ACC 1820 - Exam #2: Chapter 6, 7, and 11

7.1. Which of the following statements is true? 1. Variable manufacturing overhead costs are treated as product costs under both absorption and variable costing. 2. Absorption costing treats all manufacturing costs as product costs. A. Only statement I is true. B. Only statement II is true. C. Both statements are true. D. Neither statement is true.

C

7.14. Bellue Incorporated manufactures a single product. Variable costing net operating income was $96,300 last year and its inventory decreased by 2,600 units. Fixed manufacturing overhead cost was $1 per unit for both units in beginning and in ending inventory. What was the absorption costing net operating income last year? A. $2,600 B. $93,700 C. $96,300 D. $98,900

B

11.11. Lusk Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the monthly financial advantage (disadvantage) for the company of eliminating this product should be: A. ($30,000) B. $30,000 C. $40,000 D. ($40,000)

A

6.24. Hara Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $159.80 per unit. Sales volume (units) - 6,000 | 7,000 Cost of sales - $363,600 | $424,200 Selling and administrative costs - $531,000 | $547,400 The best estimate of the total variable cost per unit is: (Round your intermediate calculations to 2 decimal places.) A. $77.00 B. $60.60 C. $149.10 D. $138.80

A

7.10. Rhea Corporation has provided the following data for its two most recent years of operation: Selling price per unit - $67 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials - $10 Direct labor - $5 Variable manufacturing overhead - $3 Fixed manufacturing overhead per year - $252,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold - $4 Fixed selling and administrative expense per year - $65,000 Year 1 Year 2 Units in beginning inventory - 0 | 1,000 Units produced during the year - 9,000 | 7,000 Units sold during the year - 8,000 | 7,000 Units in ending inventory - 1,000 | 1,000 The net operating income (loss) under absorption costing in Year 2 is closest to: A. $6,000 B. $99,000 C. ($2,000) D. $71,000

A

7.16. Which of the following statements is true? 1. Segment margin is sales less variable expenses less traceable fixed expenses. 2. The salary paid to a store manager is not a traceable fixed expense of the store. A. Only statement I is true. B. Only statement II is true. C. Both statements are true. D. Neither statement is true.

A

7.18. Which of the following statements is true? 1. Common fixed expenses should not be allocated to business segments when performing break-even calculations and making decisions. 2. When computing the break even for a segment, the calculations include the company's common fixed expenses. A. Only statement I is true. B. Only statement II is true. C. Both statements are true. D. Neither statement is true.

A

7.4. Which of the following statements is true? 1. Under the absorption costing method, a company can increase profits simply by increasing the number of units produced. 2. Under absorption costing, a portion of fixed manufacturing overhead cost is released from inventory when production volume exceeds sales volume. A. Only statement I is true. B. Only statement II is true. C. Both statements are true. D. Neither statement is true.

A

7.9. Net operating income computed under variable costing would exceed net operating income computed under absorption costing if: A. units sold exceed units produced. B. units sold are less than units produced. C. units sold equal units produced. D. the average fixed cost per unit is zero.

A

6.5. Which of the following statements is true? 1. A shift in the sales mix from low-margin items to high-margin items will decrease total profits even though total sales increase. 2. A shift in the sales mix from high-margin items to low-margin items can cause total profits to decrease even though total sales may increase. 3. A shift in the sales mix from products with high contribution margin ratios toward products with low contribution margin ratios will raise the break-even point for the company as a whole. A) Statements I and III are true. B) Statements II and III are true. C) All of the statements are true. D) None of the statements are true.

B

6.8. Break-even analysis assumes that: A. Total revenue is constant. B. Unit variable expense is constant. C. Unit fixed expense is constant. D. Selling prices must fall in order to generate more revenue.

B

6.7. Which of the following is correct? The break-even point occurs on the CVP graph where: A. total profit equals total expenses B. total profit equals total fixed expenses C. total contribution margin equals total fixed expenses D. total variable expenses equal total contribution margin

C

11.13. The Cook Corporation has two divisions—East and West. The divisions have the following revenues and expenses: East West Sales $ 500,000 $ 550,000 Variable costs 200,000 275,000 Traceable fixed costs 150,000 180,000 Allocated common corporate costs 135,000 170,000 Net operating income (loss) $ 15,000 $ (75,000) The management of Cook is considering the elimination of the West Division. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, the elimination of the West Division would result in an overall company net operating income (loss) of: A. $15,000 B. ($155,000) C. ($75,000) D. ($60,000)

B

7.15. A company that produces a single product had a net operating income of $65,000 using variable costing and a net operating income of $95,000 using absorption costing. Total fixed manufacturing overhead was $60,000 and production was 10,000 units. This year was the first year of operations. Between the beginning and the end of the year, the inventory level: A. decreased by 5,000 units B. increased by 5,000 units C. decreased by 30,000 units D. increased by 30,000 units

B

7.17. Which of the following statements is true? 1. All other things the same, if a division's traceable fixed expenses decrease then the division's segment margin will decrease. 2. A company has two divisions, each selling several products. If segment reports are prepared for each product, the division managers' salaries should be considered as common fixed costs of the products. A. Only statement I is true. B. Only statement II is true. C. Both statements are true. D. Neither statement is true.

B

7.2. Which of the following statements is true? 1. Under variable costing, fixed manufacturing overhead is treated as a product cost. 2. Under variable costing, all variable production costs are treated as product costs. 3. Under variable costing, an increase in fixed manufacturing overhead will affect the unit product cost. A. Only statement I is true. B. Only statement II is true. C. All of the statements are true. D. None of the statements are true.

B

7.3. Which of the following statements is true? 1. Absorption costing treats all fixed costs as product costs. 2. Variable costing is more compatible with cost-volume-profit analysis than is absorption costing. A. Only statement I is true. B. Only statement II is true. C. Both statements are true. D. Neither statement is true.

B

7.5. How would the following costs be classified (product or period) under variable costing at a retail clothing store? Cost of purchasing clothing | Sales commissions 1) Product Product 2) Product Period 3) Period Product 4) Period Period A. Choice 1 B. Choice 2 C. Choice 3 D. Choice 4

B

7.8. A reason why absorption costing income statements are sometimes difficult to interpret is that: A. they omit variable expenses entirely in computing net operating income. B. they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories. C. they include all fixed manufacturing overhead on the income statement each year as a period cost. D. they ignore inventory levels in determining cost of goods sold.

B

6.21. Hedman Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (9,000 units) - $270,000 Variable expenses - $202,500 Contribution margin - $67,500 Fixed expenses - $63,750 Net operating income - $3,750 The margin of safety percentage is closest to: A. 75% B. 1% C. 6% D. 24%

C

11.1. Which of the following statements is true? 1. A cost that can be avoided by choosing one alternative over another is relevant for decision purposes. 2. It may be a good decision to replace an asset before its original cost has been fully recovered through increased revenues or decreased costs. A. Only statement I is true. B. Only statement II is true. C. Both statements are true. D. Neither statement is true.

C

11.10. Hodge Incorporated has some material that originally cost $74,600. The material has a scrap value of $57,400 as is, but if reworked at a cost of $1,500, it could be sold for $54,400. What would be the financial advantage (disadvantage) of reworking and selling the material rather than selling it as is as scrap? A. ($79,100) B. ($21,700) C. ($4,500) D. $52,900

C

11.12. Product U23N has been considered a drag on profits at Jinkerson Corporation for some time and management is considering discontinuing the product altogether. Data from the company's budget for the upcoming year appear below: Sales $ 730,000 Variable expenses $ 350,000 Fixed manufacturing expenses $ 234,000 Fixed selling and administrative expenses $ 161,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $144,000 of the fixed manufacturing expenses and $93,000 of the fixed selling and administrative expenses are avoidable if product U23N is discontinued. The financial advantage (disadvantage) for the company of eliminating this product for the upcoming year would be: A. $15,000 B. $143,000 C. ($143,000) D. ($15,000)

C

11.5. Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called: A. sunk costs. B. opportunity costs. C. avoidable costs. D. irrelevant costs.

C

7.13. Beamish Incorporated, which produces a single product, has provided the following data for its most recent month of operations: Number of units produced - 8,000 Variable costs per unit: Direct materials - $37 Direct labor - $56 Variable manufacturing overhead - $4 Variable selling and administrative expense - $2 Fixed costs: Fixed manufacturing overhead - $312,000 Fixed selling and administrative expense - $448,000 There were no beginning or ending inventories. The absorption costing unit product cost was: A. $93 per unit B. $97 per unit C. $136 per unit D. $194 per unit

C

7.19. Hayworth Corporation has just segmented last year's income statement into its ten product lines. The chief executive officer (CEO) is curious as to what effect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole? A. the product line's sales dollars B. the product line's contribution margin C. the product line's segment margin D. the product line's segment margin minus an allocation portion of common fixed expenses

C

7.20. Higado Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost with respect to the stores? A. store manager salaries B. store building depreciation expense C. the cost of corporate advertising aired during the Super Bowl D. cost of goods sold at each store

C

7.6. A cost that would be included in product costs under both absorption costing and variable costing is: A. supervisory salaries. B. factory rent. C. variable manufacturing costs. D. variable selling expenses.

C

7.7. Which of the following is true of a company that uses absorption costing? A. Net operating income fluctuates directly with changes in sales volume. B. Fixed production and fixed selling costs are considered to be product costs. C. Unit product costs can change as a result of changes in the number of units manufactured. D. Variable selling expenses are included in product costs.

C

7.22. Younie Corporation has two divisions: the South Division and the West Division. The corporation's net operating income is $26,900. The South Division's divisional segment margin is $42,800 and the West Division's divisional segment margin is $29,900. What is the amount of the common fixed expense not traceable to the individual divisions? A. $56,800 B. $69,700 C. $72,700 D. $45,800

D

7.23. J Corporation has two divisions. Division A has a contribution margin of $79,300 and Division B has a contribution margin of $126,200. If total traceable fixed expenses are $72,400 and total common fixed expenses are $34,900, what is J Corporation's net operating income? A. $168,000 B. $170,600 C. $133,100 D. $98,200

D

The Freed Corporation produces three products, X, Y, Z, from a single raw material input. Product Y can be sold at the split-off point for total annual revenues of $50,000, or it can be processed further at a total annual cost of $16,000 and then sold for $68,000. Which of the following statements is true concerning Product Y? A) Product Y should be sold at the split-off point rather than processed further. B) The annual financial advantage from processing Product Y further is $18,000. C) The annual financial advantage from processing Product Y further is $68,000. D) The annual financial advantage from processing Product Y further is $2,000.

D

11.14. Norgaard Corporation makes 8,000 units of part G25 each year. This part is used in one of the company's products. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $ 6.70 Direct labor $ 8.10 Variable manufacturing overhead $ 1.10 Supervisor's salary $ 2.00 Depreciation of special equipment $ 4.20 Allocated general overhead $ 2.10 An outside supplier has offered to make and sell the part to the company for $21.20 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $2,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part G25 would be used to make more of one of the company's other products, generating an additional segment margin of $16,000 per year for that product. The annual financial advantage (disadvantage) for the company as a result of buying part G25 from the outside supplier should be: A. ($8,400) B. $16,000 C. ($8,000) D. ($40,000)

A

11.2. Which of the following statements is true? 1. Sunk costs are never relevant in decision making. 2. Sunk costs and future costs that do not differ between the alternatives may or may not be relevant in a decision. 3. Fixed costs are sunk costs. A. Only statement I is true. B. Only statement III is true. C. All of the statements are true. D. None of the statements are true.

A

11.20. Cranston Corporation makes four products in a single facility. Data concerning these products appear below: Products A B C D Selling price per unit $ 42.30 $ 50.00 $ 37.60 $ 33.50 Variable manufacturing cost per unit $ 20.80 $ 30.70 $ 21.00 $ 19.90 Variable selling cost per unit $ 2.70 $ 2.10 $ 1.00 $ 2.40 Milling machine minutes per unit 3.30 4.10 2.60 1.30 Monthly demand in units 1,000 4,000 3,000 3,000 The milling machines are potentially the constraint in the production facility. A total of 28,200 minutes are available per month on these machines. Up to how much should the company be willing to pay for one additional minute of milling machine time if the company has made the best use of the existing milling machine capacity? (Round your intermediate calculations to 2 decimal places.) A. $4.20 B. $11.20 C. $18.80 D. $0.00

A

11.22. Paine Corporation processes sugar beets in batches that it purchases from farmers for $72 a batch. A batch of sugar beets costs $11 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $27 or processed further for $16 to make the end product industrial fiber that is sold for $40. The beet juice can be sold as is for $43 or processed further for $28 to make the end product refined sugar that is sold for $100. Which of the intermediate products should be processed further? A. beet fiber should NOT be processed into industrial fiber; beet juice should be processed into refined sugar B. beet fiber should NOT be processed into industrial fiber; beet juice should NOT be processed into refined sugar C. beet fiber should be processed into industrial fiber; beet juice should NOT be processed into refined sugar D. beet fiber should be processed into industrial fiber; beet juice should be processed into refined sugar

A

11.23. Cybil Baunt just inherited a 1958 Chevy Impala from her late Aunt Joop. Aunt Joop purchased the car 40 years ago for $8,000. Cybil is either going to sell the car for $10,000 or have it restored and then sell it for $22,000. The restoration will cost $9,000. Cybil would be financially better off by: A) $3,000 to have the vehicle restored B) $6,000 to have the vehicle restored C) $9,000 to have the vehicle restored D) $11,000 to have the vehicle restored

A

11.25. WP Corporation produces products X, Y, and Z from a single raw material input in a joint production process. Budgeted data for the next month is as follows: Product X Product Y Product Z Units produced 1,500 2,000 3,000 Per unit sales value at split-off $ 19.00 $ 21.00 $ 24.00 Added processing costs per unit $ 7.00 $ 7.50 $ 7.00 Per unit sales value if processed further $ 29.00 $ 29.00 $ 30.00 The cost of the joint raw material input is $149,000. Which of the products should be processed beyond the split-off point? Product X Product Y Product Z A) Yes Yes No B) No Yes No C) Yes No Yes D) No Yes Yes

A

6.15. Thomason Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (1,000 units) - $40,000 Variable expenses - $30,000 Contribution margin - $10,000 Fixed expenses - $7,000 Net operating income - $3,000 If the variable cost per unit increases by $1, spending on advertising increases by $2,000, and unit sales increase by 50 units, the net operating income would be closest to: A. $450 B. $1,000 C. $2,150 D. $9,450

A

6.17. Ploeger Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (4,000 units) - $240,000 Variable expenses - $156,000 Contribution margin - $84,000 Fixed expenses - $81,900 Net operating income - $2,100 The break-even point in dollar sales is closest to: A. $234,000 B. $237,900 C. $156,000 D. $0

A

6.2. Which of the following statements is true? 1. If the variable expense per unit decreases, and all other factors remain the same, the contribution margin ratio will increase. 2. The smaller the contribution margin ratio, the smaller the amount of sales required to cover a given amount of fixed expenses. A. Only statement I is true. B. Only statement II is true. C. Both statements are true. D. Neither statement is true.

A

6.22. Jilk Incorporated's contribution margin ratio is 58% and its fixed monthly expenses are $36,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $103,000? A. $23,740 B. $59,740 C. $67,000 D. $7,260

A

6.23. Gamach Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $104.50 per unit. Sales volume (units) - 5,000 | 6,000 Cost of sales - $295,000 | $354,000 Selling and administrative costs - $186,000 | $202,800 The best estimate of the total monthly fixed cost is: A. $102,000 B. $518,900 C. $556,800 D. $481,000

A

11.8. Kinsi Corporation manufactures five different products. All five of these products must pass through a stamping machine in its fabrication department. This machine is Kinsi's constrained resource. Kinsi would make the most profit if it produces the product that: A. uses the least amount of stamping time B. generates the highest contribution margin per unit. C. generates the highest contribution margin ratio D. generates the highest contribution margin per stamping machine hour.

D

11.17. A customer has requested that Lewelling Corporation fill a special order for 9,000 units of product S47 for $20.50 a unit. While the product would be modified slightly for the special order, product S47's normal unit product cost is $14.40: Direct materials $ 3.10 Direct labor 1.50 Variable manufacturing overhead 6.40 Fixed manufacturing overhead 3.40 Unit product cost $ 14.40 Assume that direct labor is a variable cost. The special order would have no effect on the company's total fixed manufacturing overhead costs. The customer would like modifications made to product S47 that would increase the variable costs by $5.00 per unit and that would require an investment of $36,000 in special molds that would have no salvage value. This special order would have no effect on the company's other sales. The company has ample spare capacity for producing the special order. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: A. ($9,900) B. $4,500 C. $54,900 D. ($26,100)

B

11.18. Banfield Corporation makes three products that use compound W, the current constrained resource. Data concerning those products appear below: VP | YI | WX Selling price per unit $ 248.04 | $ 230.66 | $ 505.44 Variable cost per unit $ 190.71 | $ 172.14 | $ 388.80 Centiliters of compound W 3.90 | 3.80 | 8.10 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized. (Round your intermediate calculations to 2 decimal places.) A. WX, VP, YI B. YI, VP, WX C. WX, YI, VP D. VP, WX, YI

B

11.21. The constraint at Pickrel Corporation is time on a particular machine. The company makes three products that use this machine. Data concerning those products appear below: VD JT SM Selling price per unit $ 344.85 $ 415.40 $ 119.32 Variable cost per unit $ 270.18 $ 310.88 $ 91.96 Minutes on the constraint 5.70 6.70 1.90 Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of this constrained resource? (Round your intermediate calculations to 2 decimal places.) A. $15.60 per minute B. $13.10 per minute C. $104.52 per unit D. $27.36 per unit

B

11.4. Which of the following statements is true? 1. The book value of an old machine is always considered an opportunity cost in a decision. 2. A cost that will be incurred regardless of which alternative is selected is not relevant when choosing between the alternatives. 3. A complete income statement need not be prepared as part of a differential cost analysis. 4. An avoidable cost is a sunk cost that can be eliminated (in whole or in part) as a result of choosing one alternative over another. A. Both statements I and II are true. B. Both statements II and III are true. C. Both statements II and IV are true. D. Both statements I and III are true.

B

11.6. The Jabba Corporation manufactures the "Snack Buster" which consists of a wooden snack chip bowl with an attached porcelain dip bowl. Which of the following would be relevant in Jabba's decision to make the dip bowls or buy them from an outside supplier? Fixed overhead cost that can be eliminated if the bowls are purchased from the outside supplier | The variable selling cost of the Snack Buster A) Yes | Yes B) Yes | No C) No | Yes D) No | No A. Choice A B. Choice B C. Choice C D. Choice D

B

11.7. Accepting a special order will improve overall net operating income if the revenue from the special order exceeds: A. the contribution margin on the order. B. the incremental costs associated with the order. C. the variable costs associated with the order. D. the sunk costs associated with the order.

B

6.1. Which of the following statements is true? 1. Incremental Analysis is an analytical approach that focuses only on those revenues and costs that will not change as a result of the decision. 2. When expressed on a per-unit basis, fixed costs can mislead decision makers into thinking of them as variable costs. 3. To estimate what the profit will be at various levels of sales volume, multiply the number of units to be sold above or below the break-even point by the unit contribution margin. A. Statements I and III are true. B. Statements II and III are true. C. All of the statements are true. D. None of the statements are true.

B

6.10. Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November Sales (6,500 units) - $442,000 Variable expenses - $312,000 Contribution margin - $130,000 Fixed expenses - $103,500 Net operating income - $26,500 If the company sells 6,400 units, its net operating income should be closest to: (Do not round intermediate calculations.) A. $25,979 B. $24,500 C. $26,500 D. $22,000

B

6.13. Kelchner Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (3,000 units) - $180,000 Variable expenses - $108,000 Contribution margin -$72,000 Fixed expenses - $62,400 Net operating income - $9,600 The contribution margin ratio is closest to: A. 67% B. 40% C. 33% D. 60%

B

6.19. Stockmaster Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (8,000 units) - $320,000 Variable expenses - $192,000 Contribution margin - $128,000 Fixed expenses - $121,600 Net operating income - $6,400 The margin of safety in dollars is closest to: A. $6,400 B. $16,000 C. $121,600 D. $128,000

B

6.3. Which of the following statements is true? 1. If fixed expenses increase by $10,000 per year, then the sales needed to break even will generally increase by more than $10,000. 2. The break-even point in units can be obtained by dividing total fixed expenses by the unit contribution margin. 3. An increase in the number of units sold will decrease a company's break-even point. A. Only statement I is true. B. Statements I and II are true. C. All of the statements are true. D. None of the statements are true.

B

6.4. Which of the following statements is true? 1. Two companies with the same margin of safety in dollars will also have the same total contribution margin. 2. Fawn Company's margin of safety is $90,000. If the company's sales drop by $80,000, it will still have positive net operating income. A) Only statement I is true. B) Only statement II is true. C) Both statements are true. D) Neither statement is true.

B

11.16. CoolAir Corporation manufactures portable window air conditioners. CoolAir has the capacity to manufacture and sell 80,000 air conditioners each year but is currently only manufacturing and selling 60,000. The following per unit numbers relate to annual operations at 60,000 units: Per Unit Selling price $ 125 Manufacturing costs: Variable $ 25 Fixed $ 40 Selling and administrative costs: Variable $ 10 Fixed $ 15 The City of Clearwater would like to purchase 3,000 air conditioners from CoolAir but only if they can get them for $75 each. Variable selling and administrative costs on this special order will drop down to $2 per unit. This special order will not affect the 60,000 regular sales and it will not affect the total fixed costs. The annual financial advantage (disadvantage) for the company as a result of accepting this special order from the City of Clearwater should be: A. ($21,000) B. $24,000 C. $144,000 D. ($129,000)

C

6.12. Schister Systems uses the following data in its Cost-Volume-Profit analyses: Sales - $375,000 Variable expenses - $225,000 Contribution margin - $150,000 Fixed expenses - $115,000 Net operating income - $35,000 What is the contribution margin if sales volume increases by 40%? A. $150,000 B. $49,000 C. $210,000 D. $21,000

C

6.16. Duve Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (2,000 units) - $40,000 Variable expenses - $24,000 Contribution margin - $16,000 Fixed expenses - $11,200 Net operating income - $4,800 If the selling price increases by $4 per unit and the sales volume decreases by 200 units, the net operating income would be closest to: A. $7,200 B. $12,800 C. $10,400 D. $11,520

C

6.18. The following information pertains to Nova Co.'s cost-volume-profit relationships: Breakeven point in units sold - 1,000 Variable expenses per unit - $500 Total fixed expenses - $150,000 How much will be contributed to net operating income by the 1,001st unit sold? A. $650 B. $500 C. $150 D. $0

C

6.6. If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will: A. decrease B. increase C. not change D. change but direction cannot be determined

C

6.9. If sales volume increases and all other factors remain constant, then the: A. contribution margin ratio will increase B. break-even point will decrease C. margin of safety will decrease D. net operating income will decrease

C

11.15. Sharp Corporation produces 8,000 parts each year, which are used in the production of one of its products. The unit product cost of a part is $36, computed as follows: Variable production cost $ 16 Fixed production cost 20 Unit product cost $ 36 The parts can be purchased from an outside supplier for only $28 each. The space in which the parts are now produced would be idle and fixed production costs would be reduced by one-fourth. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be: A. $24,000 B. ($24,000) C. $56,000 D. ($56,000)

D

11.19. Marley Corporation makes three products (X, Y, & Z) with the following characteristics: Products X Y Z Selling price per unit $ 10 $ 15 $ 20 Variable cost per unit $ 6 $ 10 $ 10 Machine hours per unit 2 4 10 The company has a capacity of 2,000 machine hours, but there is virtually unlimited demand for each product. In order to maximize total contribution margin, how many units of each product should the company produce? A. 2,000 units of X, 500 units of Y, and 200 units of Z B. 0 units of X, 0 units of Y, and 200 units of Z C. 0 units of X, 500 units of Y, and 0 units of Z D. 1,000 units of X, 0 units of Y, and 0 units of Z

D

11.3. Which of the following statements is true? 1. Future costs that do not differ between the alternatives in a decision are avoidable costs. 2. A cost that is traceable to a segment through activity-based costing is always an avoidable cost for decision making. A. Only statement I is true. B. Only statement II is true. C. Both statements are true. D. Neither statement is true.

D

11.9. United Industries manufactures a number of products at its highly automated factory. The products are very popular, with demand far exceeding the factory's capacity. To maximize profit, management should rank products based on their: A. gross margin B. contribution margin C. selling price D. contribution margin per unit of the constrained resource

D

6.11. Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November Sales (5,700 units) - $319,200 Variable expenses - $188,100 Contribution margin - $131,100 Fixed expenses - $106,500 Net operating income - $24,600 If the company sells 5,300 units, its net operating income should be closest to: (Do not round intermediate calculations.) A. $24,600 B. $2,200 C. $22,874 D. $15,400

D

6.14. Carver Corporation produces a product which sells for $40. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of sales volume, and fixed selling and administrative costs are $4 per unit. A selling commission of 15% of the selling price is paid on each unit sold. The contribution margin per unit is: A. $7 B. $17 C. $22 D. $16

D

6.20. Cassius Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (7,000 units) - $210,000 Variable expenses - $136,500 Contribution margin - $73,500 Fixed expenses - $67,200 Net operating income - $6,300 The number of units that must be sold to achieve a target profit of $31,500 is closest to: A. 42,000 units B. 16,400 units C. 35,000 units D. 9,400 units

D

6.25. Maintenance costs at a Straiton Corporation factory are listed below: Machine-Hours Maintenance Cost March - 3,627 | $54,384 April - 3,588 | $53,980 May - 3,637 | $54,453 June - 3,638 | $54,491 July 3,572 | $53,843 August - 3,611 | $54,196 September - 3,644 | $54,550 October - 3,609 | $54,181 November - 3,669 | $54,767 Management believes that maintenance cost is a mixed cost that depends on machine-hours. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first and round off to the nearest whole cent. Compute the fixed component second and round off to the nearest whole dollar. These estimates would be closest to: (Round your intermediate calculations to 2 decimal places.) A. $0.10 per machine-hour; $54,382 per month B. $15.00 per machine-hour; $54,316 per month C. $9.12 per machine-hour; $21,309 per month D. $9.53 per machine-hour; $19,801 per month

D

7.11. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Units in beginning inventory - 0 Units produced - 8,900 Units sold - 8,500 Units in ending inventory - 400 Variable costs per unit: Direct materials - $26 Direct labor - $25 Variable manufacturing overhead - $4 Variable selling and administrative expense - $4 Fixed costs: Fixed manufacturing overhead - $249,200 Fixed selling and administrative expense - $17,000 What is the variable costing unit product cost for the month? A. $59 per unit B. $83 per unit C. $87 per unit D. $55 per unit

D

7.12. Mccrone Corporation has provided the following data for its two most recent years of operation: Selling price per unit - $59 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials - $11 Direct labor - $6 Variable manufacturing overhead - $4 Fixed manufacturing overhead per year - $88,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold - $4 Fixed selling and administrative expense per year - $80,000 Year 1 Year 2 Units in beginning inventory - 0 | 1,000 Units produced during the year - 11,000 | 8,000 Units sold during the year - 10,000 | 5,000 Units in ending inventory - 1,000 | 4,000 The net operating income (loss) under variable costing in Year 1 is closest to: A. $380,000 B. $340,000 C. $180,000 D. $172,000

D

7.21. Miscavage Corporation has two divisions: the Beta Division and the Alpha Division. The Beta Division has sales of $580,000, variable expenses of $301,600, and traceable fixed expenses of $186,500. The Alpha Division has sales of $510,000, variable expenses of $178,500, and traceable fixed expenses of $222,100. The total amount of common fixed expenses not traceable to the individual divisions is $235,500. What is the company's net operating income? A. $374,400 B. $201,300 C. $609,900 D. ($34,200)

D