acct exam 2

Runaround Corporation sells running shoes and during January they ran production machines for 20,000 hours total and incurred $9,000 in maintenance costs. During July they ran production machines for 14,000 hours total and incurred $7,200 in maintenance costs. Using the high-low method, what is the variable maintenance cost per machine hour?

$0.30 per machine hour

Total fixed costs for Taylor Incorporated are $260,000. Total costs, including both fixed and variable, are $500,000 if 156,000 units are produced. The variable cost per unit is

$1.54/unit.

The higher the operating leverage factor, the

greater the impact of volume on operating income.

A company should ________ when projecting cash receipts for a given month.

include cash to be collected in that month regardless of when the sale was made

Fishing Run Corporation received a special order request for 20,000 new fishing poles at a sales price of $30 each. This is a $10 reduction in the normal sales price. The variable costs per fishing pole are $20. The total fixed costs of $110,000 will not change as a result of the special order. The Corporation has enough excess capacity to fill the order without affecting current sales. What will be the impact on operating income if the special order is accepted?

increase in operating income of $200,000

Thematics Publishing produces 10,000 binders each year. Each binder has a variable cost of $17 and total fixed costs of $110,000 per year. The binders can be purchased from an outside supplier for $20 each. The production space will remain idle, but fixed costs can be reduced by 30%. The annual impact of purchasing the binders will be to:

increase operating income by $3,000

Thematics Publishing produces 10,000 binders each year. Each binder has a variable cost of $17 and total fixed costs of $110,000 per year. The binders can be purchased from an outside supplier for $20 each. The production space will remain idle, but fixed costs can be reduced by 30%. The annual impact of purchasing the binders will be to:

increase operating income by $3,000.

sing account analysis, what type of cost is Satellite TV when the charge is $45.00 per month plus $5.99 for pay-per-view movies?

mixed

A utility bill consisting of a monthly base, plus an added amount based on usage, is classified as a

mixed cost

Which of the following represents the total cost equation? A) y = vx - f B) y = fx + v C) y = f D) none of the abovE

none of the above

Which of the following budgets is a major part of the master budget and it focuses on the income statement and its supporting schedules?

operating

Which of the following is NOT true regarding an income statement organized according to the contribution margin approach?

operating income will always be the same as operating income in a traditional income statement regardless of changes in the inventory levels.

Net income reported under absorption costing will exceed net income reported under variable costing for a given period if

production exceeds sales for that period.

The first step in the budgetary process is the preparation of the:

sales budget

The high-low method is used to_______.

separate mixed costs into their variable and fixed components

Which of the following is the key to making short-term special decisions?

A. Relevant revenues, costs, and profits C.Use of a contribution margin approach

If production increases by 30%, how will total variable costs likely react?

Increase by 30%

Gnash Motor Cars, Inc. employs a robotic spray booth to paint automobile bodies in its Flintstone plant. The robotic spray booth is capable of painting five cars per hour. Thus, its weekly theoretical capacity is 840 cars. Company engineers have set the rated speed of the spray booth af four cars per hour to allow for unavoidable downtime for maintenance and process irregularities. The output sacrificed based on the assumption that this spray booth can operate effectively 80% of the time is termed:

Rate-based waste

All fixed costs are listed ________ on a contribution margin income statement.

below the contribution margin line

In a cost-volume-profit graph, what is represented at

breakeven point

Richland Enterprises has budgeted the following amounts for its next fiscal year: Total fixed expenses $53,000 Selling price per unit $65 Variable expenses per unit $35 If Richland Enterprises can reduce fixed expenses by $18,870, how will breakeven sales in units be affected?

decrease by 629 units

Which of the following statements is true regarding regression analysis?

Regression analysis helps generate a statistic, called the R-square, which tells how well the line fits the data points.

If a regression analysis shows an R factor of 0.15, it is safe to assume

a very weak relationship between cost and volume.

What are scatterplots useful for?

a) Determining the overall strength of the relationship between historical cost and volume B) Identifying potential outliers

Moe's Pizza Shop sells a large pizza for $12.00. Unit variable expenses total $8.00. The breakeven sales in units is 7000 and budgeted sales in units is 8000. What is the margin of safety in dollars?

$12,000

Fave Motion Pictures sells movie tickets for $14 per movie patron. Variable costs are $4.50 per movie patron and fixed costs are $52,000 per month. The company's relevant range extends to 33,000 movie patrons per month. What is Fave Motion Pictures' projected operating income if 20,000 movie patrons see movies during a month?

$138,000

Monroe Group is preparing its cash collections budget. Budgeted sales are $150,000 in July, $175,000 in August, and $200,000 in September. Fifty percent of sales are cash sales; the remainder is on account. Sales on account are expected to be collected 30% in the month of sale, 60% in the month following the month of sale, and 10% in the second month following the month of sale. What are anticipated cash collections during the month of September? Question 9 options:

$190,000

Direct Call offers a calling plan that charges $10.00 per month plus $0.03 per minute of call time. Under this plan, what is your monthly cost if you talk for a total of 400 minutes?

$22.00

Phoenix, Inc. manufactures widgets. The target sales price is $440 per unit. The company desires a 45% net profit margin on its products. What is the company's target cost per unit?

$242

Natcher Corporation collects 60% of a month's sales in the month of sale, 30% in the month following sale, and 5% in the second month following sale. The company has found that 5% of their sales are uncollectible. Budgeted sales for the upcoming four months are: August budgeted sales $310,000 September budgeted sales $300,000 October budgeted sales $330,000 November budgeted sales $230,000 The amount of cash that will be collected in November is budgeted to be

$252,000

Larry Company makes and sells 2 models of dishwashers, Model ABC and Model XYZ. For every 2 Model ABC sold, 3 Model XYZ are sold. The following information is also provided: Model ABC Model XYZ Sales per unit $450 $700 Variable Cost per unit $250 $300 CM per unit $200 $400 What is the weighted average contribution margin?

$320

A company is analyzing its mixed costs. During July, its busiest month, a company had total labor hours of 14,000 and total costs of $40,000. During February, its slowest month, the company had total labor hours of 8,000 and total costs of $25,000. The company is planning for 12,000 direct labor hours next April. How many dollars should the company budget for total costs during April?

$35,000

A company is analyzing its mixed costs. During July, its busiest month, a company had total labor hours of 14,000 and total costs of $40,000. During February, its slowest month, the company had total labor hours of 8,000 and total costs of $25,000. The company is planning for 12,000 direct labor hours next April. How many dollars should the company budget for fixed costs during April?

$5,000

Acme Anvil Company is considering the introduction of a new product to its line of quality anvils. The company's engineering and manufacturing managers have concluded that there are no product design or manufacturing process changes that will allow the new product to be produced at a unit cost of less than $30. If Acme requires a 40% profit on its products, what price must the new product sell at to justify its cost?

$50

If the sales price is $150 per unit, the variable cost is $90 per unit, and total fixed costs is $24,000, the breakeven in sales dollars is:

$60,000

The manager at Tom's Taxidermy expects to sell 900 units at $80 each unit. In order for the manager to breakeven, the manager must sell 100 units. What is the margin of safety in dollars?

$64,000

Purchases in May were $65,000, while expected purchases for June and July are $80,000 and $95,000, respectively. All purchases are paid 35% in the month of purchase and 65% in the following month. At what amount are June payments for purchases budgeted?

$70,250

If the sales price is $20 per unit, the variable cost is $12 per unit, total fixed costs is $12,000, and 15,000 units are produced, the contribution margin per unit is:

$8

Thomas Corporation recorded sales of $150,000 during March. Management expects sales to increase 3% in April, another 25% in May, and another 8% in June. Cost of goods sold is expected to be 60% of sales. What is the budgeted gross profit for June?

$83,430

Which of the following budgets is the comprehensive planning document for the entire organization?

Master budget

Which of the following is the key to making short-term decisions?

-Relevant revenues costs and profits -Use of a contribution margin approach

The difference between absorption costing and variable costing is:

-the treatment of fixed MOH -the timing with which fixed MOH is expensed

Matthew's Fish Fry has a monthly target operating income of $8400. Variable expenses are 70% of sales and monthly fixed expenses are $1470. What is Matthew's operating leverage factor at the target level of operating income?

0.83

Leverage Corporation sells two products: Regular and Supreme. Leverage sells three Regulars for every two Supremes. The Regular sells for $20 each with variable costs of $11 each, whereas the Supreme sells for $25 each with variable costs of $15 each. If fixed costs are $21,000, what is the breakeven point in units?

1,340 units of Regular and 894 units of Supreme

Tom's Taxidermy has a monthly target operating income of $29,000. Variable expenses are 75% of sales and monthly fixed expenses are $15,000. What is Tom's operating leverage factor at the target level of operating income?

1.52

If the sales price is $60 per unit, the variable cost is $10 per unit, total fixed costs is $60,000, and 12,000 units are produced, the breakeven in units is:

1200

Whistle Works manufacturers safety whistle keychains. They have the following information available to prepare their master budget: Units to be produced October 4,500 November 4,750 December 5,200 Whistle Works sells each whistle for $12. It takes 3 ounces of metal to produce each whistle at a cost of $0.50 per ounce. They prefer to have 10% of materials required for the following month's production in ending inventory as well. How many ounces of direct materials does Whistle Works need to purchase in October to meet production needs?

13,575 ounces

The following information pertains to the Flying Fig Corporation: Total Units for information given 3000 Fixed Cost per Unit $200 Selling Price per Unit $500 Variable Costs per Unit $175 Target Operating Income $300,000 What is the breakeven in units?

1846 units

If the selling price per unit is $66, variable expenses per unit are $41, target operating income is $31,000, and total fixed expenses are $21,000, how many units must be sold to reach the target operating income?

2080

Green Company has budgeted sales of 23,000 units for June and 25,000 units for July. Green's policy is to maintain its finished goods inventory at 25% of the following month's unit sales. Accordingly, at the end of May, Green had 5,750 units on hand. How many units must it produce in June in order to support the sales goal and maintain its policy regarding finished goods inventory?

23,500 units

Lie Around Furniture manufactures two products: Couches and Beds. The following data are available: Couches Beds Sales price $500 $730 Variable costs $380 $405 The company can manufacture 4 couches per machine hour and 2 bed per machine hour. The company's production capacity is 13,900 machine hours per month. There is unlimited demand for both products. To maximize profits, what product and how many units should the company produce in a month?

27,800 beds

If the sales price is $150 per unit, the variable cost is $90 per unit, and total fixed costs is $24,000, the contribution margin ratio is:

40%

Who Done It Mystery Theater sells tickets for dinner and a show for $55 each. The cost of providing dinner is $21 per ticket and the fixed cost of operating the theater is $60,000 per month. The company can accommodate 15,000 patrons each month. What is the contribution margin ratio?

62.00%

If the sales price is $60 per unit, the variable cost is $36 per unit, total fixed costs is $50,000, how many units need to be sold if the desired profit is $100,000?

6250

Gabe Industries sells two products, Basic models and Deluxe models. Basic models sell for $41 per unit with variable costs of $15 per unit. Deluxe models sell for $45 per unit with variable costs of $45 per unit. Total fixed costs for the company are $1310.40. Gabe Industries typically sells four Basic models for every Deluxe model. What is the breakeven point in total units?

63 units

Grosheim Incorporated has fixed expenses of $213,000 per year. Right now, Grosheim Incorporated is selling its products for $250 per unit. Management is contemplating a 40% increase in the selling price for the next year. Variable costs are currently 20% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will pay the same amount for variable costs next year). If fixed costs increase 10% next year, and the new selling price per unit goes into effect, how many units will need to be sold to breakeven?

781 units

Assuming no other changes in the cost-volume-profit relationship, which of the following will decrease the breakeven point in units?

An increase in the selling price per unit

Which of the following components is a part of the financial budget?

Budgeted balance sheet

Total fixed costs are $150,000. Total costs, including fixed and variable are $600,000 if 140,000 units are produced. The total variable costs at a level of 230,000 units would be:

D) 738,300

Kecks Bottling Company produces 2-liter soda bottles in its Somerset plant using an injection-molding machine that has a theoretical capacity of 60,480 bottles per week. For the most recently completed week, the company's capacity cost management system reported actual production of 15,144 bottles. This represented 72% of the machine's normal capacity of 21,168 bottles. Based on this rate of utilization, line managers are advocating for the acquisition of an additional injection-molding machine. What measure of capacity utilization would provide a better signal of the need for an additional machine?

Capacity utilization based on theoretical capacity

Which of the following is an advantage of the budgeting process?

Coordinates the activities of the organization

Which of the following statements is NOT true about costs per unit within the relevant range?

Curvilinear costs stay constant with changes in volume

Which of the following budgets project cash inflows, cash outflows, and the budgeted balance sheet?

Financial budget

Fishing Run Corporation received a special order request for 20,000 new fishing poles at a sales price of $30 each. This is a $10 reduction in the normal sales price. The variable costs per fishing pole are $20. The total fixed costs of $110,000 will not change as a result of the special order. The Corporation has enough excess capacity to fill the order without affecting current sales. What will be the impact on operating income if the special order is accepted?

Increase in operating income of $200,000

Which of the following is NOT an assumption of cost-volume-profit analysis?

Inventory levels will change as production levels vary.

Fishing Run Corporation received a special order request for 20,000 new fishing poles at a sales price of $30 each. This is a $10 reduction in the normal sales price. The variable costs per fishing pole are $20. The total fixed costs of $110,000 will not change. Which of the following is TRUE?

Management should accept the order if the variable costs per unit and fixed costs in total will not change with the order. B. Management should accept the order if they have excess capacity. C. Management should consider not accepting the order if the customers will expect the price decrease as the standard price in the future. -all of the above

Fishing Run Corporation received a special order request for 20,000 new fishing poles at a sales price of $30 each. This is a $10 reduction in the normal sales price. The variable costs per fishing pole are $20. The total fixed costs of $110,000 will not change. Which of the following is TRUE?

Management should accept the order if the variable costs per unit and fixed costs in total will not change with the order Management should accept the order if they have excess capacity Management should consider not accepting the order if the customers will expect the price decrease as the standard price in the future.

To the left of the breakeven point on a CVP graph, the area between the total expense line and the sales revenue line represents which of the following?

Operating loss

In a cost-volume-profit graph, what is represented in the area between the Total Revenue and the Total Cost line to the left of the breakeven point?

Operating loss area

During the current period, 14,000 units were produced and 12,000 units were sold. Fixed manufacturing costs incurred amounted to $126,000. An absorption costing income statement would report fixed manufacturing costs as which of the following?

Overhead of $108,000 as a deduction from sales revenue to obtain gross profit

Which type of budgeting involves the participation of many levels of management?

Participative budgeting

Which of the following budgets would NOT be prepared by a service company?

Production budget

Quinn Bakery bakes gingerbread cookies and sells them by the dozen. During the holiday season, they bake 1,000 dozen cookies. They can sell the plain, undecorated cookies ("as is") for $2.50 per dozen. If they decorate the cookies at an additional cost of $1 per dozen, each decorated dozen could be sold for $4.00. Should Quinn Bakery sell the cookies undecorated ("as is") or should the cookies be decorated ("processed further")?

Quinn Bakery should decorate the cookies because operating income will be higher by $500 than if they sell them undecorated ("as is").

Quinn Bakery bakes gingerbread cookies and sells them by the dozen. During the holiday season, they bake 1,000 dozen cookies. They can sell the plain, undecorated cookies ("as is") for $2.50 per dozen. If they decorate the cookies at an additional cost of $1 per dozen, each decorated dozen could be sold for $4.00. Should Quinn Bakery sell the cookies undecorated ("as is") or should the cookies be decorated ("processed further")?

Quinn Bakery should decorate the cookies because operating income will be higher by $500 than if they sell them undecorated ("as is").

Which of the following would appear on both the budgeted income statement and the cash budget?

Rent expense

Which of the following costs are irrelevant to short-term business decisions?

Sunk costs

Which of the following should be ignored when deciding whether to sell as is or process a product further?

The costs incurred in producing the product as is

Which of the following should be ignored when deciding whether to sell as is or process a product further?

The costs incurred in producing the product as is

The difference between the target price of a product and its target cost is:

The desired profit

Within the relevant range, which of the following statements is true with respect to fixed costs per unit?

They will increase as production decreases.

Signature Corporation has three product lines: silver, gold, and platinum. All three products have a positive contribution margin, but the gold line has an operating loss. Management is considering discontinuing the product. Management decides to discontinue the gold line. Which of the following must be true if the management followed the decision rule?

Total cost savings exceeded the lost revenues from discontinuing the line.

Signature Corporation has three product lines: silver, gold, and platinum. All three products have a positive contribution margin, but the gold line has an operating loss. Management is considering discontinuing the product. Management decides to discontinue the gold line. Which of the following must be true if the management followed the decision rule?

Total cost savings exceeded the lost revenues from discontinuing the line.

To forecast total costs at a given level of production, management would use which of the following calculations?

Total fixed cost + (variable cost per unit x total units produced)

Which of the following represents the excess of the selling price per unit of a product over the variable cost of obtaining and selling each unit?

Unit contribution margin

If there are factors that restrict production capacity, a company should focus on the product line that has the highest:

contribution margin per unit of the constraint.

If there are factors that restrict production capacity, a company should focus on the product line that has the highest:

contribution margin per unit of the constraint.

Whenever the company makes changes to fixed costs, the breakeven point will never change.

false

A company sells a product that is relatively unique. Consequently, there is not a lot of competition for the product. The company most likely:

is a price-setter

Company A has a higher margin of safety while Company B has a lower margin of safety. Company A would be considered ________ Company B when considering only margin of safety.

less risky than

Which of the following costs are irrelevant to short-term decisions?

sunk costs

Which of the following is NOT true of the budgeting process?

the performance report is prepared as part of the master budget

If the data points in a scatter plot fall in a fairly straight line, it means that there is a fairly strong relationship between cost and volume.

true

The cost equation determined by regression analysis is usually more accurate than that determined by the high-low method.

true

The operating leverage factor indicates the percentage change in operating income that will occur from a percentage change in volume.

true

The target profit in target costing is intended to provide sufficient funds over the life of the product to allow the firm to recover its development and production costs and provide a reasonable return on its investment in the product.

true

On the production budget, the number of units to be produced is computed as

unit sales + desired end inventory - beginning inventory.

A(n) ________ cost is a cost whose total amount changes in direct proportion to a change in volume.

variable

Within a relevant range, costs that increase in direct proportion to volume are:

variable costs

On a regression analysis output generated with Excel, a regression equation's variable cost per unit is represented by the

x variable 1 coefficient.

The regression analysis results looking at the relationship between operating costs and the current cost driver are as follows: Intercept coefficient = 653,434 X variable 1 coefficient = 5.76 R square = 0.3784 What is the company's cost equation?

y = $5.76x + $653,434