ACCTG 002

A market segment has sales of $70,000, variable cost of goods sold of $10,000, variable selling expenses of $11,000, and total fixed expenses of $13,000. What is the segment's contribution margin ratio? a.70% b.36% c.51% d.86%

a.70% Variable Expenses = Variable Cost of Goods Sold + Variable Selling Expenses $10,000 + $11,000 = $21,000 Contribution Margin = Sales - Variable Expenses $70,000 - $21,000 = $49,000 Contribution Margin Ratio = Contribution Margin/Sales $49,000/$70,000 ≈ 0.7 = 70%

If fixed costs are $250,000, the unit selling price is $125, and the unit variable costs are $73, what is the breakeven sales (units)? a. 2,000 units b. 3,425 units c. 4,808 units d. 2,381 units

c. 4,808 units Breakeven Point (Units) = Fixed Costs/Unit Selling Price - Unit Variable Costs $250,000/$125-$73 $250,000/$52 = 4,807.69 ≈ 4,808

Which of these are common allocation bases? a. Machine dollars, direct labor dollars, direct labor hours b. Direct labor dollars, direct labor hours, direct material dollars c. Direct labor dollars, direct labor hours, machine hours d. Direct labor dollars, direct labor hours, machine dollars

c. Direct labor dollars, direct labor hours, machine hours

Which of these is not a factory overhead allocation method? a. Multiple department rates b. Activity-based costing c. Factory costing d. Single plantwide rate

c. Factory costing

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured a. equal units sold b. are equal to or greater than units sold c. are less than units sold d. exceed units sold

c. are less than units sold

For purposes of analysis, mixed costs are a. classified as period costs b. classified as variable costs c. separated into their variable and fixed cost components d. classified as fixed costs

c. separated into their variable and fixed cost components

Under variable costing, which of the following costs would be included in finished goodsinventory? a. salary of vice president of finance b. straight-line depreciation on factory equipment c. wages of carpenters in a furniture factory d. salary of salesperson

c. wages of carpenters in a furniture factory

What ratio indicates the percentage of each sales dollar that is available to cover fixed costsand to provide a profit? a. costs and expenses ratio b. margin of safety ratio c. profit ratio d. contribution margin ratio

d. contribution margin ratio

Under absorption costing, which of the following costs would be included in finished goods inventory? a. direct materials cost and fixed administrative costs b. direct materials, direct labor, and variable selling and administrative costs c. direct labor, direct materials, variable factory overhead, and variable selling costs d. direct labor, direct materials, and all factory overhead costs

d. direct labor, direct materials, and all factory overhead costs

Understanding how costs behave is useful to management for all the following reasons except a. estimating costs b. changing an existing product production c. predicting profits as sales and production volumes change d. predicting customer demand

d. predicting customer demand

Which of the following describes the behavior of a variable cost per unit? a. varies in increasing proportion with changes in the activity level b. varies in direct proportion with the activity level c. varies in decreasing proportion with changes in the activity level d. remains constant with changes in the activity level

d. remains constant with changes in the activity level

A factory has determined that its budgeted factory overhead budget for the year is $13,500,000 and budgeted direct labor hours are 10,000,000. If the actual direct labor hours for the period are 350,000, how much overhead would be allocated to the period? a. $470,630 b. $236,250 c. $472,500 d. $675,000

c. $472,500 Predetermined Overhead Rate = Budgeted Factory Overhead/Budgeted Direct Labor Hours $13,500,000/10,000,000 = $1.35 Allocated Overhead = Predetermined Overhead Rate X Actual Direct Labor Hours $1.35 X 350,000 = $472,500

A business operated at 100% of capacity during its first month and incurred the following costs to make 20,000 units of a product Direct materials .....................................$180,000 Direct labor .............................................240,000 Variable factory overhead .......................280,000 Fixed factory overhead ...........................100,000 Operating expenses: Variable operating expenses .....................$130,000 Fixed operating expenses ..............................50,000 180,000 If 1,600 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is a. $56,000 b. $78,400 c. $66,400 d. $64,000

a. $56,000 Cost per Unit = Variable Manufacturing Costs/Number of Units Produced ($180,000 + $240,000 + $280,000)/20,000 $700,000/20,000 = $35 Cost of Unsold Units = Cost per Unit X Number of Unsold Units $35 X 1,600 = $56,000

A company has the following information for October: Sales ...............................................................$1,000,000 Variable cost of goods sold .................................490,000 Fixed manufacturing costs ..................................170,000 Variable selling and administrative expenses .....112,000 Fixed selling and administrative expenses ..........100,000 Determine the October: a. Manufacturing margin b. Contribution margin c. Operating income

a. 510,000 Manufacturing Margin = Sales − Variable Cost of Goods Sold $1,000,000 − $490,000 = $510,000 b. 398,000 Contribution Margin = Manufacturing Margin - Variable Selling and Administrative Expenses $510,000 - $112,000 = $398,000 c. 128,000 Operating Income = Contribution Margin - Fixed Expenses $398,000 - $170,000 - $100,000 = $128,000

Which of the following would be an inappropriate activity base for cost analysis in a service firm? a. inventory produced b. haircuts given c. customers served d. lawns mowed

a. inventory produced

A company manufactures two products, desks and chairs, in two production departments, Assembly and Finishing. They expect to produce 10,000 desks and 20,000 chairs in the coming year. Budgeted factory overhead costs for the coming year are: Assembly $310,000 Finishing 240,000 Total $550,000 The machine hours expected to be used in the coming year are as follows: Assembly Department: Desks 15,100 Chairs 4,900 Total 20,000 Finishing Department: Desks 9,000 Chairs 11,000 Total 20,000 Round your answers to two decimal places, if necessary. a. What is the plantwide factory overhead rate? b. What is department overhead rate for: Assembly: Finishing: c. If the company uses the single plantwide rate, what is the overhead per unit for: Desks: Chairs: d. If the company uses the department overhead rate, what is the overhead per unit for: Desks: Chairs:

a. Plantwide Factory Overhead Rate = Total Factory Overhead Costs/Total Machine Hours $550,000/40,000 = $13.75 per machine hour b. Department Overhead Rate: Department Overhead Rate for Assembly= Assembly Department Overhead Costs​/Assembly Department Machine Hours $310,000/20,000 = $15.50 per machine hour Department Overhead Rate for Finishing= Finishing Department Machine Hours/Finishing Department Overhead Costs $240,000/20,000 = $12.00 per machine hour c. Overhead per Unit using Single Plantwide Rate: Overhead per Unit for Desks = Plantwide Overhead Rate X Machine Hours per Desk ($13.75 X (15,100 + 9,000))/10,000 = $33.14 Overhead per Unit for Chairs = Plantwide Overhead Rate X Machine Hours per Chair ($13.75 X (4,900 + 11,000))/20,000 = $10.93 d. Overhead per Unit using Department Overhead Rate: For Desks (Assembly Department): Overhead per Unit for Desks (Assembly) = Department Overhead Rate for Assembly X Machine Hours per Desk (Assembly) $15.50 X (15,100/10,000) = $23.26 For Desks (Finishing Department): Overhead per Unit for Desks (Finishing) = Department Overhead Rate for Finishing X Machine Hours per Desk (Finishing) $12.00 X (9,000/10,000) = $10.80 For Chairs (Assembly Department): Overhead per Unit for Chairs (Assembly) = Department Overhead Rate for Assembly X Machine Hours per Chair (Assembly) $15.50 X (4,900/10,000) = $7.55 For Chairs (Finishing Department): Overhead per Unit for Chairs (Finishing) = Department Overhead Rate for Finishing X Machine Hours per Chair (Finishing) $12.00 X (11,000/10,000) = $13.20

If fixed costs are $500,000, the unit selling price is $55, and the unit variable costs are $30, what is the breakeven sales (units) if fixed costs are increased by $80,000? a. 10,545 units b. 23,200 units c. 25,000 units d. 19,333 units

b. 23,200 units Breakeven Point (Units) = New Fixed Costs/Unit Selling Price - Unit Variable Costs New Fixed Costs = Old Fixed Costs + Increase in Fixed Costs $500,000 + $80,000 = $580,000 Breakeven Point (Units)= $580,000/$55-$30 $580,000/$25 = 23,200

Which of the following conditions would cause the break-even point to increase? a. Unit variable cost decreases b. Unit variable cost increases c. Total fixed costs decrease d. Unit selling price increases

b. Unit variable cost increases

Costs that can be influenced by management at a specific level of management are called a. variable costs b. controllable costs c. noncontrollable costs d. direct costs

b. controllable costs

If fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit? a. 400,000 units b. 10,000 units c. 20,000 units d. 25,000 units

c. 20,000 units Breakeven Point (Units) = Fixed Costs/Unit Contribution Margin $400,000/$20 = 20,000

Which of the following activity bases would be the most appropriate for food costs of a hospital? a. number of patients who stay in the hospital b. number of nurses scheduled to work c. how many MRI's are taken d. quantity of prescriptions filled

a. number of patients who stay in the hospital

The difference between the current sales revenue and the sales at the break-even point is called the a. price factor b. margin of safety c. operating leverage d. contribution margin

b. margin of safety

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit (loss) was a. $140,000 b. $370,000 c. $(30,000) d. $670,000

c. $(30,000) Variable costs are 70% of sales, so variable costs are 0.70 X $1,000,000 = $700,0000 Contribution margin (percentage of sales contributing to covering fixed costs and generating profit) is 100% - 70% = 30% Contribution margin in dollars is 0.30 X $1,000,000 = $300,000 Operating Profit (Loss) = Contribution Margin - Fixed Costs $300,000 - $330,000 = -$30,000

A different factory has determined that its budgeted factory overhead budget for the year is $4,396,000. They plan to produce 1,000,000 units. Budgeted direct labor hours are 314,000 and budgeted machine hours are 375,000. Using the single plantwide factory overhead rate based on direct labor hours, calculate the factory overhead rate for the year. a. $7.00 b. $18.20 c. $14.00 d. $67.20

c. $14.00 Factory Overhead Rate = Budgeted Factory Overhead/Budgeted Direct Labor Hours $4,396,000/314,000 = $14.00

A company produces two similar products - small lamps and desk lamps. The total plant overhead budget is $584,000 with 455,000 estimated direct labor hours. It is further estimated that small lamp production will require 260,000 direct labor hours and desk lamp production will need 195,000 direct labor hours. Using the single plantwide factory overhead rate, how much factory overhead will they allocate to small lamp production if the actual direct hours for the period is 196,000? a. $586,995 b. $774,694 c. $250,880 d. $778,667

c. $250,880 Plantwide Overhead Rate = Total Plant Overhead Budget/Total Estimated Direct Labor Hours $584,000/455,000 Overhead Allocated to Small Lamps = Plantwide Overhead Rate X Actual Direct Labor Hours for Small Lamps ($584,000/455,000) X 196,000 = $250,880

Variable costs as a percentage of sales for Lemon Inc. are 80%, current sales are $600,000, and fixed costs are $130,000. How much will operating income change if sales increase by$40,000? a. $30,000 decrease b. $8,000 decrease c. $8,000 increase d. $30,000 increase

c. $8,000 increase Contribution Margin Ratio = 1 − Variable Cost Ratio 1 − 0.80 = 0.20 Change in Operating Income = Contribution Margin Ratio X Change in Sales 0.20 X $40,000 = $8,000

Contribution margin is a. profit b. another term for volume in the "cost-volume-profit" analysis c. the same as sales revenue d. the excess of sales revenue over variable cost

d. the excess of sales revenue over variable cost