Question 1

Lori sells hand-knit scarves at a flea market.Each scarf sells for $35.Lori pays $70 to rent a vending space for one day.The variable costs are $20 per scarf.How many scarves should she sell each day in order to break even?

Accepted Answer

A) 35 scarves 
B) 5 scarves 
C) 7 scarves 
D) 4 scarves

Question 2

Indiana Hot Tubs,Inc.reports the following information for August:

Calculate the operating income for August using variable costing.

Accepted Answer

A) $550,000 
B) $697,000 
C) $477,000 
D) $770,000

Question 3

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

Question 4

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 5

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

Question 6

In variable costing,all fixed manufacturing overhead costs are expensed in the period incurred.

Accepted Answer

A) True 
 B)False

Question 7

The margin of safety focuses on how much operating income is left over from sales revenue after covering all variable and fixed costs.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following costs remains the same irrespective of the changes in production?

Accepted Answer

A) Total mixed costs 
B) Total operating costs 
C) Total variable costs 
D) Total fixed costs

Question 9

Patel Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 15%,then the total fixed costs would ________.

Accepted Answer

A) increase by 15% 
B) remain the same 
C) increase by an amount less than 15% 
D) decrease by 15%

Question 10

Medbam,Inc.has collected the following data.(There are no beginning inventories. ):

What is the operating income using absorption costing? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )

Accepted Answer

A) $28,500 
B) $21,000 
C) $6,000 
D) $13,500

Question 11

The breakeven point represents the sales volume at which the company's net income is zero.

Accepted Answer

A) True 
 B)False

Question 12

The phone bill for Laurel 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 calculation to two decimal places. )

What is the variable cost per minute?

Accepted Answer

A) $1.13 
B) $0.38 
C) $1.02 
D) $0.75

Question 13

Which of the following statements is true of absorption costing?

Accepted Answer

A) It considers variable selling and administrative costs as product costs. 
B) It considers fixed selling and administrative costs as product costs. 
C) It considers fixed manufacturing overhead cost as product costs. 
D) It considers variable manufacturing overhead cost as period costs.

Question 14

Penny's Pies,Inc.has provided the following financial information for the year:

What is the unit product cost for the year using variable costing?

Accepted Answer

A) $62 
B) $12 
C) $50 
D) $92

Question 15

Which of the following will appear as a line item in the income statement prepared under variable costing?

Accepted Answer

A) Contribution Margin 
B) Total Cost of Goods Sold 
C) Work-in-Process Inventory 
D) Gross Profit

Question 16

Hooper Business Machines provided the following manufacturing costs for the month of March.

From the above information,calculate Hooper's total fixed costs.

Accepted Answer

A) $327,200 
B) $57,300 
C) $76,100 
D) $83,400

Question 17

When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A variable costing income statement is used for ________.

Accepted Answer

A) filing income tax returns 
B) external reporting purposes 
C) determining the amount of gross profit 
D) internal decision-making purposes

Question 20

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

Accepted Answer

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

Exam 21: Cost-Volume-Profit Analysis

Lori sells hand-knit scarves at a flea market.Each scarf sells for $35.Lori pays $70 to rent a vending space for one day.The variable costs are $20 per scarf.How many scarves should she sell each day in order to break even?

Indiana Hot Tubs,Inc.reports the following information for August: Calculate the operating income for August using 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?

In absorption costing,fixed manufacturing overhead is expensed ________.

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.

In variable costing,all fixed manufacturing overhead costs are expensed in the period incurred.

The margin of safety focuses on how much operating income is left over from sales revenue after covering all variable and fixed costs.

Which of the following costs remains the same irrespective of the changes in production?

Patel Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 15%,then the total fixed costs would ________.

Medbam,Inc.has collected the following data.(There are no beginning inventories. ) : What is the operating income using absorption costing? (Round any intermediate calculations to the nearest cent,and your final answer to the nearest dollar. )

The breakeven point represents the sales volume at which the company's net income is zero.

The phone bill for Laurel 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 calculation to two decimal places. ) What is the variable cost per minute?

Which of the following statements is true of absorption costing?

Penny's Pies,Inc.has provided the following financial information for the year: What is the unit product cost for the year using variable costing?

Which of the following will appear as a line item in the income statement prepared under variable costing?

Hooper Business Machines provided the following manufacturing costs for the month of March. From the above information,calculate Hooper's total fixed costs.

When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

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

A variable costing income statement is used for ________.

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