BA 213
Guerra Electronics manufactures a variety of electronic gadgets for use in the home. Which of the following would probably be the most accurate measure of activity to use for allocating the cost of inspecting the finished products at Guerra?
Inspection time
In a job-order costing system, indirect materials that have been previously purchased and that are used in production are recorded as a debit to:
Manufacturing Overhead
Machining a part for a car axle is an example of a:
Unit-level activity.
Providing the power required to run production equipment is an example of a:
Unit-level activity.
Which of the following costs is an example of a period rather than a product cost?
Wages of salespersons.
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
What is the total period cost for the month under variable costing? A. $185,000 B. $117,600 C. $273,200 D. $302,600
In activity-based costing, unit product costs computed for external financial reports include manufacturing overhead computed by:
multiplying the activity rate for each cost pool by the corresponding amount of activity required per unit of the product.
In activity-based costing, the total overhead cost in an activity cost pool can be computed by:
multiplying the total activity in the activity cost pool by the activity rate for the activity cost pool.
Which of the following should NOT be included as part of manufacturing overhead at a company that makes office furniture?
sheet steel in a file cabinet made by the company.
n computing its predetermined overhead rate, Marple Company inadvertently left its indirect labor costs out of the computation. This oversight will cause:
the Cost of Goods Manufactured to be understated.
The term "relevant range" means the range of activity over which:
the assumptions about fixed and variable cost behavior are reasonably valid.
When switching from a traditional costing system to an activity-based costing system that includes some batch-level costs:
the unit product costs of high volume products typically change less than the unit product costs of low volume products.
Management of Mcentire Corporation has asked your help as an intern in preparing some key reports for April. Direct materials cost was $64,000, direct labor cost was $47,000, and manufacturing overhead was $75,000. Selling expense was $15,000 and administrative expense was $44,000. The conversion cost for April was: A. $186,000 B. $100,000 C. $128,000 D. $122,000
D. $122,000 Conversion cost = Direct labor + Manufacturing overhead = $47,000 + $75,000 = $122,000
Break-even analysis assumes that: A. total costs are constant. B. the average fixed expense per unit is constant. C. the average variable expense per unit is constant. D. variable expenses are nonlinear.
C. the average variable expense per unit is constant.
Which one of the following costs should NOT be considered a direct cost of serving a particular customer who orders a customized personal computer by phone directly from the manufacturer? A. the cost of the hard disk drive installed in the computer. B. the cost of shipping the computer to the customer. C. the cost of leasing a machine on a monthly basis that automatically tests hard disk drives before they are installed in computers. D. the cost of packaging the computer for shipment.
C. the cost of leasing a machine on a monthly basis that automatically tests hard disk drives before they are installed in computers.
Which of the following would be considered a product cost for external financial reporting purposes?
Cost of sand spread on the factory floor to absorb oil from manufacturing machines.
Management of Mcentire Corporation has asked your help as an intern in preparing some key reports for April. Direct materials cost was $64,000, direct labor cost was $47,000, and manufacturing overhead was $75,000. Selling expense was $15,000 and administrative expense was $44,000. The prime cost for April was: A. $59,000 B. $122,000 C. $100,000 D. $111,000
D. $111,000 Prime cost = Direct materials + Direct labor = $64,000 + $47,000 = $111,000
At an activity level of 5,300 machine-hours in a month, Clyburn Corporation's total variable maintenance cost is $114,268 and its total fixed maintenance cost is $154,336. What would be the total variable maintenance cost at an activity level of 5,600 machine-hours in a month? Assume that this level of activity is within the relevant range. A. $163,072 B. $268,604 C. $114,268 D. $120,736
D. $120,736 Variable maintenance cost per unit = Total variable maintenance cost Total activity = $114,268 5,300 machine-hours Total variable maintenance cost = Variable maintenance cost per unit Total activity = $21.56 per machine-hours 5,600 machine-hours = $120,736
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the absorption costing unit product cost for the month? A. $102 B. $130 C. $97 D. $125
D. $125
The following data were supplied by Reader Corporation: Sales: $600,000 Variable Expenses: $420,000 Fixed Expenses: $141,000 The contribution margin is: A. $420,000 B. $54,000 C. $474,000 D. $180,000
D. $180,000 Contribution margin = Sales - Variable expenses = $600,000 - $420,000 = $180,000
Getchman Marketing, Inc., a merchandising company, reported sales of $592,500 and cost of goods sold of $305,000 for April. The company's total variable selling expense was $37,500; its total fixed selling expense was $16,000; its total variable administrative expense was $35,000; and its total fixed administrative expense was $38,900. The cost of goods sold in this company is a variable cost. The contribution margin for April is: A. $465,100 B. $287,500 C. $160,100 D. $215,000
D. $215,000
Which of the following costs is often important in decision making, but is omitted from conventional accounting records?
Opportunity cost.
Variable cost:
remains constant on a per unit basis as the number of units produced increases.
The following data pertains to activity and costs for two months: June July Activity Level in units 10,000 20,000 Variable Cost 20,000 ? Fixed Cost 15,000 ? Mixed Cost 10,000 ? Total Cost 45,000 70,000 Assuming that these activity levels are within the relevant range, the mixed cost for July was:
$15,000 Variable cost per unit = $20,000 ÷ 10,000 units = $2 per unit Total variable cost in July = $2 per unit × 20,000 units = $40,000 per unit Fixed cost = $15,000 (given) Total cost = Variable cost + Fixed cost + Mixed cost $70,000 = $40,000 + $15,000 + Mixed cost Mixed cost = $70,000 - ($40,000 + $15,000) = $70,000 - $55,000 = $15,000
Snappy Company has a job-order costing system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Manufacturing overhead cost and direct labor hours were estimated at $100,000 and 40,000 hours, respectively, for the year. In July, Job #334 was completed at a cost of $5,000 in direct materials and $2,400 in direct labor. The labor rate is $6 per hour. By the end of the year, Snappy had worked a total of 45,000 direct labor-hours and had incurred $110,250 actual manufacturing overhead cost. Snappy's manufacturing overhead for the year was (over/underapplied by $):
$2,250 overapplied
Slappy Corporation leases its corporate headquarters building. This lease cost is fixed with respect to the company's sales volume. In a recent month in which the sales volume was 20,000 units, the lease cost was $482,000. To the nearest whole cent, what should be the average lease cost per unit at a sales volume of 19,200 units in a month? (Assume that this sales volume is within the relevant range.)
$25.10
Under Lamprey Company's job-order costing system, manufacturing overhead is applied to Work in Process inventory using a predetermined overhead rate. During January, Lamprey's transactions include the following: Direct materials issued to production... $90,000 Indirect materials issued to production... $8,000 Manufacturing overhead cost incurred... $125,000 Manufacturing overhead cost applied... $113,000 Direct Labor cost incurred... $107,000 Lamprey Company had no beginning or ending inventories. What was the cost of goods manufactured for January?
$310,000 Manufacturing costs=Direct materials+Direct labor+Manufacturing overhead applied
Simoneaux Corporation bases its predetermined rate on the estimated machine-hours for the upcoming year. At the beginning of the most recently completed year, the company established the machine-hours for the upcoming year at 22,000 machine-hours. The estimated variable manufacturing overhead was $8.65 per machine-hour and the estimated total fixed manufacturing overhead was $609,400. The predetermined overhead rate for the recently completed year was closest to:
$36.35
Bakker Corporation applies manufacturing overhead on the basis of direct labor-hours. At the beginning of the most recent year, the company based its predetermined overhead rate on total estimated overhead of $77,250 and 2,500 estimated direct labor-hours. Actual manufacturing overhead for the year amounted to $79,000 and actual direct labor-hours were 2,400. The overhead for the year was (overapplied/underapplied by $):
$4,840 underapplied
Aberge Company's manufacturing overhead is 60% of its total conversion costs. If direct labor is $38,000 and if direct materials are $21,000, the manufacturing overhead is:
$57,000
Carbaugh Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product. Production volume: 3,000 units 4,000 units Direct Materials: $73.90 per unit $73.90 per unit Direct Labor: $49.20 per unit $49.20 per unit Manufacturing Overhead: $70.10 per unit $55.20 per unit The best estimate of the total cost to manufacture 3,300 units is closest to
$619,680 Total Manufacturing overhead at 4,000 units = 4,000 x 55.20 per unit = 220,800 Total Manufacturing overhead at 3,000 units = 3,000 units x 70.10 per unit = 210,300 Variable manufacturing overhead per unit = change in cost/change in activity = (220,800 - 210,300)/(4,000 units - 3,000 units) = 10,500/1,000 units = 10.50 per unit
Haras Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $141.30 per unit. Sales Volume (units) 6,000 7,000 Cost of goods sold 347,400 405,300 Selling and administrative costs 436,800 458,500 The best estimate of the total variable cost per unit is:
$79.60 Variable cost of sales = Change in cost ÷ Change in activity = ($405,300 - $347,400) ÷ (7,000 units - 6,000 units) = $57,900 ÷ 1,000 units = $57.90 per unit Variable selling and administrative cost = Change in cost ÷ Change in activity = ($458,500 - $436,800) ÷ (7,000 units - 6,000 units) = $21,700 ÷ 1,000 units = $21.70 per unit Total variable cost = Variable cost of sales + Variable selling and administrative cost = $57.90 per unit + $21.70 per unit = $79.60 per unit
The following data pertains to activity and the cost of cleaning and maintenance for two recent months: Month 1 Month 2 Production Volume 2,000 units 2,500 units Cleaning & Maintenance costs 900 1,100 The best estimate of the total month 1 variable cost for cleaning and maintenance is:
$800 Cleaning and maintenance Variable cost per unit = Change in cost ÷ Change in activity = ($1,100 - $900) ÷ (2,500 units - 2,000 units) = $200 ÷ 500 units = $0.40 per unit Total variable cost at 2,000 units = 2,000 units × $0.40 per unit = $800
Dowan Company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year Dowan Company incurred $156,600 in actual manufacturing overhead cost. The manufacturing Overhead account showed that manufacturing overhead was underapplied by $12,600 for the year. If the predetermined overhead rate if $6.00 per direct labor-hour, how many hours did the company work during the year?
24,000 hours
Dickison Corporation reported the following data for the month of December The prime cost for December was: A. $109,000 B. $111,000 C. $107,000 D. $66,000
A. $109,000 Prime cost = Direct materials + Direct labor = $71,000 + $38,000 = $109,000
The amount by which a company's sales can decline before losses are incurred is called the: A. contribution margin. B. degree of operating leverage. C. margin of safety. D. contribution margin ratio.
C. margin of safety.
Management of Modugno Corporation is considering whether to purchase a new model 370 machine costing $441,000 or a new model 240 machine costing $387,000 to replace a machine that was purchased 7 years ago for $429,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A. Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $387,000 in the new machine, the money could be invested in a project that would return a total of $430,000. In making the decision to invest in the model 240 machine, the opportunity cost was: A. $430,000 B. $441,000 C. $387,000 D. $429,000
A. $430,000 The $430,000 return from alternative investment is an opportunity cost.
Gambarini Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $197.80 per unit. The best estimate of the total monthly fixed cost is: A. $541,800 B. $1,192,100 C. $1,099,200 D. $1,145,650
A. $541,800 Variable cost of sales per unit = Change in cost Change in activity = ($567,700 - $486,600) (7,000 units - 6,000 units) = $81,100 1,000 units = $81.10 per unit
The ARB Company has two divisions: Electronics and DVD/Video Sales. Electronics has traceable fixed expenses of $146,280 and the DBD/Video Sales has traceable fixed expenses of $81,765. If ARB Company has a total of $322,490 in fixed expenses, what are its common fixed expenses? A. $94,445 B. $322,490 C. $228,045 D. $47,223
A. $94,445 Common fixed expenses = Total fixed expenses - Traceable fixed expenses = $322,490 - ($146,280 + $81,765) =$94,445
Which of the following costs would not be included as part of manufacturing overhead? A. Insurance on sales vehicles. B. Depreciation of production equipment. C. Lubricants for production equipment. D. Direct labor overtime premium.
A. Insurance on sales vehicles.
The break-even point in unit sales increases when variable expenses: A. increase and the selling price remains unchanged. B. decrease and the selling price remains unchanged. C. decrease and the selling price increases. D. remain unchanged and the selling price increases.
A. increase and the selling price remains unchanged.
All other things equal, if a division's traceable fixed expenses decrease: A. the division's segment margin will increase. B. the overall company net operating income will decrease. C. the division's contribution margin will increase. D. the division's sales volume will increase.
A. the division's segment margin will increase.
Add in Chapter 6 study questions!
Add in Chapter 6 questions
Nikkel Corporation, a merchandising company, reported the following results for July: The contribution margin for July is: A. $333,800 B. $209,000 C. $233,700 D. $164,700
B. $209,000
Pedulla Inc, which produces and sells a single product, has provided its contribution format income statement for February. If the company sells 2,900 units, its net operating income should be closest to: A. $35,581 B. $44,800 C. $31,900 D. $58,000
B. $44,800 Selling price per unit = $226,200 2,600 units = $87 per unit Variable expense per unit = $114,400 2,600 units = $44 per unit
The contribution margin ratio is 25% for Grain Company and the break-even point in sales is $200,000. To obtain a target net operating income of $60,000, sales would have to be: A. $260,000 B. $440,000 C. $280,000 D. $240,000
B. $440,000 Dollar sales to break even = Fixed expenses CM ratio $200,000 = Fixed expenses 0.25 Fixed expenses = $200,000 0.25 = $50,000 Dollar sales to attain a target profit = (Target profit + Fixed expenses) CM ratio = ($60,000 + $50,000) 0.25 = $440,000
Chaffee Corporation staffs a helpline to answer questions from customers. The costs of operating the helpline are variable with respect to the number of calls in a month. At a volume of 33,000 calls in a month, the costs of operating the helpline total $742,500. To the nearest whole dollar, what should be the total cost of operating the helpline costs at a volume of 34,800 calls in a month? (Assume that this call volume is within the relevant range.) A. $742,500 B. $783,000 C. $704,095 D. $762,750
B. $783,000 Helpline cost per call = Total helpline costs Number of calls = $742,500 33,000 calls = $22.50 cost per call Total helpline cost = Helpline cost per call Number of calls = $22.50 34,800 calls = $783,000
Maintenance costs at a Tierce Corporation factory are listed below: Management believes that maintenance cost is a mixed cost that depends on machine-hours. Using the high-low method to estimate the variable and fixed components of this cost, these estimates would be closest to: A. $14.54 per machine-hour; $52,671 per month B. $9.27 per machine-hour; $19,076 per month C. $0.11 per machine-hour; $52,591 per month D. $9.27 per machine-hour; $19,071 per month
B. $9.27 per machine-hour; $19,076 per month Variable cost per unit = Change in cost Change in activity = $649 70 machine-hours = $9.27 per machine-hour Fixed cost = Total cost - Variable cost element = $52,986 - ($9.27 per machine-hour 3,658 machine-hours) = $52,986 - $33,910 = $19,076
Gabruk Inc. is a merchandising company. Last month the company's merchandise purchases totaled $88,000. The company's beginning merchandise inventory was $15,000 and its ending merchandise inventory was $13,000. What was the company's cost of goods sold for the month? A. $88,000 B. $90,000 C. $86,000 D. $116,000
B. $90,000 Cost of goods sold = Beginning merchandise inventory + purchases - Ending merchandise inventory = $15,000 + $88,000 - $13,000 = $90,000
Smith Company sells a single product at a selling price of $30 per unit. Variable expenses are $12 per unit and fixed expenses are $41,400. Smith's break-even point is: A. 1,380 units B. 2,300 units C. 3,450 units D. 6,900 units
B. 2,300 units Unit CM = Selling price per unit - Variable expenses per unit = $30 per unit - $12 per unit = $18 per unit Unit sales to break even = Fixed expenses Unit CM = $41,400 divided by $18 per unit 2,300 units
20. The Herald Company manufactures and sells a single product which sells for $50 per unit and has a contribution margin ratio of 30%. The company's monthly fixed expenses are $25,000. If Herald desires a monthly target net operating income equal to 20% of sales dollars, sales in units will have to be (rounded): A. 2,500 units B. 5,000 units C. 1,666 units D. 1,000 units
B. 5,000 units Selling price = $50 per unit CM ratio = 0.30 Fixed expenses = $25,000 Target profit = 0.20 x Dollar sales Dollar sales to attain a target profit = (Target profit + Fixed expenses) divided by CM ratio Dollar sales = [(0.20 x Dollar sales) + $25,000] divided by 0.30 0.30 x Dollar sales = (0.20 Dollar sales) + $25,000 0.10 x Dollar sales = $25,000 Dollar sales = $25,000 divided by 0.10 = $250,000 Unit sales equals Dollar sales divided by Selling price equals $250,000 divided by $50 per unit equals 5,000 units
Scheidel Enterprises, Inc. produces and sells a single product whose selling price is $190.00 per unit and whose variable expense is $81.70 per unit. The company's monthly fixed expense is $682,290. Assume the company's monthly target profit is $21,000. The unit sales to attain that target profit are closest to: A. 8,608 units B. 6,494 units C. 6,268 units D. 3,702 units
B. 6,494 units Unit CM = Selling price per unit - Variable expenses per unit = $190.00 per unit - $81.70 per unit = $108.30 per unit Unit sales to attain a target profit = (Target profit + Fixed expenses) divided by Unit CM = ($682,290 + $21,000) divided by$108.30 per unit = $703,290 divided by $108.30 per unit = 6,494 units
If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the break-even point in units is: A. Q divided by (P-V). B. F divided by (P-V). C. V divided by (P-V). D. F divided by [Q(P-V)].
B. F divided by (P-V).
The advertising costs that Pepsi incurred to air its commercials during the Super Bowl can best be described as a: A. variable cost. B. fixed cost. C. product cost. D. prime cost.
B. Fixed Cost
Brasher Company manufactures and sells a single product that has a positive contribution margin. If the selling price and variable expenses both decrease by 5% and fixed expenses do not change, then what would be the effect on the contribution margin per unit and the contribution margin ratio? A. Option A: Contribution Margin Per Unit: Decrease, Contribution margin ratio: Decrease B. Option B: Contribution Margin Per Unit: Decrease, Contribution margin ratio: No Change C. Option C: Contribution Margin Per Unit: No change, Contribution margin ratio: Decrease D. Option D: Contribution Margin Per Unit: No change, Contribution margin ratio: no change
B. Option B: Contribution Margin Per Unit: Increase, Contribution margin ratio: Increase
For a lamp manufacturing company, the cost of the insurance on its vehicles that deliver lamps to customers is best described as a: A. prime cost. B. manufacturing overhead cost. C. period cost. D. differential (incremental) cost of a lamp.
C. period cost.
A company using lean production methods likely would show approximately the same net operating income under both absorption and variable costing because: A. ending inventory would be valued in the same manner for both methods under lean production. B. production is geared to sales under lean production and thus there would be little or no ending inventory. C. under lean production fixed manufacturing overhead costs are charged to the period incurred rather than to the product produced. D. there is no distinction made under lean production between fixed and variable costs.
B. production is geared to sales under lean production and thus there would be little or no ending inventory.
A tile manufacturer has supplied the following data: If the company increases its unit sales volume by 3% without increasing its fixed expenses, then total net operating income should be closest to: A. $3,000 B. $101,371 C. $115,480 D. $103,000
C. $115,480
Glatt Inc., an escrow agent, has provided the following data concerning its office expenses: Management believes that office expense is a mixed cost that depends on the number of escrows completed. Note: Real estate purchases usually involve the services of an escrow agent that holds funds and prepares documents to complete the transaction. Using the high-low method, the estimate of the variable component of office expense per escrow completed is closest to: A. $101.08 B. $59.12 C. $17.11 D. $17.15
C. $17.11 Variable cost per unit = Change in cost Change in activity = $1,403 82 escrows = $17.11 per escrow
Cockriel Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced: 8000 Variable costs per unit: Direct Materials: $14 Direct Labor $22 Variable manufacturing overhead: $1 Variable selling and admin expense: $6 Fixed Costs: Fixed manufacturing overhead: $88,000 Fixed selling and admin expense: $608,000 There were no beginning or ending inventories. The variable costing unit product cost was: A. $42 B. $43 C. $37 D. $48
C. $37 Direct materials: $14 Direct Labor $22 Variable manufacturing overhead: $1 Variable costing unit product cost: $37
Emilio Corporation reports that at an activity level of 3,400 units, its total variable cost is $59,058 and its total fixed cost is $101,150. What would be the total variable cost at an activity level of 3,500 units? Assume that this level of activity is within the relevant range. A. $59,058 B. $160,208 C. $60,795 D. $104,125
C. $60,795 Variable cost per unit = Total variable cost Total activity = $59,058 3,400 units = $17.37 per unit Total variable cost = Variable cost per unit Total activity = $17.37 per unit 3,500 units = $60,795
Electrical costs at one of Vanartsdalen Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours. Using the high-low method to estimate the variable and fixed components of this cost, these estimates would be closest to: A. $14.41 per machine-hour; $33,832 per month B. $0.11 per machine-hour; $33,957 per month C. $9.35 per machine-hour; $11,885 per month D. $11.30 per machine-hour; $7,229 per month
C. $9.35 per machine-hour; $11,885 per month Variable cost per unit = Change in cost Change in activity = $785 84 machine-hours = $9.35 per machine-hour Fixed cost = Total cost - Variable cost element = $34,213 - ($9.35 per machine-hour 2,388 machine-hours) = $34,213 - $22,328 = $11,885
Babuca Corporation has provided the following production and total cost data for two levels of monthly production volume. The company produces a single product. The best estimate of the total monthly fixed manufacturing cost is: A. $1,424,400 B. $1,506,400 C. $932,400 D. $1,465,400
C. $932,400 Direct materials is a variable cost. Direct labor is usually a variable cost, but it doesn't hurt to check. Variable cost per unit = Change in cost Change in activity = ($94,500 - $81,000) (7,000 units - 6,000 units) = $13,500 1,000 units = $13.50 per unit Fixed cost = Total cost - Variable cost element = $94,500 - ($13.50 per unit 7,000 units) = $94,500 - 94,500 = $0 Manufacturing overhead: Variable cost per unit = Change in cost Change in activity = ($1,015,000- $1,003,200) (7,000 units - 6,000 units) = $11,800 1,000 units = $11.80 per unit Fixed cost = Total cost - Variable cost element = $1,015,000 - ($11.80 per unit 7,000 units) = $1,015,000 - $82,600 = $932,400 Total fixed cost per month = $0 + $932,400 = $932,400
Which of the following formulas is used to calculate the contribution margin ratio? A. (Sales - Fixed expenses) divided by Sales B. (Sales - Cost of goods sold) divided by Sales C. (Sales - Variable expenses) divided by Sales D. (Sales - Total expenses) divided by Sales
C. (Sales - Variable expenses) divided by Sales
The wages of factory maintenance personnel would usually be considered to be: A. Option A Indirect Labor: No, Manufacturing Overhead: Yes B. Option B Indirect Labor: Yes, Manufacturing Overhead: No C. Option C Indirect Labor: Yes, Manufacturing Overhead: Yes D. Option D Indirect Labor: No, Manufacturing Overhead: No
C. Option C Indirect Labor: Yes, Manufacturing Overhead: Yes
All other things the same, which of the following would be true of the contribution margin and variable expenses of a company with high fixed costs and low variable costs as compared to a company with low fixed costs and high variable costs? A. Option A: Contibution Margin: Higher, Variable Costs: Higher B. Option B: Contibution Margin: Lower, Variable Costs: Higher C. Option C: Contibution Margin: Higher, Variable Costs: Lower D. Option D: Contibution Margin: Lower, Variable Costs: Lower
C. Option C: Contibution Margin: Higher, Variable Costs: Lower
2. With regard to the CVP graph, which of the following statements is not correct? A. The CVP graph assumes that volume is the only factor affecting total cost. B. The CVP graph assumes that selling prices do not change. C. The CVP graph assumes that variable costs go down as volume goes up. D. The CVP graph assumes that fixed expenses are constant in total within the relevant range.
C. The CVP graph assumes that variable costs go down as volume goes up.
Smotherman Corporation produces and sells a single product. Data concerning that product appear below: Selling price per unit: $140.00 Vairable expense per unit: $44.80 Fixed expense per month: $164,696 The break-even in monthly dollar sales is closest to: A. $307,160 B. $164,640 C. $514,640 D. $242,200
D. $242,200 Unit CM = Selling price per unit - Variable expenses per unit = $140.00 per unit - $44.80 per unit = $95.20 per unit CM ratio = Unit CM divided by Unit selling price = $95.20 per unit divided by $140.00 per unit = 0.68 Dollar sales to break even = Fixed expenses divided byCM ratio = $164,696 divided by 0.68 = $242,200
Pool Company's variable expenses are 36% of sales. Pool is contemplating an advertising campaign that will cost $20,000. If sales increase by $80,000, the company's net operating income should increase by: A. $28,800 B. $64,000 C. $8,800 D. $31,200
D. $31,200 CM ratio = 1 - Variable expense ratio = 1 - 0.36 = 0.64 Increase in net operating income = CM ratio x Increase in sales - Increase in fixed expenses = (0.64 x $80,000) - $20,000= $51,200 - $20,000 = $31,200
Inspection costs at one of Krivanek Corporation's factories are listed below: Management believes that inspection cost is a mixed cost that depends on units produced. Using the high-low method, the estimate of the fixed component of inspection cost per month is closest to: A. $8,743 B. $8,887 C. $8,683 D. $6,869
D. $6,869 Variable cost per unit = Change in cost Change in activity = $293 93 units = $3.15 per unit Total fixed cost = Total cost - Variable cost element = $9,036 - ($3.15 per unit 688 units) = $9,036 - $2,167 = $6,869
Electrical costs at one of Reifel Corporation's factories are listed below: Management believes that electrical cost is a mixed cost that depends on machine-hours. Using the high-low method, the estimate of the variable component of electrical cost per machine-hour is closest to: A. $0.12 B. $20.38 C. $7.98 D. $8.22
D. $8.22 Variable cost per unit = Change in cost Change in activity = $411 50 machine-hours = $8.22 per machine hour
A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the variable costing unit product cost for the month? A. $103 B. $99 C. $94 D. $90
D. $90
The margin of safety percentage is computed as: A. Break-even sales divided by Total sales. B. Total sales - Break-even sales. C. (Total sales - Break-even sales) divided by Break-even sales. D. (Total sales - Break-even sales) divided by Total sales.
D. (Total sales - Break-even sales) divided by Total sales.
Which of the following would NOT be treated as a product cost for external financial reporting purposes? A. Depreciation on a factory building. B. Salaries of factory workers. C. Indirect labor in the factory. D. Advertising expenses.
D. Advertising expenses.
9. The degree of operating leverage can be calculated as: A. contribution margin divided by sales. B. gross margin divided by net operating income. C. net operating income divided by sales. D. contribution margin divided by net operating income.
D. contribution margin divided by net operating income.
Data concerning Homme Corporation's single product appear below: The company is currently selling 2,000 units per month. Fixed expenses are $130,000 per month. This question is to be considered independently of all other questions relating to Homme Corporation. Refer to the original data when answering this question. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $14 per unit. In exchange, the sales staff would accept a decrease in their salaries of $24,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 100 units. What should be the overall effect on the company's monthly net operating income of this change? A. decrease of $45,800 B. increase of $154,200 C. increase of $22,600 D. increase of $2,200
D. increase of $2,200
The break-even point in unit sales is found by dividing total fixed expenses by: A. the contribution margin ratio. B. the variable expenses per unit. C. the sales price per unit. D. the contribution margin per unit.
D. the contribution margin per unit.
1. The difference between total sales in dollars and total variable expenses is called: A. net operating income. B. net profit. C. the gross margin. D. the contribution margin.
D. the contribution margin.
Last month, when 10,000 units of a product were manufactured, the cost per unit was $60. At this level of activity, variable costs are 50% of total unit costs. If 10,500 units are manufactured next month and cost behavior patterns remain unchanged the: A. total variable cost will remain unchanged. B. fixed costs will increase in total. C. variable cost per unit will increase. D. total cost per unit will decrease.
D. total cost per unit will decrease.
Conversion cost consists of which of the following?
Direct labor and manufacturing overhead cost.
Which of the following statements regarding fixed costs is incorrect?
Expressing fixed costs on a per unit basis usually is the best approach for decision making.
Would plant security and assembly activities be best classified at an appliance manufacturing plant as unit-level, batch-level, product-level, or facility-level?
Facility Unit
Human resource management is an example of an activity at which of the following levels?
Facility-level activity.
Personnel administration is an example of a:
Facility-level activity.
East Company manufactures and sells a single product with a positive contribution margin. If the selling price and the variable expense per unit both increase 5% and fixed expenses do not change, what is the effect on the contribution margin per unit and the contribution margin ratio? A. Option A: Contribution Margin Per Unit: No Change, Contribution margin ratio: No change B. Option B: Contribution Margin Per Unit: Increase, Contribution margin ratio: Increase C. Option C: Contribution Margin Per Unit: Increase, Contribution margin ratio: No change D. Option D: Contribution Margin Per Unit: Increase, Contribution margin ratio: Decrease
Option C: Contribution Margin Per Unit: Increase, Contribution margin ratio: No change
The cost of leasing production equipment is classified as:
Prime Cost- NO, Product Cost- YES
Designing a new product is an example of a:
Product-level activity.
Product engineering is an example of a:
Product-level activity.
In a job-order costing system, direct labor cost is ordinarily debited to:
Work in process
The term differential cost refers to:
a difference in cost which results from selecting one alternative instead of another
Manufacturing overhead consists of:
all manufacturing costs, except direct materials and direct labor.
During October, Crusan Corporation incurred $62,000 of direct labor costs and $4,000 of indirect labor costs. The journal entry to record the accrual of these wages would include a:
debit to Work in Process of $62,000
Each of the following would be a period cost except:
depreciation of a machine used in manufacturing.
Conversion costs do NOT include:
direct materials
When a decision is made among a number of alternatives, the benefit that is lost by choosing one alternative over another is the:
opportunity cost.
The salary paid to the production manager in a factory is:
part of conversion cost.
The salary of the president of a manufacturing company would be classified as which of the following?
period cost
An example of a committed fixed cost is:
property taxes on the factory building.
Within the relevant range, variable cost per unit will:
remain constant.
