Chung Exam 1 Accounting 202

AAA Corporation has provided its contribution format income statement for January. The company produces and sells a single product. Sales (4,400 units) ..................$ 211,200 Variable expenses .................. 127,600 Contribution margin ............... 83,600 Fixed expenses ...................... 66,400 Profit ................................... 17,200 If the company sells 4,700 units, its total contribution margin should be closest to: A. $89,300 B. $98,000 C. $83,600 D. $18,373

A. $89,300

Which of the following statements is true? A. A regional sales manager's salary would be a direct cost of the regional office in which the sales manager works. B. A particular cost is either direct or indirect, regardless of the cost object. C. A direct cost is sometimes referred to as common cost. D. As long as a cost is traceable to a specific cost object, it is direct cost.

A. A regional sales manager's salary would be a direct cost of the regional office in which the sales manager works.

A laptop computer manufacturer would consider the computer's processor chip to be a(n): A. Direct material cost B. Indirect manufacturing overhead cost C. Indirect material cost D. Direct manufacturing overhead cost

A. Direct material cost

Which of the following is less likely fixed costs? A. Electricity to operate factory machines B. Factory insurance C. Factory rent D. Administrative salaries

A. Electricity to operate factory machines

Administrative costs include: A. Executive compensation and public relations costs B. Factory maintenance workers¡¯ wages C. Sales commissions and factory supervisors¡¯ salaries D. Shipping costs and sales commissions

A. Executive compensation and public relations costs

Salaries of factory supervisors and factory maintenance personnel are examples of _________ labor costs A. Indirect B. primary C. Direct D. Contributing

A. Indirect

A contribution format income statement: A. Is mainly designed to assist with management decision making. B. Is prepared primarily for external reporting purpose. C. Focuses on calculating net income. D. Separates costs into their fixed and mixed components.

A. Is mainly designed to assist with management decision making.

A dress manufacturer would consider the cost of relatively inexpensive items like thread to be part of: A. Manufacturing overhead B. Administrative costs C. Direct materials D. Selling costs

A. Manufacturing overhead

A cost driver or an activity base: A. Measures whatever causes costs to vary. B. Is part of the organization where major operations are planned and carried out. C. Is a measure of whatever causes fixed costs to occur. D. Is sometimes called a cost base.

A. Measures whatever causes costs to vary.

The break-even in units sold will decrease if there is an increase in: A. selling price. B. unit sales volume. C. unit variable expenses. D. total fixed expenses.

A. selling price.

AAA company has supplied the following data: The company's unit contribution margin is closest to: A. $ 4.10 per unit B. $ 3.80 per unit C. $ 4.55 per unit D. $ 7.15 per unit

B. $ 3.80 per unit

AAA Corporation uses the cost formula Y = $4,800 + $0.4·X for the maintenance cost, where X is machine-hours. The August budget is based on 9,000 hours of planned machine time. Fixed maintenance cost expected to be incurred during August is: A. $8,400 B. $4,800 C. $3,600 D. $6,000

B. $4,800

Alpha Corporation reported the following data for its most recent year: sales, $500,000; variable expenses, $300,000; and fixed expenses, $150,000. The company's degree of operating leverage is: A. 2 B. 4 C. 8 D. 10

B. 4

AAA company has supplied the following data: The company's degree of operating leverage is closest to: A. 15.54 B. 7.48 C. 1.25 D. 1.97

B. 7.48

Which one is different from other three from the perspective of matching principle? A. WIP B. SG&A C. Finished goods D. Raw materials

B. SG&A

Information Systems Security (preventative or detective)

Both

Sales salaries and commissions are $10,000 when 80,000 units are sold, $ 9,000 when 90,000 units are sold, $14,000 when 120,000 units are sold. Using the high-low method, what is the variable portion of sales salaries and commission? A. $0.12 per unit B. $0.08 per unit C. $0.10 per unit D. $0.14 per unit

C. $0.10 per unit

AAA company is a merchandiser that provided the following information: Sales $12,000, Cost of goods sold $6,000, variable selling $1,000, fixed administrative $1,500 Depreciation expense $500 Calculate the contribution margin of this company. A. $4,000 B. $6,000 C. $5,000 D. $10,000

C. $5,000

AAA Corporation uses the cost formula Y = $4,800 + $0.4·X for the maintenance cost, where X is machine-hours. If budgeted August maintenance cost is $10,800, the variable maintenance cost expected to be incurred during August is: A. $8,400 B. $4,800 C. $6,000 D. $3,600

C. $6,000

If a company decreases the variable expense per unit while increasing the total fixed expenses, the total expense line relative to its previous position will: A. shift upward and have a steeper slope. B. shift downward and have a steeper slope. C. shift upward and have a flatter slope. D. shift downward and have a flatter slope.

C. shift upward and have a flatter slope.

Which of the following is NOT a correct definition of the break-even point? A. the point where total profit equals zero. B. the point where total contribution margin equals total fixed expenses. C. the point where total profit equals total fixed expenses. D. the point where total sales equals total expenses.

C. the point where total profit equals total fixed expenses

Within the relevant range of activity, variable costs: A. vary per unit. B. is not predictable. C. vary in total. D. remain constant in total.

C. vary in total.

What is Y (y=a+bx)

Cost

The following monthly data are available for the Wyatt Corporation and it makes only one product: Unit selling price ..........$36 unit variable expenses .........$ 28 Total fixed expenses .........$ 50,000 Actual sales for the month of May .......7,000 units The margin of safety for the company during May was: A. $56,000 B. $106,000 C. $6,000 D. $27,000

D. $27,000

AAA Corporation uses the cost formula Y = $4,800 + $0.4·X for the maintenance cost, where X is machine-hours. The August budget is based on 9,000 hours of planned machine time. Maintenance cost expected to be incurred during August is: A. $6,000 B. $3,600 C. $4,800 D. $8,400

D. $8,400

Period costs are expensed on the income statement: A. Never: they do not appear on the income statement. B. In the period in which the related goods are sold. C. After they are capitalized. D. In the period in which they are incurred.

D. In the period in which they are incurred.

Indirect materials and indirect labor are classified as: A. Period costs B. Fixed costs C. Nonspecific costs D. Manufacturing overhead

D. Manufacturing overhead

The margin of safety is A. the excess of budgeted net operating income over actual net operating income. B. the excess of budgeted or actual sales over budgeted or actual variable expenses. C. the excess of budgeted or actual sales over budgeted or actual fixed expenses. D. the excess of budgeted or actual sales over the break-even volume of sales.

D. the excess of budgeted or actual sales over the break-even volume of sales.

Contribution margin is the amount remaining after: A. cost of goods sold has been deducted from sales revenues. B. fixed expenses have been deducted from sales revenue. C. fixed expenses have been deducted from variable expenses. D. variable expenses have been deducted from sales revenue.

D. variable expenses have been deducted from sales revenue.

Planning

Establish goals and specify how to achieve them

Controlling

Gather feedback to ensure plan is being executed then provide modifications

Costumer Intimacy Strategy

Individual Customer Needs

cost object

a destination where cost is assigned ex: product

cost driver

any factor that increases cost ex: labor cost, hours

Operating Leverage

change in profit/ change in sales

what is x (y=a+bx)

cost driver (activity level) ex: Q

cost classification chart

cost driver >(cost behavor fixed/ variable) cost >(cost assignment direct/indirect) cost obj.

Operational Excellence Strategy

deliver products and services faster, more conveniently, and at lower prices

manufacturing cost

direct materials, direct labor, manufacturing overhead D.M+D.L+M.O DM +D.L = prime cost M.O= conversion cost

2 components for it to be a direct manufacturing

easily traceable economically useful ex: wood chair, wages for assembly workers

A company's cost structure is not important as long as it achieves its sales goal.

false

All other things the same, an increase in variable expense per unit will reduce the break-even point.

false

Insurance incurred in the factory is period cost.

false

Operating leverage is a measure of how sensitive profit is to a given percentage in contribution margin.

false

Sandpaper is direct cost in furniture manufacturing.

false

Selling costs are sometimes recognized as assets.

false

There is no relationship between Profit and Contribution margin.

false

key differences of managerial and financial accounting

financial: external > summarize > objective > GAAP managerial: internal > improve > relevant and timely > NO

cost

monetary value of resources acquired and used. ex: material and labor costs

Product Leadership Strategy

offer higher quality products

Lean Production

only produces units in response to customer orders

Non-manufacturing costs

sales SG&A period cost

profit

sales - expense

What is a (y=a+bx)

total fixed costs

All other things the same, an increase in total fixed expenses will increase the break-even point.

true

As total sales increase beyond the break-even point, the degree of operating leverage will decrease.

true

At the break-even point, the total contribution margin and fixed expenses are equal.

true

For a capital-intensive company, the profits tend to be more flucturating than for a less capital-intensive company.

true

If two companies produce the same product and have the same total sales and same total expenses, operating leverage will be higher in the company with a higher proportion of fixed expenses in its cost structure.

true

what is b (y=a+bx)

unit variable cost

AAA Corporation, a company that produces and sells a single product, has provided its contribution format income statement for March. Sales (5,000 units) ..................$ 205,000 Variable expenses .................. 125,000 Contribution margin ............... 80,000 Fixed expenses ...................... 62,400 Profit ................................... 17,600 If the company sells 5,400 units, its profit should be closest to: $24,000 $19,008 $17,600 $34,000

$24,000

Maintaining Records (preventative or detective)

Detective

Performance Reviews (preventative or detective)

Detective

Reconciliations (preventative or detective)

Detective

Authorizations (preventative or detective)

Preventative

Segregation of Duties (preventative or detective)

Preventive

physical safeguards (preventative or detective)

Preventive

Contribution Margin formula

Sales - Variable Costs

Decision Making

Selecting a course of acting