Exam 2

Which of the following statements correctly defines a fixed cost?A. A Cost that in total is constant within a relevant range of activity or volumeB. A Cost that in total is constant and never changes.C. A cost that is zero when activity or output is zeroD. A cost that in total varies directly and proportionally with activity or volume

A. A Cost that in total is constant within a relevant range of activity or volume

Fixed Costs per unity will:A. Increase as production decreasesB. Decrease as production decreasesC. Remain the same as production levels changeD. increase as production increases

A. Increase as production decreases

Which of the following will appear as a line item in a contribution margin-based income statement?A. contribution marginB. total cost of goods soldC. work-in-process inventoryD. gross profit

A. contribution margin

Porterhouse Company incurs both fixed and variable production costs. Assuming the production is within the relevant range, if volume goes up by 20%, then the total variable costs would:A. increase by 20%B. remain the sameC. increase by an amount less than 20%D. decrease by 20%

A. increase by 20%

Jupiter Inc. reports the following information for August:Sales Revenue: $800,000Variable Costs: $200,000Fixed Costs: $100,000Calculate the total contribution margin for the month of August.A. $450,000B. $600,000C. $700,000D. $650,000

B. $600,000Sales - VC = CM

Carbon Inc. reports the following information for April:(BETA)Units Sold: 750Sale price/unit: $600Variable Manuf. cost per unit: $480Variable sales commission/unit: 10% of selling priceWhat is the contribution margin ratio of Beta?A. 20%B. 10%C. 25%D. 15%

B. 10%CM/Net Sales Revenue

Gross profit is calculated by deducting ___ from sales revenue.A. total fixed costsB. cost of goods soldC. total variable costsD. selling and administrative costs

B. cost of goods sold

Carbon Inc. reports the following information for April:(ALPHA)Units Sold: 3,000Sale price/unit: $250Variable Manuf. cost per unit: $175Variable sales commission/unit: 8% of selling priceWhat is the contribution margin for Alpha?A. $180,000B. $170,000C. $165,000D. $150,000

C. $165,000SR - VC = CM

The highest value of total cost was $75,000 in June for Mantilla Beverages Inc. Its lowest value of total cost was $50,000 in December. The company makes a single product. The production volume in June and December were 13,000 and 8,000 units, respectively. What is the variable cost per month?A. $9.38 per unitB. $6.25 per unitC. $5.00 per unitD. $5.77 per unit

C. $5.00 per unit(75,000-50,000)/(13,000-8,000) = $5

Jupiter Inc. reports the following information for August:Sales Revenue: $800,000Variable Costs: $200,000Fixed Costs: $75,000Calculate the net income for the month of August.A. $625,000B. $450,000C. $525,000D. $420,000

C. $525,000Sales - (FC + VC) = Net Income

Porterhouse Company incurs both fixed and variable production costs. Assuming the production is within the relevant range, if volume goes up by 20%, then the total fixed costs would:A. increase by 20%B. remain the sameC. increase by an amount less than 20%D. decrease by 20%

B. remain the same

The high-low method id used to:A. determine the highest price that can be charged for a productB. separate mixed costs into their variable and fixed componentsC. identify the relevant and irrelevant costs of a businessD. determine the sales level at highest capacity

B. separate mixed costs into their variable and fixed components

Which of the following Costs changes in total in direction proportion to a change in volume?A. fixed costB. variable costC. mixed costD. period cost

B. variable cost

Venus Inc. has fixed costs of $300,000. Total costs, both fixed and variable, are $450,00 when 30,000 units are produced. Calculate the total costs if the volume increases to 60,000 units.A. $750,000B. $1,200,000C. $600,000D. $450,000

C. $600,000$450,00 - $300,000 = $150,000 (VC)$150,000 / 30,000 units = $5/unit$5 x 60,000(units) = 300,000300,000 + (FC: 300,000) = $600,000

A cellphone service provider charges $5.00 per month and $0.10 per minute per call. If a customer's current bill is $50.00, how many calling minutes did the customer use?A. 500 minutesB. 550 minutesC. 450 minutesD. 400 minutes

C. 450 minutes$50 - $5 = 45$0.10 / $45 = 450

Within the relevant range, variable cost per unity will:A. increase as production decreasesB. decrease as production decreasesC. remain the same as production levels changeD. decrease as production increases

C. remain the same as production levels change

Carbon Inc. reports the following information for April:(ALPHA)Units Sold: 3,000Sale price/unit: $250Variable Manuf. cost per unit: $175Variable sales commission/unit: 8% of selling priceWhat is the contribution margin per unit for Alpha?A. $35 per unitB. $75 per unitC. $50 per unitD. $55 per unit

D. $55 per unitSR - VC = CMCM / # of units = CM/unit

The manager of Waterpays is reviewing the water bills for the company's dog daycare and spa. The highest and lowest bills of $3,800 and $2,400 were incurred in the months of May and November, respectively. If 400 dogs were washed in May and 200 dogs were washed in November, what was the variable cost per dog associated with the company's water bill?A. $6.00B. $12.00C. $9.50D. $7.00

D. $7.00(3,800-2,400)/(400-200) = $7

Johnson Corp. normally produces between 10,000 and 20,000 units each year. Producting more than 20,000 units alters the company's cost structure. For example, fixed costs increase because more space must be rented, and additional supervisors must be hired. The production range between 10,000 and 20,000 is called the company'sA. Differential RangeB. Leverage RangeC. Opportunity RangeD. Relevant Range

D. Relevant Range

The relevant range of Orleans Trailers Inc. is between 100,00 units and 180,000 units per month. If the company produces beyond 180,000 units per month:A. the fixed costs will remain the same, but the variable cost per unit may changeB. the fixed costs may change, but the variable cost per unit will remain the sameC. the fixed costs and the variable cost per unit will not changeD. both the fixed costs and the variable cost per unit may change.

D. both the fixed costs and the variable cost per unit may change.

Contribution margin is calculated by deducting ___ from sales revenue.A. total product costsB. total selling and administrative costsC. total fixed costD. total variable costs

D. total variable costs