units to be sold = (Total fixed costs + Desired profit)/Contribution margin per unit = ($700,000 + $560,000)/($180 - $110) = $1,260,000/$70 =18,000 units 20: When activity based costing is implemented, the initial outcome is normally that: A. the cost of all products will be higher. B. The cost of all products will be lower C. The cost of low volume products will be higher and the cost of high volume products will be lower D. The cost of low volume products will be lower and the cost of high volume products will be higher.