Managerial Accounting Exam 2

Your client's company wants to determine the relationship between its monthly operating costs and a potential cost driver. The output of regression analysis showed the following information: Intercept Coefficient = 89,500 X Variable 1 Coefficient = 62.50 R-square = 0.9855 What is the company's monthly cost equation?

y = $62.50x + $89,500

Wallace Industrial sells two products, large forklifts and small forklifts. A large forklift sells for $50,000 per unit with variable costs of $26,000 per unit. Small forklifts sell for $30,000 per unit with variable costs of $12,000 per unit. Total fixed costs for the company are $1,600,000. Wallace Industrial typically sells one large forklift for every two smalls. What is the breakeven point in total units?

80 units

Dairy Days Ice Cream sells ice cream cones for $6 per customer. Variable costs are $1 per cone. Fixed costs are $2,600 per month. What is Dairy Days' contribution margin ratio?

83%

Which of the following statements is true concerning income if production exceeds units sold?

A higher operating income will result under an absorption costing income statement.

Which of the following would be considered a discretionary fixed cost?

Advertising

If a variable cost per unit increases while the sale price per unit and total fixed costs remain constant, which of the following statements is TRUE?

Breakeven point in units increases

What does direct labor costs plus manufacturing overhead equal?

Conversion Costs

Which costs comprise WIP inventory on a production cost report?

Direct materials, direct labor, and manufacturing overhead

Fun Stuff Manufacturing produces frisbees using a three-step process that includes molding, coloring, and finishing. Which account is debited when the frisbees are totally completed?

Finished Goods Inventory

A basic principle of variable costing is fixed manufacturing overhead costs be currently expensed. What is the rationale behind this?

Fixed manufacturing overhead costs occur regardless of level of production.

Renting a scooter and paying $30 per day plus $.20 per mile driven is an example of what type of cost?

Mixed cost

Which of the following would a manufacturing company expect to experience as it automates and shifts from variable expenses to fixed expenses?

More fluctuations in profits and losses.

Which of the following product costing system is normally used to assign costs to goods that are mass-produced goods?

Process costing

Which of the following costs is an example of a fixed cost?

Salary of plant manager

What is contribution margin equal to on a contribution margin income statement?

Sales revenues minus variable expenses

On a CVP graph, the total cost line intersects the total revenue line at which of the following points?

The breakeven point

With respect to total fixed costs, which of the following statements is TRUE?

They will remain the same as production levels change within the relevant range.

The contribution margin ratio explains the percentage of each sales dollar that

contributes towards fixed costs and generating a profit.

In process costing,________ is/are found by taking the number of partially completed physical units and multiplying it by the percentage of the process completed.

equivalent units

Which of the following costs at a manufacturing company would be treated as a product cost under the absorption costing method?

fire insurance on factory building

The higher the operating leverage factor, the

greater the impact of volume on operating income.

CVP analysis assumes all of the following except

inventory levels will increase.

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

Once the break-even point is reached

net operating income will increase by the unit contribution margin for each additional item sold.

By increasing ______________, a manager can increase operating income under absorption costing.

production

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

variable

A cost that would be included in product costs under both absorption costing and variable costing would be

variable manufacturing costs.

Barkley Company sells two products, red cups and black mugs. Barkley predicts that it will sell 2,500 red cups and 1,000 black mugs in the next period. The unit contribution margins for red cups and black mugs are $2.80 and $3.50, respectively. What is the weighted average unit contribution margin?

$3.00