ACCT 2023 Mid-term two

Frank Corporation has a single product. Its selling price is $80 and the variable costs are $30. The company's fixed expenses are $5,000. What is the company's break-even point in unit sales?

100 units $80−$30=$50 $5,000/$50= 100

Atlas Corporation sells 100 bicycles during a month. The contribution margin per bicycle is $200. The monthly fixed expenses are $8,000. Compute the profit from the sale of 100 bicycles ________.

12k (CH5) 100x200=20k-8k=12k

Cartier Corporation currently sells its products for $50 per unit. The company's variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company's variable cost ratio?

40% $20/$50=40%

What costing approaches is best suited for cost-volume-profit analysis?

Variable

First-stage allocation of overhead costs to each cost pool is accomplished using all of the following except________.

grouping batch and unit level activities

The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for ________.

fixed overhead costs

Taylor Company has current sales of 1,000 units, at a selling price of $190 per unit, variable costs per unit of $76 and fixed expenses of $96,000. The company believes sales will increase by 300 units, if the company introduces sales commissions as an incentive for the sales staff. The change will decrease the selling price to $175 per unit, increase variable cost per unit to $100 and decrease fixed expenses by $20,000. What is the net operating income after the changes?

$175 − $100 = $75 $75×1,300=$97,500 $96k−$20k=$76k 97.5k−76k=$21.5k Increase of $21,500

Max, Inc., has two divisions, South Division and North Division. South Division's sales, contribution margin ratio, and traceable fixed expenses are $500,000, 60%, and $100,000 respectively. What is the segment margin for the South Division?

$200,000 $500,000 × 60% contribution margin=$300,000 $300,000 - Traceable fixed expenses of $100,000= $200,000

Winter Corporation's current sales are $500,000. The contribution margin is $300,000 and the net operating income is $100,000. What is the company's degree of operating leverage?

$300k/$100k=3

Bovine Corporation has two divisions: televisions and mobile phones. The mobile phone division has a contribution margin of $600,000. The company's common fixed costs and total traceable fixed costs are $100,000 and $500,000 respectively. What is the segment margin of the mobile phone division, assuming the traceable fixed costs of the television division are $300,000?

$400,000 $200,000 (= Total traceable fixed costs $500,000 - Traceable fixed costs of the television division of $300,000) the mobile phone segment margin is $400,000 (= CM $600,000 - Traceable fixed costs of $200,000).

Atlas Corporation sells 100 bicycles during a month at a price of $500 per unit. The variable expenses amount to $300 per bicycle. How much does profit increase if it sells one more bicycle?

$500-$300=$200

Taylor Company has current sales of 1,000 units, which generates sales revenue of $190,000, variable costs of $76,000 and fixed expenses of $96,000. The company believes sales will increase by 300 units, if advertising increases by $20,000. What is the change in net operating income after the changes?

($190k−$76k)/1,000 units=$114 per unit $114x300=34,200 - 20,000 =14,200

Cartier Corporation currently sells its products for $50 per unit. The company's variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company's contribution margin ratio?

($50−$20)/$50=60%

All of the following are differences between ABC and traditional absorption costing except ________.

ABC allocates all manufacturing costs to products

Activity-based costing accumulates costs for each __________.

Activity

Activity-based costing estimates the costs of the resources consumed by _________.

Cost objects

Which of the following is an allocation base commonly used under the traditional methods for allocation of overhead costs?

Direct labor-hours.

Fixed manufacturing overhead

Period cost

Fixed selling and administrative expenses

Period cost

Variable selling and administrative expenses

Period cost

Direct labor

Product cost

Advertising is an example of a __________activity.

Product-level

The profit graph is based on the following linear equation:

Profit = Unit CM x Q - Fixed Expenses.

Contribution margin ________.

Sales minus variable cost (CH5)

What is represented on the X axis of a cost-volume-profit (CVP) graph?

Sales volume

What does the green line in the CVP graph indicate?

Total expenses

They assign the costs of the corporate headquarters buildings to segments because the segments must cover those costs.

What is a common mistake made by companies when assigning costs to segments?

Shipping orders to a grocery store would be considered a(n) ________.

batch-level activity

In the first-stage allocation of overhead costs, products, customer orders and customers are examples of ________.

cost objects

Ordering materials, setting up machines, assembling products, and inspecting products are examples of ________.

cost pools

Generally which of the following is the most accurate for managers to use to estimate the fixed and variable components of mixed cost?

least-squares regression

When the number of units produced is greater than the number of units sold, variable costing net operating income will be ________.

less than absorption costing net operating income

The use of absorption costing for segmented income statements results in ________.

omission of upstream and downstream costs

The measure of how sensitive net operating income is to a given percentage change in dollar sales is called _______.

operating leverage

Variable manufacturing overhead

product cost

When using least-squares regression, R2 represents ________.

the measure of goodness of fit

Break-even point is the level of sales at which ______.

total revenue equals total costs

The current sales of Trent, Inc., are $400,000, with a contribution margin of $200,000. The company's degree of operating leverage is 2. If the company anticipates a 30% increase in sales, what is the percentage change in net operating income for Trent, Inc.?

2×30% =60%

Which of the following costs would not be allocated using ABC?

Direct labor.

Y = bx + a

Excel depicts the least-squares regression results using the equation form _______.

What is usually plotted as a horizontal line on the CVP graph?

Fixed expenses

A shift in the sales mix from high-margin items to low-margin items can cause total profit to ________.

decrease

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.

unit contribution margin

Absorption costing income statements ignore ________.

variable and fixed cost distinctions

40/100=.4 10,000/.4=25,000

Future Corporation has a single product; the product selling price is $100 and variable costs are $60. The company's fixed expenses are $10,000. What is the company's break-even point in sales dollars?