Accounting Midterm MBA

Mullee Corporation produces a single product and has the following cost structure: Number of units produced each year 7,000 Variable costs per unit: Direct materials $ 51 Direct labor $ 12 Variable manufacturing overhead $ 2 Variable selling and administrative expense $ 5 Fixed costs per year: Fixed manufacturing overhead $441,000 Fixed selling and administrative expense $112,000 The absorption costing unit product cost is:

$128 per unit

Remmel Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (6,000 units)$ 300,000 Variable expenses 240,000 Contribution margin 60,000 Fixed expenses 59,000 Net operating income $ 1,000 If the selling price increases by $3 per unit and the sales volume decreases by 400 units, the net operating income would be closest to:

$13,800

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 78 Units in beginning inventory 0 Units produced 8,800 Units sold 8,700 Units in ending inventory1 00 Variable costs per unit: Direct materials $ 18 Direct labor $ 10 Variable manufacturing overhead $ 4 Variable selling and administrative expense $ 5 Fixed costs: Fixed manufacturing overhead $255,200 Fixed selling and administrative expense $ 87,000 What is the unit product cost for the month under variable costing?

$32 per unit

Sjostrom Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (7,000 units) $ 280,000 Variable expenses 182,000 Contribution margin 98,000 Fixed expenses 84,000 Net operating income $ 14,000 If the variable cost per unit increases by $10, spending on advertising increases by $1,500, and unit sales increase by 15,800 units, the net operating income would be closest to:

$5700

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 78 Units in beginning inventory 0 Units produced 8,800 Units sold 8,700 Units in ending inventory1 00 Variable costs per unit: Direct materials $ 18 Direct labor $ 10 Variable manufacturing overhead $ 4 Variable selling and administrative expense $ 5 Fixed costs: Fixed manufacturing overhead $255,200 Fixed selling and administrative expense $ 87,000 What is the unit product cost for the month under absorption costing?

$61 per unit

Janos Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 111 Units in beginning inventory 300 Units produced 2,000 Units sold 2,200 Units in ending inventory 100 Variable costs per unit: Direct materials $ 29 Direct labor $ 30 Variable manufacturing overhead $ 4 Variable selling and administrative expense $ 9 Fixed costs: Fixed manufacturing overhead $ 34,000 Fixed selling and administrative expense $ 39,600 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. What is the unit product cost for the month under absorption costing?

$80 per unit

Net income equal for 2 different categories

(VE ratio 1 x X) + FE 1 = (VE ratio 2 x X) + FE 2

Kelsay Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (9,000 units)$ 540,000 Variable expenses 405,000 Contribution margin 135,000 Fixed expenses 130,500 Net operating income $ 4,500 The contribution margin per unit is closest to:

15

Target profit

= (CM ratio x sales) - FE OR sales = (target profit + FE)/ CM ratio

profit

= (CM ratio x sales) - fixed expense

CM ratio

= CM / sales

Degree of operating leverage

= CM/NI

MOS %

= MOS / sales

Predertermined

= estimated manufacturing OH cost/ estimated total amount of allocated base

Break even

= fixed expenses/ CM ratio

CVP

= revenue - cost

Segement margin

= sales - variable expenses - traceable fixed expenses

Contribution Margin (CM)

= sales- variable expenses

Margin of safety (MOS)

= total budget - BE sales

variable expense ratio

= variable expenses / sales

Which of the following statements is correct with regard to a CVP graph?

A CVP graph shows the break-seven point as the intersection of the total sales revenue line and the total expense line

Which of the following statements is false?

A time ticket records the amount of machine hours spent on a specific hours job

Which of the following is an example of a period cost in a company that makes clothing? Fabric used to create mens pants Advertising cost for new clothing Factory's supervisor salary monthly depreciation on equipment

Advertising cost for new clothing

A job-order costing system that relies on normal costing will:

Assign actual direct materials and direct labor costs to jobs

A document that lists the quantity of each type of direct material needed to complete a unit of product is called a:

Bill of materials

Which of the following statements are true? 1. In a traditional format income statement, the gross margin is sales minus cost of goods sold. 2. In a traditional format income statement, the gross margin minus selling and administrative expenses equals net operating income.

Both statements are true

Overhead application refers to applying:

Manufacturing overhead costs to job

Which of the following statements is true? 1. A decrease in the number of units sold will decrease the break-even point. 2. The break-even point can be determined by simply adding together all of the expenses from the income statement.

Neither statement is true

Which of the following statements is true? 1. Segmented statements for internal use should not be prepared using the contribution format. 2. When using segmented income statements, the dollar sales for a company to break even equals the traceable fixed expenses divided by the overall CM ratio.

Neither statement is true

Which of the following statements is true? 1. For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales. 2. The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio.

Only statement 1 is true

Which of the following statements is true? 1. Segment margin is sales less variable expenses less traceable fixed expenses. 2. The salary paid to a store manager is not a traceable fixed expense of the store.

Only statement 1 is true

Which of the following statements is true? 1. The margin of safety is the amount by which sales can decrease before losses are incurred by the company. 2. The margin of safety percentage is equal to the margin of safety in dollars divided by total contribution margin.

Only statement 1 is true

Which of the following statements is true? 1. Two companies with the same margin of safety in dollars will also have the same total contribution margin. 2. Fawn Company's margin of safety is $90,000. If the company's sales drop by $80,000, it will still have positive net operating income.

Only statement 2

Which of the following statements are true? 1. In a manufacturing company, all costs are period costs. 2. Selling and administrative expenses are period costs under generally accepted accounting principles. 3. The cost of shipping parts from a supplier is considered a period cost.

Only statement 2 is true

Which of the following statements is true? 1. Two companies with the same margin of safety in dollars will also have the same total contribution margin. 2. Fawn Company's margin of safety is $90,000. If the company's sales drop by $80,000, it will still have positive net operating income.

Only statement 2 is true

Which of the following statements is true? 1.Under variable costing, fixed manufacturing overhead is treated as a product cost. 2. Under variable costing, all variable production costs are treated as product costs. 3. Under variable costing, an increase in fixed manufacturing overhead will affect the unit product cost.

Only statement 2 is true

Which of the following statements is true? 1. Allocating common fixed costs to segments on segmented income statements increases the usefulness of such statements. 2. If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost should be considered a common cost

Only statements 2 is true

Which of the following will usually be found on an income statement prepared using absorption costing? Margin. Gross Margin A. Yes. Yes B. Yes No C. No Yes D. No. No

Option C

Which of the following statements is true? 1. If fixed expenses increase by $10,000 per year, then the sales needed to break even will generally increase by more than $10,000. 2. The break-even point in units can be obtained by dividing total fixed expenses by the unit contribution margin. 3. An increase in the number of units sold will decrease a company's break-even point.

Statements 1 and 2 are true

Which of the following statements is true? 1. Incremental analysis is an analytical approach that focuses only on those revenues and costs that will not change as a result of a decision. 2. When expressed on a per unit basis, fixed costs can mislead decision makers into thinking of them as variable costs. 3. To estimate what the profit will be at various levels of sales volume, multiply the number of units to be sold above or below the break-even point by the unit contribution margin.

Statements 2 and 3 are true

Which of the following statements is true? 1. A shift in the sales mix from low-margin items to high-margin items will decrease total profits even though total sales increase. 2. A shift in the sales mix from high-margin items to low-margin items can cause total profits to decrease even though total sales may increase. 3. A shift in the sales mix from products with high contribution margin ratios toward products with low contribution margin ratios will raise the break-even point for the company as a whole.

Statements 2 and 3 are true.

Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?

The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit

Which of the following statements is true?

The numerator in a predetermined overhead is estimated using the formula Y = a + bx

Break-even analysis assumes that:

Unit variable expense is constant

For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and installed in every automobile would best be described as a: Fixed cost mixed cost step-variable cost variable cost

Variable cost

A cost that would be included in product costs under both absorption costing and variable costing is:

Variable manufacturing costs

Which of the following statements is true regarding the formula Y = a + bx?

Y = The estimated total manufacturing overhead

Y= a + bx

Y= estimated manufacturing OH a= estimated fixed manufacturing OH b= estimated variable manufacturing OH x= estimated total amount of allocation base

The salary paid to the president of a company would be classified on the income statement as a(n):

administrative expense

which of the following statements is true regarding absorption costing?

it assigns all manufacturing costs, both fixed and variable to units of product

Which of the following statements is true? 1. Net operating income computed using absorption costing will always be less than Net operating income computed using variable costing 2. variable costing net operating income is usually closer to the net cash flow of a period than is absorption costing net operating income

only statement 2 is true

Mark is an engineer who has designed a telecommunications device. He is convinced that there is a big potential market for the device. Accordingly, he has decided to quit his present job and start a company to manufacture and market the device. Rent on the administrative office space is:

period cost

A cost incurred in the past that is not relevant to any current decision is classified as a(n): period cost opportunity cost sunk cost differential cost

sunk cost

All of the following can be differential costs except: Variable costs sunk costs opportunity costs fixed costs

sunk cost

Which of the following is correct? The break-even point occurs on the CVP graph where: total profit equals total expenses total profit equals total fixed expenses total contribution margin equals total fixed expenses total variable expense equal total contribution margin

total contribution margin equals fixed expenses