If fixed costs are $850,000 and variable costs are 60% of sales, what is the break-even
point (dollars)?
a. $2,125,000
b. $340,000
c. $3,400,000
d. $1,416,666
On the balance sheet for a manufacturing business, the cost of direct materials, direct
labor, and factory overhead, which have entered into the manufacturing process but are
associated with products that have not been finished, is reported as direct materials
inventory.
a. True
b. False
Which of the following conditions would cause the break-even point to increase?
a. Total fixed costs increase
b. Unit selling price increases
c. Unit variable cost decreases
d. Total fixed costs decrease
Stryker Industries received an offer from an exporter for 15,000 units of product at
$17.50 per unit. The acceptance of the offer will not affect normal production or
domestic sales prices. The following data is available:
What is the differential cost from the acceptance of the offer?
a. $200,000
b. $262,500
c. $85,500
d. $165,000
Which of the following should be classified as an extraordinary item on the income
statement?
a. gain on a sale of a long-term investment
b. loss due to discontinued operations
c. restructuring charges
d. loss resulting from an infrequent natural disaster
A budget can be an effective means of communicating management’s plans to the
owners of a business.
a. True
b. False
The following data is given for the Harry Company:
Overhead is applied on standard labor hours. (Round interim calculations to the nearest
cent.)
The direct labor rate variance is
a. $5,490 unfavorable
b. $5,490 favorable
c. $33,000 favorable
d. $33,000 unfavorable
The Putney Company reports the following information:
Compute:
a) product costs
b) period costs
The cash payback method can be used only when net cash inflows are the same for each
period.
a. True
b. False
The three most common cost behavior classifications are
a. variable costs, product costs, and sunk costs
b. fixed costs, variable costs, and mixed costs
c. variable costs, period costs, and differential costs
d. variable costs, sunk costs, and opportunity costs
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 3’s income from operations increase?
a. $150,000
b. $50,000
c. $32,000
d. $72,000
A single plantwide overhead rate method is very expensive to apply.
a. True
b. False
Prevention costs and appraisal costs are considered costs of controlling quality.
a. True
b. False
Mocha Company manufactures a single product by a continuous process, involving
three production departments. The records indicate that direct materials, direct labor,
and applied factory overhead for Department 1 were $100,000, $125,000, and
$150,000, respectively. The records further indicate that direct materials, direct labor,
and applied factory overhead for Department 2 were $55,000, $65,000, and $80,000,
respectively. In addition, work in process at the beginning of the period for Department
1 totaled $75,000, and work in process at the end of the period totaled $60,000.
The journal entry to record the flow of costs into Department 1 during the period for
applied overhead is
a. Factory Overhead’”Department 1 Work in Process’”Department 1 150,000
150,000
b. Work in Process’”Department 1 Factory Overhead’”Department 1 125,000
125,000
c. Work in Process’”Department 1 Factory Overhead’”Department 1 80,000
80,000
d. Work in Process’”Department 1 Factory Overhead’”Department 1 150,000
150,000
factory supervisor’s salary
Match the costs that follow to the type of product cost (a-c) or designate as not a
product cost (d).
a. direct labor
b. direct materials
c. factory overhead
d. not a product cost
Sage Company is operating at 90% of capacity and is currently purchasing a part used
in its manufacturing operations for $15 per unit. The unit cost for the business to make
the part is $20, including fixed costs, and $11, not including fixed costs. If 30,000 units
of the part are normally purchased during the year but could be manufactured using
unused capacity, what would be the amount of differential cost increase or decrease
from making the part rather than purchasing it?
a. $150,000 cost increase
b. $120,000 cost decrease
c. $150,000 cost increase
d. $120,000 cost increase
Which of the following is not a prime cost?
a. plant janitor’s wages
b. direct labor wages
c. machine operator wages
d. assembly line wages
Which of the following is not a measure that management can use in evaluating and
controlling investment center performance?
a. rate of return on investment
b. negotiated price
c. residual income
d. income from operations
Variable costs are costs that remain constant on a per-unit basis as the level of activity
changes.
a. True
b. False