ACC. 6, 7, 8
Daphne's Planter Company produces and sells planters. The manager reported $10,500 in fixed expenses, operating income of $0 at the breakeven point, and a contribution margin per unit of $60. What is the company's breakeven point in units using the shortcut approach?
175
When using multiple regression to identify explanatory variables, which of the following will increase with the addition of an independent variable that improves the model?
adjusted r-squared
When using multiple regressions analysis, which value is used to assess the predictability of the model?
adjusted r-squared
The ________ is computed as the total contribution margin divided by total sales.
contribution margin ratio
________ starts with the product's total costs and adds a desired profit to determine a cost-plus price.
cost-plus pricing
In regression analysis, the variable that we wish to explain or predict is referred to as the ________.
dependent
A unit of product under absorption costing includes ________.
direct materials, direct labor, variable overhead, and fixed overhead costs
Which of the following is NOT relevant in the thought process to make a "Sell as Is" or "Process Further" decision?
indentifying all costs except the cost of extra revenue
CVP analysis assumes all of the following except a change in volume is the only factor that affects costs. revenues are linear throughout the relevant range. the mix of products will not change. inventory levels will increase.
inventory levels will increase.
Account analysis is ________.
a method to determine cost behavior that is based on a manager's judgment in classifying each general ledger account as a variable, fixed, or a mixed cost
If a regression analysis shows an R factor of 0.15, it is safe to assume a strong negative relationship between cost and volume. a strong positive relationship between cost and volume. a perfect positive relationship between cost and volume. a very weak relationship between cost and volume.
a very weak relationship between cost and volume.
Contribution margin is also known as ________.
variable profit
For most businesses, annual straight line depreciation expense on the company's building is what type of cost?
fixed
offshoring
refers to company working overseas
How well a regression line fits the data points is illustrated by the ________.
r-square statistic
Segment margin income ________.
refers to the result of operating income or loss for each individual product line
On a per-unit basis, variable costs ________.
remain constant
The ________ is the combination of products that make up total sales.
sales mix
________ refers to the result of operating income or loss for each individual product line.
segment margin income
A regression analysis that contains only one x-variable is a ________.
simple linear regression
________ are fixed over a small range of activity and then jump up to a new fixed level with moderately small changes in volume.
step costs
A special order should be rejected when ________.
the price of the special order is NOT more than variable costs of the order
Josh's Manufacturing Company reported fixed manufacturing overhead of $2,500,000, and produced 2,600,000 total units. The variable manufacturing costs were $1.50 per unit. What is the cost per unit using absorption costing?
$2,500,000 / 2,600,000 units = $.96 $1.50 + $.96 = $2.46
Tara's Sewing Service sells designer afgans for $85 each. Unit variable expenses total $50. The breakeven sales in units are 2,500 and budgeted sales in units are 4,300. What is the margin of safety in dollars?
(4300 - 2500) 85 = 153000
Smarty Pants Company sells two products, green camouflage pants and orange camouflage pants. Smarty Pants predicts that it will sell 900 pairs of green pants and 1800 pairs of orange pants in the next period. The unit contribution margins for green pants and orange pants are $8.25 and $9.00, respectively. What is the weighted average unit contribution margin? (Round the final answer to the nearest cent.)
(900 * 8.25) + (1800 *9) = 900 + 1800 = 1st / 2nd = 8.75
Alexis Incorporated sells two products, larges and smalls. Larges sell for $94 per unit with variable costs of $62 per unit. Smalls sell for $27 per unit with variable costs of $10 per unit. Total fixed costs for the company are $14,000. Alexis Incorporated typically sells five larges for every two smalls. What is the breakeven point in total units? (Round the final answer up to the nearest unit.)
(94 - 62) = 32 (27 - 10) = 17 (32 *5) / 7 + (17 *2) / 7 14000 / ^ = 506
Variable cost = Fixed cost =
(Cost at highest activity - Cost at lowest activity)/(Highest activity-Lowest activity) Total cost - Total Variable cost
How can a manager forecast operating income?
(sales revenue × contribution margin ratio) - fixed costs
Brandy's Balloon Service currently sells 1,000 balloon bundles per month. The competition in the balloon industry continues to soar within a thirty-mile vicinity of the service location. Variable expenses were $2.00 per balloon and fixed expenses were $5,000. If Brandy changes the price of balloon bundles to $10, how many balloon bundles should she sell to achieve her target operating income of $6,000?
1,375 balloon bundles
Lisa's Custom Print Services produces and sells custom seashore prints. The manager reported $5,400 in fixed expenses, operating income of $0 at the breakeven point, and a contribution margin per unit of $50. What is the firm's breakeven point in units using the shortcut approach?
108 ($5,400 + 0) / $50 = 108 units
Sam's Appliance Outlet has variable expenses of 40% of sales. The manager reported monthly fixed expenses of $270,000. The monthly target operating income is $75,000. What is the monthly margin of safety in dollars if the manager at Sam's Appliance Outlet achieves the operating income goal?
125,000
Martha's Delivery Service reported total variable cost of $2,000,000. The managerial accountant reported 950,000 total number of units. What is the target variable cost per unit? Martha's Delivery Service Target Variable Cost per Unit Target total cost $5,000,000 Less: Fixed costs $3,000,000 Target total variable cost $2,000,000 Number of units 950,000 Target variable cost per unit ?
2.11
Sandy's Manufacturing Service reported fixed manufacturing overhead of $3,783,000 and produced 3,900,000 total units. The variable manufacturing costs were $1.50 per unit. What is the cost per unit using absorption costing?
2.47
Grandma's Yarn Factory produces and designs two specialty yarn products, green yarn and scarlet yarn. The manager estimates that clients will purchase 3,000 green yarn spools and 1,100 scarlet yarn spools by the end of the next period. The unit contribution margins for green yarn and scarlet yarn are $2.80 and $3.50. What is the weighted-average unit contribution margin?
2.99
Tina's Manufacturing Company reported total variable cost of $1,000,000. The managerial accountant reported 50,000 total number of units. What is the target variable cost per unit? Tina's Manufacturing Company Target Variable Cost per Unit Target total cost $4,000,000 Less: Fixed costs $3,000,000 Target total variable cost $1,000,000 Number of units 50,000 Target variable cost per unit ?
20
Best Birdies produces ornate birdcages. The company's average cost per unit is $22 when it produces 2500 birdcages. If $5900 of the costs are fixed, and the plant manager uses the cost equation to predict total costs, his forecast for 3500 birdcages will be (Round intermediate calculations to the nearest cent and the final answer to the nearest dollar.)
22 * 2500 = 55000 55000 - 5900 = 49100 49100 / 2500 = 19.64 19.64 * 3500 + 5900 = 74640
Blake's Manufacturing sells unfinished wood pieces for $150 each. The manager reported 280 defective wood pieces in inventory, which cost $20 to refabricate. The manager can sell the defective pieces for $30 each, or process the wood further for $10 each, and then sell them for the standard sales price. What is the total incremental income from further processing?
30,800
Blake's Repair Services has 2,000 damaged radios that cost $40,000. The radios could be sold as is for $20,000, or repaired for $30,000 and then sold for $65,000. Compute the opportunity cost of selling the radios without the repairs.
35,000
Violet Industries held an annual meeting and reported a new annual budget of $50,000 in total fixed expenses. The new selling price per unit is $58, and the new variable expense per unit is $30. If the manager can reduce fixed expenses by another $10,000, what is the effect on breakeven sales?
357 decrease in breakeven units
Corny and Sweet grows and sells sweet corn at its roadside produce stand. The selling price per dozen is $4.75, variable costs are $2.00 per dozen, and total fixed costs are $1100.00. How many dozens of ears of corn must Corny and Sweet sell to breakeven? (Round your final answer to the nearest unit amount.)
4.75 - 2 = 2.75 1100 / 2.75 = 400
Rachel's Candelabra Shoppe sells candles to clients for $6.00 each. The variable cost to produce each candle is $2.25 per candle. The fixed costs are $2,800 per month. What is the firm's contribution margin ratio?
62.5% The contribution margin ratio is 62.5%. Sales - Variable Costs = Contribution Margin Contribution Margin / Sales = Contribution Margin Ratio $6.00 - $2.25 = $3.75 Contribution Margin $3.75 / $6.00 = 62.5%
At an activity level of 6,900 units in a month, Zeus Corporation's total variable maintenance and repair cost is $408,756, and its total fixed maintenance and repair cost is $230,253. What would be the total maintenance and repair cost of both fixed and variable costs combined at an activity level of 7,100 units in a month? Assume that this level of activity is within the relevant range.
650,857 *
Tim's Manufacturing manufactures and sells sofas and futons. The following data was reported by the managerial accountant. The company can manufacture 2 sofas per machine hour and 1 futon per machine hour. The company's production capacity is 700 machine hours per month. What is the contribution margin per machine hour for the sofas? Sofas Futons Sales price $750 $525 Variable costs $400 $225
700
MaryJane's Bakery manufactures and sells a variety of baked goods. The selling price per dozen of chocolate glazed dunuts is $8.00. The variable costs to produce the chocolate glazed donuts are $3.75, and total fixed costs are $3,800. What are the breakeven sales in dollars?
7160 The breakeven sales in dollars are $7,160. Step 1: Sales - Variable Costs = Contribution Margin $8 - $3.75 = $4.25 Step 2: Fixed Expenses / Contribution Margin = Breakeven $3,800 / $4.25 = 894.11, round to 895 895 × $8 = $7,160 = Breakeven Sales in dollars
Total fixed costs for Randolph Manufacturing are $764,000. Total costs, including both fixed and variable, are $1,030,000 if 200,000 units are produced. The fixed cost per unit at 208,500 units would be closest to
764000 / 208500 = 3.66
MaryJane's Bakery manufactures and sells a variety of baked goods. The selling price per dozen of chocolate glazed donuts is $8.00. The variable costs to produce the chocolate glazed donuts are $3.75, and total fixed costs are $3,800. How many dozen chocolate glazed donuts must the manager sell to break even?
8-3.75 = 4.25 3800/4.25 = 894.1
The Coffee Factory sells two products, supreme and mild. The supreme sells for $120 per case (unit) with variable costs of $90 per unit. The mild sells for $90 per unit with variable costs of $10 per unit. The manager reported $42,600 total fixed costs. The Coffee Factory usually sells three supreme brands for each two mild brands. What is the breakeven point in total units?
852
The manager at Tom's Taxidermy expects to sell 900 units at $40 each unit. In order for the manager to breakeven, the manager must sell 800 units. What is the margin of safety in dollars?
900 - 800 = 100 100 * 40 = 4000
The Muffin House produces and sells a variety of muffins. The selling price per dozen is $18, variable costs are $7 per dozen, and total fixed costs are $9900. What are breakeven sales in dollars?
9900 / (18 - 7)
How might a change in fixed costs affect the contribution margin?
A change in fixed costs does not affect the contribution margin.
A "constraint" is best described by which of the following? A factor that restricts production or sales of a product Expected future costs that differ among alternatives The distribution of all products to be sold Benefits foregone by choosing a particular alternative course of action
A factor that restricts production or sales of a product
Which of the following is TRUE about relevant costs and information? A manager who uses relevant information understands costs NEVER differ amongst the alternatives. Relevant information includes only numerical data instead of nonfinancial information. A relevant cost includes costs incurred in the past, which cannot be used in the future. I AM SURE A manager focuses only on relevant costs and benefits, which include costs that differ amongst alternatives and impact the future.
A manager focuses only on relevant costs and benefits, which include costs that differ amongst alternatives and impact the future.
Which of the following is a TRUE statement about a special order? A special order occurs when a customer requests a one-time order at a reduction in the sales price. A special order occurs when a customer requests a one-time order but the manager increases the sales price. A special order occurs when a customer requests continuous orders at a reduction in the sales price. A special order occurs when a customer requests continuous orders at an increase in the sales price.
A special order occurs when a customer requests a one-time order at a reduction in the sales price
Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $50,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $24,000,000 for the golfing season. About 440,000 golfers are expected each year. Variable costs are about $16 per golfer. Mountaintop golf course has a favorable reputation in the area and therefore, has some control over the price of a round of golf. Using a cost-plus approach, what price should Mountaintop charge for a round of golf? $127.27 $70.55 $84.18 $16
Answer - $84.18 Explanation - Return on assets = Assets × Return = $50,000,000 × 12% = $6,000,000 Return per customer = ROA / Number of golfers = $6,000,000 / 440,000 = $13.64 Fixed Cost per Customer = Fixed Cost / Number of golfers = $24,000,000 / 440,000 = $54.54 Cost to be charged per customer = Profit + Fixed Cost + Variable Cost = $13.64 + $54.54 + $16 = $84.18
Managers should consider which of the following when predicting costs at different volumes? The relevant range of the cost The type of cost behavior Both of the above should be considered. Neither of the above should be considered.
Both of the above should be considered.
Brandy's Balloon Service currently sells 1,000 balloon bundles per month. The competition in the balloon industry continues to soar within a thirty-mile vicinity of the service location. Brandy was considering reducing the sales price of balloon bundles to $10 per bundle. If the variable expenses remain at $2.00 per balloon bundle and fixed expenses remain at $5,000, how many balloon bundles will Brandy need to sell to break even?
Brandy would need to sell 625 balloon bundles to break even. The other answer choices are not correct. Step 1: New Sales Price - Variable Cost = New Contribution Margin $10 - $2 = $8 Step 2: (Fixed Expenses + Operating Income) / Contribution Margin per unit = ($5,000 + $0) / $8 = 625 balloon bundles
If both fixed expenses and the selling price per unit increase while variable costs per unit are unchanged, which of the following statements is true? Breakeven point in units increases. Breakeven point in units remains unchanged. Breakeven point in units decreases. Breakeven point in units could increase, decrease, or remain the same.
Breakeven point in units could increase, decrease, or remain the same.
If total fixed costs decrease while the selling price per unit and variable costs per unit remain constant, which of the following statements is true? Contribution margin decreases. Breakeven point in units increases. Breakeven point in units decreases. Contribution margin increases.
Breakeven point in units decreases.
If the variable cost per unit increases while the sale price per unit and total fixed costs remain constant, which of the following statements is true? Contribution margin ratio increases. Breakeven point in units decreases. Breakeven point in units remains the same. Breakeven point in units increases.
Breakeven point in units increases.
________ expresses the relationships amongst costs, volume, and organizational profits.
CVP analysis
Stripes and Stars Manufacturing produces and manufactures sweat shirts and socks. Based on the information listed below, what is the contribution margin ratio for sweat shirts and socks? Sweat Shirts Socks Sales price $20 $18 Less: Variable expenses ($12) ($6) Contribution margin $8 $12 Contribution margin ratio: Sweat shirts: ? Socks: ?
Sweat shirts: $8 / $20 = 40% Socks: $12 / $18 = 67%
Which of the following is NOT considered when determining whether to sell or process further?
How much revenue will be earned on all other product lines.
Which is true about a scatterplot? If there is a strong relationship between cost and volume, the points will fall in a linear pattern. 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 scattered pattern. Cost and volume have no effect on the pattern of the points on a scatterplot.
If there is a strong relationship between cost and volume, the points will fall in a linear pattern.
When the number of units produced is less than the number of units sold, how does operating income under variable costing differ from operating income under absorption costing? It is higher than operating income under absorption costing. It is the same as operating income under absorption costing. It is lower than operating income under absorption costing. It depends upon the amount of decline.
It is higher than operating income under absorption costing.
Which of the following is NOT a characteristic of a price-taker? Product lacks uniqueness Heavy competition Less competition Not a brand name
Less competition
How is operating income affected if the number of units sold exceeds the number of units produced? Operating income would be the same under both a variable costing and absorption costing income statement. Operating income would be higher under a variable costing income statement. Operating income would be lower under a variable costing income statement. Operating income would be higher under an absorption costing income statement.
Operating income would be higher under a variable costing income statement.
Light Me Up Lamps has variable expenses of 30% of sales and monthly fixed expenses of $70,000. The monthly target operating income is $50,000. What is Light Me Up Lamps' operating leverage factor at the target level of operating income?
Operating leverage = ($50,000 + $70,000) / $50,000 Operating leverage = $120,000 / $50,000 Operating leverage = 2.4
Which of the following is NOT a potential drawback of outsourcing? A company must spend money to hire more employees to manage the outsourcing process. A manager who engages in outsourcing loses control of the production process. I AM SURE Outsourcing can be a lower cost alternative. A manager who engages in outsourcing loses control over quality and production scheduling.
Outsourcing can be a lower cost alternative.
________ is/are an example of a committed fixed cost expense.
Property taxes on company-owned real estate
Stanley's Bicycles store buys bicycles on average for $610 and sells them on average for $800. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1600 a month rent for his store, and also pays $7000 a month to his staff in addition to the commissions. Stanley sold 160 bicycles in June. If Stanley prepares a traditional income statement for the month of June, what would be his gross profit?
Revenue($800 × 160)$128,000Less: Cost of Goods Sold($610 × 160)$97,600 Gross Profit$30,400
The manager at TV Land Productions reported total sales revenue of $900,000. The variable expenses were $300,000, and there were $325,000 of total fixed expenses. Calculate the contribution margin ratio and use the contribution margin shortcut formula to predict the breakeven point in dollars.
Sales in dollars = ($325,000 + 0) / 66.67% = $487,476 of sales to break even
Using account analysis, what type of cost is the fee the airline company charges for your bags assuming a typical policy is $25 if the bag weighs between 0 and 50 lbs.; $75 if the bag weighs between 50 and 75 lbs. and $125 if the bag weighs between 75 and 100 lbs?
The above cost is an example of step cost as you can see that the cost charged by airline is changing or we can say increasing whenever there is a Change in the weight of the bags.
Which of the following is irrelevant when making a decision? The cost of an asset that the company is considering replacing The cost of further processing a product that could be sold as is The expected increase in contribution margin of one product line as a result of a decision to discontinue a separate unprofitable product line Fixed overhead costs that differ among alternatives
The cost of an asset that the company is considering replacing
Marla's Antique Shoppe reported that the toal monthly cost to produce authentic antiques is $10,500,000. The managerial accountant needs a gross profit of $50,000 to meet monthly expenses. What is the cost-plus price?
The cost-plus price is $10,550,000. The other answer choices are not correct. $10,500,000 + $50,000 = $10,550,000
Sam's Auto Repair reported that the total monthly cost to produce parts is $50,000. The managerial accountant needs a gross profit of $5,500 to meet monthly expenses. What is the cost-plus price?
The cost-plus price is $55,500. The other answer choices are not correct. $50,000 + $5,500 = $55,500
The ________ contain(s) NO allocation of common fixed costs.
The segment margin income statement
Stanley's Bicycles store buys bicycles on average for $610 and sells them on average for $800. He pays a sales commission of 15% of sales revenue to his sales staff. Stanley pays $1700 a month rent for his store, and also pays $3000 a month to his staff in addition to the commissions. Stanley sold 120 bicycles in June. If Stanley prepares a contribution margin income statement for the month of June, what would be his operating income?
Total Contribution margin = Sales revenue - Variable costs = (800*120) - (610+(15%*800)*120] = 8400 Operating income = Total Contribution margin - Fixed cost = 8400 - (1700+3000) = 3700
Which of the following is NOT an approach to compute the breakeven point? Income statement approach Zero income approach Shortcut approach using unit contribution margin Shortcut approach using contribution margin ratio
Zero income approach
The weighted-average contribution margin ________.
can be used for a company that sells more than one product
A segment margin income statement ________.
contains NO allocation of common fixed costs on the statement.
Variable costing is also known as ________.
direct costing
The vertical y-axis on the CVP graph represents ________
dollars
Which of these is an argument against the use of variable costing?
fixed factory overhead is necessary to produce a product
When sales exceed production, the net operating income reported under variable costing is ________.
greater than the net operating income reported under absorption costing
Which of the following is NOT a characteristic of a price-setter? Product is more unique Product is branded Pricing approach emphasizes cost-plus pricing Heavy competition
heavy competition
Product cost under absorption costing is ________.
higher than variable costing
Avoidable fixed costs ________.
include costs that may be eliminated as a result of discontinuing the product
Unavoidable fixed costs ________.
include fixed costs that continue to be incurred even if the product line is discontinued
The contribution margin ________.
is the excess of sales revenue over variable expenses
The ________ is the excess of actual or expected sales over breakeven sales.
margin of safety
________ contain both variable and fixed cost components.
mixed costs
When more than one independent variable is needed to predict a dependent variable, a cost analyst would use ________.
multiple regression
A special order ________.
occurs when a customer requests a one-time order at a reduction in the sales price
Managers can quickly forecast the total contribution margin by multiplying the projected sales units by the variable cost ratio. projected sales revenue by the unit contribution margin. projected sales units by the contribution margin ratio. projected sales revenue by the contribution margin ratio.
projected sales revenue by the contribution margin ratio.
Rochelle Corporation makes reservations for vacation homes. Rochelle Corporation provides complimentary coffee packets at a cost of $2 per guest who stay at the mountain resort. The general manager reported a total cost of $5,000 for coffee during the previous quarter. The historical number of guests at the mountain resort is 10,000 guests during the year. The manager uses the formula to compute the total variable cost (y) = Variable cost per unit of activity (v) × Volume of activity (x). The manager expects 500 guests in December. Which of the following is the correct cost equation to compute y in the cost equation for 500 guests?
y = $2 × 500
The following data pertains to activity and utility cost for two recent periods: Activity level (units) 8,000 5,000 Utility cost $8,000 $6,500 Utility cost is a mixed cost with both fixed and variable components. What is the cost formula for utility cost using the high-low method?
y = $4,000 + $0.50x
