McFarlane,Inc.reports the following information: \[\begin{array} { | l | r | c | } \hline \text { Units produced } & 590 & \text { units } \\ \hline \text { Units sold } & 490 & \text { units } \\ \hline \text { Sales price } & \$ 120 & \text { per unit } \\ \hline \text { Direct materials } & \$ 26 & \text { per unit } \\ \hline \text { Direct labor } & \$ 9 & \text { per unit } \\ \hline \text { Variable manufacturing overhead } & \$ 14 & \text { per unit } \\ \hline \text { Fixed manufacturing overhead } & \$ 16,500 & \text { per year } \\ \hline \text { Variable selling and administrative costs } & \$ 6 & \text { per unit } \\ \hline \text { Fixed selling and administrative costs } & \$ 12,200 & \text { per year } \\ \hline \end{array}\] There are no beginning inventories.What is the ending balance in Finished Goods Inventory using variable costing?

A) $4900 B) $3500 C) $5500 D) $7697 A) $4900 B) $3500 C) $5500 D) $7697

The phone bill for a company consists of both fixed and variable costs.Refer to the four-month data below and apply the high-low method to answer the question. \[\begin{array} { | l | r | r | } \hline & \text { Minutes } & \text { Total Bill } \\ \hline \text { January } & 480 & \$ 4000 \\ \hline \text { February } & 200 & \$ 2700 \\ \hline \text { March } & 170 & \$ 2640 \\ \hline \text { April } & 320 & \$ 2855 \\ \hline \end{array}\] What is the fixed portion of the total cost? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

A) $2107.20 B) $1360 C) $1893 D) $2640 A) $2107.20 B) $1360 C) $1893 D) $2640

Betsy's Pies,Inc.has provided the following financial information for the year: \[\begin{array} { | l | r | } \hline \text { Finished Goods Inventory: } & \\ \hline \text { Beginning balance, in units } & 640 \\ \hline \text { Units produced } & 2100 \\ \hline \text { Units sold } & 2200 \\ \hline \text { Ending balance, in units } & 540 \\ \hline \text { Production Costs: } & \\ \hline \text { Variable manufacturing costs per unit } & \$ 60 \\ \hline \text { Total fixed manufacturing costs } & \$ 33,600 \\ \hline \end{array}\] What is the unit product cost for the year using variable costing?

A) $76 B) $15 C) $60 D) $62 A) $76 B) $15 C) $60 D) $62

Exam 21: Cost-Volume-Profit Analysis

Reeds Paper Company sells a product for $80 per unit.Variable costs are $25 per unit,and fixed costs are $4,000 per month.Andres sold 2,000 units in October.Prepare an income statement for October using the contribution margin format.

(Essay)

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Question 201

When the variable cost per unit decreases,the contribution margin on each unit sold also decreases.

(True/False)

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Question 202

Fixed costs per unit is inversely proportional to the volume of units produced.

(True/False)

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Question 203

Alvarez Company is facing an $8 increase in the variable costs of producing one of its products for the upcoming year.As a result,the sales manager has made a proposal to increase the sales price of the product while increasing the advertising budget at the same time.The sales price increase will lower sales volume,but the other changes may help the company maintain its profit margin.Alvarez has provided the following information regarding the current year results and the proposal made by the sales manager: Current Year Proposal Unit sales 27,000 18,000 Sales price per unit \ 48 \ 54 Variable cost per unit \ 32 \ 40 Fixed cost \ 80,000 \ 96,000 Relative to the current year,the sales manager's proposal will ________.

(Multiple Choice)

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Question 204

When production is greater than sales,the operating income will be higher under absorption costing than variable costing.Assume zero beginning and ending inventories.Which of the following gives the correct reason for the above statement?

(Multiple Choice)

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(73)

Question 205

McFarlane,Inc.reports the following information: Units produced 590 units Units sold 490 units Sales price \ 120 per unit Direct materials \ 26 per unit Direct labor \ 9 per unit Variable manufacturing overhead \ 14 per unit Fixed manufacturing overhead \ 16,500 per year Variable selling and administrative costs \ 6 per unit Fixed selling and administrative costs \ 12,200 per year There are no beginning inventories.What is the ending balance in Finished Goods Inventory using variable costing?

(Multiple Choice)

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Question 206

The sales level at which operating income is zero is called the breakeven point.

(True/False)

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Question 207

Sensitivity analysis allows managers to see how various business strategies will affect profit levels.

(True/False)

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Question 208

Companies can use the contribution margin ratio approach to compute required sales in terms of units rather than in sales dollars.

(True/False)

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Question 209

The fixed costs per unit will ________.

(Multiple Choice)

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Question 210

If a company reduces its fixed costs,the operating income will increase by the same amount as the cost reduction.

(True/False)

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Question 211

Absorption costing considers ________ as product costs.

(Multiple Choice)

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Question 212

In absorption costing,fixed manufacturing overhead is expensed ________.

(Multiple Choice)

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Question 213

The phone bill for a company consists of both fixed and variable costs.Refer to the four-month data below and apply the high-low method to answer the question. Minutes Total Bill January 480 \ 4000 February 200 \ 2700 March 170 \ 2640 April 320 \ 2855 What is the fixed portion of the total cost? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar.)

(Multiple Choice)

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Question 214

In absorption costing,all product costs are recorded first as assets in the inventory accounts.

(True/False)

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Question 215

Complete the statement,using the following terms: increase,decrease,or have no effect on. Decreases in variable costs per unit contribution margin per unit and the breakeven point.

(Essay)

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Question 216

Betsy's Pies,Inc.has provided the following financial information for the year: Finished Goods Inventory: Beginning balance, in units 640 Units produced 2100 Units sold 2200 Ending balance, in units 540 Production Costs: Variable manufacturing costs per unit \ 60 Total fixed manufacturing costs \ 33,600 What is the unit product cost for the year using variable costing?

(Multiple Choice)

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Question 217

Contribution margin ratio is equal to ________.

(Multiple Choice)

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Question 218

Contribution margin is calculated by deducting ________ from sales revenue.

(Multiple Choice)

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Question 219

Which of the following is an example of a cost that does NOT change in total over wide ranges of volume or activity?

(Multiple Choice)

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Question 220

Exam 21: Cost-Volume-Profit Analysis

Reeds Paper Company sells a product for $80 per unit.Variable costs are $25 per unit,and fixed costs are $4,000 per month.Andres sold 2,000 units in October.Prepare an income statement for October using the contribution margin format.

When the variable cost per unit decreases,the contribution margin on each unit sold also decreases.

Fixed costs per unit is inversely proportional to the volume of units produced.

When production is greater than sales,the operating income will be higher under absorption costing than variable costing.Assume zero beginning and ending inventories.Which of the following gives the correct reason for the above statement?

The sales level at which operating income is zero is called the breakeven point.

Sensitivity analysis allows managers to see how various business strategies will affect profit levels.

Companies can use the contribution margin ratio approach to compute required sales in terms of units rather than in sales dollars.

The fixed costs per unit will ________.

If a company reduces its fixed costs,the operating income will increase by the same amount as the cost reduction.

Absorption costing considers ________ as product costs.

In absorption costing,fixed manufacturing overhead is expensed ________.

In absorption costing,all product costs are recorded first as assets in the inventory accounts.

Complete the statement,using the following terms: increase,decrease,or have no effect on. Decreases in variable costs per unit ________ contribution margin per unit and ________ the breakeven point.

Contribution margin ratio is equal to ________.

Contribution margin is calculated by deducting ________ from sales revenue.

Which of the following is an example of a cost that does NOT change in total over wide ranges of volume or activity?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

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

Complete the statement,using the following terms: increase,decrease,or have no effect on. Decreases in variable costs per unit contribution margin per unit and the breakeven point.