8) Mist Company sells two products-A and B. Mist predicts that it will sell 2,500 units of A and 1,500 units of B
during the next period. The unit contribution margins are $3.50 and $4.80, respectively. What is the weighted–
average unit contribution margin? (Please round to nearest cent.)
A) $3.99
B) $4.25
C) $4.15
D) $3.71
9) McDaniel, Inc. sells two products-J and B. McDaniel predicts that it will sell 7,200 units of J and 5,600 units of B
in the next period. The unit contribution margins are $2.85 and $6.30, respectively. What is the weighted-average
unit contribution margin?
A) $5.15
B) $4.58
C) $4.99
D) $4.36
10) Jackson Company has provided the following information regarding the two products that it sells:
Jet Boats
Ski Boats
Sales price per unit
$8,000
$20,000
Variable cost per unit
$4,800
$14,000
Annual fixed costs are $280,000.
How many units must be sold in order for Jackson to breakeven, assuming that Jackson sells five jet boats for every
two ski boats sold?
A) 70 jet boats and 28 ski boats
B) 50 jet boats and 20 ski boats
C) 20 jet boats and 50 ski boats
D) 45 jet boats and 28 ski boats
11) Becky’s Bakery sells three large muffins for every two small ones. A small muffin sells for $3, with a variable
cost of $2.00. A large muffin sells for $5 with a variable cost of $2.50. What is the weighted-average contribution
margin?
A) $1.93
B) $1.75
C) $1.25
D) $1.90
12) Becky’s Bakery sells three large muffins for every two small ones. A small muffin sells for $3, with a variable
cost of $2.00. A large muffin sells for $5 with a variable cost of $2.50. Fixed costs are $3,000 per month. How
much is the breakeven in terms of total units? (Please round to the nearest whole number.)
A) 1,240
B) 1,579
C) 946
D) 1,180
13) Becky’s Bakery sells three large muffins for every two small ones. A small muffin sells for $3, with a variable
cost of $2.00. A large muffin sells for $5 with a variable cost of $2.50. Fixed costs are $3,000 per month. How
much is the breakeven volume for each type of muffin?
A) 947 large, 632 small
B) 890 large, 524 small
C) 901 large, 622 small
D) 922 large, 687 small
14) Becky’s Bakery sells three large muffins for every two small ones. A small muffin sells for $3, with a variable
cost of $2.00. A large muffin sells for $5 with a variable cost of $2.50. Fixed costs are $3,000 per month. How
much is the breakeven point in total sales dollars?
A) $6,091
B) $5,845
C) $6,922
D) $6,631
15) The local convenience store sells soft drinks. It sells two large drinks for every small drink. A large drink sells
for $1.50, with a variable cost of $0.60. A small drink sells for $1.00 with a variable cost of $0.50. What is the
weighted-average contribution margin? (Please round to the nearest cent.)
A) $0.77
B) $0.65
C) $0.70
D) $0.45
16) The local convenience store sells soft drinks. It sells two large drinks for every small drink. A large drink sells
for $1.50, with a variable cost of $0.60. A small drink sells for $1.00, with a variable cost of $0.50. The weighted
average contribution margin is $0.70.
17) Argyle sells steel beams to building contractors in two sizes-regular and heavy. Argyle sells 4 regular beams for
every one heavy beam. Cost data are as follows:
Regular
Heavy
Price per unit
$20.00
$28.00
Variable cost per unit
$16.00
$20.00
How much is the weighted average contribution margin per unit?
A) $5.20
B) $6.00
C) $4.80
D) $4.15
18) Argyle sells steel beams to building contractors in two sizes-regular and heavy. Argyle sells 4 regular beams for
every one heavy beam. Cost data are as follows:
Regular
Heavy
Price per unit
$20.00
$28.00
Variable cost per unit
$16.00
$20.00
Argyle’s fixed costs are $2,880 per month. How much is the breakeven point in total number of units?
A) 590
B) 578
C) 620
D) 600
19) Argyle sells steel beams to building contractors in two sizes-regular and heavy. Argyle sells 4 regular beams for
every one heavy beam. Cost data are as follows:
Regular
Heavy
Price per unit
$20.00
$28.00
Variable cost per unit
$16.00
$20.00
Argyle’s fixed costs are $2,880 per month. How much is the breakeven point for each product type?
A) 500 regular, 100 heavy
B) 420 regular, 180 heavy
C) 480 regular, 120 heavy
D) 120 regular, 480 heavy
20) Argyle sells steel beams to building contractors in two sizes:regular and heavy. Argyle sells 4 regular beams for
every one heavy beam. Cost data are as follows:
Regular
Heavy
Price per unit
$20.00
$28.00
Variable cost per unit
$16.00
$20.00
Argyle’s fixed costs are $2,880 per month. How much is the breakeven point for total sales revenues?
A) $12,960
B) $13,240
C) $9,600
D) $12,880
Learning Objective 19-6
1) When a company produces more units than it sells, absorption costing income will exceed variable costing
income.
2) The only difference between absorption costing and variable costing is the way that fixed manufacturing
overhead costs are treated.
3) Which of the following accurately describes absorption costing?
A) Only variable manufacturing costs are assigned to products.
B) Only fixed manufacturing costs are assigned to products.
C) Both variable and fixed manufacturing costs are assigned to products.
D) Both manufacturing and non-manufacturing costs are assigned to products.
4) Which of the following accurately describes variable costing?
A) Only variable manufacturing costs are assigned to products.
B) Only fixed manufacturing costs are assigned to products.
C) Both variable and fixed manufacturing costs are assigned to products.
D) Both manufacturing and non-manufacturing costs are assigned to products.
5) If production exceeds units sold, which of the following statements is CORRECT?
A) The same operating income will result under both a variable costing and absorption costing income statement.
B) A higher operating income will result under a variable costing income statement.
C) A lower operating income will result under an absorption costing income statement.
D) A higher operating income will result under an absorption costing income statement.
6) A decrease in inventory levels will cause which of the following when comparing operating income under
absorption and variable costing?
A) The same operating income under both variable costing and absorption costing
B) A higher operating income under variable costing
C) A lower operating income under variable costing
D) A lower cost of goods sold and a higher operating income under absorption costing
7) Allston Products sells a special kind of effects pedal for musical performers. Each unit sells for $20.00.
Additional data for the month of April, 2011, are as follows:
Direct materials
per unit
Direct labor
per unit
Variable manuf. overhead
per month
Fixed manuf. overhead
per month
Operating expenses
per month
Beginning inventory
units
Units produced
units
Units sold
units
Ending inventory
units
Using variable costing, what is the cost per unit produced?
A) $16.25
B) $14.25
C) $14.50
D) $12.75
8) Allston Products sells a special kind of effects pedal for musical performers. Each unit sells for $20.00.
Additional data for the month of April, 2011, are as follows:
Direct materials
per unit
Direct labor
per unit
Variable manuf. overhead
per month
Fixed manuf. overhead
per month
Operating expenses
per month
Beginning inventory
units
Units produced
units
Units sold
units
Ending inventory
units
Using absorption costing, what is the cost per unit produced?
A) $16.25
B) $14.25
C) $14.50
D) $12.75
9) Allston Products sells a special kind of effects pedal for musical performers. Each unit sells for $20.00.
Additional data for the month of April, 2011, are as follows:
Direct materials
per unit
Direct labor
per unit
Variable manuf. overhead
per month
Fixed manuf. overhead
per month
Operating expenses
per month
Beginning inventory
units
Units produced
units
Units sold
units
Ending inventory
units
Using absorption costing, how much is the net operating income for April?
A) $6,900
B) $7,480
C) $7,125
D) $6,250
10) Allston Products sells a special kind of effects pedal for musical performers. Each unit sells for $20.00.
Additional data for the month of April, 2011, are as follows:
Direct materials
per unit
Direct labor
per unit
Variable manuf. overhead
per month
Fixed manuf. overhead
per month
Operating expenses
per month
Beginning inventory
units
Units produced
units
Units sold
units
Ending inventory
units
Using variable costing, how much is the net operating income for April?
A) $6,900
B) $7,480
C) $7,125
D) $6,250
11) Allston Products sells a special kind of effects pedal for musical performers. Each unit sells for $20.00.
Additional data for the month of April, 2011, are as follows:
Direct materials
per unit
Direct labor
per unit
Variable manuf. overhead
per month
Fixed manuf. overhead
per month
Operating expenses
per month
Beginning inventory
units
Units produced
units
Units sold
units
Ending inventory
units
Which of the following statements is TRUE?
A) Absorption costing produces operating income that is $875 higher than variable costing.
B) Absorption costing produces operating income that is $875 lower than variable costing.
C) Absorption costing produces operating income that is $13,125 higher than variable costing.
D) Absorption costing produces operating income that is $13,125 lower than variable costing.
12) If a company uses standard absorption costing, how could a business manager exploit that accounting method in
order to boost book income without violating the rules of GAAP?
A) By adopting just-in-time inventory management, the manager could reduce the costs of financing and storing
inventory, which would in turn, help boost book income.
B) By coding administrative costs to inventory, the manager could report lower total expenses and thus report higher
income.
C) By reducing inventory levels, the manager could show higher sales revenues, and thus report higher book
income.
D) By building up inventory levels, fixed manufacturing costs could be “stored up” in inventory, the cost of goods
sold would be lower, and book income would be higher.