86. Octagonal Company has the following information for 2014:
Selling price
$150 per unit
Variable production costs
$40 per unit produced
Variable selling and admin. expenses
$16 per unit sold
Fixed production costs
$200,000
Fixed selling and admin. expenses
$140,000
Units produced
10,000 units
Units sold
8,000 units
There were no beginning inventories.
What is the net income for Octagonal using the absorption costing method?
87. Octagonal Company has the following information for 2014:
Selling price
$150 per unit
Variable production costs
$40 per unit produced
Variable selling and admin. expenses
$16 per unit sold
Fixed production costs
$200,000
Fixed selling and admin. expenses
$140,000
Units produced
10,000 units
Units sold
8,000 units
There were no beginning inventories.
What is the cost of ending inventory for Octagonal using the variable costing method?
88. Octagonal Company has the following information for 2014:
Selling price
$150 per unit
Variable production costs
$40 per unit produced
Variable selling and admin. expenses
$16 per unit sold
Fixed production costs
$200,000
Fixed selling and admin. expenses
$140,000
Units produced
10,000 units
Units sold
8,000 units
There were no beginning inventories.
What is the net income for Octagonal using the variable costing method?
89. Absorption costing is to gross margin as variable costing is to:
90. Kasawaki Company incurred the following costs in manufacturing digital cameras:
Direct materials
$14
Indirect materials (variable)
4
Direct labor
8
Indirect labor (variable)
6
Other variable factory overhead
10
Fixed factory overhead
28
Variable selling expenses
20
Fixed selling expenses
14
During the period, the company produced and sold 1,000 units.
What is the inventory cost per unit using absorption costing?
91. Kasawaki Company incurred the following costs in manufacturing digital cameras:
Direct materials
$14
Indirect materials (variable)
4
Direct labor
8
Indirect labor (variable)
6
Other variable factory overhead
10
Fixed factory overhead
28
Variable selling expenses
20
Fixed selling expenses
14
During the period, the company produced and sold 1,000 units.
What is the inventory cost per unit using variable costing?
92. When monthly production volume is constant and sales volume is less than production, net income
determined with variable costing procedures will
93. Bernardo Company reported the following units of production and sales for August and September 2014:
Units
Month
Produced
Sold
August 2014
100,000
90,000
September 2014
100,000
105,000
Net income under absorption costing for August was $40,000; net income under variable costing for September was $50,000. Fixed manufacturing
costs were $600,000 for each month.
How much was net income for September using absorption costing?
94. Bernardo Company reported the following units of production and sales for August and September 2014:
Units
Month
Produced
Sold
August 2014
100,000
90,000
September 2014
100,000
105,000
Net income under absorption costing for August was $40,000; net income under variable costing for September was $50,000. Fixed manufacturing
costs were $600,000 for each month.
How much was net income for August using variable costing?
95. Under absorption costing, when production is less than sales volume, the profits, using variable costing
procedures, will be:
96. Inventory values calculated using variable costing as opposed to absorption costing will generally be
97. The following information pertains to Fondueland Corporation:
Beginning inventory
0 units
Ending inventory
5,000 units
Direct labor per unit
$20
Direct materials per unit
16
Variable overhead per unit
4
Fixed overhead per unit
10
Variable selling costs per unit
12
Fixed selling costs per unit
16
What is the value of ending inventory using the variable costing method?
98. Which of the following statements is TRUE?
99. All of the following costs are included in inventory under absorption costing EXCEPT
100. What is the primary difference between variable and absorption costing?
101. Which of the following could be considered a segment?
102. Normandy Company has the following information pertaining to its two divisions for 2014:
Division X
Division Y
Variable selling and admin. expenses
$ 70,000
$ 90,000
Direct fixed manufacturing expenses
35,000
100,000
Sales
200,000
400,000
Direct fixed selling and admin. expenses
30,000
70,000
Variable manufacturing expenses
40,000
100,000
Common expenses are $24,000 for 2014.
What is the segment margin for Division Y?
103. Normandy Company has the following information pertaining to its two divisions for 2014:
Division X
Division Y
Variable selling and admin. expenses
$ 70,000
$ 90,000
Direct fixed manufacturing expenses
35,000
100,000
Sales
200,000
400,000
Direct fixed selling and admin. expenses
30,000
70,000
Variable manufacturing expenses
40,000
100,000
Common expenses are $24,000 for 2014.
What is the operating income for Normandy Company?
104. Consider the following portion of a segmented income statement for the year just ended. Assume that the
fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department
will not affect the sales of the other departments nor reduce the common expenses.
Division X
Sales
$ 100,000
Variable manufacturing costs
60,000
Gross profit
$ 40,000
Fixed expenses (direct and allocated)
50,000
Operating income (loss)
$ (10,000)
What is X’s divisional segment margin?
105. Sarandon Company has the following information pertaining to its two divisions for 2014:
Division A
Division B
Variable selling and admin. expenses
$ 35,000
$ 45,000
Direct fixed manufacturing expenses
17,500
50,000
Sales
100,000
200,000
Direct fixed selling and admin. expenses
15,000
35,000
Variable manufacturing expenses
20,000
50,000
Common expenses are $12,000 for 2014.
What is the segment margin for Division B?
106. Sarandon Company has the following information pertaining to its two divisions for 2014:
Division A
Division B
Variable selling and admin. expenses
$ 35,000
$ 45,000
Direct fixed manufacturing expenses
17,500
50,000
Sales
100,000
200,000
Direct fixed selling and admin. expenses
15,000
35,000
Variable manufacturing expenses
20,000
50,000
Common expenses are $12,000 for 2014.
What is the operating income for Sarandon Company?
107. Deep Pit Mining mines three products. Gold ore sells for $1,000 per ton, variable costs are $600 per ton,
and fixed mining costs are $250,000. The segment margin for 2014 was $(100,000). The management of Deep
Pit Mining was considering dropping the mining of gold ore. Only one-half of the fixed expenses are direct and
would be eliminated if the segment was dropped.
What were the sales (in tons) for 2014?
108. Division B earns a contribution margin of $200,000 and has a divisional margin of $70,000. If Division B
is closed, all of the direct divisional expenses and $110,000 of common expenses can be eliminated. These facts
indicate that closing the division will cause the firm’s operating income to
109. The Crested Butte Company recorded the following data for a product line:
Sales
$250,000
Variable manufacturing expenses
50,000
Direct fixed manufacturing expenses
37,500
Variable selling and administrative expenses
25,000
Direct fixed selling and admin. expenses
30,000
What is the contribution margin of the product line?
110. The Crested Butte Company recorded the following data for a product line:
Sales
$250,000
Variable manufacturing expenses
50,000
Direct fixed manufacturing expenses
37,500
Variable selling and administrative expenses
25,000
Direct fixed selling and admin. expenses
30,000
What is the segment margin of the product line?
111. Common segment costs, when contrasted with direct segment costs, are
112. Consider the following portion of a segmented income statement for the year just ended. Assume that the
fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department
will not affect the sales of the other departments nor reduce the common expenses.
Division X
Sales
$ 100,000
Variable manufacturing costs
60,000
Gross profit
$ 40,000
Fixed expenses (direct and allocated)
50,000
Operating income (loss)
$ (10,000)
What would be the effect on the firm’s operating income if Division X were discontinued?
113. The following information pertains to Cumberland Corporation:
Beginning inventory
0 units
Ending inventory
6,000 units
Direct labor per unit
$20
Direct materials per unit
16
Variable overhead per unit
4
Fixed overhead per unit
10
Variable selling costs per unit
12
Fixed selling costs per unit
16
Absorption costing net income would be how much greater or less than the variable costing net income?
114. The following information pertains to Cumberland Corporation:
Beginning inventory
0 units
Ending inventory
6,000 units
Direct labor per unit
$20
Direct materials per unit
16
Variable overhead per unit
4
Fixed overhead per unit
10
Variable selling costs per unit
12
Fixed selling costs per unit
16
What is the value of ending inventory using the absorption costing method?
115. Hammerhold Company has two divisions with the following segment margins for the current year:
Northern, $250,000; Southern, $450,000. Common expenses of the company are $55,000. What is Hammerhold
Company’s net income?
116. Taylor Company’s budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210
per unit.
Taylor’s sales price variance is
117. Taylor Company’s budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210
per unit.
Taylor’s sales volume variance is
118. Taylor Company’s budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210
per unit.
Taylor’s total sales variance is
119. Franklin Company’s expected sales were 2,000 units at $100 per unit. During 2014, it had actual sales of
1,800 units at $110 per unit. Budgeted variable costs were $60 per unit.
What is Franklin’s sales price variance?
120. Franklin Company’s expected sales were 2,000 units at $100 per unit. During 2014, it had actual sales of
1,800 units at $110 per unit. Budgeted variable costs were $60 per unit.
What is Franklin’s sales volume variance?
121. Franklin Company’s expected sales were 2,000 units at $100 per unit. During 2014, it had actual sales of
1,800 units at $110 per unit. Budgeted variable costs were $60 per unit.
What is Franklin’s total sales variance?
122. The sales price variance is created by a difference between:
123. The contribution margin variance is the difference between the actual contribution margin and the:
124. The contribution margin variance is favorable if the budgeted contribution margin is less than the:
125. The budgeted contribution margin of two products is $1,000 the actual contribution margin is $500 and the
126. The budgeted average unit contribution margin is the budgeted total contribution margin divided by the:
127. The contribution margin volume variance is the difference between the actual and budgeted quantities sold
multiplied by the:
128. The budgeted quantity sold of a product is 200 units. The actual quantity sold is 100 units. The budgeted
average unit contribution margin is $3.00. What is the contribution margin volume variance?
129. The sum of the change in units for each product multiplied by the difference between the budgeted
contribution margin and the budgeted average unit contribution margin is called the:
130. The sales mix variance tells managers what impact a difference between actual and expected percentages
of products sold has on:
131. In order for an effect of changing sales mix on profit to exist, a company must produce:
132. The market share variance is calculated by
133. The market share and market size variances allow firms to compare their performance with the:
134. The market size variance is the difference between actual and budgeted industry sales in units, multiplied
by the budgeted market share percentage, times the:
135. When the market share variance is unfavorable, it means that the budgeted share of the market is:
136. The market size variance is favorable when the budgeted industry sales in units is:
137. According to Hansen and Mowen, which of the following product life cycle stages comes first?
138. Which of the following product life cycle stages is characterized by rapid increases in sales and
production?
139. The majority of the product cost is “locked in” during which of the following life-cycle stages?
140. Which of the following product life cycle stages has revenues for the entire industry decreasing?
141. Which of the following is NOT a limitation of profit management?
142. What are the ways employee behavior changes in relation to a profit emphasis?
143. A successful firm
144. An alternative to the limitation of focusing on profits would be
145. Answer the following:
a.
Discuss each of the following economic market structures (i.e., number of firms in industry, barriers to entry, uniqueness of product):
1. Perfectly competitive market
2. Monopolistic competition
3. Oligopoly
4. Monopoly
b.
Match the following industries with the appropriate economic market:
Restaurants
United States Post Office
Cereal
Wheat farmer
Automotive
Market
Number of
Expenses
Structure
Firms in
Barriers
Uniqueness
Related to
Type
Industry
to Entry
of Product
Structure Type
Perfect
Many
Very low
Not
No special expense
competition
Monopolistic
Many
Low
Some
Advertising,
competition
coupons, costs
features
of differentiation
Oligopoly
Few
High
Fairly
Costs of
Unique
differentiation
advertising, rebates
Monopoly
One
Very High
Very
Legal and lobbying
Unique
expenditures
b.
Perfectly competitive market:
Wheat farmer
Monopoly:
United States Post Office
Monopolistic competition:
Restaurants
Oligopoly:
Cereal
Automobile
146. Compare and contrast the various pricing policies used by companies.
147. The Furthur Phish Company has recorded the following data for three of their products:
Product
Old Price
New Price
Old Quantity
New Quantity
X
$14.75
$14.25
2,000
2,200
Y
19.25
18.50
3,000
3,300
Z
24.50
27.50
4,000
3,600
Required:
a.
Determine the price elasticity of demand for each of the products.
b.
Which products have an elastic demand? Inelastic demand?
b.
Products X and Y are inelastic. Product Z is neither inelastic nor elastic.