Accounting Exam 3 Topic 11 A B C

Collins Company had the following cost data available. The Collins accountant believes that direct labor hours is the correct cost driver to use to predict and manage these costs. $100,000; 15,000 direct labor hours for January $80,000; 12,000 direct labor hours for February $90,000; 14,000 direct labor hours for March $75,000; 11,000 direct labor hours for April $85,000; 12,500 direct labor hours for May $70,000; 10,000 direct labor hours for June Use the high-low method to compute the total amount of monthly fixed costs for Collins Company.

$10,000 (100,000 - 70,000)/(15,000 - 10,000) = 6$/labor hour Y = mX + b 100,000 = 6*(15,000) + b b = 10,000 70,000 = 6*(10,000) + b b = 10,000

Tilly Company had the following cost and volume data for the first four months of the year. January: Cost of $52,500; volume of 9,000 units February: Cost of $40,000; volume of 6,500 units March: Cost of $70,000; volume of 14,000 units April: Cost of $60,000; volume of 11,000 units Using the scattergraph method, which ONE of the following is the BEST estimate of the variable cost per unit?

$4.00 per unit (70,000 - 40,000)/(14,000 - 6,500) (30,000)/(7,500) = 4.00

Collins Company had the following cost data available. The Collins accountant believes that direct labor hours is the correct cost driver to use to predict and manage these costs. $50,000; 15,000 direct labor hours for January $40,000; 12,000 direct labor hours for February $35,000; 10,000 direct labor hours for March $38,000; 11,000 direct labor hours for April $45,000; 12,500 direct labor hours for May $45,000; 14,000 direct labor hours for June Use the high-low method to compute the total amount of monthly fixed costs for Collins Company

(50,000 - 35,000)/(15,000 - 10,000) 15,000/5,000 = 3$ per unit Y = mX + b 50,000 = 3*15,000 + b b = 5,000

The following data are for Sophie Wynn Company. Variable cost per unit $12.50 Fixed costs $500,000 Calculate the selling price per unit that must be charged in order to generate a profit of $270,000 with a sales volume of 50,000 units.

(Sp * 50,000) - (12.5 * 50,000) - 500,000 = 270,000 50,000 Sp = 270,000 + 500,000 + 625,000 Sp = $27.90

The following data are for Julian Mark Company. Selling price per unit $5.00 Variable cost per unit $2.00 Number of units sold 50,000 units Net income $40,000 Calculate the breakeven point in number of units.

36,667 units Sales - Variable Cost - Fixed Cost = Net Income (units * 5) - (units * 2) - Fixed = 40,000 fixed = -3 * units Fixed cost + 40,000 = (-150,000 + 40,000) = 110,000 (units * 5) - (units * 2) - 110,000 = 0 3 * units = 110,000 units = 36,667

Yvonne Company reported the following data. Price per unit = $20 Fixed cost = $6,000 Variable cost per unit = $11 How many units must Yvonne Company sell in order to reach a TARGET PROFIT OF $30,000?

4,000 units Sales - Variable Cost - Fixed Cost = Net Income (units * 20) - (units * 11) - 6,000 = 30,000 20 units - 11 units = 36,000 9 units = 36,000 units = 4,000

Hayley Company reported the following data. Price per unit = $10 Variable cost per unit = $7 Fixed cost = $1,500 Given these data, compute the BREAKEVEN number of UNITS.

500 units = (1,500/(10-7))

Which ONE of the following statements describes a FIXED COST?

Constant in total over the relevant range

Which ONE of the following statements describes a VARIABLE COST?

Constant per unit over the relevant range

Within the relevant range, the fixed cost per unit

Decreases as activity level increases

Which ONE of the following is a VARIABLE cost?

Depreciation on factory machinery

Which ONE of the following is most likely to be a variable cost?

Direct labor

Costs that contain both fixed and variable components are

Mixed costs

Within the relevant range, per-unit variable cost:

Remains constant as activity level increases

Brendon Company reported the following data. Price per unit = $20 Fixed cost = $6,000 Breakeven number of units = 1,000 units Given these data, compute the VARIABLE COST PER UNIT.

Sales - Variable Cost - Fixed Cost = Net Income (1000 * 20) - (1000 * Variable price) - 6,000 = 0 20,000 - 1000 Vp = 6,000 1000 Vp = 14,000 Vp = $14

The following data are for Bernie Marie Company. Variable cost ratio 35% Number of units sold 20,000 Net income $50,000 Fixed cost $80,000 Calculate the breakeven number of sales units.

Sales - Variable Cost - Fixed Cost = Net Income (20,000 * price) - (.35 * 20,000 * price) - 80,000 = 50,000 .65 * 20,000 * price = 130,000 price = $10.00 (10 * units) - (.35 * 10 * units) - 80,000 = 0 6.5 units = 80,000 units = 12,308 12,308 units

The following data are for Julian Mark Company. Total sales revenue $250,000 Number of units sold 50,000 units Fixed costs $100,000 Net income $40,000 Calculate the breakeven point in number of units.

Sales - Variable Cost - Fixed Cost = Net Income (250,000) - x - 100,000 = 40,000 140,000 - 250,000 = x Variable cost = 110,000 250,000 / 50,000 = 5 / unit 110,000 / 50,000 = 2.2 / unit (5 * units)-(2.2 * units)-100,000 = 0 2.8 * units = 100,000 units = 35,714 units

Jeff Co. sells its giant cheese wheels for $36 per wheel. The contribution margin ratio is 75% and total fixed costs are $270,000. How many wheels must Jeff sell in order to generate a profit of $54,000?

Sales - Variable Cost - Fixed Cost = Net Income (36 * units) - ((36 * .25) * units) - 270,000 = 54,000 (36 - 9) * units = 54,000 + 270,000 27 units = 324,000 units = 12,000 wheels 12,000 wheels contribution margin must be taken out of price per wheel to get variable cost per unit

The following data are for Lily Kay Company. Total sales revenue $250,000 Number of units sold 50,000 units Contribution margin per unit $3.50 Fixed costs $100,000 Calculate the number of units that must be sold to generate net income of $80,000.

Sales - Variable Cost - Fixed Cost = Net Income (5 * units) - (1.5 * units) - 100,000 = 80,000 3.5 * units = 180,000 units = 51,429 51,429 units

Ramona Company reported the following data. Price per unit = $10 Variable cost per unit = $7 Fixed cost = $1,500 Number of units sold = 700 units Given these data, compute NET INCOME.

Sales - Variable Cost - Fixed Cost = Net Income (700 * 10) - (700 * 7) - 1,500 = Net income 7,000 - 4,900 - 1,500 = $600 $600

New Braunfel's Flood Insurance Agency had total sales last year of $500,000, total variable costs of $200,000, and total fixed costs of $125,000. Accordingly, New Braunfel's net income for last year was $175,000 ($500,000 - $200,000 - $125,000). What is New Braunfel's break-even point in total sales dollars?

Sales - Variable Cost - Fixed Cost = Net Income x - (200,000/500,000)*x - 125,000 = 0 x - .4x = 125,000 .6x = 125,000 x = 208,333

The following data are for Kylie Ramona Company. Variable cost ratio 15% Fixed costs $100,000 Calculate the breakeven sales revenue.

Sales - Variable Cost - Fixed Cost = Net Income x - .15x -100,000 = 0 .85x = 100,000 x = 117,647

The purpose of the high-low method is to

Separate a mixed cost into its fixed and variable components

In a graph used for breakeven analysis, what is represented by the VERTICAL INTERCEPT of the TOTAL COST LINE?

Total fixed cost

In a graph used for breakeven analysis, what is represented by the SLOPE of the TOTAL COST LINE?

Variable cost per unit