A business operated at 100% of capacity during its first month and incurred the
following costs:
If 500 units remain unsold at the end of the month, what is the amount of inventory that
would be reported on the variable costing balance sheet?
a. $41,500
b. $36,000
c. $42,800
d. $38,500
Answer:
If the expected sales volume for the current period is 7,000 units, the desired ending
inventory is 400 units, and the beginning inventory is 400 units, the number of units set
forth in the production budget, representing total production for the current period, is
a. 6,700
b. 7,400
c. 7,100
d. 7,000
Answer:
Silver River Company sells Products S and T and has made the following estimates for
the coming year:
Fixed costs are estimated at $202,400. Determine (a) the estimated sales in units of the
overall product necessary to reach the break-even point for the coming year, (b) the
estimated number of units of each product necessary to be sold to reach the break-even
point for the coming year, and (c) the estimated sales in units of the overall product
necessary to realize an operating income of $119,600 for the coming year.
Answer:
Which of the following describes the behavior of a variable cost per unit?
a. varies in increasing proportion with changes in the activity level
b. varies in decreasing proportion with changes in the activity level
c. remains constant with changes in the activity level
d. varies in direct proportion with the activity level
Answer:
Nighthawk Inc. is considering disposing of a machine with a book value of $22,500 and
an estimated remaining life of three years. The old machine can be sold for $6,250. A
new machine with a purchase price of $68,750 is being considered as a replacement. It
will have a useful life of three years and no residual value. It is estimated that the
annual variable manufacturing costs will be reduced from $43,750 to $20,000 if the
new machine is purchased. The net differential increase or decrease in cost for the entire
three years for the new equipment is
a. $8,750 increase
b. $31,250 decrease
c. $8,750 decrease
d. $2,925 decrease
Answer:
Materials used by Square Yard Products Inc. in producing Division 3’s product are
currently purchased from outside suppliers at a cost of $5 per unit. However, the same
materials are available from Division 6. Division 6 has unused capacity and can
produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer
price of $3.20 per unit is established, and 40,000 units of material are transferred, with
no reduction in Division 6’s current sales.
How much will Division 6’s income from operations increase?
a. $8,000
b. $15,000
c. $80,000
d. $150,000
Answer:
Flour mill
Match each business that follows to the type of costing system (a or b) it would
typically use.
a. Job order costing
b. Process costing
Answer:
Sensational Soft Drinks makes three products: iced tea, soda, and lemonade. The
following data are available:
Sensational is experiencing a bottleneck in one of its processes that affects each product
as follows:
(a) Using a theory of constraints (TOC) approach, rank the products in terms of
profitability.
(b) What price for lemonade would equate its profitability (contribution margin per
bottleneck hour) to that of soda?
Answer:
Indirect costs can be specifically traced to a cost object.
a. True
b. False
Answer:
A cost that will not be affected by later decisions is termed an opportunity cost.
a. True
b. False
Answer:
Below is budgeted production and sales information for Flushing Company for the
month of December:
The unit selling price for product XXX is $5 and for product ZZZ is $15.
Budgeted production for product XXX during the month is
a. 498,000 units
b. 502,000 units
c. 534,000 units
d. 566,000 units
Answer:
The profit margin for Central Division is 20% and the investment turnover is 2.8. What
is the rate of return on investment for Central Division?
a. 20%
b. 7.1%
c. 14%
d. 56%
Answer:
A business operated at 100% of capacity during its first month and incurred the
following costs:
If 1,600 units remain unsold at the end of the month, what is the amount of inventory
that would be reported on the variable costing balance sheet?
a. $64,000
b. $56,000
c. $66,400
d. $78,400
Answer:
The cash budget summarizes future plans for acquisition of fixed assets.
a. True
b. False
Answer:
Copper Hill Inc. manufactures laser printers within a relevant range of production of
70,000 to 100,000 printers per year. The following partially completed manufacturing
cost schedule has been prepared:
Complete the preceding cost schedule, identifying each cost by the appropriate letter (a)
through (o).
Answer:
Ruby Company produces a chair that requires 5 yards of material per unit. The standard
price of one yard of material is $7.60. During the month, 8,500 chairs were
manufactured, using 40,000 yards at a cost of $7.50.
Determine the (a) price variance, (b) quantity variance, and (c) total cost variance.
Answer:
Which of the following drives work-in-process inventory levels higher?
a. Machine breakdowns
b. Production rate losses
c. Rework processes
d. All of the above
Answer:
If Division Inc. expects to sell 200,000 units in the current year, desires ending
inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year,
the budgeted volume of production for the year is 198,000 units.
a. True
b. False
Answer:
Changes in the quantity of finished goods inventory, caused by differences in the levels
of sales and production, directly affect the amount of income from operations reported
under absorption costing.
a. True
b. False
Answer:
Standard and actual costs for direct labor for the manufacture of 1,000 units of product
were as follows:
Determine the direct labor (a) time variance, (b) rate variance, and (c) total direct labor
cost variance.
Answer:
A series of equal cash flows at fixed intervals is termed an annuity.
a. True
b. False
Answer:
If a company has issued only one class of stock, the earnings per share are determined
by dividing net income plus interest expense by the number of shares outstanding.
a. True
b. False
Answer:
As of January 1 of the current year, the Grayson Company had accounts receivables of
$40,000. The sales for January, February, and March were as follows: $120,000,
$140,000, and $150,000, respectively. Of each month’s sales, 20% are for cash. Of the
remaining 80% (the credit sales), 60% are collected in the month of sale, with the
remaining 40% collected in the following month. What is the total cash collected (both
from accounts receivable and for cash sales) in the month of January?
a. $64,000
b. $107,000
c. $61,600
d. $121,600
Answer:
If a firm has a quick ratio of 1, the subsequent payment of an account payable will
cause the ratio to increase.
a. True
b. False
Answer:
Bobby Company has fixed costs of $160,000. The unit selling price, variable cost per
unit, and contribution margin per unit for the company’s two products are provided
below.
The sales mix for product X and Y is 60% and 40%, respectively. Determine the
break-even point in units of X and Y.
Answer:
Global Publishers has collected the following data for recent months:
(a) Using the high-low method, find variable cost per unit, total fixed costs, and the
total cost equation.
(b) What is the estimated cost for a month in which 19,000 issues are published?
Answer:
(Hint: Determine units produced at normal capacity.)
Answer:
Given the following:
Variable cost as a percentage of sales = 60% Unit variable cost = $30
Fixed costs = $200,000
What is the break-even point in units?
Answer:
What is the present value of $8,000 to be received at the end of 6-years if the required
rate of return is 15%?
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Answer:
Define solvency and profitability. How are they alike?
Answer: