Question 1

Lacey sells hand-knit scarves at the flea market.Each scarf sells for $50.Lacey pays $30 to rent a vending space for one day.The variable costs are $15 per scarf.What total revenue amount does she need to earn to break even?

Accepted Answer

A)  $45 
B)  $43 
C)  $100 
D)  $93

Question 2

Pfeiffer Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 25%,then the total costs would ________.

Accepted Answer

A)  increase by 25% 
B)  remain the same 
C)  increase by an amount less than 25% 
D)  decrease by 25%

Question 3

E-trax,Inc.has provided the following financial information for the year: $$\begin{array} { | l | r | } 
\hline \text { Finished Goods Inventory: } & \
\hline \text { Beginning balance, in units } & 630 \
\hline \text { Units produced } & 2,800 \
\hline \text { Units sold } & \underline { 2,900 } \
\hline \text { Ending balance, in units } & \underline { 530 } \
\hline \text { Production costs: } \
\hline \begin{array} { l } 
\text { Nariable manufacturing costs per } \
\text { unit }
\end{array} & \$ 60 \
\hline \text { Total fixed manufacturing costs } & \$ 42,000 \
\hline
\end{array}$$ What is the unit product cost for the year using absorption costing?

Accepted Answer

A)  $75 
B)  $79 
C)  $127 
D)  $74

Question 4

Isphase,Inc.has provided the following financial data for the year ended December 31,2017:
 $$\begin{array} { | l | r | l|} 
\hline \text { Units produced and sold } & 3,500& \text { units } \
\hline \text { Sales price } & \$ 220 &\text { per unit } \
\hline \text { Direct materials } & \$ 25& \text { per unit } \
\hline \text { Direct labor } & \$ 45 &\text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 30 &\text { per unit } \
\hline \text { Variable selling and administrative costs } & \$ 20 &\text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 105,000 &\text { per year } \
\hline \text { Fixed selling and administrative costs } & \$ 140,000 &\text { per year } \
\hline
\end{array}$$ There are no beginning inventories.Prepare an income statement for the year using the traditional format.

Accepted Answer

The answer of Isphase,Inc.has provided the following financial data for...

Question 5

Schmidt Company sells glass vases at a wholesale price of $3 per unit.The variable cost of manufacture is $1.75 per unit.The fixed costs are $18,000 per month.Schmidt sold 5,500 units during this month.Calculate Schmidt's operating income (loss)for this month.

Accepted Answer

A)  $9,625 
B)  $11,125 
C)  $(11,125) 
D)  $(18,000)

Question 6

Sales mix,or product mix,is the combination of products that make up total sales.

Accepted Answer

A) True 
 B)False

Question 7

Neptune Company sold 4,000 units in November at a price of $35 per unit.The variable cost is $22 per unit.The monthly fixed costs are $10,000.What is the operating income earned in November?

Accepted Answer

A)  $52,000 
B)  $140,000 
C)  $42,000 
D)  $88,000

Question 8

In absorption costing,fixed manufacturing overhead is expensed ________.

Accepted Answer

A)  when all the other non-manufacturing fixed costs are expensed 
B)  when the product is sold 
C)  at the end of the period in which it is paid 
D)  when the units are produced

Question 9

Fontana Pizza Company sells pizzas in two different sizes-medium and large.The number of medium pizzas sold is twice the number of large pizzas sold.The contribution margin of a medium pizza is $12 and the contribution margin of a large pizza is $18.The weighted average contribution margin is $15.

Accepted Answer

A) True 
 B)False

Question 10

Joe's Tires,Inc.reports the following information for the year ended December 31: $$\begin{array} { | l | r | } 
\hline \text { Units sold } & { 590 \text { units } } \
\hline \text { Sales price } & \$ 200 \text { per unit } \
\hline \text { Direct materials } & \$ 27 \text { per unit } \
\hline \text { Direct labor } & \$ 9 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 16 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 30 \text { per unit } \
\hline \text { Variable selling and administrative costs } & \$ 5 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 12,500 \text { per year } \
\hline
\end{array}$$ The operating income calculated using variable costing and absorption costing amounted to $9,200 and $11,900,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under absorption costing for the year.

Accepted Answer

A)  $20,400 
B)  $17,700 
C)  $33,630 
D)  $30,680

Question 11

The high-low method is used to ________.

Accepted Answer

A)  determine the highest price that can be charged for a product 
B)  separate mixed costs into their variable and fixed components 
C)  identify the relevant and irrelevant costs of a business 
D)  determine the sales level at highest capacity

Question 12

Which of the following is considered a period cost under variable costing but not under absorption costing?

Accepted Answer

A)  fixed selling and administrative costs 
B)  variable manufacturing costs 
C)  fixed manufacturing overhead 
D)  variable selling and administrative costs

Question 13

Heung,Inc.reports the following information for the year ended December 31: $$\begin{array} { | l | r | } 
\hline \text { Units sold } & \text { 560units } \
\hline \text { Sales price } & \$ 140 \text { per unit } \
\hline \text { Direct materials } & \$ 29 \text { per unit } \
\hline \text { Direct labor } & \$ 8 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 13 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 20 \text { per unit } \
\hline \text { Variable selling and administrative costs } & \$ 5 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 13,200 \text { per year } \
\hline
\end{array}$$ The operating income calculated using variable costing and absorption costing amounted to $9,000 and $10,800,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under variable costing for the year 2016.

Accepted Answer

A)  $13,000 
B)  $11,200 
C)  $27,440 
D)  $28,000

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The margin of safety can be used to evaluate a company's plans for the future.

Accepted Answer

A) True 
 B)False

Question 16

Both the traditional income statement approach and the contribution margin approach will yield the same answer for net income.

Accepted Answer

A) True 
 B)False

Question 17

For every unit that is produced but not sold,absorption costing "hides" some of the fixed manufacturing overhead in ending Finished Goods Inventory.

Accepted Answer

A) True 
 B)False

Question 18

Oxygen,Inc.reports the following information: $$\begin{array} { | l | r | } 
\hline \text { Units produced } & 2,500 \text { units } \
\hline \text { Units sold } & 2,000 \text { units } \
\hline \text { Sales price } & \$ 200 \text { per unit } \
\hline \text { Direct materials } & \$ 40 \text { per unit } \
\hline \text { Direct labor } & \$ 25 \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 20 \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 90,000 \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 15 \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 75,000 \text { per year } \
\hline
\end{array}$$ Assume that the production costs and sales prices were the same in the previous year.Assume no beginning inventories.
Requirements:

Accepted Answer

A) Calculate unit product cost using absorption costing and variable costing. 
B) Calculate the operating income using absorption costing and variable costing.

Question 19

The phone bill for Ace Accounting consists of both fixed and variable costs.Refer to the four month data below and apply the high-low method to answer the question.(Round your intermediate calculations to two decimal places.) $$\begin{array} { | l | r | r | } 
\hline & \text { Minutes } & \text { Total Bill } \
\hline \text { May } & 480 & \$ 3,400 \
\hline \text { June } & 210 & \$ 2,680 \
\hline \text { July } & 175 & \$ 2,650 \
\hline \text { August } & 330 & \$ 2,875 \
\hline
\end{array}$$ What is the fixed portion of the total cost?

Accepted Answer

A)  $976.90 
B)  $1,788.70 
C)  $2,219.20 
D)  $2,650.00

Question 20

A company's proportion of fixed costs to variable costs is called its ________.

Accepted Answer

A)  target profit 
B)  relevant range 
C)  mixed cost 
D)  cost structure

Exam 21: Cost-Volume-Profit Analysis

Lacey sells hand-knit scarves at the flea market.Each scarf sells for $50.Lacey pays $30 to rent a vending space for one day.The variable costs are $15 per scarf.What total revenue amount does she need to earn to break even?

Pfeiffer Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 25%,then the total costs would ________.

Schmidt Company sells glass vases at a wholesale price of $3 per unit.The variable cost of manufacture is $1.75 per unit.The fixed costs are $18,000 per month.Schmidt sold 5,500 units during this month.Calculate Schmidt's operating income (loss) for this month.

Sales mix,or product mix,is the combination of products that make up total sales.

Neptune Company sold 4,000 units in November at a price of $35 per unit.The variable cost is $22 per unit.The monthly fixed costs are $10,000.What is the operating income earned in November?

In absorption costing,fixed manufacturing overhead is expensed ________.

Fontana Pizza Company sells pizzas in two different sizes-medium and large.The number of medium pizzas sold is twice the number of large pizzas sold.The contribution margin of a medium pizza is $12 and the contribution margin of a large pizza is $18.The weighted average contribution margin is $15.

The high-low method is used to ________.

Which of the following is considered a period cost under variable costing but not under absorption costing?

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

The margin of safety can be used to evaluate a company's plans for the future.

Both the traditional income statement approach and the contribution margin approach will yield the same answer for net income.

For every unit that is produced but not sold,absorption costing "hides" some of the fixed manufacturing overhead in ending Finished Goods Inventory.

A company's proportion of fixed costs to variable costs is called its ________.