1991 State Cooperative Education Test

Name:

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

Which of the following is NOT an agricultural cooperative organization?

a.	Agway	c.	Land O’Lakes
b.	ConAgra	d.	Ocean Spray

Cooperatives are among several types of corporations and in the tax code are identified as:

a.	Corporations	c.	S-corporations
b.	Nonprofit Corporations	d.	T-corporations

Cooperatives are best described as:

a.	Nonprofit corporations	c.	User-oriented
b.	Investor owned and controlled	d.	Democratically controlled

Federated cooperatives are cooperatives:

a.	In which farmers hold direct membership
b.	Which are owned by other cooperatives
c.	Operated by the Federal government
d.	That operate the federated department stores

Consumer cooperatives:

a.	Sell to consumers but are owned by investors
b.	Are formed and owned by consumers to purchase items
c.	Are not allowed in the United States
d.	Are grocery stores formed by farmers in cities

The national council of Farmer Cooperatives (NCFC):

a.	Is a political voice for U.S. farmer cooperatives
b.	Is a National federation of cooperatives to market vegetables
c.	Is a trade association that does voluntary overseas cooperative development
d.	Is a USDA agency devoted to farmer cooperatives

Cooperatives have specialized banks to serve their financial needs.

a.	True	b.	False

The Sherman Antitrust Act of 1890 made agricultural marketing cooperatives illegal.

a.	True	b.	False

Threshing bees, neighborhood barn raising, and cheese rings of the early 1800’s are all examples of informal cooperatives.

a.	True	b.	False

10.

Approximately what percentage of U.S. milk is cooperatively marketed:

a.	25-40%	b.	45-60%	c.	75-90%	d.	Over 90%

11.

The state with the largest number of agricultural cooperatives is:

a.	Texas	b.	Michigan	c.	New York	d.	Minnesota

12.

A regional farm supply cooperative may be organized as all the following EXCEPT:

a.	A centralized cooperative
b.	A federated cooperative
c.	A mixed cooperative containing both centralized and federated components
d.	A nonmember, investor-owned cooperative

13.

In an agricultural cooperative, the benefits normally go to:

a.	Patrons in proportion to use
b.	Only to member-investors in proportion to their investment
c.	All stockholders according to their investment
d.	The manager and employees according to their hours

14.

In the U.S. , the bank for Cooperatives (CoBank):

a.	Is regulated by the Farm Credit Administration
b.	Makes short and long-term loans to farmer cooperatives
c.	Provides export assistance loans
d.	All of these are correct

15.

The basic cooperative principles were developed by:

a.	James Wallingford
b.	The Romans
c.	Tradespeople in Rochdale, England
d.	A group of pioneer farmers in Meyersville, New Hampshire

16.

The associated Press is a cooperative corporation.

a.	True	b.	False

17.

“NICE” refers to:

a.	An organization which finances many consumer cooperatives
b.	An educational institute sponsored each year by AIC
c.	A cooperative oriented political action committee
d.	The Northeast Institute of Cooperative Enrichment

18.

A rural electric cooperative would be classified as a:

a.	Marketing cooperative	c.	Service cooperative
b.	Supply cooperative	d.	Purchasing cooperative

19.

Service at cost means:

a.	Surpluses (profits) are returned to members
b.	Producers receive market prices
c.	Producers pay the cooperative whatever a supply item cost
d.	All of these are correct

20.

Farmers become members of cooperatives for the following reason EXCEPT:

a.	Dividends and chance for appreciation of the stock
b.	Increased farm income
c.	To assure a source of a particular supply
d.	To gain market power

21.

Patronage refunds from cooperatives may be all the following EXCEPT:

a.	Distributed on the basis of dollar volume sold or purchased
b.	Distributed on the basis of physical units sold or purchased
c.	Paid to members, at least partially, in the form of equity credits
d.	The basis for the number of votes in deciding the directors

22.

A subsidiary corporation is:

a.	The same as a federated cooperative
b.	A corporation, owned and controlled by a parent corporation
c.	The same as a holding company
d.	A marketing agency-in-common

23.

The National Cooperative Business Association (NCBA) is:

a.	A trade association of all types of cooperatives
b.	A trade association of only agricultural cooperatives
c.	A trade association of only consumer cooperatives
d.	A National cooperative of investor-owned corporations

24.

Legally, a cooperative may be:

a.	Unincorporated
b.	Incorporated as a stock corporation
c.	Incorporated as a non-stock corporation
d.	All of theses are correct

25.

Agricultural Cooperative Service (ACS), an agency of USDA, was authorized by the:

a.	Farm Credit Act of 1933	c.	Capper-Volstead Act in 1922
b.	Agricultural Marketing Act of 1926	d.	Federal Farm Loan Act in 1916

26.

The Sherman Antitrust Act of 1890 made:

a.	Monopolies legal	c.	Price collusion illegal
b.	Cooperative legal	d.	All of these are correct

27.

Cooperatives limit returns on equity capital because:

a.	Cooperatives do not require as much capital as investor-oriented businesses
b.	They are not concerned about making a profit
c.	They want to discourage investment by patrons
d.	All of these are correct

28.

Cooperatives expand (integrate horizontally) their operations by:

a.	Increasing the number of employees
b.	Renovating their old facilities
c.	Adding branch, facilities to perform the same types of services
d.	All of these are correct

29.

The cooperative principle of “operations at cost” is usually accomplished by:

a.	Setting prices in order to cover expenses
b.	Refunding to patrons any net margins remaining after deducting operating expenses on supplies sold to them or farm products purchased from them
c.	Retaining net margins remaining after deducting operating expenses and investing them in the cooperative
d.	All of these are correct

30.

Cooperative management is concerned primarily with:

a.	Maximizing the profit of the cooperative
b.	Meeting the needs of farmer-members
c.	Fulfilling members’ needs while maintaining a strong business
d.	Meeting government regulations

31.

Historically, a factor encouraging the rapid development of purchasing cooperatives was:

a.	The deflation of prices
b.	The opportunity for savings from the wide gross margins taken by existing firms
c.	Farmers desire to cooperate with others in purchasing farm supplies
d.	All of these are correct

32.

Cooperatives exist because:

a.	Farmers are greedy
b.	Existing firms are not adequately servicing the needs of farmers
c.	Farmers like to work together
d.	Farmers want to put other firms out of business

33.

If members of a marketing cooperative include potential patronage refunds in their production decisions, these members will likely:

a.	Not change their production
b.	Decrease production
c.	Increase production

34.

A supply cooperative operating where marginal cost-marginal revenue would be following which objective:

a.	Maximize the net price received by patrons
b.	Operate at cost
c.	Minimize net price paid by patrons
d.	Maximize net income

35.

A supply cooperative operating where marginal cost-average total cost would be following which objective:

a.	Minimize net price paid by patrons	c.	Operate at cost
b.	Maximize net income	d.	Maximize net price received by patrons

36.

The objective which would give members of a marketing cooperative the highest price for their product before considering patronage refunds includes:

a.	Maximizing net price received by patrons
b.	Operating at cost
c.	Maximizing net income like an investor-oriented firm
d.	None of these are correct

37.

Bargaining cooperatives:

a.	Negotiate with farmers for products
b.	Negotiate with processors on behalf of farmer-members
c.	Negotiate for farm labor

38.

Marketing agreements:

a.	Are illegal
b.	Transfer some decision making from individual growers to the cooperative
c.	Transfer some decision making from the cooperative to individual growers
d.	None of these are correct

39.

Which of the following is not the brand of a marketing cooperative:

a.	Sunkist	b.	Dole	c.	Land O’ Lakes	d.	Welch’s

40.

Centralized cooperatives:

a.	Directly serve farmer-members
b.	Are located only in the central part of the country
c.	Serve local co-op members

41.

Per-unit capital retains are:

a.	An out-of-pocket, on-time expense
b.	A deduction based on volume of product marketed through the cooperative
c.	The amount of product members can market on their own

42.

Cooperative marketing:

a.	Increases risk to the individual producer
b.	Reduces risk to the individual producer
c.	Does not affect risk to the individual producer

43.

Local cooperatives:

a.	Serve farmers in large regions
b.	Serve farmers near a town of over one or two countries
c.	May be members of a federated cooperative
d.	Both serve farmers in large regions and may be members of a federated cooperative
e.	Both serve farmers near a town of over one or two countries and may be members of a federated cooperative

44.

Marketing cooperatives pay the following taxes:

a.	Personal property	c.	Income, both State and Federal
b.	Sales, both State and local	d.	All of these are correct

45.

Marketing cooperatives may declare patronage refunds to:

a.	Members only	c.	Both members and nonmembers
b.	Nonmembers only

46.

Cooperatives benefit consumers as well as producers by:

a.	Producing quality products and enforcing grades and standards
b.	Subsidizing cheaper prices to the consumer
c.	Paying reduced prices to producers
d.	Paying high prices to producers

47.

Most marketing cooperatives:

a.	specialize in one type of product	c.	Handle all types products
b.	Handle several types of products

48.

Pooling is a cooperative marketing method involving:

a.	Assembling and commingling products from many producers	c.	Both assembling and commingling products from many producers, and combining sales returns and operating expenses, and distributing net returns to members according to the volume of product each provided
b.	Combining sales returns and operating expenses, and distributing net returns to members according to the volume of product each provided

49.

Federal and State laws and regulations usually specify:

a.	The number of members a marketing cooperative may have	c.	The geographic boundaries of a cooperative’s trade area
b.	That member business must be greater than nonmember business in a marketing cooperative

50.

In a marketing cooperative, patronage refunds are distributed:

a.	To members, based on how much they sold through the cooperative	c.	To cooperative managers depending on profits made
b.	To wholesalers based on how much product they purchased from the cooperative

51.

For price differentials to be successful, cooperatives must:

a.	Price uniformly to all patrons	c.	Offer no discounts or premiums
b.	Separate patrons into categories according to volume, location, method of payment, or other criteria

52.

Benefits of marketing cooperatives include which of the following:

a.	Expanded markets	d.	Both expanded markets and increased farm income
b.	Loss of market power	e.	All of these are correct
c.	Increased farm income

53.

Most of the equity of marketing and farm supply cooperatives comes from:

a.	Per-unit capital retains	c.	Retained patronage refunds
b.	the direct cash investments of members	d.	Unallocated reserves

54.

A balance sheet for a cooperative does NOT contain information on:

a.	The money a cooperative borrows	c.	The amount a cooperative sells
b.	What a cooperative owns

55.

A cooperative should be operated to make a profit for:

a.	Only the people who invest in it	c.	Only full-time farmers
b.	The members who use it

56.

Patronage refunds are based on:

a.	The use of the cooperative	c.	The amount of a member’s investment in the cooperative
b.	Length of membership in cooperative

57.

The amount of patronage refunds a member receives depends on:

a.	The amount of earnings the cooperative had and the member’s use of the cooperative	c.	The number of cooperative memberships held by the member’s family
b.	Size of the member’s farming operation	d.	The amount of credit the member has outstanding with the cooperative

58.

Is it possible for members to lose their investment in cooperatives?

a.	yes; as in other businesses, a cooperative member may lose all investment in a cooperative	b.	No; to encourage cooperatives, the federal government guarantees members’ cooperative investment

59.

With the revolving fund method of equity redemption:

a.	Equity investments are redeemed (returned in the order they were issued; that is, the oldest investment is redeemed first	c.	Members take turns in having their investments redeemed
b.	Investments are redeemed according to member’s age	d.	The cooperative redeems the same amount of each member’s investment

60.

A cooperative patron is:

a.	A cooperative member	c.	A user of a cooperative
b.	An investor in a cooperative

61.

How can a cooperative benefit its patrons?

a.	By issuing patronage refunds	c.	Through group actions not possible by individual producers
b.	Through improved services or products	d.	All of these are correct

62.

How are cooperatives different from other businesses?

a.	Cooperatives are always smaller	c.	Cooperatives do not own land and buildings
b.	Cooperatives distribute their earnings differently	d.	All of these are correct

63.

A cooperative can be responsive to members’ needs only if:

a.	Members express those needs and recognize they must bear the financial burden to fulfill those needs	c.	New members will be brought into the cooperative
b.	The needs fit into the long range plan of the cooperative’s manager	d.	The cooperative has enough cash on hand to pay for the new services

64.

Equity redemption occurs when:

a.	Cash dividends are paid on equity	c.	Equity held by cooperative members is redeemed by their cooperative
b.	Cash is paid by members into their cooperative	d.	Patronage refunds are issued by their cooperative

65.

Cooperative members can supply equity capitol to their cooperatives:

a.	Through direct cash investment	c.	By having part of their patronage refund retains invested in the cooperative
b.	By agreeing to having per-unit capital retains deducted from the products they market through a cooperative	d.	All of these are correct

66.

A member’s share of ownership in a cooperative is IDEALLY equal to the:

a.	Length of years as a member	c.	Member’s use of the cooperative
b.	Size of the member’s farm	d.	Member’s need for money

67.

Limited return on equity means:

a.	A cooperative must not pay all patronage refunds in cash	c.	The earnings of the cooperative must be shared among the patrons, customers, and employees
b.	Cooperatives are limited as to how high dividends o equity capital can be	d.	The amount of interest a cooperative can pay on borrowed funds is limited

68.

If some patrons are not cooperative members, can they ever receive patronage refunds along with members?

a.	No; only members receive a patronage refund	c.	Nonmember patrons always receive patronage refunds along with members
b.	Nonmembers may or may not receive a patronage refund depending on the policy of the cooperative

69.

Are cooperative members liable for the debts of their cooperative?

a.	no; in almost all cases, cooperatives are incorporated under State laws, and members are not liable for the cooperative’s debts	b.	Yes; cooperatives are set up like partnerships, and thus members are liable for their cooperative’s debts

70.

Cooperatives that have section 521 tax status (commonly called exempt cooperatives) must:

a.	Treat members and nonmember patrons alike	c.	Not sell farm supplies
b.	Deal only with members	d.	Sell only farm supplies

71.

Net income of farmer cooperatives is generally taxed according single-tax principle.

a.	True; depending on how the net income is distributed, the tax will be paid either by the cooperative or by its patrons	b.	False; patrons only pay tax on cash received, and cooperatives are not required to pay tax

72.

What is the difference between patronage refunds and dividends on equity?

a.	No difference; both have the same meaning	c.	Patronage dividends are established by the manager; dividends on equity are established by the board of directors
b.	Patronage dividends are paid on the amount of equity owned; dividends on equity are based on use of the cooperative	d.	Patronage dividends are based on use of the cooperative, and dividends on equity are based on the amount of equity owned

73.

Most cooperatives issue patronage refunds with at least 20 percent paid in cash. How does this effect their taxable income?

a.	No effect until patronage refunds are redeemed	c.	Cooperatives are not required to pay income taxes; therefore, issuing patronage refunds makes no difference
b.	These patronage refunds can be deducted from the cooperative’s income and thus reduce or eliminate any income taxes due