While customers and cost influence prices, so does
a. Contribution margin.
b. Fixed versus variable costs.
c. Competition.
d. Desired profit.
Leonora Industries manufactures light fixtures for home, retail, and industrial
customers. The retail line has been showing losses for several years, and management is
considering dropping the line. Recent income statements have been very similar to the
following information which was prepared for the most recent year:
Of the fixed costs, $315,000 is common costs that have been allocated equally to each
product line. What will total operating income be if Leonora drops the retail line?
a. $101,900
b. $(3,100)
c. $77,400
d. $26,900
The sales volume variance is influenced most heavily by actions of
a. The budget committee.
b. The operations personnel.
c. The sales and marketing personnel.
d. The executives of the company.
At Devoe Manufacturing, the Southern Division is responsible for the production and
selling of products in fifteen states. This division is an example of which of the
following responsibility centers?
a. Cost center
b. Revenue center
c. Profit center
d. Investment center
Betty Hopper, controller for Diamond Manufacturing Company, has prepared the
following financial information for the most recent period showing profitability of its
three divisions:
The factory insurance and advertising assigned to the furniture division is avoidable if
the division is discontinued. Depreciation will remain unchanged if a division is
dropped. Discontinuing furniture will reduce the utilities by $800.
Required:
a. Prepare an analysis showing whether Furniture should be eliminated.
b. If the Furniture division is eliminated, what will be effect on the overall profit for
Diamond?
Calculations which show the additional impact of one alternative over another are
referred to as
a. Relevant analysis.
b. Avoidable analysis.
c. Incremental analysis.
d. Opportunity analysis.
Wolfe Manufacturing Company’s standards are set at one gallon of liquid for each unit
of production at a cost of $2.10 per gallon. Actual production was 50,000 units using
45,000 gallons of liquid at a cost of $2.20 per gallon.
Required:
a. Calculate the direct material price variance.
b. Calculate the direct material quantity variance.
When managers talk about cost behavior, they are referring to
a.Where a cost is reported on the income statement.
b.The way in which total costs change in response to changes in the level of activity.
c.The method used to determine whether a cost is accrued or expensed.
d.None of these answer choice are correct.
The greatest use of activity-based costing information for managers is for
a. Product costing.
b. Pricing decisions.
c. Channel profitability decisions.
d. Process improvement.
Which of the following is not an example of a fixed cost for manufacturer of bicycles?
a.Rent on factory warehouse
b.Insurance on factory equipment
c.Number of tires
d.Advertising costs
If selling price is $100 per unit, variable cost is $70 per unit, and fixed cost is $200,
calculate the contribution margin ratio.
a.14%
b.30%
c.200%
d.50%
Classify each of the following items as a source or use of cash. Then classify each item
as a cash flow provided by an operating, investing, or financing activity. Place an X in
each appropriate column. Assume transactions involve cash unless otherwise stated.
The net initial investment is the
a. Net cash outflow in year 0
b. Net cash outflow for all years combined
c. Net cash outflow as computed at the initial discount rate
d. None of these answer choices are correct
Morgan Company reported the following data for the operations of its Mixing
Department for the month of July.
Required:
a. Calculate the equivalent units of production for materials and conversion costs.
b. Determine the cost per equivalent unit for materials and conversion costs.
c. Determine the cost of units transferred out of the Mixing Department during the
period.
d. Determine the cost of ending work in process inventory in the Mixing Department.
Clarkson Computer Company distributes a specialized wrist support that sells for $30.
The company’s variable costs are $12 per unit; fixed costs total $360,000 a year.
Required:
a. If sales increase by $41,000 per year, by how much should operating income
increase?
b. Last year, Clarkson sold 32,000 wrist supports. The company’s marketing manager is
convinced that a 6% reduction in the sales price, combined with a $50,000 increase in
advertising, will result in a 30% increase in sales volume over last year. Should
Clarkson implement the price reduction? Why or why not?
