unit 2 test

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

$12,000

Given the following information, calculate the unit product cost under absorption costing. Direct materials: $50/unit; Direct labor: $75/unit; Variable manufacturing overhead: $27/unit; Fixed manufacturing overhead: $30,000; Units produced: 10,000; Units sold: 6,000.

$155

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?

$20,000

Which of the following explains why operating budgets generally span a period of one year?

Companies choose a span of one year to correspond to their fiscal years

Which of the following is deducted from the total selling and administrative expense budget to determine the cash disbursements for selling and administrative expense budget?

Depreciation expense

The section on the cash budget that summarizes all cash payments that are planned for the budget period is the cash

Disbursements Section

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted

Income Statement

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? multiple choice

Increase of $14,200 Correct

Which of the following is not a benefit of self-imposed budgets?

Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations.

A change in profits that occurs due to a change in sales and fixed expenses may be calculated as ______.

cm ratio × change in sales - change in fixed expenses

One mistake companies make when preparing segmented income statements is arbitrarily assigning _______ fixed costs to segments

common

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 Correct

Variable costing income statements are based upon a ______ format.

contribution margin

To calculate the degree of operating leverage, divide

contribution margin / net operating income

For external reporting, income statements are generally prepared using

variable costing

To prepare a CVP graph, lines must be drawn representing total revenue, ______. Multiple choice question.

total expense. total fixed expense

At the break even point

total revenue equals total cost, net operating income is 0

Absorption costing income statements ignore ________.

variable and fixed cost distinctions

With regards to interpreation, what are the important areas that appear on a CVP graph?

Break-even point, loss area, and profit area Correct

The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the ________.

unit product cost

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

total revenue equals total costs

Film Studio, Inc. has beginning retained earnings of $80,000 and expects to earn net income of $70,000 during the budget period. What would be the budgeted ending balance in retained earnings if the company declares and pays dividends of $50,000?

$100,000

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?

$21,500

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?

$25,000

Striker Company estimates its expected cash receipts for the period to be $80,000 and its expected cash disbursements to be $70,000. The beginning cash balance for the period was $5,000. The management wants to maintain a minimum cash balance of $40,000.

$25,000

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. Assuming the traceable fixed costs of the television division are $300,000, what is the segment margin of the mobile phone division?

$400,000

Assuming the variable costing method is used, what is the total manufacturing costs added to work in process during the month of February? multiple choice

$52,000

If sales increase by $50,000, what will be the net operating income for the company?

$55,000

If the company eliminates the Western Division and the Eastern Division sales increase by 10% as a result, how much will the company's net operating income decrease?

$83,700

Assuming the absorption costing method is used, what is the total manufacturing costs per unit added to work in process during the month of February? multiple choice

$92,000

Adams, Inc. has sales of $100,000 with a contribution margin of $60,000 and net income of $20,000. Baron, Inc. has sales of $110,000 with a contribution margin of $44,000 and net income of $22,000. Which of the following statements are correct?

- Barons net income grows twice as fast as its sales - Adams has a higher degree of operating leverage than Baron.

Using absorption costing for segmented income statements can lead to ______

- Omission of upstream and downstream costs - under-costing of segments

A variable costing income statement

- number of units produced does not affect net operating income - calculates contribution margin while the absorption costing income statement calculates gross margin - focuses on fixed and variable expenses while an absorption costing income statement focuses on period and product cost

GAAP and IFRS rules ______.

- require that the same method be used for both internal and external segment reporting - require segmented financial data to be included in annual reports

When calculating the profit impact of discontinuing a segment, consider _____.

- the segments traceable fixed costs - the segment's contribution margin

When preparing a segment margin income statement ______.

- tracable fixed expenses are deducted from contribution margin - fixed manufacturing cost are included in cost of goods sold

What is Ralph Corporation's margin of safety in dollars?

1 million

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

What is Ralph Corporation's margin of safety in percentage?

20%

Spice sells paprika for $9.00 per bottle. Variable cost is $2.43 per bottle and Spice's annual fixed costs are $825,000. The variable expense ratio for paprika is ______.

27%

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?

3.00

What are the unit sales required to attain a target profit of $120,000?

4,000

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%

What are the sales dollars required to attain a target profit of $120,000?

400,000

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?

60%

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.?

60%

The amount of goods for resale to be acquired from suppliers during the period is shown on the

Merchandise Purchases Budget

The profit graph is based on the following linear equation:

Profit = Unit CM x Q - Fixed Expenses. Correct

Which of the following is a common mistake made by companies when assigning costs to segments?

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

SPS Products has two divisions—Catalog Sales and Online Sales. For the last quarter the Catalog Sales segment margin was ($5,000). Online sales were $100,000. Online Sales contribution margin was $60,000, and its segment margin was $40,000. If Catalog Sales are discontinued, it is estimated that online sales will increase by 10%. Discontinuing Catalog Sales should increase company profits by ______.

Reason: Increased online sales contribution margin ($100,000 × 10% ×$60,000 ÷ $100,000) is $6,000 + $5,000 saved from stopping catalog sales = $11,000.

Which of the following is not one of the reasons that organizations use budgets?

The budgeting process enables managers to uncover bottlenecks as they occur.

Which of the following statements about the segment margin is not true?

The segment margin is obtained by deducting the common fixed costs that have been allocated to a segment from that segment's contribution margin.

In order to comply with GAAP and IFRS, the ______ costing method must be used for external reporting in the United States.

absorption

________ costing is used for internal decision making purposes

absorption

Companies prepare direct labor budgets to ________.

avoid labor shortages

A budgeted balance sheet is developed using data from the ______ of the budget period and data contained in the various schedules.

beggining

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

decrease

An example of a traceable fixed cost for General Motors' Corvette Division is the ______.

depreciation cost on the equipment used to manufacture corvettes

In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ________.

desired ending raw materials inventory for the last period

Product costs under absorption costing include ______.

direct materials, direct labor, variable manufacturing overhead, fixed manufacturing voerhead

The purpose of preparing a direct materials budget is to ________.

estimate the quantity of raw materials to be purchased Correct

When the units produced are equal to the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method. multiple choice 1

is equal to

When the units produced are less than the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

is greater than`

A traceable fixed cost ______.

is incurred because of the existence of the segment

When the units produced exceed the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method. multiple choice 2

is less than

Segmented income statements ______.

may be prepared for activities at many levels in a company

Segment break-even calculations include ______ fixed expenses.

only traceable

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

operating leverage

The budgeting process begins with the preparation of the ______ budget.

sales

Contribution Margin equals

sales minus variable cost

The term used for the relative proportion in which a company's products are sold is ______.

sales mix

Assigning common fixed costs to segments impacts ______.

segment margin only

A company determines that the number of units sold is the cost driver for its variable selling and administrative expense budget. The product of its variable selling and administrative rate and budgeted unit sales will be ________.

total budgeted variable selling and administrative expenses

Arbot Co. manufactures appliances at three manufacturing facilities in the United States. Each location has a plant manager who oversees the manufacturing process for that location. Segmented income statements are prepared for each plant and for each product manufactured in the plant. The salary of each plant manager is a ______ for the individual product lines made in the plant.

traceable fixed cost to the plant and a common fixed cost

True or false: Under absorption costing, fixed overhead is treated like a variable cost because a portion of the total cost is allocated to each unit produced, rather than being expensed as one large sum. True false question.

true

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

Which of the following costing approaches is best suited for cost-volume-profit analysis?

variable

Perry, Inc. desires to maintain the ending inventory of raw materials at 40 percent of the next quarter's raw material needs. What is the cost of raw materials to be purchased in the first quarter?

$320,000

Which of the following statements are correct regarding income statements prepared under variable and absorption costing?

- Reported net income on the statements often differ - Both income statements include product and period cost

Common mistakes made by companies when assigning costs to segments include ______.

- arbitrarily allocating common fixed cost - omitting costs that should be included - inappropriately assigning traceable fixed cost

The term "cost structure" refers to the relative proportion of

variable and fixed cost in an orginization

The variable costing income statement separates ______.

variable and fixed expenses

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?

$200

Incorrectly or arbitrarily assigning common costs to segments ______.

- could reduce the overall profits of the comp[any - distorts the profitability of segments - causes company net income to be reported incorrectly

When a company produces and sells multiple products ______.

- each product most likely has a unique contribution margin - a change in the sales mix will most likely change the break-even point - each product likely has different costs

What is the cost of goods sold for the month of January using the absorption costing method?

$32,000

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 Correct