accounting exam 2

Because it is needed for the schedule of expected cash collections, the annual master budget file includes the ___ ____ from last year

balance sheet

Contribution margin ______.

becomes profit after fixed expenses are covered

A budgeted balance sheet is developed using data from the ______ of the budget period and data contained in the various schedules.

beginning

A detailed plan for the future that is usually expressed in formal quantitative terms is a(n)

budget

A change in profits that occurs due to a change in sales and fixed expenses may be calculated as ______.

cm ratio × change in sales - change in fixed expenses

A fixed cost that supports the operations of more than one segment, but is not traceable in whole or part to any one segment is a(n) ______ fixed cost

common

When a segment is eliminated, a ______.

common fixed cost will remain unchanged traceable fixed cost will disappear

Budgets ______.

communicate management's plan throughout the organization

Variable costing income statements are based upon a ______ format.

contribution

The degree of operating leverage = ______.

contribution margin ÷ net operating income

The calculation of contribution margin (CM) ratio is ______.

contribution margin ÷ sales

Contribution margin ratio is equal to _______ _______ divided by ______

contribution margin, sales

When units produced exceed units sold, net income will generally be ______ costing.

higher under absorption costing than under variable

Many managers believe that being empowered to create their own self-______ budgets is the most effective method of budget preparation.

imposed

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted

income statement

Given the following information, calculate the unit product cost under absorption costing. Direct materials: $50/unit; Direct labor: $75/unit; Variable manufacturing overhead: $27/unit; Fixed manufacturing overhead: $30,000; Units produced: 10,000; Units sold: 6,000.

($50 + $75 + $27 + ($30,000 ÷ 10,000) ) = $155 per unit

The Quaint Quilt produces and sells handmade quilts. Variable manufacturing costs total $140 per quilt. Fixed manufacturing overhead totals $68,250 per quarter. Variable selling and administrative costs are $19 per quilt sold, and fixed selling and administrative costs are $50,000 per quarter. Last quarter, the company produced 910 quilts and sold 780 quilts. The total variable cost reported on Quaint Quilt's variable costing income statement is ______.

(($140 + $19) × 780 quilts sold) = $124,020

Pearls, Pearls, Pearls! manufactures and sells jewelry. The total variable cost of goods sold this month is $72,490. Variable selling and administrative cost is $22 per unit sold. If 350 units are produced and 314 units are sold this month, the total variable cost reported on the income statement for the month is $

((22*314)+72490)= 79398

Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ______ units.

(10,000 + 5,000 - 2,000 =) 13,000

Spice sells paprika for $9.00 per bottle. Variable cost is $2.43 per bottle and Spice's annual fixed costs are $825,000. The variable expense ratio for paprika is ______.

.27 ($2.43 ÷ $9.00)

Given sales of $1,452,000, variable expenses of $958,320 and fixed expenses of $354,000, the contribution margin ratio is ______.

.34 (($1,452,000 - $958,320) ÷ $1,452,000)

Company A has a contribution margin ratio of 35%. For each dollar in sales, contribution margin will increase by ______.

.35

Gifts Galore had sales revenue of $189,000. Total contribution margin was $100,170 and total fixed expenses were $27,500. The contribution margin ratio was ______.

.53 ($100,170 ÷$189,000)

The break-even point is the level of sales at which the profit equals

0

order in which items appear on the contribution margin format income statement.

1. sales 2. variable expenses 3. contribution margin 4. fixed expenses 5. net operating income

A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______.

180000

A company's break-even point is 17,000 units. If the contribution margin is $22 per unit and 26,000 units are sold, net operating profit will be ______.

198000 ((26,000 - 17,000) × $22)

JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK-EVEN?

2800 ($98,000 ÷ ($50 - $15))

A company sold 750 units with a contribution margin of $120 per unit. If the company has a break-even point of 450 units, the net operating income or (loss) is ______.

36000 ((750 - 450) × $120)

Daisy's Dolls sold 30,000 dolls this year. Each doll sold for $40 and had a variable cost of $19. Fixed expenses were $250,000. Net operating income for the year is ______.

380,000 (30,000 × ($40 - $19) - $250,000)

Seating Galore sells high-end desk chairs. The variable expense per chair is $85.05 and the chairs sell for $189.00 each. The variable expense ratio for Seating Galore's chairs is

45%

A company sells 500 sleds per month for $80. Variable costs are $41 per unit and fixed expenses are $3,500 per month. The company thinks that using a new material would increase sales by 70 units per month. If the new material increases variable costs by $4 per unit, the impact on net income would be a ______.

450

Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is ______.

4800

A product has a selling price of $10 per unit, variable expenses of $6 per unit and total fixed costs of $35,000. If 10,000 units are sold, net operating income will be

5000 ((10x10000)-(6x10000)-35000)

Frames, Inc. manufactures large wooden picture frames. Each frame requires $19 of direct materials and $40 of direct labor. Variable manufacturing overhead cost is $9 per frame produced, and variable selling and administrative expense is $13 per frame sold. The company produces 5,000 units each month and total fixed manufacturing overhead cost per month is $15,000. The unit product cost of each frame using variable costing is $

68

A company has a target profit of $204,000. The company's fixed costs are $305,000. The contribution margin per unit is $40. The BREAK-EVEN point in unit sales is ______.

7625

A company's selling price is $90 per unit, variable cost per unit is $28 and total fixed expenses are $320,000. The number of unit sales needed to earn a target profit of $200,800 is ______.

8400

Vivian's Violins has sales of $326,000, contribution margin of $184,000 and fixed costs total $85,000. Vivian's Violins net operating income is ______.

99000

Which of the following statements are correct regarding income statements prepared under variable and absorption costing?

Reported net income on the statements often differ. Both income statements include product and period costs.

Which of the following is needed to prepare a sales budget?

The budgeted number of units to be sold

When inventory increases, which costing method generally results in higher net income?

absorption costing

Fixed manufacturing overhead costs are included as part of Work in Process inventory under ______.

absorption costing only

For external reporting, income statements are generally prepared using _____ costing, while _____ costing is used for internal decision making purposes. (Enter only one word per blank.)

absorption, variable

The two general costing approaches used by manufacturing companies to prepare income statements are ____ costing and _______ costing

absorption, variable

The contribution margin equals sales minus ______.

all variable costs

According to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n) ______.

decrease in the unit variable cost

Net operating income is less under absorption costing than under variable costing when inventory for the period ______.

decreases

Working hours required to satisfy the production budget are shown on the ______ budget

direct labor

In a manufacturing company, the ______ budget details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories

direct materials

The cost of unsold units is computed on the ______ budget.

ending finished goods inventory

When using variable costing, fixed manufacturing overhead is ______.

expensed in the period incurred

The cash budget includes four major sections: receipts, disbursements, the cash excess or deficiency, and

financing

Total contribution margin equals ______.

fixed expenses plus net operating income

Under variable costing the cost of a unit of inventory does not contain ______.

fixed manufacturing overhead

Product costs under absorption costing include ______.

fixed manufacturing overhead direct materials variable manufacturing overhead direct labor

The difference between reported net income on variable costing and absorption costing income statements is based on how ______.

fixed overhead is accounted for

A variable costing income statement ______.

focuses on fixed and variable expenses, while an absorption costing income statement focuses on period and product costs calculates contribution margin while the absorption costing income statement calculates gross margin

When units sold exceed units produced, net income under variable costing will generally be _______ net income under absorption costing.

higher than

A company currently has sales of $700,000 and a contribution margin ratio of 45%. As a result of increasing advertising expense by $8,000, the company expects to increase sales to $735,000. If this is done and these results occur, net operating income will ______.

increase by $7,750 (($735,000 - $700,000) × 45% - $8,000)

A traceable fixed cost ______.

is incurred because of the existence of the segment

The cash budget ______.

is prepared near the end of the master budget process

A measure of how sensitive net operating income is to a given percentage change in sales dollars is known as operating

leverage

An integrated business plan that formally lays out the company's goals is called the ______ budget.

master

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the

master/planning budget

The amount of goods for resale to be acquired from suppliers during the period is shown on the _____ _____ budget.

merchandise purchases

The amount of goods to be acquired from suppliers during the period is shown on the _______ budget.

merchandise purchases

Operating leverage is a measure of how sensitive ______ is to a given percentage change in sales dollars.

net operating income

At the break-even point ______.

net operating income is zero total revenue equals total cost

Variable costing treats ______ manufacturing costs as product costs.

only variable

A budget that is prepared with the full cooperation of managers at all levels is a self-imposed or ___ budget

participative

Developing goals and preparing various budgets to achieve those goals is part of ______

planning

Developing goals and preparing various budgets to achieve those goals is part of the ___ process

planning

When allocating fixed manufacturing overhead cost to units under absorption costing, the total fixed overhead costs must be divided by the number of units

produced

When using absorption costing, fixed manufacturing overhead cost per unit = Total fixed manufacturing overhead divided by units ______

produced

In a manufacturing company, the ____ budget is used to determine the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

production

In a manufacturing company, the ______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget?

production

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget?

production

The segment margin is a valuable tool for assessing the long-run ______ of a segment

profitability

What number does the direct materials budget take directly from the production budget?

required production

Because all other parts of the budget depend on it, if the ______ budget is inaccurate, the rest of the budget will be inaccurate.

sales

The first step in the budgeting process is the preparation of the ___ budget

sales

The relative proportions in which a company's products are sold is referred to as

sales mix

To calculate total sales on the sales budget, multiply budgeted sales in units by ______.

sales price per unit

Assigning common fixed costs to segments impacts ______.

segment margin only

CVP analysis focuses on how profits are affected by ______.

selling price total fixed costs mix of products sold sales volume unit variable cost

Terry's Trees has reached its break-even point and has a contribution margin ratio of 70%. For each $1 increase in sales ______.

total contribution margin will increase by $0.70 net operating income will increase by $0.70

The break-even point is reached when the contribution margin is equal to ______.

total fixed expenses

The segment margin is obtained by deducting the ______ fixed costs of a segment from the segment's ______.

traceable; contribution margin

True or false: Under absorption costing, fixed overhead is treated like a variable cost because a portion of the total cost is allocated to each unit produced, rather than being expensed as one large sum.

true

The ending finished goods inventory budget computes the cost of ______ units.

unsold

Costs are separated between variable and fixed expenses when using ______ costing, whereas ______ costing separates costs between product and period.

variable, absorption

CVP analysis allows companies to easily identify the change in profit due to changes in ______.

volume, selling price, and cost