acct 1160 test 3 practice questions

During the year, $20,000 of raw materials were purchased. $10,000 of raw materials were put into production. The company has $30,000 raw materials inventory at the end of the year. Given this information, what was the beginning balance of the Raw Materials Inventory at the beginning of the year? A. $20,000 B. $10,000 C. $30,000 D. None of the above

A. $20,000 Beg Bal + purchases - put into production = ending balance Beg Bal + $20,000 - $10,000 = $30,000 Beg Bal = $20,000

If sales are $700,000, variable costs are 40% of sales, and fixed costs are $200,000, what is operating income? A. $220,000 B. $280,000 C. $500,000 D. $420,000

A. $220,000 700,000 - 280,000 = 420,000 420,000 - 200,000 = $220,000 Op Inc = Total Sales - Total VC - Total FC Op Inc = $700,000 - ($700,000 x 40%) - $200,000 = $220,000 Or another way: Op Inc = CM - FC CM Ratio = 100% - 40% = 60% Op In = ($700,000 x 60%) - $200,000

If sales are $800,000, variable costs are 20% of sales, and fixed costs are $400,000, what is operating income? A. $240,000 B. $280,000 C. $500,000 D. $400,000

A. $240,000 Op Inc = Total Sales - Total VC - Total FC Op Inc = $800,000 - ($800,000 x 20%) - $400,000 = $240,000 Or another way: Op Inc = CM - FC CM Ratio = 100% - 20% = 80% Op In = ($800,000 x 80%) - $400,000

Silver, Inc. has estimated total factory overhead costs of $400,000 and 10,000 direct labor hours for the current fiscal year. If actual direct labor hours for the year total 12,000 and actual factory overhead totals $450,000, what is the predetermined overhead rate applied to jobs in process? A. $40.00 per direct labor hour B. $37.50 per direct labor hour C. $50.00 per direct labor hour D. $45.00 per direct labor hour

A. $40.00 per direct labor hour

Alex Corporation uses the total cost concept of product pricing. Alex Corp desires a profit equal to a 10% rate of return on invested assets of $500,000. Below is cost information for the production and sale of 10,000 units of its sole product. Fixed costs $100,000 Variable costs per unit $25 The minimum desired profit is: A. $50,000 B. $250,000 C. $150,000 D. $500,000

A. $50,000 10% x $500,000

Hart Co. sold 1,000 units of inventory in 2020. Below is the cost and sales data. Sales Price per unit: $20 Variable Cost: 60% of sales Total Fixed Costs incurred in 2020: $2,000 Disregarding that 1,000 units were sold, how much sales revenue would the company need to earn in order to achieve a target profit of $20,000? A. $55,000 B. $20,000 C. $14,000 D. $2,750

A. $55,000 Target Profit $ = (FC + TP) / CM Ratio = ($2,000 + $20,000) / 40% = $55,000

Company X produced 10,000 units this February. 7,000 of the units were sold in February. Below is the cost and sales data. Sales Price per unit: $10 Variable Cost per unit: $4 Total Fixed Costs incurred in February: $20,000 Disregarding how many units were actually sold, how many units did Company X need to sell in order to break even? A. 3,333 units B. 6,000 units C. 5,000 units D. 4,200 units

A. 3,333 units fixed cost / unit contribution margin -> 20,000 / 6 = 3,333

Which of the following is false regarding the cost behavior of costs? A. Variable costs per unit increase as unit production increases. B. Total variable costs increase as unit production increases. C. Fixed costs per unit decrease as unit production increases. D. Total fixed costs remain the same as unit production increases.

A. Variable costs per unit increase as unit production increases. (it stays the same)

Company X produced 10,000 units this February. 7,000 of the units were sold in February. Below is the cost and sales data. Sales Price per unit: $10 Variable Cost per unit: $4 Total Fixed Costs incurred in February: $20,000 What is the operating income for February? A. $60,000 B. $22,000 C. $42,000 D. $38,000

B. $22,000 $6 x 7,000 = 42,000; subtract 20,000 for fixed costs. Op Inc = (Units Sold x unit CM) - Total FC (unit CM = SP per unit - VC per unit) (instead of Units Sold x unit CM, could just use total CM) Could also view it as: Op Inc = total Sales - total VC - total FC 7,000 units sold x ($10 SP/u - $4 VC/u) = $42,000 CM Op Inc = $42,000 - $20,000 = $22,000

A business received an offer to purchase 10,000 units of product at a special sales price of $10 per unit. There is excess production capacity to produce the order without incurring additional fixed costs. The following data are available: Normal unit sales price: $20 Unit manufacturing costs: Variable: $6 Fixed: $2 What is the amount of the gain or loss from acceptance of the offer? A. $20,000 gain B. $40,000 gain C. $20,000 loss D. $40,000 loss

B. $40,000 gain Fixed costs aren't changing. Only variable costs are relevant. Additionally, the two options are either accept the offer and get the income from the sales or don't accept the offer and have $0 additional sales. $10 special sales price - $6 VC = $4 per unit $4/u x 10,000 units = $40,000

Hart Co. sold 1,000 units of inventory in 2020. Below is the cost and sales data. Sales Price per unit: $20 Variable Cost: 60% of sales Total Fixed Costs incurred in 2020: $2,000 What is the unit contribution margin? A. $20 B. $8 C. $14 D. $12

B. $8 uCM = SP/u - VC/u uCM = $20 - ($20 x 60%) uCM = $20 - $12 = $8

Hart Co. sold 1,000 units of inventory in 2020. Below is the cost and sales data. Sales Price per unit: $20 Variable Cost: 60% of sales Total Fixed Costs incurred in 2020: $2,000 What is the total contribution margin for 2020? A. $20,000 B. $8,000 C. $14,000 D. $12,000

B. $8,000 uCM x # units sold = $8/u x 1,000 units = $8,000

A company sells its inventory for $10 per unit. The contribution margin ratio is 70%. Fixed costs are $140,000. What is the minimum number of units the company must sell in order to break even? A. 15,000 units B. 20,000 units C. 40,000 units D. 45,000 units

B. 20,000 units ucm = $7; 140,000 / 7 = 20,000 Short way: Break-even point units = Fixed Costs / unit CM BE Units = $140,000 / ($10 x 70%) = 20,000 units

Company X produced 10,000 units this February. 7,000 of the units were sold in February. Below is the cost and sales data. Sales Price per unit: $10 Variable Cost per unit: $4 Total Fixed Costs incurred in February: $20,000 What is the contribution margin ratio? A. 42% B. 60% C. 40% D. 70%

B. 60% 10-4 = 6 (contribution margin) / sales price per unit which is $10 $6 CM per unit / $10 sales price per unit Or: $42,000 total CM / $70,000 total sales

Company X has incurred various factory overhead costs, such as factory rent and insurance expense and indirect labor wages and salaries. The company has recorded this to its factory overhead inventory account. The company allocates overhead to inventory using a predetermined rate. As the company completes the inventory, what should it record? A. Decrease Cash; Decrease Retained Earnings B. Decrease Work in Process; Increase Finished Goods C. Decrease Finished Goods; Decrease Retained Earnings D. Decrease Finished Goods; Increase Work in Process

B. Decrease Work in Process; Increase Finished Goods

Frank Co. is currently making a part used in its manufacturing operations at a total variable cost of $2,000. The total cost to purchase the part instead is $3,000. Assume the company's fixed costs will not change if it decides to purchase the part rather than manufacture it. What would be the change in differential costs for purchasing the part rather than making it? A. $5,000 decrease B. $1,000 decrease C. $1,000 increase D. $5,000 increase

C. $1,000 increase

Alex Co. produces merchandise at a cost of $10 per unit. The company would like to sell each unit at a markup of $4 per unit. What is the sales price per unit? A. $10 B. $4 C. $14 D. $6

C. $14 SP = Cost + Markup on Cost

A business received an offer from a customer to purchase 1,000 units of product at a special sales price of $20 per unit. There is excess production capacity to produce the order without incurring additional fixed costs. The following data are available: Normal unit sales price: $25 Unit manufacturing costs: Variable: $22 Fixed: $2 What is the amount of the gain or loss from acceptance of the offer? A. $2,000 gain B. $1,000 gain C. $2,000 loss D. $1,000 loss

C. $2,000 loss Fixed costs aren't changing. Only variable costs are relevant. Additionally, the two options are either accept the offer and get the income from the sales or don't accept the offer and have $0 additional sales. $20 special sales price - $22 VC = $2 loss per unit $2/u loss x 1,000 units = $2,000 loss

When Job X was sold, the following information was available about that inventory item: Direct materials cost $400 Direct labor hours 10 The company pays $15 per direct labor hour. To estimate the predetermined factory overhead rate, the company estimated total factory overhead of $50,000 and total 5,000 direct labor hours (the activity base). Job X was sold for $900. What was the gross profit on the sale? A. $900 B. $650 C. $250 D. $550

C. $250 Total Cost = DM $400 + DL (10hr x $15/hr) + OH (($50,000/5,000) x 10hrs) = $650 GP = Sales - COGS = $900 - $650 = $250

Company X produced 10,000 units this February. 7,000 of the units were sold in February. Below is the cost and sales data. Sales Price per unit: $10 Variable Cost per unit: $4 Total Fixed Costs incurred in February: $20,000 What is the total contribution margin? A. $60,000 B. $28,000 C. $42,000 D. $70,000

C. $42,000 6 x $7,000

Company X produced 10,000 units this February. 7,000 of the units were sold in February. Below is the cost and sales data. Sales Price per unit: $10 Variable Cost per unit: $4 Total Fixed Costs incurred in February: $20,000 What is the unit contribution margin? A. $10 B. $4 C. $6 D. $14

C. $6 10-4= $6

Hart Co. sold 1,000 units of inventory in 2020. Below is the cost and sales data. Sales Price per unit: $20 Variable Cost: 60% of sales Total Fixed Costs incurred in 2020: $2,000 What is the operating income for 2020? A. $20,000 B. $8,000 C. $6,000 D. $12,000

C. $6,000 Op Inc = Sales - VC - FC Op Inc = ($20/u x 1,000 units) - ($20/u x 1,000 units x 60%) - $2,000

Company X produced 10,000 units this February. 7,000 of the units were sold in February. Below is the cost and sales data. Sales Price per unit: $10 Variable Cost per unit: $4 Total Fixed Costs incurred in February: was $20,000 NOW $30,000 Disregarding how many units were actually sold and now assuming total FC were $30,000, how many units did Company X need to sell in order to break even? A. 3,333 units B. 6,000 units C. 5,000 units D. 4,200 units

C. 5,000 units $30,000 / $6 = 5,000

Company X produced 10,000 units this February. 7,000 of the units were sold in February. Below is the cost and sales data. Sales Price per unit: $10 Variable Cost per unit: was $4 NOW $6 Total Fixed Costs incurred in February: $20,000 Disregarding how many units were actually sold and now assuming VC per unit is $6, now how many units did Company X need to sell in order to break even? A. 3,333 units B. 6,000 units C. 5,000 units D. 4,200 units

C. 5,000 units 10-6 = 20,000 / $4 = 5,000 breakeven = fixed costs / ucm

Company X produced 10,000 units this February. 7,000 of the units were sold in February. Below is the cost and sales data. Sales Price per unit: $10 Variable Cost per unitterm-54: $4 Total Fixed Costs incurred in February: was $20,000 NOW $30,000 Disregarding how many units were actually sold and now assuming total FC were $30,000, how many units did Company X need to sell in order to break even? A. 3,333 units B. 6,000 units C. 5,000 units D. 4,200 units

C. 5,000 units Fixed costs / ucm 30,000 / 6 = 5,000

If sales are $700,000, variable costs are 40% of sales, and fixed costs are $200,000, what is the contribution margin ratio? A. 40% B. 30% C. 60% D. 80%

C. 60% 700,000 - 40% of that (700,000 x .4 = 280,000) 700,000 - 280,000 = 420,000 ... / 700,000 again, answer = .6 100% = VC % + CM % 100% = 40% + 60%

Company X has incurred various factory overhead costs, such as factory rent and insurance expense and indirect labor wages and salaries. The company has recorded this to its factory overhead inventory account. The company allocates overhead to inventory using a predetermined rate. The inventory is sold for cash. The sales price exceeded the cost of the inventory. What should the company record? A. Increase Cash; Decrease Retained Earnings B. Decrease Work in Process; Increase Finished Goods C. Increase Cash; Decrease Finished Goods; Increase Retained Earnings D. Decrease Finished Goods; Decrease Retained Earnings

C. Increase Cash; Decrease Finished Goods; Increase Retained Earnings

Relevant revenues and costs in Differential Analysis focus on: A. last year's net income B. activities that occurred in the past C. differences between the alternatives being considered D. monies already earned and/or spent

C. differences between the alternatives being considered

A company sells its inventory for $10 per unit. The contribution margin ratio is 70%. Fixed costs are $140,000. What is the minimum amount of sales the company must sell in order to break even? A. $260,000 B. $700,000 C. $140,000 D. $200,000

D. $200,000 20,000 x $10/u = $200,000 140,000 / .7 Short way: Break-even point units = Fixed Costs / CM Ratio BE Units = $140,000 / 70% = $200,000

Alex Corporation uses the total cost concept of product pricing. Alex Corp desires a profit equal to a 10% rate of return on invested assets of $500,000. Below is cost information for the production and sale of 10,000 units of its sole product. Fixed costs $100,000 Variable costs per unit $25 The unit selling price for the company's product is: A. $10 B. $15 C. $25 D. $40

D. $40 Op Inc = Rate of Return x Invested Assets = 10% x $500,000 = $50,000 Op Inc = (# Units x Sale Price) - (# Units x VC/U) - FC $50,000 = (10,000 units x Sales Price) - (10,000 units x $25/u) - $100,000 $150,000 = (10,000 units x Sales Price) - $250,000 $400,000 = 10,000 x Sale Price $400,000 / 10,000 = $40

Xander Corp uses the total cost concept of product pricing and desires a profit equal to a 20% rate of return on invested assets of $400,000. Below is cost information for the production and sale of 4,000 units of its sole product. Fixed costs $200,000 Variable costs per unit $20 The unit selling price for the company's product should be: A. $20 B. $4 C. $16 D. $90

D. $90 Op Inc = Rate of Return x Invested Assets = 20% x $400,000 = $80,000 Op Inc = (# Units x Sale Price) - (# Units x VC/U) - FC $80,000 = (4,000 units x Sales Price) - (4,000 units x $20/u) - $200,000 $280,000 = (4,000 units x Sales Price) - $80,000 $360,000 = 4,000 x Sale Price $360,000 / 4,000 = $90

Company X produced 10,000 units this February. 7,000 of the units were sold in February. Below is the cost and sales data. Sales Price per unit: $10 Variable Cost per unit: $4 Total Fixed Costs incurred in February: $20,000 Disregarding how many units were actually sold, if Company X wants to earn $50,000 operating income in February, how many units does Company X need to sell? A. 3,333 units B. 8,333 units C. 6,667 units D. 11,667 units

D. 11,667 units Fixed cost = 20K + target profit = $50,000 = 70,000 divided by 6 = 11,667 Op Inc =(Units Sold x unit CM) - Total FC (unit CM = SP per unit - VC per unit) (instead of Units Sold x unit CM, could just use total CM) Could also view it as: Op Inc = total Sales - total VC - total FC So: $50,000 = (Units Sold x unit CM) - Total FC $50,000 = (Units Sold x $6cm/u) - $20,000 $70,000 = $6 x Units Sold .... Units Sold = 3,333 units

Hart Co. sold 1,000 units of inventory in 2020. Below is the cost and sales data. Sales Price per unit: $20 Variable Cost: 60% of sales Total Fixed Costs incurred in 2020: $2,000 Disregarding that 1,000 units were sold, how many units did the company need to sell in order to break even? A. 100 units B. 1,000 units C. 167 units D. 250 units

D. 250 units BE Units = FC / uCM = $2,000 / ($20 x (100%-60%))

If sales are $800,000, variable costs are 20% of sales, and fixed costs are $400,000, what is the contribution margin ratio? A. 40% B. 30% C. 60% D. 80%

D. 80% 100% = VC % + CM % 100% = 20% + 80% The longer way to solve this: CM Ratio = CM / Sales CM = Sales - VC So, CM Ratio = (Sales - VC) / Sales To solve for VC, we'll use the 20% ratio. VC = 20% of Sales ... VC = 20% x $800,000 = $160,000 So, CM Ratio = ($800,000 - $160,000) / $800,000

Company X has incurred various factory overhead costs, such as factory rent and insurance expense and indirect labor wages and salaries. The company has recorded this to its factory overhead inventory account. The company allocates overhead to inventory using a predetermined rate. As the company produces the inventory, what should it record as it allocates the overhead to the inventory being produced? A. Decrease Cash; Decrease Retained Earnings B. Decrease Work in Process; Increase Factory Overhead C. Decrease Cash; Increase Factory Overhead D. Decrease Factory Overhead; Increase Work in Process

D. Decrease Factory Overhead; Increase Work in Process

When Job X was sold, the following information was available about that inventory item: Direct materials cost $300 Sales commission $400 Direct labor hours 30 The company pays $10 per direct labor hour. Factory overhead is allocated using the predetermined overhead rate of $15 per direct labor hour. What was the cost to produce Job X? a. $1,050 b. $1,450 c. $600 d. $700

a. $1,050 The cost of job X is the direct materials cost + direct labor cost + factory overhead cost. So it's 300 + (30 x 10) + (30 x 15) = 1,050

Compute the break-even profit (in dollars) if fixed costs are $400,000 and variable cost are 75% of sales. a. $1,600,000 b. $2,000,000 c. $500,000 d. $700,000

a. $1,600,000

A business received an offer to purchase 20,000 units of product at a special sales price of $15 per unit. There is excess production capacity to produce the order without incurring additional fixed costs. The following data are available: Normal unit sales price: $25 Unit manufacturing costs: Variable: $10 Fixed: $8 What is the amount of the gain or loss from acceptance of the offer? a. $100,000 gain b. $40,000 gain c. $100,000 loss d. $40,000 loss

a. $100,000 gain ($15 - $10) x 20,000 units (compared to $25 x 20k units = $500k)

Marlo Company is considering discontinuing a product. The costs of the product consist of $20,000 fixed costs and $15,000 variable costs. The variable operating expenses related to the product total $4,000. What is the differential cost? a. $19,000 b. $15,000 c. $35,000 d. $39,000

a. $19,000 Differential cost is the amount of increase or decrease in cost that is expected from a particular course of action compared with an alternative Variable costs + variable operating expenses = $19,000

Job D required $1,300 of direct materials and 30 direct labor hours. Laborers are paid $17 per hour. Factory overhead is applied at a rate of $15 per direct labor hour. After Job D is finished and sold, what amount will be reported as Cost of Goods Sold? a. $2,260 b. $1,300 c. $1,750 d. $1,810

a. $2,260 30 x 15 = 450 (factory overhead cost) 30 x 17 = 510 (direct labor cost) 1300 + 450 + 510 = 2260

Drake Co. received an offer from a potential customer for 1,000 units of its most popular product at a special sales price of $9. The company's monthly production capacity is 6,250 units. It is currently producing 5,000 units a month. The normal sales price is $15. The total unit manufacturing costs $10,000, which includes $3,75 of fixed costs. What is the differential income realized by Drake if the special order is accepted? a. $2,750 b. $1,000 c. $5,250 d. $2,250

a. $2,750 Company has excess capacity of 1,250 units (6,250 - 5,000) if the special order is accepted so regular sales won't be affected. Differential income = unit variable manufacturing cost - special sales price x number of units in special order $10 - $2.75 = $6.25 - $9.00 x 1,000 = $2,750

A recording artist is considering two different marketing campaigns for her new album. She estimates that Campaign A will result in sales of 10,000 albums at $5 per album and Campaign B will result in 15,000 sales at $3 per album. Campaign A will cost $3,000 to perform. Campaign B will cost $6,000 to perform. When deciding which campaign to use, her analysis will show differential revenue of: a. $5,000 b. $3,000 c. $50,000 d. $45,000

a. $5,000 (10,000 x $5) - (15,000 x $3)

Victor Company is considering disposing of equipment that was originally purchased for $200,000 and has $150,000 of accumulated depreciation to date. The same equipment would cost $310,000 to replace. What is the sunk cost? a. $50,000 b. $150,000 c. $200,000 d. $310,000

a. $50,000 A sunk cost is not affected by later decisions. $200,000 - $150,000

Using the same facts as above and assuming Job X was sold for $2,000, what was the gross profit on the sale? a. $900 b. $1,100 c. $1,300 d. $500

a. $900 2000 - 1,100

A company sells its inventory for $10 per unit. Variable costs are 40% of its sales. Fixed costs are $140,000. How many units must the company sell in order to make a target profit of $100,000? a. 40,000 units b. 60,000 units c. 16,667 units d. 33,333 units

a. 40,000 units (Target units = (fixed costs + target profit) / unit CM Target units = (140,000 + 100,000) / ($10 x 40%)) = $240,000 / $6 = 40,000 units

Which of the following is reported on the Income Statement? a. Cost of Goods Sold b. Raw Materials c. Work in Progress d. Finished Goods

a. Cost of Goods Sold

Company X paid $50,000 of rent expense related to its headquarters building. What should it record? a. Decrease Cash; Decrease Retained Earnings (Rent Expense) b. Decrease Cash; Increase Retained Earnings (Rent Expense) c. Decrease Cash; Increase Work in Process d. Decrease Factory Overhead; Increase Work in Process

a. Decrease Cash; Decrease Retained Earnings (Rent Expense)

As variable cost per unit decreases, what happens to the break-even point? a. Decreases b. Increases c. Stays constant d. Depends on fixed cost per unit

a. Decreases

As units decrease, what happens to Fixed Cost per unit? a. Fixed Cost per unit increases b. Fixed Cost per unit decreases c. Fixed Cost per unit is always constant

a. Fixed Cost per unit increases

Which of the following statements is true of managerial accounting? a. Managerial accounting is primarily concerned with generating information used by managers b. Reporting under managerial accounting is constrained by rules such as generally accepted accounting principles (GAAP) c. Managerial accounting is required to be reported monthly or quarterly d. Managerial accounting provides information to the external stakeholders of the company

a. Managerial accounting is primarily concerned with generating information used by managers

Which of the following is a product cost? a. Rent on a factory b. Sales commissions c. CEO Salary d. Utilities on company headquarters

a. Rent on a factory

Which of the following is not included as part of the cost of a product? a. Selling Expense b. Manufacturing Overhead c. Direct Labor d. Direct Materials

a. Selling Expense

As the number of units produced increases, the fixed cost per unit decreases. a. True b. False

a. True

As the number of units produced increases, the total variable cost increases. a. True b. False

a. True

True or False: Managerial Accounting produces information that is useful to management for decision making. a. True b. False

a. True

Compute the break-even point (in dollars) if fixed costs are $540,000 and variable costs are 70% of sales.

answer : $1,800,000 $540,000 / .3

Alpha Inc. operated at 75% capacity for the past year during which fixed costs were $225,000, variable costs were 70% of sales, and sales were $850,000. What is the operating profit?

answer : $30,000 $850,000 - 595,000 = $225,000 $255,000 - $255,000 = $30,000

Wiles Inc.'s unit selling price is $40, the unit variable cost is $30, fixed costs are $135,000, and current sales are 10,000 units. How much would operating income change if sales increase by 5,000 units?

answer : $50,000 UCM = 40-30 = $10 Going from 10K to 15K -> 10 x 5,000 units = $50,000

Omega Inc. is expecting a $30,000 reduction in fixed costs. What will be the change in break-even sales (in units), if selling price per unit is $50 and the unit variable cost is $35?

answer : 2,000 units 30,000 / UCM of $15 (50-35) = 2,000

If sales are $820,000, variable costs are 68% of sales, and operating income is $260,000, what is the contribution margin ratio?

answer : 32% 100% - 68% = 32%

If fixed costs are $550,000 and the unit contribution margin is $15, what amount of units must be sold in order to realize a target profit of $125,000?

answer : 45,000 units (FC + TP) / UCM $550,000 + $125,000 / 15

Frank Co. is currently purchasing a part used in its manufacturing operations for $30 per unit. The unit cost for Frank Co. to make the part (instead of purchasing it) would be $25. If 20,000 units of the part are normally purchased each year but could be manufactured using production capacity that is currently unused, what would be the change in differential costs for making the part rather than purchasing it? a. $600,000 decrease b. $100,000 decrease c. $100,000 increase d. $600,000 increase

b. $100,000 decrease $25/u versus $30/u = $5/u decrease x 20,000 units = $100,000 decrease

Alex Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 50,000 units of its sole product. Fixed costs $120,000 Variable costs per unit $20 Alex Corp desires a profit equal to a 15% rate of return on invested assets of $700,000. According to Alex Corp's management, the minimum profit required for the product is: a. $50,000 b. $105,000 c. $120,000 d. $225,000

b. $105,000

Beso Company currently manufactures 1,000 stereos per month at a variable cost of $50 per speaker and a fixed cost of $100 per speaker. Next month, if Beso plans to manufacture 1,100 speakers, what will total costs be? a. $165,000 b. $155,000 c. $160,000 d. $150,000

b. $155,000

For the current period, the beginning balance for Finished Goods Inventory is $3,000. During the period, $1,700 of finished goods were transferred in and $2,500 of goods were sold. What is the ending balance of Finished Goods Inventory? a. $7,200 b. $2,200 c. $4,700 d. $3,000

b. $2,200 beginning balance is 3,000. add 1700 because that is done, which is 4700. we sold 2500. we now have 2200 left.

From the question above: When deciding which campaign to use, her analysis will show differential cost of: a. $5,000 b. $3,000 c. $6,000 d. $4,500

b. $3,000 ($3,000 - $6,000)

Clicker, Co. sold 60 units with a total sales revenue of $600. The total variable cost is $300. Total fixed cost for the year are $60. What is the contribution margin per unit? a. $6 b. $5 c. $9 d. $4

b. $5

A company estimated $420,000 of factory overhead cost and an activity base of 16,000 direct labor hours for the period. During the period, a job was completed with $4,500 of direct materials and $3,000 of direct labor. The direct labor rate was $15 per hour. What is the factory overhead applied to this job? a. $2,100 b. $5,250 c. $78,750 d. $420,000

b. $5,250 3,000 / 15 = 200 (total hours of direct labor) Predetermined factory overhead rate = 420,000 % 16,000 = 26.25/hr 26.25 x 200 hours = 5,250

On January 1, 2019, Noori Company had a Finished Goods Inventory of $2,000. During the year, $3,000 of goods were sold and $8,000 goods were transferred out of Work in Progress Inventory. What is the balance of Finished Goods Inventory on December, 31, 2019? a. $8,000 b. $7,000 c. $6,000 d. $5,000

b. $7,000 Finished + Goods Transferred - Goods sold 2,000 + 8,000 - 3,000

Clicker, Co. sold 10 units with a total sales revenue of $2,000. The total variable cost is $500. Total fixed cost for the year are $200. What is the contribution margin ratio? a. 10% b. 75% c. 65% d. 5%

b. 75%

Which of the following statements describes variable costs? a. Costs that vary on a per-unit basis as the level of activity changes b. Costs that vary in total in direct proportion to changes in the level of activity c. Costs that remain the same in total dollar amount as the level of activity changes d. Costs that vary on a per-unit basis, but remain the same in total as the level of activity changes

b. Costs that vary in total in direct proportion to changes in the level of activity

Which of the following costs would be included as part of the factory overhead costs of a computer manufacturer? a. The cost of memory chips b. Depreciation of testing equipment c. Wages of computer assemblers d. The cost of disk drives

b. Depreciation of testing equipment c is direct labor, a and d are direct materials

As the number of units produced increases, the variable cost per unit increases a. True b. False

b. False (it stays the same)

As the number of units produces increases, the total fixed cost increases. a. True b. False

b. False (it stays the same)

If the factory overhead account has a negative balance, factory overhead is said to be: a. Underapplied b. Overapplied c. Underabsorbed d. In error

b. Overapplied

Which of the following costs is an example of fixed cost? a. Direct materials b. Plant manager salary c. Hourly wages of machine operators d. Direct labor

b. Plant manager salary

Depreciation on equipment used by the sales team would be classified as: a. Direct labor b. Selling expense c. Administrative expense d. Factory overhead

b. Selling expense

Which of the following correctly describes the break-even point? a. The level of sales that makes contribution margin equal to $0. b. The level of sales in which operating income (or net income) is $0. c. The level of sales that produces $0 in revenue. d. The amount of sales that makes fixed costs equal $0.

b. The level of sales in which operating income (or net income) is $0.

Which of the following is how a company would find their desired profit while trying to set sales price for a product? a. Total Equity * Desired Rate of Return b. Total Assets * Desired Rate of Return c. Sales Price * Desired Rate of Return d. Net Income * Desired Rate of Return

b. Total Assets * Desired Rate of Return

Henry Company is considering spending $100,000 for a new grinding machine. This amount could be invested to yield a 12% return. What is the opportunity cost? a. $112,000 b. $88,000 c. $12,000 d. $100,000

c. $12,000 12% of $100,000 = $12,000 *probably not on test*

The total cost to manufacture a part is $140 per unit, which includes $34 of fixed costs. The part can be purchased from an outside supplier for $120 per unit. What is the cost savings per unit from manufacturing the part? a. $20 b. $34 c. $14 d. $54

c. $14 Cost savings of $14 per unit Cost savings = $140 - $34 = $106 $120 - $106 = $14 Fixed costs of $34 not considered because they aren't affected by the company decision to purchase rather than manufacture

A recording artist is considering two different marketing campaigns for her new album. She estimates that Campaign A will result in sales of 5,000 albums at $8 per album and Campaign B will result in 10,000 albums sold at $3 per album. Campaign A will cost $4,000 to perform. Campaign B will cost $8,000 to perform. When deciding which campaign to use, her analysis will show differential income of: a. $6,000 b. $10,000 c. $14,000 d. $4,000

c. $14,000 differential revenue: a: 5,000 x $8 = $40,000 b. 10,000 x $3 = $30,000 dif rev = $10,000 differential cost: a = $4,000 b = $8,000 dif cost = ($4,000) differential income = $14,000

During 2018, Noori Company had Selling Expenses of $7,000 and Administrative Expenses of $5,000. During the year, $25,000 of finished goods were sold for $40,000. What is Noori's gross profit for 2018? a. $7,000 b. $28,000 c. $15,000 d. $3,000

c. $15,000 selling and admin are period costs, they have nothing to do with profit. the 25K is COGS and they sold that for 40K so the profit is 15,000.

An item of inventory had the following costs: Direct materials $10 Direct labor $20 Applied factory overhead $40 The item was sold for $100. What is the gross profit on the sale? a. $100 b. $70 c. $30 d. $80

c. $30

Elite, Inc. estimates total factory overhead costs of $900,000, and 25,000 direct labor hours for the current year. It uses these amounts to compute its predetermined overhead rate. If the direct labor hours for Job 41 is 2,000, calculate the total factory overhead applied to this job. a. $40,000 b. $4,000 c. $72,000 d. $25,000

c. $72,000 $900,000 / $25,000 = 36 36 x 2,000 = $72,000

From the question above: When deciding which campaign to use, her analysis will show differential income of: a. $47,000 b. $39,000 c. $8,000 d. $3,000

c. $8,000 ((10,000 x $5) - (15,000 x $3)) - ($3,000 - $6,000)

Based on the following operating data, what is the operating leverage? Sales = $600,000 Variable Costs = (240,000) Contribution Margin = $360,000 Fixed Costs = (160,000) Operating Income = $200,000 a. 0.8 b. 1.2 c. 1.8 d. 4.0

c. 1.8 Operating Leverage = Contribution Margin / Operating Income = $360,000 / $200,000 = 1.8

A company is currently producing a product that has variable costs of $40 per unit to produce. If the company were to purchase the product from an outside party, it would cost $45 per unit, but the company could reduce fixed costs by $10,000. If 2,000 units are needed, it is most cost effective to: a. Continue making the product b. Buy the product from the outside party c. Both alternatives are equal d. Not enough information is given

c. Both alternatives are equal (Produce: $40 x 2,000 = $80,000 Purchase: ($45 x 2,000) - $10,000 = $80,000)

Which of the following describes the contribution margin ratio? a. Fixed costs as a percentage of contribution margin b. Operating income as a percentage of sales c. Contribution margin as a percentage of sales d. Variable costs as a percentage of sales

c. Contribution margin as a percentage of sales

Which ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit? a. Costs and expenses ratio b. Target profit ratio c. Contribution margin ratio d. Margin of safety ratio

c. Contribution margin ratio

Which of the following is an example of direct labor cost for an airplane manufacturer? a. Cost of wages of janitors b. Salary of the chairman c. Cost of wages of assembly workers d. Salary of plant supervisor

c. Cost of wages of assembly workers

Silver, Inc. paid $100,000 for its factory rent cost. It allocates its overhead based on a predetermined rate of $50 per direct labor hour. Steve clocked three hours while working on Job 8. The job is still not complete. What should Silver record when it incurs the $100,000 rent cost? a. Decrease Retained Earnings (Rent Expense); Increase Factory Overhead b. Increase Retained Earnings (Rent Expense); Increase Factory Overhead c. Decrease Cash; Increase Factory Overhead d. Decrease Cash; Decrease Retained Earnings (Rent Expense)

c. Decrease Cash; Increase Factory Overhead

When a company uses Raw Materials in the production process, which of the following occurs: a. Decrease Raw Materials, Increase Manufacturing Overhead b. Increase Raw Materials, Decrease Cash c. Decrease Raw Materials, Increase Work in Progress d. Increase Raw Materials, Decrease Work in Progress

c. Decrease Raw Materials, Increase Work in Progress

Which of the following is a product cost? a. CEO salary b. Corporate office lightings c. Depreciation on factory equipment d. Commission to sales people

c. Depreciation on factory equipment a and b are period, d is period cost selling expense

When setting the normal selling price for a product, a company does NOT consider: a. Variable costs b. Markup on the product c. Excess production capacity d. Desired profit

c. Excess production capacity

Steve worked three hours on building a custom guitar for Gibson guitars. He earns $20/hour. The guitar is not yet a finished good. Steve has not yet been paid for this work. What should Gibson record for this? a. Increase Wages Payable, Increase Materials b. Increase Wages Payable, Increase Finished Goods c. Increase Wages Payable, Increase Work in Process d. Decrease Wages Payable, Increase Work in Process

c. Increase Wages Payable, Increase Work in Process

Which of the following is not considered a cost of manufacturing a product? a. Direct materials cost b. Factory overhead cost c. Sales salaries d. Direct labor cost

c. Sales salaries (because that is a period cost)

Which of the following is the cost behavior formula? a. Total Cost = Total Fixed Cost + Variable Cost per unit b. Total Cost = (Fixed Cost + Variable Cost) x Units c. Total Cost = Fixed Cost + (Variable Cost per unit x Units) d. Total Cost = Variable Cost + (Fixed Cost per unit x Units)

c. Total Cost = Fixed Cost + (Variable Cost per unit x Units)

Under which of the following scenarios would a company most likely to choose to accept an order at a special discounted price? a. When the order is placed by a customer who is a competitor to the company's existing customers. b. The special order will increase fixed costs but not variable cost per unit. c. When the company has excess production capacity and the special order price is higher than variable costs for the order. d. When the company is already operating at full production capacity.

c. When the company has excess production capacity and the special order price is higher than variable costs for the order.

When Job X was sold, the following information was available about that inventory item: Direct materials cost $500 Sales commission $200 Direct labor hours 20 The company pays $20 per direct labor hour. Factory overhead is allocated using the predetermined overhead rate of $10 per direct labor hour. What was the cost to produce Job X? a. $900 b. $1,000 c. $1,300 d. $1,100

d. $1,100 500 + 20 x 20 + 20 x 10

The Raw Materials Inventory had a beginning balance of $50,000. Purchases of $80,000 were made during the period, and $30,000 of goods were put into production. What is the balance of Raw Materials Inventory that will be reported on the Balance Sheet? a. $160,000 b. $0 c. $130,000 d. $100,000

d. $100,000 add 50,000 + 80,000 and subtract 30,000.

Silver, Inc. has estimated total factory overhead costs of $450,000 and 20,000 direct labor hours for the current fiscal year. If actual direct labor hours for the year total 10,000 and actual factory overhead totals $500,000, what is the predetermined overhead rate applied to jobs in process? a. $45.00 per direct labor hour b. $25.00 per direct labor hour c. $50.00 per direct labor hour d. $22.50 per direct labor hour

d. $22.50 per direct labor hour $450,000 % 20,000 = 22.5

From the question above: The unit selling price for the company's product is: a. $15.70 b. $14.00 c. $20.00 d. $24.50

d. $24.50

Frank Co. is currently purchasing a part used in its manufacturing operations for $25 per unit. The unit cost for Frank Co. to make the part (instead of purchasing it) would be $27. If 20,000 units of the part are normally purchased each year but could be manufactured using production capacity that is currently unused, what would be the change in differential costs for making the part rather than purchasing it? a. $40,000 decrease b. $60,000 increase c. $60,000 decrease d. $40,000 increase

d. $40,000 increase

If the unit selling price is $16, the unit variable cost is $12, and fixed costs are $160,000, what are the break-even sales (units)? a. 5,714 units b. 10,000 units c. 13,333 units d. 40,000 units

d. 40,000 units Break-even Sales (units) = Fixed Costs / UCM = $160,000 / $4 = 40,000 units

Based on the data presented in the previous question, how many units of sales would be required to realize operating income of $20,000? a. 11,250 units b. 35,000 units c. 40,000 units d. 45,000 units

d. 45,000 units Sales (units) = Fixed Costs + Target Profit / UCM = $160,000 + $20,000 / $4 = $45,000 units

If sales are $500,000, variable costs are $200,000, and fixed costs are $240,000, what is the contribution margin ratio? a. 40% b. 48% c. 52% d. 60%

d. 60% Contribution Margin Ratio = Sales - Variable Costs / Sales $500,000 - $200,000 / $500,000 = 60%

If fixed costs are $600,000 and the unit contribution margin is $10, what quantity of units must be sold in order to realize an operating income of $175,000? a. 60,000 units b. 55,000 units c. 42,500 units d. 77,500 units

d. 77,500 units

Which of the following has an example of a period cost? a. Advertising expenses b. Sales salaries expenses c. Depreciation of the headquarters office building d. All of the above

d. All of the above

Which of the following is NOT a factor to consider when deciding whether to discontinue a product line? a. The fixed costs that will be eliminated upon discontinuation. b. The contribution margin for the product line. c. If the production capacity used for that product can be used for a different product. d. All of the above are factors to consider.

d. All of the above are factors to consider

Which of the following is true about the changes in fixed costs? a. An increase in production will result in an increase in per unit fixed costs b. A decrease in production will result in an increase in total fixed cost c. A decrease in fixed cost will result in an increase in variable cost d. An increase in production will result in a decrease in per unit fixed cost

d. An increase in production will result in a decrease in per unit fixed cost

Which of the following statements is false? a. Contribution margin equals sales minus the costs that vary in proportion to production. b. Product costs can be either variable or fixed costs. c. At break-even, the target profit is zero. d. Contribution margin ratio describes the percentage of each sales dollar used to pay variable costs.

d. Contribution margin ratio describes the percentage of each sales dollar used to pay variable costs.

Silver, Inc. paid $100,000 for its factory rent cost. It allocates its overhead based on a predetermined rate of $50 per direct labor hour. Steve clocked three hours while working on Job 8. The job is still not complete. What should Silver record to allocate the factory overhead to Job 8? a. Decrease Retained Earnings (Salaries Expense); Decrease Factory Overhead b. Increase Retained Earnings (Salaries Expense); Increase Factory Overhead c. Decrease Cash; Increase Work in Process d. Decrease Factory Overhead; Increase Work in Process

d. Decrease Factory Overhead; Increase Work in Process Steve worked the 3 hours so they have to take what they owe him out of their estimation and the job isn't done so its still in process.

When making a decision between alternatives, relevant revenues and costs focus on: a. Activities that occurred in the past to project future activity b. Monies already earned and/or spent c. Last year's net income d. Differences between the alternatives being considered.

d. Differences between the alternatives being considered.

When using job order costing for a professional service business, the primary product (service) costs are: a. Direct Materials and Overhead b. Direct Materials and Direct Labor c. Direct Materials, Direct Labor, and Overhead d. Direct Labor and Overhead

d. Direct Labor and Overhead

The cost of materials entering directly into the manufacturing process is classified as: a. Direct labor cost b. Burden cost c. Factory overhead cost d. Direct materials cost

d. Direct materials cost

When the production of a good is finished, it increases: a. Sales b. Cost of Goods Sold c. Work in Progress Inventory d. Finished Goods Inventory

d. Finished Goods Inventory

Which of the following is NOT a part of the decision-making process? a. Assessing the results b. Choosing between alternatives c. Identify the objective d. Gathering all information possible, no matter the relevance

d. Gathering all information possible, no matter the relevance

Recording direct labor costs: a. Increases Factory Overhead and Increases Wages Payable b. Increases Factory Overhead and Decreases Work-in-Process c. Increases Finished Goods and Increases Wages Payable d. Increases Work-in-Process and Increases Wages Payable

d. Increases Work-in-Process and Increases Wages Payable

A cost that has been incurred in the past and is not relevant to a decision is a(an): a. Historical cost b. Replacement cost c. Differential cost d. Sunk cost

d. Sunk cost

Which of the following is true? a. Fixed Costs change in total as unit production increases b. Fixed Costs change in total as unit production decreases c. Variable Costs decrease on a per unit basis as unit production decrease d. Variable Costs change in total as unit production increases

d. Variable Costs change in total as unit production increases

Costs that vary in total in direct proportion to changes in an activity level are called: a. Differential costs b. Sunk costs c. Fixed costs d. Variable costs

d. Variable costs

Which of the following is a direct labor cost? a. Salary for a plant supervisor b. Salaries for janitors of the factory building c. Bonuses for sales people of the leading product d. Wages for assembly line workers

d. Wages for assembly line workers

The recording of the jobs completed would decrease: a. Finished goods inventory b. Cost of goods sold c. Factory overhead d. Work-in-process inventory

d. Work-in-process inventory