Accounting Ch 6&7 Exam
runaround corporation sells running shoes and during January they ran production machines for hours total and incurred $9000 in maintenance costs. During July they ran production machines for 14,000 hours total and incurred $7200 in maintenance costs based on this data what is the variable maintenance cost per machine hour? a. $.45 per machine hour b. $.51 per machine hour c. $3.33 per machine hour d. $.30 per machine hour
$.30 per machine hour
At Dwight Inc., total fixed and variable costs are $410,000 at a production level of 120,000 units. The company has total fixed cost of $245,000 to fix cost per unit at a production level of 200,000 units is: a. $1.23 b. $1.67 c. $3.42 d. $2.04
$1.23
If target sales in units is 70,000, total fixed expenses are $11,000, and the unit contribution margin is $.20, what is the target operating income? a. $14,000 b. $3000 c. $22 d. $25,000
$3000
total costs for lock and company at 140,000 units are $339,000, while total fixed costs are $165,000. The total variable costs at a level of 300,000 units would be: a. $158,200 b. $726,429 c. $372,857 d. $353,571
$372,857
all variable costs are listed ___ on a contribution margin income statement a. below the gross profit line b. above the contribution margin line c. above the gross profit line d. below the contribution margin line
above the contribution margin line
on a traditional income statement, all manufacturing - related costs, whether fixed or variable, are listed: a. above the contribution margin line b. Above the sales line c. Above the gross profit line d. below the operating line
above the gross profit line
if inventory has not increased or decreased, but has stayed the same, operating income will be the same under variable costing and absorption costing
true
in a manufacturing company, fixed costs remain the same at many different production levels within the relevant range
true
rent on a factory building would likely be classified a fixed cost
true
the fixed cost per unit does not always remain the same
true
total fixed costs do not change in response to changes in the volume of production
true
under absorption costing, all non manufacture costs are treated as period costs
true
when graphing total variable costs, the cost line begins at the origin
true
when using the high-low method, fixed costs and variable costs appear in the same cost equation
true
the use of either absorption or variable causing will make a little difference in companies: a. with high fixed costs b. using just in time inventory methods c. with high variable costs d. with large inventories
using just in time inventory methods
a(n) ____ cost is a cost whose total amount changes in direct proportion to a change in volume a. irrelevant b. fixed c. mixed d. variable
variable
using account analysis, what type of cost is the price of gasoline when your car gets 30 miles per gallon and each gallon costs $3.65? a. step b. variable c. mixed d. fixed
variable
Who done it mystery theater sells tickets for dinner and a show for $30 each. The cost of providing dinner is $26 per ticket and the fixed cost of operating the theater is $120,000 per month. The company can accommodate 13,000 patrons each month. What is the contribution margin per patron? a. $7.50 b. $.13 c. $4 d. $26
$4
palmers gourmet chocolates produces and sells assorted boxed chocolates. The unit selling price is $60, unit variable costs are $15, and total fixed costs are $3600. what are break even sales in dollars? a. $4800 b. $80 c. $3600 d. $1
$4800
what term represents the fixed cost component in the equation: y = vx + f? a. v b. y c. vx d. f
f
Managers often approximate curvilinear costs and step cost as fixed costs
false
Regression analysis uses only two of the historical data points to estimate a cost equation
false
The break even point is the sales level we're operating income is positive
false
The traditional income statement is considered by most companies to be a better management tool than the contribution margin income statement
false
Total next costs can be expressed as a combination of the fixed and sunk cost equations
false
an r-square value over .80 generally indicates that the cost equation is not very reliable for predicting costs at other volumes within the relevant range
false
companies with high operating leverage is generally have lower fixed costs than variable costs
false
in the equation y = vx + f, the x represents the fixed costs
false
regression analysis is found by using only the two data points of the highest and lowest volume
false
the cost equation determined using the high-low method should be the same as the cost equation determined using regression analysis
false
the variable cost per unit of activity increases as activity increases
false
total mixed costs can be expressed as y = vx, where y = total variable cost, v = variable cost per unit of activity, and x = volume of activity
false
using account analysis, what type of cost is the rental of a space at $6000 per month? a. variable b. mixed c. fixed d. step
fixed
The lowest possible operating leverage factor for a company is 1 and only occurs when: a. fixed costs are zero b. variable costs are zero c. The company is at break even d. A company has the same amount of variable and fixed costs
fixed costs are zero
all else being equal, a company with a high operating leverage will have: a. relatively low risk b. relatively high contribution margin ratio c. relatively low fixed costs d. relatively high variable costs
relatively high contribution margin ratio
which of the following costs is an example of a fixed cost? a. sales commissions b. delivery costs c. salary of a plant manager d. direct materials
salary of a plant manager
the contribution margin is equal to: a. sales minus fixed expenses b. sales minus variable expenses c. sales minus cost of goods sold d. sales minus operating expenses
sales minus variable expenses
in the equation y = 11.75x + $550, "y" represents a. total cost b. variable costs / unit c. total fixed costs d. none of these
total costs
A company that sells one product would be more likely to calculate break even in terms of sales units, rather than sales revenue.
true
CVP assumes that inventory levels will not change
true
The break even point on a CVP graph is the point where the sales revenue line intersects the total expense line
true
U.S GAAP requires companies to use absorption costing for external reporting purposes
true
Under absorption costing, fixed manufacturing costs are not expensed until the units are sold
true
a "perfect" Straight line would render an R-square value of 1.00
true
a contribution margin income statement allows managers to see which costs will change with changes in volume and which costs will remain fixed
true
a scatterplot helps managers visualize the relationship between historical costs and volume
true
contribution margin income statements organize costs by behavior
true
Moe's pizza shop sells a large pizza for $12. Unit variable expenses total eight dollars. The breakeven cells in units is 7000 and budgeted sales in units is 8000. What is the margin of safety in dollars? a. $180,000 b. $1000 c. $83 d. $12,000
$12,000
the manager at screaming trees has been trying to calculate the portion of the company's over head expenses that is fixed and the portion that is variable. over the past 12 months, the number of yards processed was highest in July, when the total monthly overhead costs totaled $31,000 for 36,000 yards of mulch processed. the lowest number of yards of mulch processed in the last 12 months occurred in October, when the total overhead costs were $25,000 for 24,000 yards of mulch processed. what is the fixed portion of the monthly over head expenses? a. $25,000 b. $13,000 c. $7,000 d. $18,000
$13,000
Helga's pretzels sells pretzels for eight dollars. The variable cost for each pretzel are one dollar, while the total fixed costs are $1000. The contribution margin for 1900 pretzels is: a. $8000 b. $13,300 c. $1000 d. $14,200
$13,300
hides headphones sells deluxe headphones for $70 each. Unit variable expenses total $60. The breakeven sales in units is 1700 and budgeted sales in units is 4177. What is the margin of safety in dollars? a. $35.3857143 b. $2,477 c. $173,390 d. $411,390
$173,390
The selling price of a particular product is seven dollars per unit, the variable expense is two dollars per unit, and the break even sales in dollars is $25,319, what are the total fixed expenses? a. $18,085 b. $3617 c. $25,319 d. $273
$18,085
it costs homers manufacturing $.65 to produce baseballs and Homer sells them for five dollars apiece. Homer pays a sales commission of 5% of sales revenue to his sales staff. Homer also pays $17,000 a month rent for his factory and store and also pay $78,000 a month to his staff in addition to commissions. Homer sold 70,500 baseballs in June. If homer prepares a contribution margin income statement for the month of June, what would be his operating income? a. $63,450 b. $384,050 c. $194,050 d. $352,500
$194,050
stanley's bicycle store buys bikes on average for $610 and sells them on average for $780. he pays a sales commission of 15% of sales revenue to his sales staff. stanley pays $1500 a month rent from his store, and also pays $3000 a month to his staff in addition to the commissions. stanley sold 140 bikes in june. if stanley prepares a traditional income statement for the month of june, what would be his operating income? a. $44,680 b. $109,200 c. $2,920 d. $23,800
$2,920
light me up lamps has variable expenses a 40% of sales and monthly fixed expenses of $240,000. The monthly target operating income is $60,000. What is the monthly margin of safety as a percentage of target sales in dollars? a. 60% b. 1.80% c. 25% d. 20%
$2.60
it costs homers manufacturing $0.85 to produced baseballs and homer sells them for $4/ ball. homer lays a sales commission of 5% of sales revenue to his sales staff. homer also pays $13,000 a month rent for his factory and store, and also $81,000 a month to his staff in addition to the commissions. homer sold 68,500 baseballs in june. if homer prepares a contribution margin income statement for the month of june, what would be his contribution margin? a. $202,075 b. $345,925 c. $274,000 d. $71,925
$202,075
Total fixed cost for Green Plains incorporation are $150,000. Total costs, including both fixed and variable, or $600,000 if 140,000 units are produced. The total variable cost at a level of 230,000 units would be? a. $246,429 b. $738,300 c. $985,714 d. $273,913
$738,300
if the selling price per unit is $26, the variable expense per unit is $22, and the break even sales in dollars is $52,000, what are the total fixed expenses? a. $2000 b. $9455 c. $500 d. $8000
$8000
if the selling price per unit is $70, the variable expense per unit is $50, and total fixed expenses are $261,000, what are the breakeven sales in dollars? a. $75,690 b. $3728.57143 c. $900,000 d. $150,000
$900,000
The Écran slugger company produces various types of wooden baseball bat. It has calculated the average cost per unit of a production level of 7600 baths to be $13. Given this information, what would be the total cost of producing 7600 baseball bats? a. $13 b. $98,800 c. $7613 d. $988
$98,800
toms taxidermy has a monthly target operating income of $29,000. Variable expenses are 75% of sales and monthly fixed expenses are $15,000. What is Tom's operating leverage factor at the target level of operating income? a. 0.66 b. 1.52 c. 2.93 d. 0.48
1.52
Oscar Inc. currently sells its products for $300 per unit. Management is contemplating a 20% increase in the selling price for the next year. Variable costs are currently 10% of sales revenue and are not expected to change next year. Fixed expenses are $100,000 per year. If fixed costs were to decrease 30% during the current year and the new selling price goes into affect how many units will need to be sold to break even? a. 333 units b. 213 units c. 130,000 units d. 2333 units
213 units
yellow company as variable expenses are 20% of sales and have monthly fixed expenses of $24,000. The monthly target operating income is $800. What is the monthly margin of safety as a percentage of target sales in dollars? a. 196.77% b. 80.00% c. 3.33% d. 3.23%
3.23%
Given break even sales in units of 31,000 and the unit contribution margin of $10, how many units must be sold to reach your target operating income of $15,000? a. 1500 b. 29,500 c. 150,000 d. 32,500
32,500
paint and sip sells admission tickets for a painting class for $60 each. The cost of providing the canvas and supplies is $31 per ticket and the fixed cost of operating the art gallery is $45,000 per month. The company can accommodate 5400 patrons each month. What is the contribution margin ratio? a. 29% b. 48% c. 52% d. 207%
48%
gabe industries sells two products, basic models and deluxe models. Basic models sell for $44 per unit with variable cost of $25 per unit. The lex models sell for $54 per unit with variable costs of $25 per unit. Total fixed cost for the company are $1441. Gabe industries typically sells three basic models for every deluxe model. What is the break even point for basic models and deluxe models? (round any intermediary calculations to the nearest cent and your final answers to the nearest whole unit) a. 38 units of basic; 25 units of deluxe b. 25 units of basic; 38 units of deluxe c. 23 units of basic; 50 units of deluxe d. 50 units of basic; 23 units of deluxe
50 units of basic; 23 units of deluxe
The muffin house produces and sells a variety of muffins. The selling price per dozen is $20 variable costs are seven dollars per dozen and total fixed cost or $6500. How many dozen muffins must the muffin house sell to break even? a. 241 b. 10,000 c. 500 d. 325
500
tom's taxidermy expects to sell 1200 units of its specialty preservation product. The managerial accountant reported that the manager must sell 700 units of specialty products to break even. Compute the margin of safety in units. a. 1900 b. 500 c. 700 d. 600
500
palmers gourmet chocolates produces and sells assorted box chocolates. The unit selling price is $40, unit variable costs are $30, and total fixed cost or $700. How many bottles of chocolates must Palmer's gourmet chocolate sell to break even? a. 10 b. 70 c. 2800 d. 17.5
70
J & a corporation has a monthly target operating income of $26,100. Variable expenses are 10% of sales and monthly fixed expenses are $9900. What is the monthly margin of safety as a percentage of target sales in dollars? a. 263.64% b. 72.50% c. 137.93% d. 90%
72.50%
if a regression analysis shows an R factor of .89 exist it is safe to assume: a. A strong negative relationship between cost and volume b. A perfect positive relationship between cost and volume c. no relationship between cost and volume d. A strong positive relationship between cost and volume
A strong positive relationship between cost and volume
if both fixed expenses and the selling price per unit increases while variable costs per unit are unchanged, which of the following is true? a. Break even point in units remains unchanged b. Break even point in units decreases c. Break even point in units increases d. Break even point in units could increase, decrease, or remain the same
Break even point in units could increase, decrease, or remain the same
Which of the following does not appear on an income statement prepared using variable costing? a. fixed production costs b. variable production costs c. contribution margin d. Gross margin
Gross margin
if the sales price per unit increases while the variable cost per unit and total fixed cost remain constant which of the following statements is true? a. The contribution margin decreases and the break even point decreases b. The contribution margin decreases and the break even point increases c. The contribution margin increases and the break even point decreases d. The contribution margin increases and the break even point increases
The contribution margin increases and the break even point decreases
Sugartown corporation has total sales revenues of $930,000. If it's total fixed costs are $182,000 and it's total variable costs are $267,000, then the total contribution margin is: a. total revenue minus total variable costs b. equal to operating income c. total revenue minus total fixed costs d. Total variable costs minus total fixed costs
Total revenue minus total variable costs
And expenses such as advertising could be considered a discretionary fixed cost
True
The X variable one coefficient in regression analysis yells the variable cost per unit of Activity
True
if all other factors are constant, I need decrease and fixed costs will decrease the break even point.
True
if unit sales prices, unit variable cost and total fixed costs all remain the same, but the mix changes, there is an effect on the break even point.
True
what factor related to manufacturing costs causes the difference between operating income computes using absorption costing and operating income computed using variable costing? a. absorption costing "inventories" all fixed manufacturing and period costs b. absorption costing expenses all costs, whether fixed or variable c. absorption costing "inventories" all fixed manufacturing costs d. absorption costing "inventories" all direct manufacturing costs
absorption costing "inventories" all fixed manufacturing costs
which method are managers using when they use their judgement to classify costs as a variable, fixed or mixed? a. high-low b. regression analysis c. low-high d. account analysis
account analysis
assuming no other changes in the cost volume profit relationship, which of the following will decrease the break even point in units? a. an increase in total fixed costs b. an increase in the variable cost per unit c. A decrease in the selling price per unit d. an increase in the selling price per unit
an increase in the selling price per unit
A companies margin of safety can be stated: a. in units b. as a percentage of sales c. in dollars d. any of the above
any of the above
managers should consider which of the following when predicting costs at different volumes? a. The relevant range of the cost b. The type of cost behavior c. both of the above should be considered d. Neither of the above should be considered
both of the above should be considered
best birdies produces ornate birdcages. the companies average cost per unit is $23 when it produces 2600 birdcages. if $5900 of the total costs are fixed, what is the variable cost of producing each birdcage a. $168,020 b. $266,000 c. $277,820 d. cannot be determined from info given
cannot be determined from info given
management has little or no control over: a. committed fixed costs b. all fixed costs c. discretionary fixed costs d. all of the above
committed fixed costs
What Datapoint can be used to solve for the fixed cost component when using the high low method? a. the "low" month b. any month in the data set c. either the "high" or the "low" month d. the "high" month
either the "high" or the "low" month
to find the number of units that need to be sold to break even, the formula used could be: a. contribution margin ratio divided by fixed expenses b. contribution margin per unit divided by fixed expenses c. fixed expenses divided by contribution margin ratio d. fixed expenses divided by contribution margin per unit
fixed expenses divided by contribution margin per unit
The higher the operating leverage factor, the: a. more likely operating income is to stay constant b. greater the impact of volume on operating income c. lessen the impact of volume on operating income d. none of the above
greater the impact of volume on operating income
scatter plots: a. if there is a strong relationship between cost and volume, the points will fall in a scattered pattern b. if there is a strong relationship between cost and volume, the points will fall in a linear pattern c. cost and volume have no effect on the pattern of the points on a scatter plot d. a strong relationship between production and inventory is shown by a linear pattern
if there is a strong relationship between cost and volume, the points will fall in a linear pattern
what absorption costing is used and management bonuses are related to operating income, managers are more likely to: a. increase inventory levels b. keep inventory levels consistent c. decrease inventory levels d. steal from the company
increase inventory levels
total predicted sales in units minus total break even sales in units divided by total predicted sales in units yields: a. contribution margin per unit b. margin of safety percentage c. percent of sales mix d. contribution margin ratio
margin of safety percentage
by increasing ___, a manager can increase operating income under absorption costing a. leased assets b. variable costs c. fixed costs d. production
production
Net income reported under absorption costing will exceed net income reported under variable costing for a given period if: a. variable overhead exceeds fixed overhead for that period b. production equals sales for that period c. sales exceed production for that period d. production exceeds sales for that period
production exceeds sales for that period
what variable represents the volume of activity in the equation: y = vx + f (assume v represents the variable cost per unit of activity) a. v b. x c. vx d. y
x
on a regressions analysis output generated with excel, a regression equation's variable cost per unit is represented by the a. intercept coefficient b. x variable 1 coefficient c. r-square d. residual
x variable 1 coefficient
your clients company wants to determine the relationship between its monthly operating costs and potential cost driver. the output of the regression is shown: intercept coefficient = 89,500 x variable 1 coefficient = 62.50 r-square = 0.9855 what is the company's monthly cost equation? a. y = $89,500x + $98.55 b. y = $62.50x + $89,500 c. y = $98.55x + $89,500 d. y = $89,500x + $62.98
y = $98.55x + $89,500
which of the following represents the equation for total fixed costs? a. y = vx + f b. y = vx - f c. y = f d. none of the above
y = f
your clients company wants to determine the relationship between its monthly operating costs and potential cost driver. the output of regression analysis showed the following: intercept coefficient = 75,828 X variable 1 coefficient = 52.61 R-square = 0.9756 should your client use this information to predict monthly operating costs? a. yes, because regressions analysis can always be relied upon b. yes, because r-square is so high c. no, because r-square is so high d. there is not enough information to make this prediction
yes, because r-square is so high