Accounting Exam #2

PHB Co. sold 3,000 units in October at a sales price of $45 per unit. The variable cost is $25 per unit. Fixed costs are $30,000. Calculate the contribution margin per unit

$20

Kapital, Inc. has prepared the operating budget for the first quarter of the year. The company forecast sales of $45,000 in January, $55,000 in February, and $65,000 in March. Variable and fixed selling and administrative expenses are as follows: Variable Expenses: Power cost (20% of sales) Miscellaneous expenses: (10% of sales) Fixed Expenses: Salary expense: $6,000 per month Rent expense: $5,000 per month Depreciation expense: $1,400 per month Power cost/fixed portion: $600 per month Miscellaneous expenses/fixed portion: $1,200 per month Calculate total S & A expenses for the month of January

$27,700

The budgeted production of Taurus, Inc. is 13,000 units per month. Each unit requires 30 minutes of direct labor to complete. The direct labor rate is $80 per hour. Calculate the budgeted cost of direct labor for the month. (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

$520,000

PHB Co. sold 3,000 units in October at a sales price of $45 per unit. The variable cost is $25 per unit. Fixed costs are $30,000. Calculate the total contribution margin.

$60,000

A 15% increase in production volume will result in a ________.

15% increase in total variable costs

Magnolia, Inc. has budgeted sales for the first quarter of the next year to be 45,000 units. The inventory on hand at the beginning of quarter is 5,000 units. The desired ending inventory is 3,000 units. Calculate the budgeted production for the first quarter

43,000 units

PHB Co. sold 3,000 units in October at a sales price of $45 per unit. The variable cost is $25 per unit. Fixed costs are $30,000. Calculate the contribution margin ratio.

44%

Manhattan Enterprises manufactures cookware sets and sells the sets to department stores. Manhattan expects to sell 2,400 cookware sets for $200 each in April and 3,500 cookware sets for $215 each in May. Sales are 15% cash and 85% on account. Compute the total budgeted sales for May.

752,500

Which of the following best describes a standard?

A sales price, cost, or quantity that is expected under normal conditions

An unfavorable sales volume variance in operating income suggests a(n) ________.

An unfavorable sales volume variance in operating income suggests a(n) ________.

Contribution margin ratio is equal to ________.

CM/Net sales revenue

The budget process is a loop that consists of ________.

Developing strategies, planning, acting, and controlling

Which of the following is a variable cost?

Direct Materials Cost

Absorption costing considers fixed selling and administrative costs as product costs.

False

Developing a budget reduces coordination and communication at different levels in an organization.

False

Service companies do not have fixed costs; all costs incurred by service companies are variable costs.

False

Setting standard costs is a function of the company's production department and does not require input from other departments.

False

Target profit can be determined by using the contribution margin, contribution margin ratio, or break even approach.

False

The contribution margin for service companies is calculated by subtracting fixed costs from service revenue.

False

The flexible budget variance is the difference between expected results in the flexible budget for the actual units sold and the static budget.

False

The level of forecasted sales has little effect on other elements of the master budget.

False

Which of the following costs does not change in total despite changes in volume within the relevant range?

Fixed Costs

The efficiency variance measures ________.

How well the business uses its materials or human resources

A favorable flexible budget variance in sales revenue suggests a(n) ________.

Increase in sales price

When the sales price per unit decreases, the breakeven point ________.

Increases

Which of the following statements is true of the capital expenditures budget?

It must be completed before the cash budget is prepared.

The starting point in developing the master budget is the preparation of the ________.

Sales Budget

A company is analyzing its month-end results by comparing it to both static and flexible budgets. During the previous month, the actual sales volume was lower than the expected sales volume as per the static budget. This difference results in an unfavorable ________.

Sales volume variance for sales revenue

When there are no beginning or ending balances in Finished Goods Inventory, variable and absorption costing will result in ________.

Same operating income

A favorable direct materials cost variance occurs when the actual direct materials cost incurred is less than the standard direct materials cost.

True

A flexible budget is prepared to represent various levels of sales volume.

True

A standard cost system helps management set performance standards.

True

Absorption costing is more appropriate than variable costing for making plant production capacity decisions.

True

After comparing budgets with the actual results, the feedback allows managers to determine what, if any, corrective action should be taken.

True

Contribution margin is the difference between net sales revenue and variable costs.

True

Emara Company sells two generators-Model A and Model B-for $456 and $394, respectively. The variable cost of Model A is $406 and of Model B is $304. The company will generate lower revenues but a higher net income if it sells more of Model B than Model A.

True

For manufacturing companies, the primary source of cash is from its customers.

True

For short-term pricing decisions, variable costing is an appropriate costing method to use.

True

Target profit is the operating income that results when sales revenue minus variable and fixed costs equals management's profit goal.

True

The capital expenditures budget is completed before the preparation of the cash budget.

True

The forecast of sales revenue is the cornerstone of the master budget.

True

The sales level at which operating income is zero is called the breakeven point.

True

The sales volume variance is the difference between the expected results in the flexible budget for the actual units sold and the static budget.

True

Total variable costs change in direct proportion to changes in the volume of production.

True

Which of the following costs change in total in direct proportion to a change in volume?

Variable Costs

When there is no beginning Finished Goods Inventory and all the goods that are produced are sold, the operating income ________.

will be the same for both absorption costing and variable costing