ACC 1B Exam #2

Which of the following includes gross profit on the income statement?

Absorption Costing Only

The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents the

Break-Even point

Scoresby Co. uses 6 machine hours and 2 direct labor hours to produce Product X. It uses 8 machine hours and 16 direct labor hours to produce Product Y. Scoresby's Assembly and Finishing departments have factory overhead rates of $240 per machine hour and $160 per direct labor hour, respectively. How much total factory overhead will be allocated to a unit of each of the two products?

Product X, $1,760; Product Y, $4,480

Which of the following estimates the number of units to be manufactured to meet budgeted sales and desired inventory levels?

Production budget.

Which of the following is a reason for banks to use activity-based costing?

To determine both amounts to charge and the profitability of services provided.

Which of the following conditions would cause the break-even point to increase?

Total fixed costs increase

If Division Inc. expects to sell 200,000 units in the current year, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for the year is 202,000 units

True

The contribution margin ratio is computed as contribution margin divided by sales.

True

The first budget to be prepared is usually the sales budget.

True

Jase Manufacturing Co.'s static budget at 10,000 units of production includes $40,000 for direct labor and $4,000 for electric power. Total fixed costs are $24,000. At 12,000 units of production, a flexible budget would show

Variable costs of $52,800 and $24,000 of fixed costs.

On the variable costing income statement, the figure representing the difference between manufacturing margin and contribution margin is

Variable selling and administrative expenses.

Which of the following is a way to accomplish an activity cost reduction?

change the classification of employees doing an activity so as to increase the activity rate.

Which of the following is an integrated set of operating and financial budgets for a period of time?

Master Budget

Activity-based costing can be beneficial in allocating selling and administrative expenses to various products for managerial decision making. Which of the following would be the best allocation base for help desk costs?

Number of Calls

Aleutian Company produces two products: Rings and Dings. They are manufactured in two departments: Fabrication and Assembly. Data for the products and departments are listed below. Product Number ofUnits Direct Labor Hoursper Unit Machine Hoursper Unit Rings 1,000 4 6 Dings 2,000 3 9 All of the machine hours take place in the Fabrication Department, which has estimated total factory overhead of $90,000. All of the labor hours take place in the Assembly Department, which has estimated total factory overhead of $105,000. Aleutian Company uses the multiple production department factory overhead rate method. The Fabrication Department uses machine hours as an allocation base, and the Assembly Department uses direct labor hours.

$10.50 per direct labor hour

If fixed costs are $850,000 and variable costs are 60% of sales, the break-even point (dollars) is

$2,125,000

The level of inventory of a manufactured product has increased by 4,000 units during a period. The following data are also available: Line Item Description Variable Fixed Unit manufacturing costs of the period $22.00 $11.00 Unit operating expenses of the period 7.00 5.00 The effect on operating income if absorption costing is used rather than variable costing would be a

$44,000 Increase

Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are as follows: Product Number of Units Direct Labor HoursPer Unit Machine HoursPer Unit Blinks 1,000 4 5 Dinks 2,000 2 8 All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $72,000. Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs. The single plantwide rate (rounded to the nearest cent), if it is based on machine hours instead of labor hours, is

$9 per machine hour

If the contribution margin ratio for France Company is 45%, sales are $425,000, and fixed costs are $100,000, the operating income is

$91,250

Piper Technology's fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130. The amount of sales (rounded to the nearest whole unit) required to realize an operating income of $200,000 is

14,167 Units

O'Boyle Co.'s fixed costs are $256,000, the unit selling price is $36, and the unit variable costs are $20, the break-even sales (units) is:

16,000 units

Payton Industries has fixed costs of $490,000, the unit selling price is $35, and the unit variable costs are $20. The break-even sales (units) if fixed costs are reduced by $40,000 is

30,000 units

Bryce Co. sales are $914,000, variable costs are $498,130, and operating income is $196,000. The contribution margin ratio is:

45.5%

The budgeted balance sheet is also called a pro forma balance sheet.

True

The level of inventory of a manufactured product has increased by 5,000 units during a period. The following data are also available: Line Item Description Variable Fixed Unit manufacturing costs of the period $24.00 $10.00 Unit operating expenses of the period 8.00 3.00 The effect on operating income if variable costing is used rather than absorption costing would be a

$50,000 decrease

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: Line Item Description Variable Fixed Unit manufacturing costs of the period $24.00 $10.00 Unit operating expenses of the period 8.00 3.00 The effect on operating income if variable costing is used rather than absorption costing would be a(n)

$80,000 decrease

The level of inventory of a manufactured product has increased by 9,470 units during a period. The following data are also available: Line Item Description Variable Fixed Unit manufacturing costs of the period $13.00 $8.00 Unit operating expenses of the period 3.00 1.00 The effect on operating income if absorption costing is used rather than variable costing would be a

$85,230 Increase

Lee Company's sales are $525,000, variable costs are 53% of sales, and operating income is $19,000. The contribution margin ratio is

47%

Connor Company has fixed costs of $400,000, the unit selling price is $25, and the unit variable costs are $15. The break-even sales (units) if the variable costs are increased by $2 is:

50,000 Units

Motorcycle Manufacturers, Inc., projected sales of 53,500 machines for the year. The estimated January 1 inventory is 6,740 units, and the desired December 31 inventory is 7,490 units. The budgeted production for the year is

54,250

If selling and administrative expenses are allocated to different products for decision making, they should be reported in the financial statements as

A period Cost

Which of the following would be included in the cost of a product manufactured according to variable costing?

Direct Materials

Which of the following would be inappropriate as an allocation base for calculating factory overhead rates?

Direct labor dollars

Under absorption costing, which of the following costs would be included in finished goods inventory?

Direct labor, direct materials, variable factory overhead, and variable selling costs.

Miller and Sons' static budget for 10,000 units of production includes $50,000 for direct materials, $44,000 for direct labor, variable utilities of $5,000, and supervisor salaries of $24,000

Direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $24,000

A disadvantage of static budgets is that they:

Do not allow for possible changes in activity levels

The primary budget in a nonmanufacturing business is the _____ budget.

Staffing

Which of the following may be used in a manufacturing company?

both absorption and variable costing

Which of the following is a cost pool used with the activity-based costing method?

Production Setups

Activity rates are determined by

dividing the cost budgeted for each activity pool by the actual activity base for that pool