Steele Corporation has the following information for January, February, and March: $\begin{array}{lccc} & \text { January } & \text { February } & \text {March}\\ \text { Units produced } & 10,000 & 10,000 &10,000\\ \text { Units sold } & 7,000 & 8,500&10,500 \\ \end{array}$ $\begin{array}{lr} \text { Production costs per unit (based on 10,000 units) are as follows: }\\ \text { Direct materials } & \$ 12 \\ \text { Direct labour } & 8 \\ \text { Variable factory overhead } & 6 \\ \text { Fixed factory overhead } & 4 \\ \text { Variable selling and admin. expenses } & 4 \\ \text { Fixed selling and admin. expenses } & \end{array}$ -Refer to the figure.What is the February contribution margin for Steele Corporation using the variable costing method?

A) $119,000 B) $170,000 C) $204,000 D) $240,000 A) $119,000 B) $170,000 C) $204,000 D) $240,000 A

The following information pertains to four different products being sold by Andy Company: $\begin{array}{ccccc} \text { Product }& \text { Old Price } &\text { New Price } & \text { Old Quantity } & \text { New Quantity }\\ \hline\text { A } & \$ 10.00 & \$ 11.00 & 2,000 & 1,900 \\ \text { B } & 20.00 & 18.00 & 4,000 & 4,600 \\ \text { C } & 30.00 & 33.00 & 6,000 & 5,500 \\ \text { D } & \$ 40.00 & \$ 38.00 & 8,000 & 10,000 \end{array}$ Which product has an inelastic demand curve?

A) Product A B) Product B C) Product C D) Product D A) Product A B) Product B C) Product C D) Product D

Assume the following information for a product line: $\begin{array}{llr} \text { Sales } &\$500,000\\ \text {Variable manufacturing expenses } &100,000\\ \text { Direct fixed manufacturing expenses} &75,000\\ \text { Variable selling and administrative expenses} &50,000\\ \text { Direct fixed selling and admin, expenses } &60,000\\ \end{array}$ -Refer to the figure.What is the segment margin of the product line?

A) $215,000 B) $325,000 C) $350,000 D) $400,000 A) $215,000 B) $325,000 C) $350,000 D) $400,000

Steele Corporation has the following information for January,February,and March: $\begin{array}{lrrr} &\underline{\text { January}}&\underline{\text { February }} &\underline{\text { March }}\\ \text { Units produced } & 10,000 & 10,000 & 10,000 \\ \text { Units sold } & 7,000 & 8.500 & 10,500 \end{array}$ Production costs per unit (based on 10,000 units)are as follows: $\begin{array}{lr} \text { Direct materials} &\$12\\ \text {Direct labour } &8\\ \text {Variable factory overhead } &6\\ \text { Fixed factory overhead } &4\\ \text { Variable selling and admin. expenses } &10\\ \text { Fixed selling and admin. expenses } &4\\ \end{array}$ There were no beginning inventories for January,and all units were sold for $50.Costs are stable over the three months. What is the January ending inventory for Steele Corporation using the variable costing method?

A) $78,000 B) $90,000 C) $108,000 D) $260,000 A) $78,000 B) $90,000 C) $108,000 D) $260,000

Eastwood Company has the following information for the current year: $\begin{array}{llcc} \text { Selling price } & \text { \$ 150 per unit } \\ \text { Variable production costs} & \text { \$ 40 per unit producer } \\ \text { Variable selling and admin. expenses} & \text { \$ 16 per unit sold } \\ \text { Fixed production costs } & \text { \$ 200,000 } \\ \text { Fixed selling and admin. expenses } & \text {\$ 140,000 } \\ \text { Units produced} & \text { 10,000 units} \\ \text {Units sold } & \text { 8.000 units } \\ \end{array}$ There were no beginning inventories. -Refer to the figure.What is the cost of ending inventory for Eastwood using the variable costing method?

A) $80,000 B) $120,000 C) $180,000 D) $300,000 A) $80,000 B) $120,000 C) $180,000 D) $300,000

The following information pertains to three different products being sold by Andy Company: $\begin{array}{ccccc} \text { Product }& \text { Old Price } &\text { New Price } & \text { Old Quantity } & \text { New Quantity }\\ \hline\text { A } & \$ 10.00 & \$ 11.00 & 2,000 & 1,900 \\ \text { B } & 20.00 & 18.00 & 4,000 & 4,600 \\ \text { C } & 30.00 & 33.00 & 6,000 & 5,500 \\ \text { D } & \$ 40.00 & \$ 38.00 & 8,000 & 10,000 \end{array}$ Which product has an elastic demand curve?

A) Product A B) Product B C) Product C D) Product D A) Product A B) Product B C) Product C D) Product D

Nauman Company has the following information pertaining to its two divisions for the current year: $\begin{array}{lrr} &\text { Division } X&\text { Division } Y\\ \text { Variable selling and admin. expenses } & \$ 70,000 & \$ 90,000 \\ \text { Direct fixed manufacturing expenses } & 35,000 & 100,000 \\ \text { Sales } & 200,000 & 400,000 \\ \text { Direct fixed selling and admin. expenses } & 30,000 & 70,000 \\ \text { Variable manufacturing expenses } & 40,000 & 100,000 \end{array}$ Common expenses are $24,000 for the current year. - What is the net income for Nauman Company?

A) $41,000 B) $65,000 C) $300,000 D) $325,000 A) $41,000 B) $65,000 C) $300,000 D) $325,000

Assume the following information for a product line: $\begin{array}{llr} \text { Sales } &\$500,000\\ \text {Variable manufacturing expenses } &100,000\\ \text { Direct fixed manufacturing expenses} &75,000\\ \text { Variable selling and administrative expenses} &50,000\\ \text { Direct fixed selling and admin, expenses } &60,000\\ \end{array}$ -Refer to the figure.What is the contribution margin of the product line?

A) $215,000 B) $325,000 C) $350,000 D) $400,000 A) $215,000 B) $325,000 C) $350,000 D) $400,000

Perry Products is thinking of expanding its product line.The company's current income statement is as follows: $\begin{array}{lrr} \text { Revenues } & & \$ 600,000 \\ \text { Cost of goods sold: } && \\ \text { Direct materials } & \$ 250,000 \\ \text { Direct labour } & 100,000 \\ \text { Overhead } & \underline{80,000} & \underline{430,000}\\ \text { Gross profit }& & 170,000 \\ \text { Gross profit } & & \underline{ 70,000 }\\ \text { Selling and administrative } & & \underline{ \$ 100,000} \end{array}$ The cost of the new product is $95 per unit made up of $50 of direct materials,$35 of direct labour and $10 of overhead per unit.What is the bid price assuming Perry utilizes a markup on direct materials?

A) $19.77 B) $70 C) $119 D) $133 A) $19.77 B) $70 C) $119 D) $133

Exam 12: Pricing and Profitability Analysis

Redding Company has two divisions with the following segment margins for the current year: Northern,$200,000; Southern,$400,000.Common expenses of the company are $50,000.What is Redding Company's net income?

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(Multiple Choice)

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Question 1

Correct Answer:

Verified

B

Taylor Company's budgeted sales were 10,000 units at $200 per unit.Actual sales were 9,200 units at $210 per unit. What is Taylor's total sales variance?

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

B

Steele Corporation has the following information for January, February, and March: January February March Units produced 10,000 10,000 10,000 Units sold 7,000 8,500 10,500 Production costs per unit (based on 10,000 units) are as follows: Direct materials \ 12 Direct labour 8 Variable factory overhead 6 Fixed factory overhead 4 Variable selling and admin. expenses 4 Fixed selling and admin. expenses -Refer to the figure.What is the February contribution margin for Steele Corporation using the variable costing method?

Free

(Multiple Choice)

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Question 3

Correct Answer:

Verified

A

The following information pertains to four different products being sold by Andy Company: Product Old Price New Price Old Quantity New Quantity A \ 10.00 \ 11.00 2,000 1,900 B 20.00 18.00 4,000 4,600 C 30.00 33.00 6,000 5,500 D \ 40.00 \ 38.00 8,000 10,000 Which product has an inelastic demand curve?

(Multiple Choice)

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Question 4

Assume the following information for a product line: Sales \5 00,000 Variable manufacturing expenses 100,000 Direct fixed manufacturing expenses 75,000 Variable selling and administrative expenses 50,000 Direct fixed selling and admin, expenses 60,000 -Refer to the figure.What is the segment margin of the product line?

(Multiple Choice)

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Question 5

Steele Corporation has the following information for January,February,and March: Units produced 10,000 10,000 10,000 Units sold 7,000 8.500 10,500 Production costs per unit (based on 10,000 units)are as follows: Direct materials \1 2 Direct labour 8 Variable factory overhead 6 Fixed factory overhead 4 Variable selling and admin. expenses 10 Fixed selling and admin. expenses 4 There were no beginning inventories for January,and all units were sold for $50.Costs are stable over the three months. What is the January ending inventory for Steele Corporation using the variable costing method?

(Multiple Choice)

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Question 6

Eastwood Company has the following information for the current year: Selling price \ 150 per unit Variable production costs \ 40 per unit producer 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. -Refer to the figure.What is the cost of ending inventory for Eastwood using the variable costing method?

(Multiple Choice)

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Question 7

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.What effect will closing the division have on the firm's operating income?

(Multiple Choice)

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Question 8

Nanerty Inc.produces two types of backpacks: basic and deluxe.The basic backpack sells for $25 and the deluxe sells for $100.Nanerty is budgeting sales of 1,000 basic backpacks and 650 deluxe.Variable costs associated with the basic backpack amount to $10 and $40 for the deluxe.Actual units sold were 1,200 basic and 550 deluxe. a.Calculate the contribution margin variance. b.Calculate the sales mix variance.

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Question 9

What is the definition of markup?

(Multiple Choice)

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Question 10

The following information pertains to three different products being sold by Andy Company: Product Old Price New Price Old Quantity New Quantity A \ 10.00 \ 11.00 2,000 1,900 B 20.00 18.00 4,000 4,600 C 30.00 33.00 6,000 5,500 D \ 40.00 \ 38.00 8,000 10,000 Which product has an elastic demand curve?

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Question 11

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. $\begin{array}{lr}&\text { Division } X\\\text { Sales } & \$ 100,000 \\\text { Variable manufacturing costs } & \$ 60,000 \\\text { Gross profit } & \$ 40,000\\\text {Fixed expenses (direct and allocated) }&50,000\\\text {Operating income (loss)}&\$(10,000)\end{array}$ What is X's divisional segment margin?

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Question 12

What is an alternative to the limitation of focusing on profits?

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Question 13

Nauman Company has the following information pertaining to its two divisions for the current year: 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 the current year. - What is the net income for Nauman Company?

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Question 14

What are the characteristics of a successful firm?

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Question 15

Assume the following information for a product line: Sales \5 00,000 Variable manufacturing expenses 100,000 Direct fixed manufacturing expenses 75,000 Variable selling and administrative expenses 50,000 Direct fixed selling and admin, expenses 60,000 -Refer to the figure.What is the contribution margin of the product line?

(Multiple Choice)

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Question 16

Taylor Company’s budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. -Refer to the figure.What is Taylor's price volume variance?

(Multiple Choice)

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Question 17

Perry Products is thinking of expanding its product line.The company's current income statement is as follows: Revenues \ 600,000 Cost of goods sold: Direct materials \ 250,000 Direct labour 100,000 Overhead Gross profit 170,000 Gross profit Selling and administrative The cost of the new product is $95 per unit made up of $50 of direct materials,$35 of direct labour and $10 of overhead per unit.What is the bid price assuming Perry utilizes a markup on direct materials?

(Multiple Choice)

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Question 18

Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in the current year when 30,000 were projected. Sales for the following year look no better. At $100 per game, it is not a hot seller. Direct costs of the board game are $56 variable cost and $100,000 fixed. John is considering several options. Option One: Cut the price to $70 and perhaps sell 15,000 units. Option Two: Cut the price to $60, reduce material costs by $10, and cut advertising by $60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to $80 and include a $10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 percent of the rebate coupons would be redeemed. Option Four: Cut the price to $60 per game and possibly sell 20,000 units. -Refer to the figure.What is the total cost per case for drugstore chains?

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Question 19

Generally,how will inventory values calculated using variable costing compare to inventory values calculated using absorption costing?

(Multiple Choice)

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Question 20

Redding Company has two divisions with the following segment margins for the current year: Northern,$200,000; Southern,$400,000.Common expenses of the company are $50,000.What is Redding Company's net income?

Taylor Company's budgeted sales were 10,000 units at $200 per unit.Actual sales were 9,200 units at $210 per unit. What is Taylor's total sales variance?

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.What effect will closing the division have on the firm's operating income?

What is the definition of markup?

The following information pertains to three different products being sold by Andy Company: Product Old Price New Price Old Quantity New Quantity A \ 10.00 \ 11.00 2,000 1,900 B 20.00 18.00 4,000 4,600 C 30.00 33.00 6,000 5,500 D \ 40.00 \ 38.00 8,000 10,000 Which product has an elastic demand curve?

What is an alternative to the limitation of focusing on profits?

What are the characteristics of a successful firm?

Taylor Company’s budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. -Refer to the figure.What is Taylor's price volume variance?

Generally,how will inventory values calculated using variable costing compare to inventory values calculated using absorption costing?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

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