accounting exam 3

Given the following cost and activity observations for Smithson Company's utilities, use the high-low method to calculate Smithson's fixed costs per month. Do not round intermediate calculations. Cost January $52,200 February 75,000 March 57,000 April 64,000 Machine Hours January $20,000 February 29,000 March 22,000 April 24,500 a. $1,533 b. $2,530 c. $22,800 d. $50,600

a

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes? a. direct labor b. salary of a factory supervisor c. units-of-production depreciation on factory equipment d. direct materials

b

Manley Co. manufactures office furniture. During the most productive month of the year, 4,500 desks were manufactured at a total cost of $86,625. In its slowest month, the company made 1,800 desks at a cost of $49,500. Using the high-low method of cost estimation, total fixed costs are a. $61,875 b. $33,875 c. $24,750 d. cannot be determined from the data given

c

a disadvantage of static budgets is that they a. are dependent on the previous year's actual results b. cannot be used by service companies c. do not show possible changes in underlying activity levels d. show the expected results of a responsibility center for several levels of activity

c

a formal written statement of management's plans for the future, expressed in financial terms, is a a. gross profit report b. responsibility report c. budget d. performance report

c

the first budget customarily prepared as part of an entity's master budget is the a. production budget b. cash budget c. sales budget d. direct materials purchases budget

c

which of the following costs is a mixed cost? a. salary of a factory supervisor b. electricity costs of $3 per kilowatt-hour c. rental costs of $10,000 per month plus $0.30 per machine hour of use d. straight-line depreciation on factory equipment

c

which of the following is not an example of a cost that varies in total as the number of units produced changes? a. electricity per KWH to operate factory equipment b. direct materials cost c. straight-line depreciation on factory equipment d. wages of assembly worker

c

which of the following would not be used in preparing a cash budget for October? a. beginning cash balance in October 1 b. budgeted salaries expense for October c. estimated depreciation expense for October d. budgeted sales and collections for October

c

As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March of 2012 were as follows: $120,000, $140,000 and $150,000, respectively. Of each month's sale, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of February? a. $129,600 b. $62,400 c. $133,600 d. $91,200

c

if sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, what is the operating leverage? a. 0.0 b. 7.5 c. 2.0 d. 1.3

c

a series of budgets for varying rates of activity is termed a(n) a. flexible budget b. variable budget c. master budget d. activity budget

a

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

b

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

a

which of the following describes the behavior of the fixed cost per unit? a. decreases with increasing production b. decreases with decreasing production c. remains constant with changes in production d. increases with increasing production

a

cost behavior refers to the manner in which a cost a. changes as the related activity changes b. is allocated to products c. is used in setting sale prices d. is estimated

a

most operating decisions of management focus on a narrow range of activity called the a. relevant range of production b. strategic level of production c. optimal level of production d. tactical operating level of production

a

if variable costs per unit increased because of an increase in hourly wage rates, the break-even point would a. decrease b. increase c. remain the same d. increase or decrease, depending on the percentage increase in wage rates

b

the production budgets are used to prepare which of the following budgets? a. operating expenses b. direct materials purchases, direct labor cost, and factory overhead cost c. sales in dollars d. direct materials purchases budget

b

the systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed a. contribution margin analysis b. cost-volume-profit analysis c. budgetary analysis d. gross profit analysis

b

the three most common cost behavior classifications are a. variable costs, product costs, and sunk costs b. fixed costs, variable costs, and mixed costs c. variable costs, period costs, and differential costs d. variable costs, sunk costs, and opportunity costs

b

which of the following is an example of a cost that varies in total as the number of units produced changes? a. salary of a production supervisor b. direct materials cost c. property taxes on factory buildings d. straight-line depreciation on factory equipment

b

The primary difference between a static budget and a flexible budget is that a static budget a. is suitable in volatile demand situation while flexible budget is suitable in a stable demand situation b. is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales c. includes only fixed costs, whereas a flexible budget includes only variable costs d. is a plan for a single level of production, whereas a flexible budget can be converted to any level of production

d

Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are: a. 47% and $11 per unit b. 53% and $7 per unit c. 47% and $8 per unit d. 52% and $11 per unit

d

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

d

the budget process involves doing all of the following except a. establishing specific goals b. executing plans to achieve the goals c. periodically comparing actual results with the goals d. dismissing all managers who fail to achieve operational goals specified in the budget

d

the budget that summarizes future plans for the acquisition of fixed assets is the a. direct materials purchases budget b. cash budget c. sales budget d. capital expenditures budget

d