When the variable cost per unit increases, the total number of units required to break
even also increases.
In a manufacturing company, wages and benefits of assembly line workers are included
in manufacturing overhead.
The amount by which sales can decrease before the company incurs an operating loss is
called breakeven point.
In a process costing system, a department’s total production costs incurred in a
particular period must equal the total costs transferred out of the department.
In manufacturing, the cost objects are often units of product.
When indirect materials are issued to production, the Raw Materials Inventory account
is credited.
In the first step in developing an activity-based costing system for a manufacturing
company, the management team must determine the activities that incur the majority of
the product and period costs.
If the cost of indirect materials needed for production is insignificant, it should not be
included in the budgeting process.
A static budget presents financial data at multiple levels of sales volume.
Route Two Tire Company makes a special kind of racing tire. Variable costs are $200
per unit, and fixed costs are $32,000 per month. Route Two sells 500 units per month at
a sales price of $300. The company believes that it can increase the price if the tire
quality is upgraded. If so, the variable cost will increase to $240 per unit, and the fixed
costs will rise by 50%. The CEO wishes to increase the company’s operating income by
15%. Which sales price level would give the desired results? (Round your answer to the
nearest cent.)
A) $1,020.00 per unit
B) $264.00 per unit
C) $336.00 per unit
D) $377.40 per unit
Bridge Company makes special equipment used in cell towers. Each unit sells for $410.
Bridge uses just-in-time inventory procedures; it produces and sells 12,000 units per
year. It has provided the following income statement data:
A foreign company has offered to buy 100 units for a reduced sales price of $300 per
unit. The marketing manager says the sale will have no negative impact the company’s
regular sales. The sales manager says that this sale will not require any additional
selling and administrative costs, as it is a one-time deal. The production manager
reports that there is plenty of excess capacity to accommodate the deal without
requiring any additional fixed costs. If Bridge accepts the deal, how will this impact
operating income? (Round any intermediate calculations to the nearest cent, and your
final answer to the nearest dollar.)
A) Operating income will increase by $29,917.
B) Operating income will decrease by $29,917.
C) Operating income will increase by $30,000.
D) Operating income will decrease by $30,000.
The predetermined overhead allocation rate is the rate used to ________.
A) assign direct material costs to jobs
B) allocate actual manufacturing overhead costs incurred during a period
C) allocate estimated manufacturing overhead costs to jobs
D) trace manufacturing and non-manufacturing costs to jobs
Under a standard cost system, when recording the use of direct materials in the
production process, the debit to Work-in-Process Inventory is ________.
A) standard quantity for actual production times standard cost per unit of direct
materials
B) standard quantity for actual production times actual cost per unit of direct materials
C) actual quantity times standard cost per unit of direct materials
D) actual quantity times actual cost per unit of direct materials
A company’s proportion of fixed costs to variable costs is called its ________.
A) target profit
B) relevant range
C) mixed cost
D) cost structure
A company that uses labor, equipment, supplies, and facilities to convert raw materials
into finished products is a ________.
A) merchandising company
B) manufacturing company
C) service company
D) trading company
When a company is preparing a budgeted statement of cash flows, the payments for
selling and administrative expenses can be obtained from the ________.
A) budgeted payments for direct materials purchases
B) sales budget
C) cash budget
D) budgeted balance sheet
Anthony Chemicals, Inc. has fixed costs of $34,000 per month. The highest production
volume during the year was in January when 120,000 units were produced, 72,000 units
were sold, and total costs of $610,000 were incurred. In June, the company produced
only 54,000 units. What was the total cost incurred in June? (Round any intermediate
calculations to the nearest cent and your final answer to the nearest dollar.)
A) $259,200
B) $293,200
C) $610,000
D) $644,000
Which of the following transactions is recorded in the purchases journal?
A) purchase of furniture on account
B) cash purchase of merchandise inventory
C) sale of merchandise inventory on account
D) cash sales of merchandise inventory
For each of the following, indicate whether the statement relates to managerial
accounting (MA) or financial accounting (FA):
Which of the following costs does not change in total despite changes in volume within
the relevant range?
A) fixed costs
B) variable costs
C) mixed costs
D) total production costs
Miami Fashions uses standard costs for their manufacturing division. From the
following data, calculate the fixed overhead allocated to production based on direct
labor hours (DLHr).
A) $23,000
B) $60,000
C) $40,000
D) $20,000
Peter Smith has just won the state lottery and has the following three payout options for
after-tax prize money:
1. $64,000 per year at the end of each of the next six years
2. $304,000 (lump sum) now
3. $502,000 (lump sum) six years from now
The annual discount rate is 9%. Compute the present value of the third option. (Round
to nearest whole dollar.)
Present value of $1:
A) $240,000
B) $98,133
C) $101,717
D) $299,192
