The sales price is $30 per unit, the contribution margin is $8 per unit and total fixed
costs are $32,000. What is the break-even point in units?
A) 857
B) 1,200
C) 2,000
D) 4,000
Wendell Company has the following information available for the past quarter:
Division A Division B Division C
Sales $250,000 $400,000 $350,000
Variable expenses 52% 30% 40%
Fixed expenses controllable by division manager $60,000 $200,000 $175,000
Fixed expenses controllable by others $10,000 $5,000 $7,500
Unallocated expenses for all three divisions are $25,000. What is the contribution by
Division C?
A) $2,500
B) $27,500
C) $35,000
D) $210,000
The greatest benefit of activity analysis is that it directs management accountants to the
________.
A) relevant costs for decision making
B) most accurate product cost
C) appropriate cost driver for each cost
D) most accurate product price
________ is the field of accounting that develops information for external parties such
as stockholders, suppliers, banks and governmental regulatory bodies.
A) Auditing
B) Internal auditing
C) Management accounting
D) Financial accounting
Krakowski Company manufactures a part for its production cycle. The costs per unit for
10,000 units of the part are as follows:
Per Unit
Direct materials $20.00
Direct labor 15.00
Variable factory overhead 16.00
Fixed factory overhead 10.00
Total costs $61.00
The fixed factory overhead costs are unavoidable. Winters Company has offered to sell
10,000 units of the same part to Krakowski Company for $55 per unit. Assuming no
other use for the facilities, Krakowski Company should ________.
A) make the part to save $40,000
B) make the part to save $60,000
C) buy the part from Winters Company to save $40,000
D) buy the part from Winters Company to save $60,000
When a laptop computer is the cost object, the keyboard would be classified as a(n)
________.
A) direct cost
B) allocated cost
C) indirect cost
D) unallocated cost
When examining the output from regression analysis, the goodness of fit measure is
labeled ________ by most computer programs.
A) X coefficient
B) constant
C) standard error of estimate
D) R2
When the number of units sold exceeds the number of units produced, net income under
variable costing ________ net income under absorption costing.
A) is less than
B) exceeds
C) equals
D) not enough information to determine
The Anthony Company used regression analysis to predict the annual cost of utilities.
The results were as follows:
Utilities Cost
Explained by Direct Labor Hours
Constant 4,500
Standard error of Y estimate 595
R-Squared 0.87
No. of observations 30
Degrees of freedom 28
X Coefficient 5.02
Standard error of coefficient 0.92
The variable cost per direct labor hour is ________.
A) $0.87
B) $0.92
C) $5.02
D) $4,500
The final output of the financial budget is ________.
A) budgeted statement of stockholders’ equity
B) budgeted balance sheet
C) budgeted income statement
D) budgeted statement of cash flows
The following information is presented for the Maybeel Manufacturing Company.
— Direct labor rate standard is $11.55.
— Direct labor efficiency standard is 2.5 hours per unit.
— Budgeted production is 1,200 units.
— Production required 2,910 direct labor hours at a cost of $33,174.
— Actual production is 1,150 units.
What is the direct labor efficiency variance?
A) $404.25 Favorable
B) $404.25 Unfavorable
C) $1,039.50 Favorable
D) $1,039.50 Unfavorable
One way to reduce negative attitudes of managers toward budgets is by ________.
A) zero-based budgeting
B) activities-based budgeting
C) long range planning
D) participative budgeting
Swanson Company has identified the following activities related to indirect production
costs:
Activity Activity Costs Cost Drivers
Machine Setup $180,000 1,500 setup hours
Materials Handling $50,000 12,500 pounds of materials
Electric Power $20,000 20,000 kilowatt hours
Swanson Company has obtained the following data concerning two products:
Product 1 Product 2
Number of units produced 4,000 20,000
Direct materials cost $20,000 $25,000
Direct labor cost $12,000 $20,000
Number of setup hours 100 120
Pounds of materials used 500 1,500
Kilowatt-hours 1,000 2,000
Using activity-based costing, what amount of machine setup cost is assigned to
Products 1 and 2?
Product 1 Product 2
A) $12,000 $14,400
B) $30,000 $150,000
C) $50,000 $130,000
D) $81,818 $98,182
Brankov Company purchased common stock in Ramona Company for $400,000. In the
current year, Ramona Company reported net income of $50,000 and paid a dividend of
$32,000. At the end of the year, the market value of the investment in Ramona
Company was $410,000.
Required:
A) Assume Brankov Company owns 10% of the shares of Ramona Company. Brankov
Company considers the investment to be available-for-sale securities. Show the effects
of the transactions above on the accounts of Brankov Company using the balance sheet
equation.
B) Assume Brankov Company owns 25% of the shares of Ramona Company. Show the
effects of the transactions above on the accounts of Brankov Company using the
balance sheet equation.
Which of the following is an advantage of the absorption approach to pricing products?
A) It displays variable and fixed cost behavior patterns.
B) It offers insights into the long run and short run effects of cutting prices on special
orders.
C) It can easily address changes in sales volume.
D) It recovers all costs necessary for a firm to stay in business.
If the proportions of different products sold in a sales mix change, the ________.
A) contribution margin per unit for each product increases
B) break-even point will change
C) contribution margin per unit for each product decreases
D) net income will not change
Beckham Company has the following information available:
Selling price per unit $100
Variable cost per unit $55
Fixed costs per year $400,000
Expected sales per year 20,000 units
What is the expected operating income for a year?
A) $480,000
B) $500,000
C) $680,000
D) $700,000
On a classified balance sheet, the Equipment account is reduced by ________.
A) Allowance for Bad Debts
B) Allowance for Doubtful Accounts
C) Accumulated Depreciation
D) Depreciation Expense
Timothy Company manufactures two models of pens, a standard model and a deluxe
model. Three activities have been identified in the production of the pens. The
following information is available:
Number of Number of Number of Direct
Product Setups Components Labor Hours
Standard 22 8 375
Deluxe 28 12 225
Cost Pool Total Costs Cost Driver
Setup Costs $30,000 Number of setups
Assembly Costs $36,000 Number of components
Labor Costs $9,000 Number of direct labor hours
If activity-based costing is used, the setup cost assigned to the standard model is
________.
A) $33
B) $8,400
C) $13,200
D) $44,000
The activity of Sterling Company for the month of April is presented below:
Cost of goods sold $62,000
Cash purchases of inventory $25,000
Credit purchases of inventory $50,000
Cash paid for credit purchase of inventory $22,000
Cash dividend paid $7,000
Wages earned and paid $14,000
Wages earned and unpaid $2,000
Rent paid for April, May and June $6,000
Using the accrual basis of accounting, the total expenses for Sterling Company for the
month of April is ________.
A) $62,000
B) $78,000
C) $80,000
D) $86,000
Contribution margin is equal to ________.
A) sales minus variable costs
B) sales minus fixed costs
C) sales minus variable production costs
D) sales minus production costs
It is misleading to call a cost-volume-profit graph a break-even graph. Why?
A) The graph reveals more information than the break-even point.
B) The graph does not show the break-even point.
C) The main purpose of the graph is to show the cost drivers for different activity
levels.
D) The main purpose of the graph is to show the margin of safety.
A manager at a local home improvement store is considering the following costs. Which
of the following is a cost controllable by the manager?
A) Salaries of public relations staff at corporate headquarters
B) Salaries of attorneys at corporate headquarters
C) Salary of treasurer of company
D) Salary of head cashier
Cash receipts of interest income are reported in the ________ section of the statement
of cash flows. The direct method is used.
A) operating activities
B) investing activities
C) financing activities
D) noncash investing and financing activities
Leno Company used regression analysis to predict the annual cost of indirect materials.
The results were as follows:
Indirect Materials Cost
Explained by Units Produced
Constant 14,885
Standard error of Y estimate 9,960
R-Squared 0.7832
No. of observations 22
Degrees of freedom 20
X Coefficient 11.75
Standard error of coefficient 2.1876
The linear cost function is ________ where Y = Total indirect materials cost and X =
Number of units produced.
A) Y = $2.1876 + $9,960X
B) Y = $11.75 + $14,885X
C) Y= $9,960 + $14,885X
D) Y = $14,885 + 11.75X
Foster Corporation has a joint process, which produces three products, A, B and C.
Each product may be sold at split-off or processed further and then sold. Joint
processing costs for a year are $40,000. Other relevant data are:
Sales Value Separable Processing Sales Value
Product at Split-Off Costs After Split-Off at Completion
A $15,500 $2,200 $17,700
B 18,000 8,000 23,000
C 24,000 11,500 37,500
Required:
A) Which products should be processed further? Why?
B) If the Foster Company maximizes profits, what is the operating income?
The following information is available for Kinsner Corporation:
Total fixed costs $313,500
Variable costs per unit $99
Selling price per unit $154
If management has a targeted net income of $46,200, then the number of units that must
be sold is ________.
A) 2,036 units
B) 2,336 units
C) 5,700 units
D) 6,540 units
What are the qualitative aspects of a decision?
A) those which are not relevant to a decision
B) those with a concrete dollar amount
C) those for which measurement in dollars and cents is difficult and imprecise
D) those which are always relevant to a decision
The primary users of management accounting information are ________.
A) bankers
B) governmental regulatory bodies
C) managers in organizations
D) managerial accountants
Wendell Division has operating income of $40,000 for the year ending December 31,
2011. Average invested capital is $800,000 and the weighted-average cost of capital is
10%. The division is considering a new investment that would cost $800,000 and earn
7% annually. If economic profit is the performance metric, should the manager of the
Wendell Division accept the new investment?
A) No, because the return on investment of the division decreases with the new
investment.
B) No, because the economic profit for the investment is negative.
C) Yes, because the economic profit for the investment is positive.
D) Yes, because the return on investment of the division increases with the new
investment.
A payment on bonds payable will be reported in the ________ section of the statement
of cash flows.
A) operating activities only
B) investing activities
C) financing activities
D) noncash investing and financing activities
Zimmerman Company manufactures plastic cups in one department. The following
information is available:
Work-In-Process Inventory, beginning 0
Units started 60,000
Units completed and transferred 48,000
Work-In-Process Inventory, end 12,000
Direct materials added $180,000
Direct labor $165,600
Factory overhead $82,800
The units in the ending Work-In-Process Inventory are 50 percent complete with respect
to direct materials and 60 percent complete with respect to conversion costs. The unit
cost of direct materials is ________.
A) $1.00
B) $3.00
C) $3.33
D) $5.00