Managerial Accounting Modules 6-9 Exam- Hanna

If at the end of the fiscal year, the variances from standard are significant, the variances should be transferred to the

work in process, cost of goods sold, and finished goods accounts

Given the following cost and activity observations for George Company's utilities, use the high-low method to determine George's variable utilities cost per machine hour.

Difference in Total Cost = Total Cost (highest level) - Total Cost (lowest level) = $18,000 - $16,000 = $2,000 Variable Cost per Machine Hour = Difference in Total Cost ÷ Difference in Machine Hours = $2,000 ÷ (120,000 - 100,000) = $0.10 *excel

Which of the following statements is true regarding fixed and variable costs?

Fixed costs are constant in total, and variable costs are constant per unit.

The operating budgets of a company include the

production budget

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as

there is no limit

Which of the following conditions would cause the break-even point to increase?

unit variable cost increases

Which of the following types of cost is shown in the cost data below?

variable costs

When a manager seeks to achieve personal departmental objectives that may work to the detriment of the overall firm, the manager is experiencing

goal conflict

The direct materials price variance is the difference between the

actual costs and the actual quantity at the standard price

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would

decrease

Which of the following would be included in the cost of a product manufactured according to absorption costing?

depreciation expense on factory building

Which of the following is not a reason for a direct materials quantity variance?

increased material cost per unit

Standards that represent levels of operation that can be attained with reasonable effort are called _____ standards.

normal

Favorable volume variances may be harmful when

production in excess of normal capacity cannot be sold

The principle of exceptions allows managers to focus on correcting variances between

standard costs and actual costs

As production increases, variable costs per unit

stay the same

The total manufacturing cost variance is

the difference between total actual costs and total standard costs for the units produced

Under absorption costing, which of the following costs would not be included in finished goods inventory?

the salaries for salespeople

It would be acceptable to have the selling price of a product just above the variable costs and expenses of making and selling it in

the short run

Planned sales are 10,000 units at $7.00 per unit. Actual sales are 11,000 units at $6.50 per unit. Which of the following statements is not true?

the total revenue variance is unfavorable

Under variable costing, which of the following costs would be included in finished goods inventory?

wages of carpenters in a furniture factory

Which of the following conditions normally would not indicate that standard costs should be revised?

Actual costs differed from standard costs for the preceding week.

Rusty Co. sells two products: X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Selling price of E was:

Sales mix percentage for Product X: 5,000 units / (5,000 units + 35,000 units) = 12.5%Sales mix percentage for Product Y: 35,000 units / (5,000 units + 35,000 units) = 87.5%Unit selling price of E: ($110 × 0.125) + ($70 × 0.875) = $75

Which of the following is not an assumption underlying cost-volume-profit analysis?

The break-even point will be passed during the period.

Given the following costs and activities for Dance Company's electrical costs, use the high-low method to determine Dance's variable electrical costs per machine hour.

Difference in Total Cost = Total Cost (highest level) - Total Cost (lowest level) = $13,200 - $11,400 = $1,800 Variable Cost per Machine Hour = Difference in Total Cost ÷ Difference in Machine Hours = $1,800 ÷ (17,500 - 14,500) = $0.60 *excel

An October sales forecast projects 7,000 units are going to be sold at a price of $11.50 per unit. The desired ending inventory in units is 15% higher than the beginning inventory of 1,000 units. Total October sales are anticipated to be

Expected October Sales = 7,000 × $11.50 = $80,500

Which of the following statements is correct using the direct costing concept?

Only variable manufacturing costs are included in the calculation of cost of goods manufactured, while fixed costs are considered period costs.

Beemer's sales are $400,000, variable costs are 75% of sales, and operating income is $50,000. The operating leverage is

Operating Leverage = Contribution Margin / Operating Income = [$400,000 - ($400,000 × 75%)] / $50,000 = 2.0

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is

Percent Change in Operating Income = Percent Change in Sales × Operating Leverage = 12% × 4 = 48%

Assume that Corn Co. sold 6,900 units of Product A and 3,100 units of Product B during the past year. The unit contribution margins for Products A and B are $33 and $57, respectively. Corn has fixed costs of $375,000. The break-even point in units is

Sales mix for Product A: 6,900 units / (6,900 units + 3,100 units) = 69%Sales mix for Product B: 3,100 units / (6,900 units + 3,100 units) = 31%Unit contribution margin of E = [($33 × 0.69) + ($57 × 0.31)] = 40.44Break-Even Sales (units) = Fixed Costs / Contribution Margin = $375,000 / $40.44 = 9,273 units

Rusty Co. sells two products: X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Unit contribution of E was:

Sales mix percentage for Product X: 5,000 units / (5,000 units + 35,000 units) = 12.5%Sales mix percentage for Product Y: 35,000 units / (5,000 units + 35,000 units) = 87.5%Unit contribution margin of E: ($40 × 0.125) + ($20 × 0.875) = $22.50

Standard costs are used in companies for a variety of reasons. Which of the following is not one of the benefits for using standard costs?

They are used to indicate where changes in technology and machinery need to be made.

An unfavorable fixed overhead volume variance can be due to all of the following except

an increase in utility costs

A report that summarizes actual costs, standard costs, and the differences for the units produced is called a

budget performance report

Charlotte Co. has budgeted salary increases to factory supervisors totaling 9%. If selling prices and all other cost relationships are held constant, next year's break-even point

cannot be determined from the data given

Kaden Company's fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24. The break-even sales (units) is

Break-Even Sales (units) = Fixed Costs / Contribution Margin = $46,800 / ($42 - $24) = 2,600 units

Kaiser Air is considering a new flight between Atlanta and Tampa. The average fare per seat is $400. The fixed costs for the flight, which include crew salaries, operating costs, and aircraft depreciation, total $32,000. Variable costs per passenger total $75. The break-even number of passengers per flight is

Break-Even Sales (units) = Fixed Costs / Unit Contribution Margin = $32,000 / ($400 - $75) = 98 passengers

If fixed costs are $561,000 and the unit contribution margin is $8.00, the break-even point in units if variable costs are decreased by $0.50 per unit is

Break-Even Sales (units) = Fixed Costs / Unit Contribution Margin = $561,000 / ($8 + $0.50) = 66,000 units

If fixed costs are $500,000 and the unit contribution margin is $20, the break-even point in units if fixed costs are reduced by $80,000 is

Break-Even Sales (units) = Fixed Costs / Unit Contribution Margin = ($500,000 - $80,000) / $20 = 21,000 units

Bryce Co. sales are $814,000, variable costs are $463,400, and operating income is $229,000. The contribution margin ratio is

Contribution Margin Ratio = (Sales - Variable Costs ) ÷ Sales = ($814,000 - $463,400) ÷ $814,000 = 43.1%

Variable costs as a percentage of sales for Lemon Inc. are 72%, current sales are $575,000, and fixed costs are $175,000. How much will operating income change if sales increase by $48,100?

Contribution Margin Ratio = 100% - Variable Costs as a Percentage of Sales = 100% - 72% = 28% Change in Operating Income = Change in Sales Dollars × Contribution Margin Ratio = $48,100 × 28% = $13,468 *excel sheet

If the contribution margin ratio for France Company is 45%, sales are $401,000, and fixed costs are $110,000, the operating income is

Contribution Margin Ratio = Contribution Margin / Sales = 45% × $401,000 = $180,450Operating Income = Contribution margin - Fixed costs = $180,450 - $110,000 = $70,450

If sales are $802,000, variable costs are 70% of sales, and operating income is $240,000, what is the contribution margin ratio?

Contribution margin ratio = 100% - Variable costs as a percentage of sales = 100% - 70% = 30%

If fixed costs are $281,000, the unit selling price is $74, and the unit variable costs are $48, the old and new break-even sales (units), respectively, if the unit selling price increases by $7 are

Old Break-Even Sales (units) = Fixed Costs / Unit Contribution Margin = $281,000 / ($74 - $48) = 10,808 units New Break-Even Sales (units) = Fixed Costs / Unit Contribution Margin = $281,000 / (($74 + $7) - $48) = 8,515 units

A firm operated at 80% of capacity for the past year, during which fixed costs were $208,000, variable costs were 64% of sales, and sales were $1,079,000. Operating profit was

Variable Costs = $1,079,000 × 64% = $690,560 Contribution Margin = Sales - Variable Costs = $1,079,000 - $690,560 = $388,440 Operating Income = Contribution margin - Fixed Costs = $388,440 - $208,000 = $180,440

Which of the following is not true when determining the selling price for a product?

Variable costing is effective when determining short-run decisions, but absorption costing is only used for long-term pricing policies.

The direct labor rate variance is the difference between the

actual costs and the actual hours at the standard rate

The direct labor time variance is the difference between the

actual hours at the standard rate and the standard costs

The direct materials quantity variance is the difference between the

actual quantity at the standard price and the standard costs

The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured

equal units sold

Which of the following would not be an appropriate activity base for cost analysis in a service firm?

inventory produced

The primary difference between a static budget and a flexible budget is that a static budget

is a plan for a single level of activity, whereas a flexible budget adjusts for changes in the activity level

Standard costs are divided into which of the following components?

standard price and standard quality