Which of the following is not a step in calculating the breakeven point?
a. Put everything into “constant” form – sales price per unit, variable cost per unit, total
fixed cost.
b. Subtract fixed cost from sales revenue.
c. Calculate the contribution margin per unit.
d. Solve by dividing total fixed cost by contribution margin per unit.
Buttermilk Bakery has provided the following cost data for the last year when 100,000
loaves of bread were produced and sold.
All costs are variable except for $125,000 overhead and $75,000 selling and
administrative. The sales price was $10 per loaf.
Required:
a. How many units must be sold to meet a target operating income of $405,000?
b. If Buttermilk desires a target operating income of $150,000, what is the amount of
sales dollars needed to reach this target?
c. What would be the operating income from producing 90,000 loaves?
A company may set standards for the maximum cost that should be incurred to produce
a unit of product. Such cost standards are useful
a. In the planning (budgeting) process.
b. In evaluating how well manufacturing operations are managed.
c. Both in the planning (budgeting) process and in evaluating how well manufacturing
operations are managed .
d. Neither in the planning (budgeting) process nor in evaluating how well
manufacturing operations are managed.
Costs that occur only with the implementation of a particular alternative are referred to
as
a. Avoidable.
b. Sunk.
c. Opportunity.
d. None of these answer choices are correct.
When a company issues new shares of common stock, which of the following is the
correct reporting on the statement of cash flows?
a. A source of cash in the financing section
b. A use of cash in the financing section
c. A source of cash in the investing section
d. A use of cash in the investing section
Schwynn Inc. manufactures street bicycle tires and mountain bicycle tires. To determine
the amount of overhead to assign to each product line, the controller, Chu has
developed the following information.
Total estimated overhead costs for the two product lines are $990,000.
Required:
a. Compute the overhead cost assigned to the street tires and mountain tires, assuming
that direct labor hours is used to allocate overhead costs.
b. Chu is not satisfied with the traditional method of allocating overhead because he
believes that most of the overhead costs relate to the mountain tire product line because
of its complexity. He therefore develops the following three activity cost pools and
related cost drivers to better understand these costs.
Compute the activity-based overhead rates for these three cost pools.
c. Compute the cost that is assigned to the street tires and mountain tires product lines
using an activity-based costing system, given the following information.
d. What do you believe Chu should do?
Sue’s Lakeside Ice Cream Shop makes and sells frozen treats at a lakeside resort. Sue
has two full-time employees who make the treats at a facility rented near the lake. The
treats are then delivered to the Ice Cream Shop where Sue sells them. Indicate whether
each of the following costs that Sue might incur would be considered a product cost. If
the cost is a product cost, classify it as direct materials, direct labor, indirect materials,
indirect labor, or manufacturing overhead. If the cost is not a product cost, classify it
with N/A. a. The cost of ice used to freeze ice cream
b. The purchase price of a van to deliver treats to the shop
c. Electricity used to run the ice cream machines
d. Salary of the two employees making the treats
e. Sue’s salary
f. Rent on the ice cream shop
g. Rent on the facility where the treats are made
h. The cost of ice cream cones
i. The cost of flyers distributed to all lakefront cottages to advertise Sue’s Lakeside Ice
Cream Shop
j. The cost of napkins available to customers
At the beginning of the year, managers at King Industries estimated $400,000 in
manufacturing overhead, 20,000 direct labor hours and 50,000 machine hours. Actual
manufacturing costs at the end of the year were $425,000 in manufacturing overhead.
During the year 22,000 direct labor hours and 47,000 machine hours were incurred. If
overhead is applied based on direct labor hours, how much overhead was applied
during the year?
a. $399,960
b. $440,000
c. $467,500
d. $425,040
Mounce’s Chocolate Delight’s bakery had $2,000 in inventory at the beginning of the
month. During the month she used $45,000 of material and had $1,500 in ending
inventory. How much inventory did the bakery purchase during the month?
a. $44,500
b. $45,000
c. $45,500
d. $48,500
In the context of managerial accounting, relevant information
a.Is information that will make a difference in the decision.
b.Is information that has been provided by the controller.
c.Must be provided in quantitative terms.
d.Must be analyzed by the chief financial officer before being provided to managers.
When the units produced equals the units sold
a. Operating income is higher under absorption costing than under variable costing.
b. Operating income is lower under absorption costing than under variable costing.
c. Operating is the same under absorption costing and variable costing.
d. Cannot be determined with the information given.
Pangle Health Food Store sells a variety of herbal supplements and natural skin care
items. Pangle purchases the items from leading manufacturers. Identify each of the
following costs incurred by Pangle in terms of its cost behavior – variable, fixed, mixed,
or step.
a.Dried fruits for making “All natural trail mix”
b.Annual salary for sales clerk
c.Weight loss supplements packaged in bottles of 100 pills per bottle
d.Shipping charges for vitamin tablets (billed in 100 pound increments)
e.Telephone charges (base rate plus usage)
f.Advertising (annual contract with newspaper for one ad per week)
g.Salary for Cindi Pangle (president of company)
h.Sales bonus on body lotions of $1 per 100 sales
i.Sales bonus on body power of $0.10 per item sold
j.Straight line depreciation on store fixtures