Acct 2 exam

Net operating income under variable and absorption costing will generally: A) always be equal. B) never be equal. C) be equal only when production and sales are equal. D) be equal only when production exceeds sale

C

16. Which of the following types of decisions involves deciding whether to eliminate a particular division or segment of the business? A)Special-order B)Make-or-buy C)Continue-or-discontinue D)Sell-or-process further

C

Flupper, Inc. must perform maintenance on its production machinery after every 10,000 units produced. Production varies between 12,000 and 30,000 units a year. The cost of this maintenance would be classified as a A)variable cost. B)fixed cost. C)step cost. D)mixed cost.

C

The foregone benefit of choosing one alternative over another is measured by A)opportunity costs. B)activity-based costs. C)differential costs. D)capital costs

A

Which of the following is not relevant to a sell-or-process further decision? A)The cost of processing the product "as is". B)The cost of processing the product further. C)The opportunity cost of spending resources processing the product further. D)The incremental revenue from processing the product further.

A

Note that the Total unit cost = $50]An outside supplier has offered to provide Aitken Corp with the 20,000 sub-components. What is the maximum price Aitken Corp should pay the outside supplier? A)$40 B)$45 C)$50 D)$55

A. $15+10+15

If sales revenue doubles, variable costs will A) decrease in total. B) increase in total. C) decrease on a per unit basis. D) increase on a per unit basis.

B

How much will the sale of one additional case add to Bronco's net operating income? A) $250.00 B) $100.00 C) $150.00 D) $12.50

B. Current contribution margin ÷ Current sales in cases = Contribution margin per case $40,000 ÷ 400 = $100 contribution margin per case. If one additional case is sold, net operating income will increase by $100

Sorin Inc., a company that produces and sells a single product, has provided its contribution format income statement for January. If the company sells 4,600 units, its total contribution margin would be: A) $54,600 B) $59,800 C) $69,400 D) $13,362

B. Current contribution margin ÷ Current sales in units = Contribution margin per unit $54,600 ÷ 4,200 = $13 contribution margin per unit. If 4,600 units are sold, the total contribution margin will be 4,600 × $13,or $59,800

The unit sales to attain the company's monthly target profit of $44,000 is: A) 7,896 B) 12,769 C) 6,578 D) 4,341

C. (Fixed expenses + Target profit)/Contribution margin per unit = break-even units($997,920 + 44,000) / (240 - 81.60) = 6,578 units OR Sales = Variable expenses + Fixed expenses + Target profit$240.00 Q = $81.60 Q + $997,920 + $44,000$158.40. Q = $1,041,920 Q = $1,041,920 ÷ $158.40 per unit = 6,578 units (rounded)

The break-even in monthly unit sales is: A) 3,111 B) 6,892 C) 4,040 D) 13,52

C. Fixed expenses/Contribution margin per unit = break-even units$466,620 / (150 - 34.50) = 40,400 units OR Sales = Variable expenses + Fixed expenses + Profit. $150.00 Q = $34.50 Q + $466,620 + $0. $115.50 Q = $466,620. Q = $466,620 ÷ $115.50 per unit = 4,040 units

Contribution margin is defined as: A) Sales revenue minus cost of goods sold. B) Sales revenue minus fixed expenses. C) Sales revenue minus direct labor. D) Sales revenue minus variable expenses.

D

What would Pepin's profit margin be if the Nelson division was dropped? A)$99,625 profit B)$91,000 profit C)$384,000 profit D)$71,000 loss

D. $384,000 - $455,000

Booble, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. If sales revenue increases by $20,000, by how much will profit increase? A)$1,800 B)$4,500 C)$5,000 D)$9,000

D. = Contribution margin ratio x increased profit= .45 x $20,000 = $9,000

Assume that Xenon has sufficient capacity to fill the order without harming normal production and sales. If Xenon accepts the order, what effect will the order have on the company's short-term profit? A)$30,000 decrease B)$30,000 increase C)$50,000 decrease D)$20,000 increase

D. Fixed Manufacturing OH should not be considered. Total profit of special order = $1,500 - $1,300 = 200 x 100. Total = $20,000

The degree of operating leverage is closest to: A) 0.05 B) 0.15 C) 21.31 D) 6.89

Degree of operating leverage = Contribution margin/Net operating income= $84,000/$12,200 = 6.89

What is the margin of safety in dollars? A) $2,104,000 B) $457,000 C) $396,000 D) $216,00

Margin of safety in dollars: Break-even sales = $200 per unit × 10,520 = $2,104,000. Current sales = $200 per unit × 12,500 = $2,500,000. Margin of safety in dollars = Sales − Break-even sales= $2,500,000 − $2,104,000= $396,000

Bluestem is currently operating at full capacity and cannot fill the order without harming normal production and sales. If Bluestem accepts the order, what effect will the order have on the company's short-term profit? A)$60,000 decrease B)$60,000 increase C)$100,000 decrease D)Zero

Opportunity costs should be considered, since it will harm unit cost for special order = $150-$130(relevant costs) - $70(Opportunity cost of $200-$130) = ($50)Total profit of special order = 2,000 x ($50) = Total = ($100,000)