Managerial Final Exam Review

The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Sales $300,000 (Total) $90,000 (Dirt Bikes) $150,000 (Mountain Bikes) $60,000 (Racing Bikes) Variable manufacturing and selling expenses $120,000 T $27,000 DB $60,000 MB $33,000 RB Contribution margin $180,000 T $63,000 DB $90,000 MB $27,000 RB Fixed Expenses: Advertising, traceable $30,000 T $10,000 DB $14,000 MB $6,000 RB Depreciation of special equipment $23,000 T $6,000 DB $9,000 MB $8,000 RB Salaries of product-line managers $35,000 T $12,000 DB $13,000 MB $10,000 RB Allocated common fixed expenses* $60,000 T $18,000 DB $30,000 MB $12,000 RB Total Fixed Expenses $148,000 T $46,000 DB $66,000 MB $36,000 RB Net operating income (loss) $32,000 T $17,000 DB $24,000 MB $(9,000) RB * Allocated on the basis of sales dollars Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1.) What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2.) Should the production and sale of racing bikes be discontinued?

1.) Financial advantage (deisadvantage) per quarter; $11,000 Lost contribution margin $(27,000) + Fixed costs that can be avoided: Advertising, traceable $6,000 + Salary fo the product-line manager $10,000 = $(27,000) + $16,000 = Financial (disadvantage) of discontinuing the Racing Bikes $(11,000) [The depreciation of the special equipment is a sunk cost and is not relevant to the decision. The common costs are allocated and will continue regardless of whether or not the racing bikes are discontinued; thus, they are not relevant to the decision.] 2.) Should the production and sale of racing bikes be discontinued? No.

Why do organizations create budgets? Check all that apply. a.) Uncover potential bottlenecks before they occur. b.) Encourage managers to think about and plan for the future. c.) Coordinate the plans and activities of department managers d.) Allocate resources within the organization where they can be used most effectively. e.) Communicate financial goals throughout the organization.

All of the above. a.) Uncover potential bottlenecks before they occur. b.) Encourage managers to think about and plan for the future. c.) Coordinate the plans and activities of department managers d.) Allocate resources within the organization where they can be used most effectively. e.) Communicate financial goals throughout the organization.

Svahn, AB, is a Swedish manufacturer of sailing yachts. The company has assembled the information shown below that pertains to two independent decision-making contexts. Case A: The company chronically has no idle capacity and the old Model B100 machine is the company's constraint. Management is considering purchasing a Model B300 machine to use in addition to the company's present Model B100 machine. The old Model B100 machine will continue to be used to capacity as before, with the new Model B300 machine being used to expand production. This will increase the company's production and sales. The increase in volume will be large enough to require increases in fixed selling expenses and in general administrative overhead, but not in the fixed manufacturing overhead. Case B: The old Model B100 machine is not the company's constraint, but management is considering replacing it with a new Model B300 machine because of the potential savings in direct materials with the new machine. The Model B100 machine would be sold. This change will have no effect on production or sales, other than some savings in direct materials costs due to less waste. Determine whether each item is relevant or irrelevant. a.) Sales revenue b.) Direct materials c.) Direct labor d.) Variable manufacturing overhead e.) Depreciation--Model B100 machine f.) Book value--Model B100 machine g.) Disposal value--Model B100 machine h.) Market value--Model B300 machine (cost) i.) Fixed manufacturing overhead (general) j.) Variable selling expense k.) Fixed selling expense l.) General administrative overhead

Case A: Case B: a.) R I b.) R R c.) R I d.) R I e.) I I f.) I I g.) I I h.) R R i.) I I j.) R I k.) R I l.) R I

A plant wide overhead rate accounts for differences across departments in terms of how jobs consume overhead costs. True or False?

False

An indirect cost is a cost that can be easily and conveniently traced to a specified cost object. True or False?

False

Overhead is overapplied if the manufacturing overhead account has a debit balance at the end of a period. True or False?

False

Relevant costs and irrelevant benefits should be considered when making decisions. True or False?

False

Some common costs, like the cost of maintaining a corporate headquarters have to be paid for. Therefore, it is appropriate to include allocated common costs into the analysis relating to determining if a business segment is profitable and should be kept or if it is unprofitable and should be dropped. True or False?

False

An activity cost pool is a "Bucket" that costs are accumulated that relate to multiple activities. True or False?

False An activity cost pool is a "Bucket" that costs are accumulated that relate to single activities.

When a company applies more overhead to jobs than is actually incurs, it is considered to have underapplied overhead. True or False?

False It is overapplied

Under Absorption costing, only those manufacturing costs that vary with output are treated as product costs. True or False?

False That is the definition of variable costing. Absorption costing treats all manufacturing costs as product costs regardless if they are variable or fixed.

The budgeting process starts with the development of the production budget. You have to know what and how many you are going to make before you can begin to create a budget for activity. True or False?

False You start with the sales budget

Activity Based Costing is a method that assigns all manufacturing overhead costs to products based on the activities performed to make those products. True or False?

True

An indirect cost is a cost that cannot be easily and conveniently traced to a specified cost object. True or False?

True

Common fixed expenses should not be allocated to business segments when performing break-even calculations and making decisions. True or False?

True

Differential costs are always relevant costs. True or False?

True

The spending variance measure the difference between an actual cost incurred and what the standard cost is for actual output. True or False

True

There are two reasons we can have variances between a plan and actual results. 1.) We use more or fewer amounts of an input than planned. 2.) An input cost more or less than planned. True or False?

True

Variable cost per unit = Direct materials per unit + Direct labor per unit + Variable overhead per unit True or False?

True

Dehner Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours = 47,000 Total fixed manufacturing overhead cost = $202,100 Variable manufacturing overhead per direct labor-hour = $2.00/hr Recently, JobP951 was completed with the following characteristics: Number of units in the job = 50 Total direct labor-hours = 100 Direct materials = $850 Direct labor cost = $4,700 The unit product cost for Job P951 is closest to: (Round your intermediate calculations to 2 decimal places) a.) $123.60 b.) $23.60 c.) $315.00 d.) $61.80

a.) $123.60 Estimated total manufacturing overhead cost = Estimated fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base x Estimated total amount of the allocation base) = $202,100 + ($2.00 per direct labor-hour x 47,000 direct labor hours) = $202,100 + $94,000 = $296,100 Estimated total MOH cost Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total amount of the allocation base = $296,100 / 47,000 direct labor-hours = $6.30 per direct labor-hour Predetermined OH rate Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $6.30 per direct labor-hour x 100 direct labor hours = $630 Overhead applied to Job P951 Direct materials $850 Direct labor $4,700 Manufacturing overhead applied $630 = Total cost of Job P951 $6,180 Total cost of JobP951 46,180 / Number of units 50 = Unit product cost $123.60

Rediger Incorporated a manufacturing Corporation, has provided the following data for the month of June. The balance in the Work in Process inventory account was $41,000 at the beginning of the month and $26,500 at the end of the month. During the month, the Corporation incurred direct materials cost of $58,800 and direct labor cost of $33,700. The actual manufacturing overhead cost incurred was $54,900. The manufacturing overhead cost applied to Work in Process was $54,800. The cost of goods manufactured for June was: a.) $161,800 b.) $147,400 c.) $161,900 d.) $147,300

a.) $161,800 Cost of goods manufactured = Direct materials + Direct labor + Manufacturing overhead applied + Beginning work in process inventory - Ending work in process inventory = $58,800 + $33,700 + $54,800 + $41,000 - $26,500 = $161,800 Cost of goods manufactured

Schister Systems uses the following data in its Cost-Volume-Profit analyses: Sales = $355,000 Variable expenses = $213,000 Contribution margin = $142,000 Fixed expenses = $111,000 Net operating income = $31,000 What is the total contribution margin if sales volume increases by 30%? a.) $184,600 b.) $142,000 c.) $40,300 d.) $21,700

a.) $184,600 Contribution margin ratio = Contribution margin / Sales = $142,000 / $355,000 = 0.40 Contribution margin = Contribution margin ratio x Sales = 0.40 x (1.3 x $355,000) = $184,600 Total contribution margin

Price Precision Co. is starting to replace its direct laborers with robots (Which are part of manufacturing overhead). The company estimated 50,000 direct labor-hours would be required to support production planned for the year. The company also estimated $700,000 of total fixed manufacturing overhead cost for the coming year and $5.00 of variable manufacturing overhead cost per direct labor hour. What is the company's predetermined overhead rate? a.) $19 per direct labor hour b.) $30 per direct labor hour c.) $14 per direct labor hour d.) $20 per direct labor hour

a.) $19 per direct labor hour Total fixed manufacturing overhead cost for the upcoming year $700,000 / Estimated direct labor hours required 50,000 hrs = $14 + Variable manufacturing overhead cost per direct labor hour $5.00 = Predetermined overhead rate $19 per direct labor hour

Chavez Corporation reported the following data for the month of July: Inventories: Raw materials $44,000 (beginning) $38,500 (ending) Work in Process $24,500 (beginning) $34,000 (ending) Finished goods $40,500 (beginning) $55,500 (ending) Additional information: Raw materials purchases = $74,500 Direct labor cost = $99,500 manufacturing OH cost incurred = $67,500 Indirect materials included in MOH cost incurred = $11,400 MOH cost applied to Work in Process = $66,500 Any underapplied or overapplied manufacturing overhead is closed out to cost of goods sold. The cost of goods manufactured for July is: a.) $225,100 b.) $246,600 c.) $245,600 d.) $234,600

a.) $225,100 Beginning work in process $24,500 Direct materials: Raw materials inventory, beginning $44,000 + Purchases of raw materials $74,500 = Total raw materials available $118,500 - Raw materials inventory, ending $38,500 = Total raw materials used in production $80,000 - Indirect materials included in MOH $11,400 = Direct materials used in production $68,600 + Direct labor $99,500 + MOH cost applied to work in process $66,500 = Total MOH costs added to production $234,600 + Beginning work in process $24,500 = Total manufacturing costs to account for $259,100 - Ending work in process $34,000 = Cost of goods manufactured $225,100

Dukelow Corporation has two divisions: the Governmental Products Division and the Export Products Division. The Governmental Products Division's divisional segment margin is $39,300 and the Export Products Division's divisional segment margin is $91,700. The total amount of common fixed expenses not traceable to the individual divisions is $103,600. What is the company's net operating income (loss)? a.) $27,400 b.) $131,000 c.) $234,600 d.) $(131,000)

a.) $27,400 Total segment margin = $39,300 + $91,700 = $131,000 Total net operating income = Total segment margin - Common fixed expenses = $131,000 - $103,600 = $27,400 Net operating income

Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours = 30,700 Total fixed manufacturing overhead cost = $337,700 Variable manufacturing overhead per machine-hour = $4.00 Recently, Job T687 was completed with the following characteristics: Number of units in the job = 10 Total machine-hours = Direct materials = $575 Direct labor cost = $1,150 If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to: (Round your intermediate calculations to 2 decimal places) a.) 283.50 b.) $285.00 c.) $81.00 d.) $241.50

a.) $283.50 Estimated total manufacturing overhead cost = Estimated total MOH cost + (Estimated VOH cost per unit of allocation base x Estimated total amount of the allocation base) = $337,700 + ($4/machine-hour x 30,700 machine-hours) = $337,700 + $122,800 = $460,500 Estimated total MOH cost Predetermined overhead rate = Estimated total MOH cost / Estimated total amount of the allocation base = $460,500 / 30,700 machine-hours = $15/machine-hour Predetermined OH rate Overhead applied to Job T687 = Predetermined OH rate x Amount of the total machine-hours = $15/machine-hour x 20 machine-hours = $300 Overhead applied to Job T687 Direct materials = $575 + Direct labor = $1,150 + MOH applied = $300 = Total cost of Job T687 $2,025 Total cost of Job T687 = $2,025 / Number of units = 10 = Unit product cost $202.50 Unit product cost for Job T687 = $202.50 + Markup (40% x $202.50) = $81.00 = Selling price $283.50

Cull Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed MOH cost of $433,100, variable MOH of $2.20 per machine-hour, and 61,000 machine-hours. The company has provided the following data concerning Job X455 which was recently completed: Number of units in the job = 1- Total machine-hours = 80 Direct materials = $770 Direct labor cost = $1,540 If the company marks up its unit product cost by 25% then the selling price for a unit in Job X455 is closest to: (Round your intermediate calculations to 2 decimal places.) a.) $381.75 b.) $76.35 c.) $305.40 d.) $406.75

a.) $381.75 Estimated total MOH cost = Estimated total fixed MOH cost x Total machine-hours) = $433,100 + ($2.20/machine-hour x 61,000 machine-hours) = $433,100 + $134,200 = $567,300 Est. total MOH cost Predetermined overhead rate = Estimated total MOH cost / Total machine-hours = $567,300 / 61,000 machine-hours = $9.30 Predetermined OH rate Overhead applied to Job X455 = Predetermined OH rate x Total machine-hours in Job X455 = $9.30 x 80 machine-hours = $744 Overhead applied Direct materials $770 + Direct labor cost $1,540 + MOH applied $744 = Total cost for Job X455 $3,054 Total cost for Job X455 $3,054 / Number of units in the job 10 = Unit product cost $305.40 Unit product cost $305.40 + Markup ($305.40 x 25%) = $76.35 = Selling price $381.75

Job 910 was recently completed. The following data have been recorded on its job cost sheet: Direct materials = $3,193 Direct labor-hours = 21 labor-hours Direct labor wage rate = $12 per labor-hour Machine-hours = 166 machine-hours The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined overhead rate is $15 per machine-hour. The total cost that would be recorded on the job cost sheet for Job 910 would be: a.) $5,935 b.) $3,220 c.) $3,760 d.) $3,445

a.) $5,935 Direct materials = $3,193 + Direct labor (21 direct labor-hours x $12 per labor-hour) = $252/labor-hour + Overhead = (166 machine-hours x $15 per machine-hour = $2,490 = Total manufacturing cost for Job 910 $5,935

A company plans to make 14,000 units of its product in quarter 1. They need 15 pounds of raw materials for each unit produced. They desire to have 48,000 pounds of raw materials on had at the end of quarter 1. If they have no beginning inventory of raw materials, how many pounds of material do they need to purchase in quarter 1? Material costs $2.00 per pound. How much are the quarter 1 materials purchased going to cost the firm? a.) $516,000 b.) $420,000 c.) $96,000 d.) $258,000

a.) $516,000 ((14,000 x 15) + 48,000) x $2

The following partially completed T-accounts summarize transactions for Faaberg Corporation during the year: Raw Materials: Debit: beginning balance 5,300; 5,500 Credit: 9,600 Work in Process: Debit: beginning balance 4,400; 6,500; 8,800; 8,600 Credit: 22,500 Finished Goods: Debit: beginning balance 2,500; 22,500 Credit: 20,700 Manufacturing Overhead: Debit: 3,100; 3,800; 3,500 Credit: 8,600 Wages & Salaries Payable: Debit: 20,700 Credit: beginning balance 2,800; 12,600 Cost of Goods Sold: Debit: 20,700 Credit: 0 The manufacturing overhead applied was: a.) $8,600 b.) $15,300 c.) $3,500 d.) $3,800

a.) $8,600 The manufacturing overhead applied is the credit entry of $8,600 in the Manufacturing Overhead account Manufacturing Overhead: Debit: 3,100; 3,800; 3,500 Credit: Manufacturing overhead applied 8,600

Gabuat Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price = $138 Units in beginning inventory = 0 Units produced = 2,600 Units sold = 2,310 Units in ending inventory = 290 Variable costs per unit: Direct materials = $49 Direct labor = $27 Variable manufacturing overhead = $6 Variable selling & admin. expense = $6 Fixed costs: Fixed manufacturing overhead = $36,400 Fixed selling &n admin. expense = $13,860 The total gross margin for the month under the absorption costing approach is: a.) $97,020 b.) $83,160 c.) $166,320 d.) $83,160

a.) $97,020 Absorption costing unit product cost = DM + DL + VMOH + FMOH = $49 + $27 + $6 + ($36,400 / 2,600 units produced) = $82 + $14 = $96 A. costing unit product cost Sales ($138 x 2,310 units sold) = $318,780 - Cost of Goods Sold ($96 x 2,310 units) = $221,760 = Gross margin $97,020 using absorption costing

Parwin Corporation plans to sell 23,000 units during August. If the company has 8,000 units on hand at the start of the month and plans to have 9,000 units on hand at the end of the month, how many units must be produced during the month? a.) 24,000 b.) 22,000 c.) 32,000 d.) 31,000

a.) 24,000 23,000 - 8,000 + 9,000

A manufacturer of tiling grout has supplied the following data: Kilograms produced and sold = 440,000 Sales revenue = $1,870,000 Variable manufacturing overhead = $946,000 Fixed manufacturing expense = $238,000 Variable selling and administration expense = $346,000 Fixed selling and administration expense = $204,000 Net operating income = $136,000 The company's contribution margin ratio is closest to: a.) 30.9% b.) 76.4% c.) 81.5% d.) 49.4%

a.) 30.9% Contribution margin = Sales - Variable expenses = $1,870,000 - ($$946,000 + $346,000) = $1,870,000 - $1,292,000 = $578,000 Contribution margin ratio = Contribution margin / Sales = $578,000 / $1,870,000 = 0.309 ~ 30.9 Contribution margin ratio

In a job order costing system, job cost equals: a.) Direct materials, Direct labor, and Manufacturing overhead applied using a predetermined overhead rate b.) Direct materials, Direct labor, and Admin. costs c.) Direct materials, Direct labor, and Selling costs incurred d.) Direct materials, Direct labor, and Actual manufacturing overhead costs incurred

a.) Direct materials, Direct labor, and Manufacturing overhead applied using a predetermined overhead rate

Which of the following statements is true? a.) Period costs are excluded from the calculation of gross margin. b.) Period costs and fixed costs are synonyms. c.) Period costs may be included in inventory as reported on the balance sheet. d.) Period costs include indirect materials and indirect labor.

a.) Period costs are excluded from the calculation of gross margin.

The correct formula to calculate the total unit sales to achieve Target Profit is: CM = Contribution Margin a.) Unit Sales to attain the target profit = (Target Profit + Total Fixed Costs)/Unit CM b.) Unit Sales to attain the target profit = CM Unit/(Target Profit + Total Fixed Costs) c.) Unit Sales to attain the target profit = (Target Profit + Total Variable Costs)/Unit CM d.) Unit Sales to attain the target profit = (Target Profit + Total Fixed Costs)/CM Ratio

a.) Unit Sales to attain the target profit = (Target Profit + Total Fixed Costs)/Unit CM

Which of the following items are inventoriable items that would appear on a company Balance Sheet? (Select all that apply) a.) Work-in-Process b.) Selling expenses c.) Finished goods d.) Administrative expenses e.) Raw materials

a.) Work-in-Process b.) Selling expenses c.) Finished goods d.) Administrative expenses

Farris Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price = $116 Units in beginning inventory = 0 Units produced = 9,000 Units sold = 8,600 Units in ending inventory = 400 Variable costs per unit: Direct materials = $19 Direct labor = $61 Variable manufacturing overhead = $7 Variable selling & admin. expense = $11 Fixed costs: Fixed manufacturing overhead = $135,000 Fixed selling & admin. expense = $8,900 What is the net operating income (loss) for the month under variable costing? a.) $(23,900) b.) $10,900 c.) $6,000 d.) $16,900

b.) $10,900 Variable costing unit product cost = DM + DL + VMOH = $19 + $61 + $7 = $87 V. costing unit product cost Sales ($116 x 8,600 units sold) = $997,600 - Variable expenses: [($87 x 8,600 units) = $748,200 + ($11 x 8,600 units) = $94,600] = $842,800 = Contribution margin $154,800 - Fixed expenses: [$135,000 + $8,900] = $143,900 = Net operating income $10,900 under variable costing

Chavez Corporation reported the following data for the month of July: Inventories: Raw materials $29,000 (beginning) $31,000 (ending ) Work in Process $17,000 (beginning) $19,000 (ending) Finished goods $33,000 (beginning) $48,000 (ending) Additional information: Raw materials purchases = $67,000 Direct labor cost = $92,000 MOH cost incurred = $60,000 Indirect materials included in MOH cost incurred = $8,400 MOH cost applied to Work in Process = $59,000 Any underapplied or overapplied manufacturing overhead is closed out to cost of goods sold. The cost of goods manufactured for July is: a.) $218,600 b.) $205,600 c.) $207,600 d.) $219,600

b.) $205,600 Beginning work in process $17,000 Direct materials: Raw materials inventory, beginning $29,000 + Purchases of raw materials $67,000 = Total raw materials available $96,000 - Raw materials inventory, ending $31,000 = Total raw materials used in production $65,000 - Indirect materials included in MOH $8,400 = Direct materials used in production $56,600 + Direct labor $92,000 + MOH cost applied to work in process $59,000 = Total Manufacturing costs added to production $207,600 + Beginning work in process $17,000 = Total manufacturing costs to account for $224,600 - Ending work in process $19,000 = Cost of goods manufactured $205,600

Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November: Sales (6,500 units) = $403,000 Variable expenses = $273,000 Contribution margin = $130,000 Fixed expenses = $103,500 Net operating income = $26,500 If the company sells 6,400 units, its net operating income should be closest to: (Do not round intermediate calculations.) a.) $26,500 b.) $24,500 c.) $25,979 d.) $22,000

b.) $24,500 Selling price per unit = Sales / Quantity = $403,000 / 6,500 units = $62 per unit Variable expenses per unit = Variable expenses / Quantity sold = $273,000 / 6,500 units = $42 per unit Unit contribution margin = Selling price per unit - Variable expenses per unit = $62 per unit - $42 per unit = $20 per unit Profit = (Unit contribution margin x Q) - Fixed expenses = ($20/unit x 6,400 units) - $103,500 = $128,000 - $103,500 = $24,500 Net operating income

Combe Corporation has two divisions: Alpha and Beta. Data from the most recent month appear below: Alpha: Sales = $215,000 Variable expenses = $139,750 Traceable fixed expenses = $84,150 Beta: Sales = $368,600 Variable expenses = $166,300 Traceable fixed expenses = $99,500 The company's common fixed expenses total $64,600. The break-even in dollar sales for Alpha Division is closest to: a.) $184,571 b.) $240,429 c.) $150,400 d.) $425,000

b.) $240,429 Alpha contribution margin = Alpha sales - Alpha variable expenses =$215,000- $139,750 = $75,250 Alpha CM Alpha CM ratio = Segment contribution margin / Alpha sales = $75,250 / $215,000 = 0.35 Alpha CM ratio Dollar sales for Alpha to break-even = Alpha fixed expenses / Alpha CM ratio = $84,150 / 0.35 = $240,429 for Alpha to break-even

Assume (1) estimated fixed manufacturing overhead rate for the coming period of $204,000, (2) estimated variable manufacturing overhead rate of $2.00 per direct labor hour, and (3) estimated direct labor-hours to be worked in the coming period of 55,000 hours. The predetermined plantwide predetermined overhead rate for the period is closest to: a.) $6.14 b.) $5.71 c.) $5.58 d.) $5.92

b.) $5.71 Fixed manufacturing overhead for the coming period $204,000 / Estimated direct labor-hours to be worked in the coming period 55,000 hrs = 3.709090... + Estimated variable manufacturing overhead $2.00 per direct labor-hour = Predetermined plantwide overhead rate $5.71

Helmers Corporation manufactures a single product. Variable costing net operating income last year was $103,000 and this year was $123,500. Last year, $38,400 in fixed manufacturing overhead costs were released from inventory under absorption costing. This year, $14,500 in fixed manufacturing overhead costs were deferred in inventory under absorption costing. What was the absorption costing net operating income last year? a.) $141,400 b.) $64,600 c.) $109,000 d.) $103,000

b.) $64,600 Variable costing net operating income $103,000 + Fixed manufacturing overhead costs deferred under absorption costing $0 - Fixed manufacturing overhead costs released under absorption costing $(38,400) = Absorption costing net operating income $64,600

Haack Incorporated is a merchandising company. Last month the company's cost of goods sold was $63,200. The company's beginning merchandise inventory was $19,100 and its ending merchandise inventory was $24,600. What was the total amount of the company's merchandise purchases for the month? a.) $106,900 b.) $68,700 c.) $57,700 d.) $63,200

b.) $68,700 Cost of goods sold = Beginning merchandise inventory + Purchases - Ending merchandise inventory $63,200 = $19,100 + Purchases - $24,600 Purchases = $63,200 - $19,100 + $24,600 = $68,700 OR Ending merchandise inventory + Cost of goods sold - Beginning merchandise inventory

A company has budgeted the following expenses for May in its Selling and Administrative budget: Advertising = $17,000 Executive Salaries = $55,000 Insurance = $10,000 Property Taxes = $4,000 Depreciation = $20,000 The amount of cash needed to pay for these expenses during May is: a.) $106,000 b.) $86,000 c.) $89,000 d.) $69,000

b.) $86,000 Depreciation is a non-cash expense.

Serfass Corporation's contribution format income statement for July appears below: Sales = $390,000 Variable expenses = $175,000 Contribution margin = $214,500 Fixed expenses = $77,220 Net operating income = $137,280 The degree of operating leverage is closest to: a.) 0.64 b.) 1.56 c.) 1.82 d.) 0.35

b.) 1.56 Degree of operating leverage = Contribution. margin / Net operating income = $214,500 / $137,280 = 1.56 Degree of operating leverage

Assume the following (1) selling price per unit = $30, (2) variable expense per unit = $18, and (3) total fixed expenses = $58,200. Given these three assumptions, the unit sales needed to achieve a target profit of $7,200 is: a.) 78,050 units b.) 5,450 units c.) 65,400 units d.) 12,650 units

b.) 5,450 units (Total fixed expenses + Target profit) / Contribution margin per unit = ($58,200 + $7,200) / ($30 - $18) = $65,400 / $12 = 5,450 unit sales to attain Target profit

A cement manufacturer has supplied the following data: Tons of cement produced and sold = 310,000 Sales revenue = $1,014,000 Variable manufacturing expense = $239,000 Fixed manufacturing expense = $334,000 Variable selling and administrative expense = $186,880 Fixed selling and administrative expense = $100,000 Net operating income = $154,120 The company's contribution margin is closest to: a.) 43.5% b.) 58.0% c.) 15.2% d.) 67.1%

b.) 58.0% Contribution margin = Sales - Variable expenses = $1,014,000 - ($239,000 + $186,880) = $1,014,000 - $425,880 = $588,120 CM ratio = Contribution margin / Sales = $588,120 / $1,014,000 = 0.58 ~ 58% CM ratio

Barefoot Sandal corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year. A: CM Ratio Increase; Break Even Point Decrease B: CM Ratio Decrease; Break Even Point Decrease C: CM Ratio Increase; Break Even Point No Effect D: CM Ratio Decrease; Break Even Point No Effect a.) B b.) A c.) D d.) C

b.) A

Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year? Choice A: CM ratio increase; Break-even point decrease Choice B: CM ratio decrease; Break-even point decrease Choice C: CM ratio increase; Break-even point no effect Choice D: CM ratio decrease; Break-even point no effect a.) Choice C b.) Choice A c.) Choice B d.) Choice D

b.) Choice A

Which of the following would be classified as Period Costs? Choose all that apply. a.) Direct materials b.) Executive salaries c.) Sales commissions d.) Manufacturing overhead e.) Advertising f.) Rental cost of administrative offices g.) Direct labor

b.) Executive salaries c.) Sales commissions e.) Advertising f.) Rental cost of administrative offices

A cost that has already been incurred and cannot be changed now or in the future is a_______? a.) Opportunity cost b.) Sunk cost c.) Fixed cost d.) Incremental cost

b.) Sunk cost

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory? a.) The factory utilities of the department in which production takes place. b.) The amount paid to the individual who stains a chair. c.) The cost of the glue in a chair. d.) The workman's compensation insurance of the supervisor who oversees production.

b.) The amount paid to the individual who stains a chair.

Which of the following is not an underlying assumption of cost-volume-profit analysis? a.) In multiproduct companies, the mix of products sold remains constant. b.) The average fixed cost per unit increases as the level of activity increases. c.) Selling price is constant. d.) Variable cost per unit is constant within the relevant range.

b.) The average fixed cost per unit increases as the level of activity increases.

The correct formula to calculate break even in units sold is: Note CM = Contribution Margin a.) Units Sales to Break Even = Total Fixed Expenses/CM % b.) Unit Sales to Break Even = Total Fixed Expenses/Unit CM c.) Unit Sales to Break Even = Total Variable Expenses/Unit CM d.) Units Sales to Break Even = Unit CM/Total Fixed Expenses

b.) Unit Sales to Break Even = Total Fixed Expenses/Unit CM

Activity-based absorption costing assigns all manufacturing overhead costs to products based on the ___________ performed to make those products. a.) computations b.) activities c.) overhead d.) hours

b.) activities

The cost of goods manufactured is: a.) the amount transferred from Raw Materials to Finished Goods b.) the amount transferred from Work in Process to Finished Goods c.) the amount transferred from Raw Materials to Work in Process d.) the amount transferred from Finished Goods to Cost of Goods Sold

b.) the amount transferred from Work in Process to Finished Goods

Assume a company has four divisions. Division A has sales, variable expenses, and traceable fixed expenses of $200,000, $104,000, and $34,200, respectively. If the company as a whole has common fixed expenses of $50,000, then Division A's dollar sales to break-even is closest to: a.) $146,250 b.) $186,250 c.) $71,250 d.) $133,750

c.) $71,250 Step 1: Calculate the contribution margin for Division A: Sales $200,000 - Variable expenses $104,000 = CM $96,000 Step 2: Calculate the CM ratio for Division A: CM $96,000 / Sales $200,000 = 48% Step 3: Calculate the break-even point for Division A: Traceable fixed expenses $34,200 / CM ratio 48% = $71,250 sales to break-even

Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that: a.) variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs. b.) variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs. c.) variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs while absorption costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs. d.) variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.

b.) variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.

Assume the following information: Sales = $600,000 (total) $40 (per unit) Contribution margin = $360,000 (total) $24 (per unit) Net operating income = $240,000 (total) What is the amount of fixed expenses? a.) $200,000 b.) $360,000 c.) $120,000 d.) $240,000

c.) $120,000 Total fixed expenses = Contribution margin - Net operating income = $360,000 - $240,000 = $120,000 Total fixed expenses

Younie Corporation has two divisions: the South Division and the West Division. The corporation's net operating income is $92,300. The South Division's divisional segment margin is $46,300 and the West Division's divisional segment margin is $171,700. What is the amount of the common fixed expense not traceable to the individual divisions? a.) $264,000 b.) $218,000 c.) $125,700 d.) $138,600

c.) $125,700 Sales ? - Variable expenses ? = Contribution margin ? - Traceable fixed expenses ? = Segment margin ($46,300 + $171,700) = $218,000 - Common fixed expenses not traceable (FIND) = Net operating income $92,300 Common fixed expenses not traceable = Segment margin - Net operating income = $218,000 - $92,300 = $125,700 Common fixed expenses not traceable

Assume the following information for a company that produced and sold 10,000 units during its first year of operations: Selling price = $20 per unit Direct materials = $77 per unit Direct labor = $50 per unit Variable manufacturing overhead $10 per unit Fixed manufacturing overhead = $300,000 per year Using absorption costing, what is the company's unit product cost? a.) $137 b.) $157 c.) $167 d.) $127`

c.) $167 Direct materials $77/unit + Direct labor $50/unit + Variable manufacturing overhead $10/unit + Fixed manufacturing overhead ($300,000 per year / 10,000 units) = $30/unit = $167 Unit product cost using A. costing

Keyser Corporation, which has only one product, has provided the following data concerning its most recent month of operatings: Selling price = $149 Units in beginning inventory = 1,150 Units produced = 9,050 Units sold = 9,150 Units in ending inventory = 1,050 Variable costs per unit: Direct materials = $33 Direct labor = $50 Variable manufacturing overhead = $14 Variable selling & admin. expense = $24 Fixed costs: Fixed manufacturing overhead = $72,400 Fixed selling & admin. expense = $165,400 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 net operating income for the month under variable costing? a.) $17,600 b.) $28,100 c.) $18,400 d.) $4,500

c.) $18,400 Variable costing unit product cost = DM/unit + DL/unit + VMOH/unit = $33 + $50 + $14 = $97 V. costing unit product cost Net operating income using V. costing = Sales ($149 x 9,150 units sold) = $1,363,350 - Variable expenses: [V. cost of goods sold ($97 x 1,950 units) = $887,550 + Variable S&A expense ($24 x 9,150 units) = $219,600] = $1,107,150 = Contribution margin $256,200 - Fixed expenses: [$72,400 + $165,400] = $237,800 = Net operating income $18,400 using variable costing

Drake Corporation's relevant range of activity is 4,900 units to 5,500 units. When it produces and sells 5,200 units, its average costs per unit are as follows: Direct materials = $6.50/unit Direct labor = $3.70/unit Variable manufacturing overhead = $2.10/unit Fixed manufacturing overhead = $3.00/unit Fixed selling expense = $1.00/unit Fixed administrative expense = $0.70/unit Sales commissions = $0.80/unit Variable administrative expense = $0.70/unit If 4,200 units are produced, the total amount of indirect manufacturing cost incurred is closest to: a.) $21,420 b.) $15,600 c.) $24,420 c.) $8,820

c.) $24,420 Total variable manufacturing overhead cost = ($2.10/unit x 4,200 units) = $8,820 + Total fixed manufacturing overhead cost = [$3.00/unit x (4,900 + 5,500 = 10,400 -> 10,400 / 2 = 5,200 units) 5,200 units] = $15,600 = Total indirect manufacturing cost $24,420

the raw materials inventory balance increased by $6,100 during the period and the raw material purchases were $600,000, then what is the raw materials used in production? a.) $36,100 b.) $83,900 c.) $53,900 d.) $66,100

c.) $53,900 Raw material purchases during the period - Raw material inventory balance increase = $60,000 - $6,100 = $53,900 Raw materials used in production

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price = $165 Units in beginning inventory = 0 Units produced = 11,700 Units sold = 11,500 Units in ending inventory = 200 Variable costs per unit: Direct materials = $53 Direct labor = $52 Variable manufacturing overhead = $9 Variable selling and administrative expense = $5 Fixed costs: Fixed manufacturing overhead = $351,000 Fixed selling and administrative expense = $149,500 What is the total period cost for the month under Variable costing? a.) $351,000 b.) $500,500 c.) $558,000 d.) $207,000

c.) $558,000 Fixed manufacturing overhead $351,000 + Fixed selling & admin. expenses $149,500 + Variable selling & admin. expenses ($5/unit x 11,500 units sold) = $57,500 = $558,000 Total period costs using variable costing

Overhead application refers to applying: a.) Nonmanufacturing overhead costs to jobs. b.) Direct labor costs to jobs. c.) Direct material costs to jobs. d.) Manufacturing overhead costs to jobs.

d.) Manufacturing overhead costs to jobs. The process of assigning overhead cost to jobs is called overhead application.

Sabv Corporation's break-even-point in sales is $900,000, and its variable expenses are 75% of sales. If the company lost $40,000 last year, sales must have amounted to: a.) $634,000 b.) $860,000 c.) $740,000 d.) $820,000

c.) $740,000 Contribution margin ratio = 1 - Variable expense ratio = 1- 0.75 = 0.25 CM ratio Sollar sales to break-even = Fixed expenses / CM ratio =$900,000 = Fixed expenses / 0.25 => Fixed expenses = $900,000 x 0.25 = $225,000 Fixed expenses Profit = (CM ratio x Sales) - Fixed expenses -$40,000 = (0.25 x Sales) - $225,000 => Sales = ($225,000 - $40,000) / 0.25 = $740,000 Sales

Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $290,000, variable expenses of $149,100, and traceable fixed expenses of $69,300. The Alpha Division has sales of $600,000, variable expenses of $331,800, and traceable fixed expenses of $130,300. The total amount of common fixed expenses not traceable to the individual divisions is $131,200. What is the company's net operating income? a.) $409,100 b.) $268,200 c.) $78,300 d.) $209,500

c.) $78,300 Sales ($290,000 + $600,000) = $890,000 Variable expenses ($149,100 + $331,800) = $480,900 = Contribution margin $409,100 - Traceable fixed expenses ($69,300 + $130,300) = $199,600 = Segment margin $209,500 - Common fixed expenses not traceable $131,200 = Net operating income $78,300

The journal entry to record the completion of work and transferring to finished good would be: Note DR = Debit CR = Credit a.) DR - Finished Goods; CR - Accounts Payable b.) DR - Work in Process; CR - Finished Goods c.) DR - Finished Goods; CR - Work in Process d.) DR - Finished Goods; CR - Manufacturing Overhead

c.) DR - Finished Goods; CR - Work in Process

Roger Corp. had $10,000 in raw materials on hand. During the month, Roger Corp. purchased on account an additional $25,000 in raw materials. What journal entry records the purchase of raw materials? a.) Cash 10,000 Raw Materials 10,000 b.) Accounts Payable 10,000 Raw Materials 10,000 c.) Raw Materials 25,000 Accounts Payable 25,000 d.) Raw Materials 25,000 Cash 25,000

c.) Raw Materials 25,000 Accounts payable 25,000

Which of the following statements is false? a.) The break-even point is the level of sales at which the total contribution margin equals the total fixed costs. b.) Margin of safety is the excess of budgeted or actual dollar sales over the break-even dollar sales. c.) Sales mix refers to the relative selling prices of a company's various products. d.) Operating leverage is a measure of how sensitive net operating income is to a given percentage change in dollar sales.

c.) Sales mix refers to the relative selling prices of a company's various products. Sales mix is the relative proportions in which a company's products are sold. Sales mix is computed by expressing the sales of each product as a percentage of total sales.

Kuzio Corporation produces and sells a single product. Data concerning that product appear below: Selling price = $140 per unit; 100% of sales Variable expenses = $84 per unit; 60% of sales Contribution margin = $56 per unit; 40% of sales The company is currently selling 4,800 units per unit. Fixed expenses are $209,000 per month. The marketing manager believes that a $7,400 increase in the monthly advertising budget would result in a 170 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change? a.) decrease of $7,400 b.) increase of $7,400 c.) increase of $2,120 d.) decrease of $2,120

c.) increase of $2,120 Net operating income with 4,800 units: Sales ($140 x 4,800 units) = $ - Variable expenses ($84 x 4,800 units) = $ = Contribution margin $ - Fixed expenses (without $7,400 increase) $209,000 = Net operating income $58,800 for 4,800 units Net operating income with 4,970 units: Sales ($140 x 4,970 units) = $695,800 - Variable expenses ($84 x 4,970 units) = $417,480 = Contribution margin $278,320 - Fixed expenses ($209,000 + $7,400) = $216,400 = Net operating income $61,920 for 4,970 units => NOI for 4,970 units $61,920 - NOI for 4,800 units $58,800 = $2,120 increase in NOI when you increase the monthly advertising budget (fixed exp.) by $7,400

Assume that a company pays a 5% sales commission. Also, assume (1) a company's plantwide predetermined overhead rate is $12.00 per direct labor-hour, and (2) its job cost sheet for Job X shows that this job used 18 direct labor-hours and incurred direct materials and direct labor charges of $500 and $360, respectively. What is the total cost of Job X? a.) $1,086.80 b.) $1,129.80 c.) $716.00 d.) $1,076.00

d.) $1,076.00 Direct materials $500 + Direct labor $360 + MOH applied (18 direct labor-hours x $12.00/direct labor-hour) = 216 = $1,076.00 Total cost of Job X

Schonhardt Corporation's relevant range of activity is 2,200 units to 5,000 units. When it produces and sells 3,600 units, its average cost per unit are as follows: Direct materials = $7.55/unit Direct labor = $2.80/unit Variable manufacturing overhead = $1.50/unit Fixed manufacturing overhead = $3.00/unit Fixed selling expense = $0.90/unit Fixed administrative expense = $0.60/unit Sales commissions = $0.70/unit Variable administrative expense = $0.60/unit If 4,000 units are produced, the total amount of fixed manufacturing cost incurred is closest to: a.) $14,040 b.) $14,400 c.) $10,080 d.) $10,800

d.) $10,800 Fixed manufacturing overhead per unit = $3.00 x Number of units produced = 3,600 = Total fixed manufacturing overhead cost $10,800

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price = $97 Units in beginning inventory = 0 Units produced = 4,600 Units sold = 3,770 Units in ending inventory = 830 Variable costs per unit: Direct materials = $22 Direct labor = $37 Variable manufacturing overhead = $5 Variable selling & admin. expense = $4 Fixed costs: Fixed manufacturing overhead = $54,900 Fixed selling and administrative expense = $3,200 The total contribution margin for the month under variable costing is: a.) $51,320 b.) $124,410 c.) $54,430 d.) $109,330

d.) $109,330 Variable costing unit product cost = DM + DL + VMOH = $22 + $37 + $5 = $64 V. costing unit product cost Sales ($97 x 3,770 units sold) = $365,690 - Variable expenses: [($64 x 3,770 units) = $241,280 + ($4 x 3,770 units) = $15,080] = $256,360 = Contribution margin $109,330 using variable costing

Which of the following costs are always irrelevant to decision making? a.) fixed costs b.) opportunity costs c.) avoidable costs d.) sunk costs

d.) sunk costs

Assume the following information: Direct materials $70,000 (Right) Direct labor $45,000 (R) VMOH $14,000 (L) + FMOH $25,000 (L) = Total MOH $39,000 (R) Variable selling expense $15,000 (L) + Fixed selling expense $20,000 (L) = Total selling expense $35,000 Variable administrative expense $8,000 + Fixed administrative expense $12,000 = Total administrative expense $20,000 What is the total variable manufacturing cost? a._ $143,000 b.) $33,000 c.) $115,000 d.) $129,000

d.) $129,000 Direct materials $70,000 + Direct labor $45,000 + Variable manufacturing overhead $14,000 = Total variable manufacturing cost $129,000

Company A had sales of $100,000 in January and $150,000 in February. 70% of sales are collected in the month of sale and 30% in the month following the sale. How much cash does Company expect to collect in February? a.) $115,000 b.) $100,000 c.) $150,000 d.) $135,000

d.) $135,000 $100,000 x 0.30 + $150,000 x 0.70 = $135,000

Data concerning Follick Corporation's single product appear below: Selling price per unit = $280.00 Variable expense per unit = $78.40 Fixed expense per month = $158,400 The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.) a.) $440,000 b.) $281,600 c.) $158,400 d.) $220,000

d.) $220,000 Contribution margin ratio = Unit Contribution margin (Selling price per unit - V. expense per unit) / Units Selling price = ($280.00 per unit - $78.40 per unit) / $280.00 per unit = $201.60 per unit / $280.00 per unit = 0.72 Dollar sales to break-even = Fixed expenses / Contribution margin ratio = $158,400 / 0.72 = $220,000 to Break-even

An income statement for Sam's Bookstore for the first quarter of the year is presented below: Sales $910,000 - Cost of goods sold $530,000 = Gross margin $380,000 - Selling & Admin/ Expenses (selling $113,000 + admin. $130,000) $243,000 = Net operating income$137,000 On average, a book sells for $70. Variable selling expenses are $5 per book with the remaining selling expenses being fixed. The variable administrative expenses are 3% of sales with the remainder being fixed. The contribution margin for Sam's Bookstore for the first quarter is: a.) $817,700 b.) $622,300 c.) $315,000 d.) $287,700

d.) $287,700 Unit sales = $910,000 / $70 per book = 13,000 books Sales - Variable expenses: [Cost of goods sold $530,000 + V. selling ($5/book x 13,000 books) $65,000 + V. admin. (3% of $910,000) $27,300] $622,300 (total V. exp.) = Contribution margin $287,700

Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours = 30,500 Total fixed MOH cost = $610,000 VMOH per machine-hours = $6.00 Recently, Job T687 was completed with the following characteristics: Number of units in the job = 10 Total machine-hours = 30 Direct materials = $690 Direct labor-cost = $1,370 If the company marks up its unit product costs by 40% then the selling price for a unit in Job T687 is closest to: (Round your intermediate calculations to 2 decimal places.) a.) $113.60 b.) $288.40 c.) $754.00 d.) $397.60

d.) $397.60 Estimated total MOH cost = Estimated total Fixed MOH + (Estimated VMOH per machine-hour x Total machine-hours) = $610,000 + ($6/machine-hour x 30,500 machine-hours) = $610,000 + $183,000 = $793,000 Est. total MOH cost Predetermined OH rate = Estimated total fixed MOH cost / Total machine-hours = $793,000 / 30,500 machine-hours = $26/machine-hour Predetermined OH rate Overhead applied to Job T687 = Predetermined OH cost x Total machine-hours (actually used in job) = $26/machine-hour x 30 machine-hours = $780/machine-hour Overhead applied Direct materials $690 + Direct labor $1,370 + MOH applied $780 = Total cost of Job T687 $2,840 Total cost of Job T687 $2,840 / Number of units 10 = Unit product cost $284.00 Unit product cost $280 + Markup ($280 x 40%) = $113.60 = Selling price $397.60

Nantor Corporation has two divisions, Southern and Northern. The following information was taken from last year's income statement segmented by division: Sales = ($2,860,000 + $1,740,000) = $4,600,000 Contribution margin = ($1,230,000 + $720,000) = $1,950,000 Divisional segment margin = ($820,000 + $210,000) = $1,030,000 In last year's income statement segmented by division, what were Nantor's total common fixed expenses? a.) $920,000 b.) $1,490,000 c.) $1,600,000 d.) $570,000

d.) $570,000 Net operating income = Divisional segment margin - Common fixed expenses $460,000 = $1,030,000 - Common fixed expenses => Common fixed expenses = $1,030,000 - $460,000 = $570,000 Common fixed expenses

Newham Corporation produces and sells two products. In the most recent month, Product R10L had sales of $37,000 and variable expenses of $11,380. Product X96N had sales of $50,000 and variable expenses of $17,330. The fixed expenses of the entire company were $46,120. The break-even point for the entire company is closest to: a.) $46,120 b.) $58,290 c.) $74,830 d.) $68,836

d.) $68.836 Contribution margin ratio = Contribution margin / Sales CM = [Product R10L ($37,000 - $11,380) + Product X96N ($50,000 - $17,330)] = $25,620 + $32,670 = $58,290 CM => CM ratio = $58,290 / ($37,000 + $50,000) = $58,290 / $87,000 = $0.67 CM ratio Dollar sales to break-even = Fixed expenses / Contribution margin ratio = $46,120 / 0.67 = $68,836 To break-even

Tractor World had $5,000 of underapplied overhead at the end of the period. The Cost of Goods sold balance before adjusting for under or over applied overhead is $120,000. What is their adjusted Cost of Goods Sold balance? a.) $120,000 b.) $130,000 c.) $115,000 d.) $125,000

d.) 125,000 Adjusted Cost of Goods Sold balance = $120,000 GOGS balance before adjusting + $5,000 underapplied overhead

All ABC companies direct labor workers are paid the same hourly rate. Some workers are trained more than others. Poorly trained workers could have an unfavorable effect on which of the following variances? A: Labor Rate Variance Yes; Material Quantity Variance Yes B: Labor Rate Variance Yes; Material Quantity Variance No C: Labor Rate Variance No; Material Quantity Variance Yes D: Labor Rate Variance No; Material Quantity Variance No a.) D b.) B c.) A d.) C

d.) C

Cost of Goods Sold (unadjusted) can be calculated by using which formula? a.) Cost of Goods sold (Unadjusted) equals Beginning Finished Goods Inventory + Cost of Goods Manufactured + Ending Finished Goods Inventory. b.) Cost of Goods sold (Unadjusted) equals Beginning Ending Goods Inventory - Cost of Goods Manufactured - Beginning Finished Goods Inventory. c.) Cost of Goods sold (Unadjusted) equals Beginning Finished Goods Inventory - Cost of Goods Manufactured - Ending Finished Goods Inventory. d.) Cost of Goods sold (Unadjusted) equals Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory.

d.) Cost of Goods sold (Unadjusted) equals Beginning Finished Goods Inventory + Cost of Goods Manufactured - Ending Finished Goods Inventory.

Assume the following (1) sales = $200,000, (2) unit sales = 10,000, (3) the contribution margin ratio = 37%, and (4) net operating income = $10,000. Given these four assumptions, which of the following is true? a.) the total fixed expense = $126,000 b.) the break-even point is 8,077 units c.) the variable expense per unit = $7.40 d.) the total contribution margin = $74,000

d.) the total contribution margin = $74,000 Sales $200,000 x Contribution margin ratio 37% = Total contribution margin $74,000