Question 1

Which of the following will appear as a line item in the traditional format of an income statement?

Accepted Answer

A)  contribution margin 
B)  total variable costs (manufacturing and non-manufacturing) 
C)  total fixed costs (manufacturing and non-manufacturing) 
D)  gross profit 
A)  contribution margin 
B)  total variable costs (manufacturing and non-manufacturing) 
C)  total fixed costs (manufacturing and non-manufacturing) 
D)  gross profit

Question 2

Flexlux,Inc.reports the following information: $$\begin{array} { | l | r | r|} 
\hline \text { Units produced } & 530& \text { units } \
\hline \text { Units sold } & 530& \text { units } \
\hline \text { Sales price } & \$ 160 &\text { per unit } \
\hline \text { Direct materials } & \$ 10 &\text { per unit } \
\hline \text { Direct labor } & \$ 15& \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 40& \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 19,000 &\text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 20& \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 10,000 &\text { per year } \
\hline
\end{array}$$ What is the unit product cost using variable costing?

Accepted Answer

A)  $85 
B)  $61 
C)  $65 
D)  $95 
A)  $85 
B)  $61 
C)  $65 
D)  $95

Question 3

When the total fixed costs increases,the breakeven point ________.

Accepted Answer

A)  increases 
B)  decreases 
C)  decreases proportionately 
D)  remains the same 
A)  increases 
B)  decreases 
C)  decreases proportionately 
D)  remains the same

Question 4

Paulson Company has provided the following information: $$\begin{array} { | l | r | } 
\hline \text { Price per unit } & \$ 50 \
\hline \text { Variable cost per unit } & 15 \
\hline \text { Fixed costs per month } & \$ 16,000 \
\hline
\end{array}$$ What is the amount of sales in dollars required for Paulson to break even?

Accepted Answer

A)  $4,800 
B)  $22,857 
C)  $53,333 
D)  $16,000 
A)  $4,800 
B)  $22,857 
C)  $53,333 
D)  $16,000

Question 5

Which of the following appears as a line item in a contribution margin income statement?

Accepted Answer

A)  Gross profit 
B)  Cost of goods sold 
C)  Operating income 
D)  Selling and administrative expenses 
A)  Gross profit 
B)  Cost of goods sold 
C)  Operating income 
D)  Selling and administrative expenses

Question 6

In variable costing,the balance of ending Finished Goods Inventory includes fixed manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 7

Dentofax,Inc.reports the following information for August: $$\begin{array} { | l | r | } 
\hline \text { Sales Revenue } & \$ 700,000 \
\hline \text { Variable Cost of Goods Sold } & 180,000 \
\hline \text { Fixed Cost of Goods Sold } & 40,000 \
\hline \text { Variable Selling and Administrative Costs } & 180,000 \
\hline \text { Fixed Selling and Administrative Costs } & 70,000 \
\hline
\end{array}$$ Calculate the operating income for August using absorption costing.

Accepted Answer

A)  $230,000 
B)  $360,000 
C)  $950,000 
D)  $470,000 
A)  $230,000 
B)  $360,000 
C)  $950,000 
D)  $470,000

Question 8

Kumar produces large decorative tiles used in home decor.The tiles sell for $700 and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } 
\hline \text { Rent and utilities } & \$ 1,100 \
\hline \text { Management salaries } & 2,500 \
\hline \text { Other expenses } & 530 \
\hline
\end{array}$$ Kumar's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.70 went to cover his fixed costs,and that anything past that point was pure profit.
Kumar is planning to increase the selling price to $760.What impact will the increase in selling price have on the contribution margin ratio?

Accepted Answer

A)  It will stay the same. 
B)  It will go up from 70% to 72%. 
C)  It will go up from 70% to 79%. 
D)  It will go down from 79% to 72%. 
A)  It will stay the same. 
B)  It will go up from 70% to 72%. 
C)  It will go up from 70% to 79%. 
D)  It will go down from 79% to 72%.

Question 9

Grimes Foods produces a gourmet salsa which sells for $28 per unit.Variable costs are $8 per unit,and fixed costs are $7,000 per month.If Grimes expects to sell 1,500 units,compute the margin of safety in dollars.

Accepted Answer

A)  $32,200 
B)  $30,000 
C)  $23,000 
D)  $9,200 
A)  $32,200 
B)  $30,000 
C)  $23,000 
D)  $9,200

Question 10

The level of inventory on hand at the end of the year does not affect the amount of operating income calculated under variable costing and absorption costing.

Accepted Answer

A) True 
 B)False

Question 11

Haywood Company has fixed costs of $30,000 per month.Highest production volume during the year was in January when 110,000 units were produced,90,000 units were sold,and total costs of $650,000 were incurred.In June,the company produced only 60,000 units.What was the total cost incurred in June?

Accepted Answer

A)  $537,600 
B)  $368,400 
C)  $650,000 
D)  $433,333 
A)  $537,600 
B)  $368,400 
C)  $650,000 
D)  $433,333

Question 12

A company that sells multiple products will always set selling prices such that all products have the same contribution margin.

Accepted Answer

A) True 
 B)False

Question 13

Fixed manufacturing overhead is considered a product cost under variable costing.

Accepted Answer

A) True 
 B)False

Question 14

McFadden,Inc.has collected the following data.(There are no beginning inventories.) $$\begin{array} { | l | r | } 
\hline \text { Units produced } & { 700 \text { units } } \
\hline \text { Sales price } & \$ 120 \text { per unit } \
\hline \text { Direct materials } & \$ 20 \text { per unit } \
\hline \text { Direct labor } & \$ 12 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 5 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 16,000 \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 6 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 12,300 \text { per year } \
\hline
\end{array}$$ What is the ending balance in Finished Goods Inventory using variable costing if 500 units are sold?

Accepted Answer

A)  $6,400 
B)  $7,400 
C)  $3,400 
D)  $4,000 
A)  $6,400 
B)  $7,400 
C)  $3,400 
D)  $4,000

Question 15

Assume that Anna's cellphone service provider charges $6 per month and $0.4 per minute per call.If Anna's current bill is $80,how many calling minutes did Anna use?

Accepted Answer

A)  220 minutes 
B)  200 minutes 
C)  185 minutes 
D)  170 minutes 
A)  220 minutes 
B)  200 minutes 
C)  185 minutes 
D)  170 minutes

Question 16

The fixed manufacturing overhead is considered a product cost in variable costing and a period cost in absorption costing.

Accepted Answer

A) True 
 B)False

Question 17

In its first year of business,Smith,Inc.produced and sold 600 units.If Smith uses variable costing,________.

Accepted Answer

A)  its operating income for the period will be higher than under absorption costing 
B)  its operating income for the period will be lower than under absorption costing 
C)  its value of ending Finished Goods Inventory reported in the balance sheet will be higher than under absorption costing 
D)  its operating income will be the same as under absorption costing 
A)  its operating income for the period will be higher than under absorption costing 
B)  its operating income for the period will be lower than under absorption costing 
C)  its value of ending Finished Goods Inventory reported in the balance sheet will be higher than under absorption costing 
D)  its operating income will be the same as under absorption costing

Question 18

Under absorption costing,the more fixed manufacturing overhead in ending Finished Goods Inventory,the larger the Cost of Goods Sold.

Accepted Answer

A) True 
 B)False

Question 19

Volplex,Inc.produces paper and office supplies and uses the just-in-time inventory system.Currently,the company is using variable costing.Which of the following is true of the effect of costing systems on the financial results of Volplex?

Accepted Answer

A)  Its operating income will be significantly higher if the company uses absorption costing instead of variable costing. 
B)  Its operating income will be significantly lower if the company uses absorption costing instead of variable costing. 
C)  Its operating income will vary a little if the company uses absorption costing instead of variable costing. 
D)  Its operating income will be negative if the company uses absorption costing instead of variable costing. 
A)  Its operating income will be significantly higher if the company uses absorption costing instead of variable costing. 
B)  Its operating income will be significantly lower if the company uses absorption costing instead of variable costing. 
C)  Its operating income will vary a little if the company uses absorption costing instead of variable costing. 
D)  Its operating income will be negative if the company uses absorption costing instead of variable costing.

Question 20

Grimes Company incurred fixed costs of $310,000.Total costs,both fixed and variable,are $480,000 when 50,000 units are produced.It sold 40,000 units during the year.Calculate the variable cost per unit.

Accepted Answer

A)  $9.60 
B)  $4.25 
C)  $6.20 
D)  $3.40 
A)  $9.60 
B)  $4.25 
C)  $6.20 
D)  $3.40

Which of the following will appear as a line item in the traditional format of an income statement?

When the total fixed costs increases,the breakeven point ________.

Paulson Company has provided the following information: Price per unit \ 50 Variable cost per unit 15 Fixed costs per month \ 16,000 What is the amount of sales in dollars required for Paulson to break even?

Which of the following appears as a line item in a contribution margin income statement?

In variable costing,the balance of ending Finished Goods Inventory includes fixed manufacturing overhead.

Grimes Foods produces a gourmet salsa which sells for $28 per unit.Variable costs are $8 per unit,and fixed costs are $7,000 per month.If Grimes expects to sell 1,500 units,compute the margin of safety in dollars.

The level of inventory on hand at the end of the year does not affect the amount of operating income calculated under variable costing and absorption costing.

Haywood Company has fixed costs of $30,000 per month.Highest production volume during the year was in January when 110,000 units were produced,90,000 units were sold,and total costs of $650,000 were incurred.In June,the company produced only 60,000 units.What was the total cost incurred in June?

A company that sells multiple products will always set selling prices such that all products have the same contribution margin.

Fixed manufacturing overhead is considered a product cost under variable costing.

Assume that Anna's cellphone service provider charges $6 per month and $0.4 per minute per call.If Anna's current bill is $80,how many calling minutes did Anna use?

The fixed manufacturing overhead is considered a product cost in variable costing and a period cost in absorption costing.

In its first year of business,Smith,Inc.produced and sold 600 units.If Smith uses variable costing,________.

Under absorption costing,the more fixed manufacturing overhead in ending Finished Goods Inventory,the larger the Cost of Goods Sold.

Volplex,Inc.produces paper and office supplies and uses the just-in-time inventory system.Currently,the company is using variable costing.Which of the following is true of the effect of costing systems on the financial results of Volplex?

Grimes Company incurred fixed costs of $310,000.Total costs,both fixed and variable,are $480,000 when 50,000 units are produced.It sold 40,000 units during the year.Calculate the variable cost per unit.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 21: Cost-Volume-Profit Analysis

Which of the following will appear as a line item in the traditional format of an income statement?

When the total fixed costs increases,the breakeven point ________.

Paulson Company has provided the following information: Price per unit \ 50 Variable cost per unit 15 Fixed costs per month \ 16,000 What is the amount of sales in dollars required for Paulson to break even?

Which of the following appears as a line item in a contribution margin income statement?

In variable costing,the balance of ending Finished Goods Inventory includes fixed manufacturing overhead.

Grimes Foods produces a gourmet salsa which sells for $28 per unit.Variable costs are $8 per unit,and fixed costs are $7,000 per month.If Grimes expects to sell 1,500 units,compute the margin of safety in dollars.

The level of inventory on hand at the end of the year does not affect the amount of operating income calculated under variable costing and absorption costing.

Haywood Company has fixed costs of $30,000 per month.Highest production volume during the year was in January when 110,000 units were produced,90,000 units were sold,and total costs of $650,000 were incurred.In June,the company produced only 60,000 units.What was the total cost incurred in June?

A company that sells multiple products will always set selling prices such that all products have the same contribution margin.

Fixed manufacturing overhead is considered a product cost under variable costing.

Assume that Anna's cellphone service provider charges $6 per month and $0.4 per minute per call.If Anna's current bill is $80,how many calling minutes did Anna use?

The fixed manufacturing overhead is considered a product cost in variable costing and a period cost in absorption costing.

In its first year of business,Smith,Inc.produced and sold 600 units.If Smith uses variable costing,________.

Under absorption costing,the more fixed manufacturing overhead in ending Finished Goods Inventory,the larger the Cost of Goods Sold.

Volplex,Inc.produces paper and office supplies and uses the just-in-time inventory system.Currently,the company is using variable costing.Which of the following is true of the effect of costing systems on the financial results of Volplex?

Grimes Company incurred fixed costs of $310,000.Total costs,both fixed and variable,are $480,000 when 50,000 units are produced.It sold 40,000 units during the year.Calculate the variable cost per unit.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters