. Manufacturing overhead consists of:
a. all manufacturing costs.
b. indirect materials but not indirect labor.
c. all manufacturing costs, except direct materials and direct labor.
d. indirect labor but not indirect materials.
2.Each of the following would be a period cost except:
a. the salary of the company president’s secretary.
b. the cost of a general accounting office.
c. depreciation of a machine used in manufacturing.
d. sales commissions.
3.In describing the cost formula equation Y = a + bX, which of the following statements is correct?
a. “X” is the dependent variable.
b. “a” is the fixed component.
c. In the high-low method, “b” equals change in activity divided by change in costs.
d. As “X” increases “Y” decreases.
4. Which one of the following costs should NOT be considered a direct cost of serving a particular customer who orders a customized personal computer by phone directly from the manufacturer?
a. the cost of the hard disk drive installed in the computer.
b. the cost of shipping the computer to the customer.
c. the cost of leasing a machine on a monthly basis that automatically d. tests hard disk drives before they are installed in computers.
d. the cost of packaging the computer for shipment.
5. The term differential cost refers to:
a. a difference in cost which results from selecting one alternative instead of another.
b. the benefit forgone by selecting one alternative instead of another.
c. a cost which does not involve any dollar outlay but which is relevant to the decision-making process.
d. a cost which continues to be incurred even though there is no activity.
6.When a decision is made among a number of alternatives, the benefit that is lost by choosing one alternative over another is the:
a. realized cost.
b. opportunity cost.
c. conversion cost.
d. accrued cost.
7.In September direct labor was 40% of conversion cost. If the manufacturing overhead for the month was $66,000 and the direct materials cost was $20,000, the direct labor cost was:
66000/.6 = 110000*.4 = 44000
8. At a volume of 10,000 units, Company P incurs $30,000 in factory overhead costs, including $10,000 in fixed costs. Assuming that this activity is within the relevant range, if volume increases to 12,000 units, Company P would expect to incur total factory overhead costs of:
20000/10000*12000 +10000 = 34000
9. Haar Inc. is a merchandising company. Last month the company’s cost of goods sold was $61,000. The company’s beginning merchandise inventory was $11,000 and its ending merchandise inventory was $21,000. What was the total amount of the company’s merchandise purchases for the month?
61000+21000-11000 = 71000
10. At a sales volume of 35,000 units, Thoma Corporation’s sales commissions (a cost that is variable with respect to sales volume) total $448,000.
To the nearest whole cent, what should be the average sales commission per unit at a sales volume of 36,800 units? (Assume that this sales volume is within the relevant range.)
448000/35000 = 12.8
12. Fiene Sales, Inc., a merchandising company, reported sales of 2,200 units in June at a selling price of $600 per unit. Cost of goods sold, which is a variable cost, was $364 per unit. Variable selling expenses were $23 per unit and variable administrative expenses were $33 per unit. The total fixed selling expenses were $30,500 and the total administrative expenses were $55,300.
The contribution margin for June was:
13. Getchman Marketing, Inc., a merchandising company, reported sales of $592,500 and cost of goods sold of $305,000 for April. The company’s total variable selling expense was $37,500; its total fixed selling expense was $16,000; its total variable administrative expense was $35,000; and its total fixed administrative expense was $38,900. The cost of goods sold in this company is a variable cost.
The gross margin for April is:
14. The following cost data pertain to the operations of Mancia Department Stores, Inc., for the month of February.
Corporate legal office salaries – $62,000
Shoe dept. cost of salaries (Brentwood Store) – $80,000
Corporate HQ building lease- $79,000
Store Manager Salary (Brentwood Store)- $14,000
Shoe Department Sales Commissions (Brentwood Store) – $8,000
Store utilities (Brentwood Store) – $13,000
Shoe Department Managers Salary (Brentwood Store) – $4,000
Central Warehouse lease cost – $11,000
Janitorial Cost (Brentwood Store) – $11,000
The Brentwood Store is just one of many stores owned and operated by the company. The Shoe Department is one of many departments at the Brentwood Store. The central warehouse serves all of the company’s stores.
What is the total amount of the costs listed above that are direct costs of the Shoe Department?
15. Temblador Corporation purchased a machine 7 years ago for $319,000 when it launched product E26T. Unfortunately, this machine has broken down and cannot be repaired. The machine could be replaced by a new model 330 machine costing $323,000 or by a new model 230 machine costing $285,000. Management has decided to buy the model 230 machine. It has less capacity than the model 330 machine, but its capacity is sufficient to continue making product E26T. Management also considered, but rejected, the alternative of dropping product E26T and not replacing the old machine. If that were done, the $285,000 invested in the new machine could instead have been invested in a project that would have returned a total of $386,000.
In making the decision to buy the model 230 machine rather than the model 330 machine, the differential cost was:
17. If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the break-even point in units is:
Q ÷ (P-V).
F ÷ (P-V).
V ÷ (P-V).
F ÷ [Q(P-V)].
18. James Company has a margin of safety percentage of 20% based on its actual sales. The break-even point is $200,000 and the variable expenses are 45% of sales. Given this information, the actual profit is:
19.Montgomery Corporation produces and sells a single product. Data concerning that product appear below:
Selling price – $240 per unit – 100% of sales
Variable Expenses – $144 per unit – 60% of sales
Contribution Margin – $96 per unit – 40% of sales
Fixed expenses are $239,000 per month. The company is currently selling 3,000 units per month. The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $12,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500 units. What should be the overall effect on the company’s monthly net operating income of this change?
increase of $102,000
decrease of $30,000
decrease of $6,000
increase of $30,000
20. Hassick Corporation produces and sells a single product whose contribution margin ratio is 63%. The company’s monthly fixed expense is $460,530 and the company’s monthly target profit is $19,000. The dollar sales to attain that target profit is closest to:
21. Shiraki Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit – $200
Variable expenses per unit – $78
Fixed expenses per month – $396,500
The break-even in monthly dollar sales is closest to:
22. Data concerning Carlo Corporation’s single product appear below:
Selling price per unit – $230
Variable expenses per unit – $69
Fixed expenses per month – $466,900
The break-even in monthly dollar sales is closest to:
23. A cement manufacturer has supplied the following data:
Tons of cement produced and sold – 260,000
Sales Revenue- $1,118,000
Variable Manufacturing Expense – $429,000
Fixed manufacturing expense – $288,000
Variable selling and administrative expense – $228,000
Net Operating Income – $82,000
What is the company’s unit contribution margin?
24. A company that makes organic fertilizer has supplied the following data:
Bags produced and sold – 680,000
Sales Revenue- $4,352,000
Variable Manufacturing Expense – $1,972,000
Fixed manufacturing expense – $730,000
Variable selling and administrative expense – $412,000
Net Operating Income – $456,000
The company’s unit contribution margin is closest to:
25. The following is Allison Corporation’s contribution format income statement for last month:
Sales – $800,000
Variable Expense – $300,000
Contribution Margin – 500,000
Fixed expenses- 400,000
Net Operating Income – 100,000
The company has no beginning or ending inventories. The company produced and sold 10,000 units last month.
What is the company’s degree of operating leverage?
25. Paxton Corp has provided the following data concerning its operations last month:
Variable expenses- 250,000
Fixed Expenses- 100,000
Paxton Corp is a retailing organization.
The contribution margin ratio is:
27. Robledo Corporation produces and sells a single product. Data concerning that product appear below:
Selling Price- $100 per unit – 100% of sales
Variable Expenses- 20 per unit – 20% of sales
Contribution Margin- $80 per unit – 80% of sales
Fixed expenses are $625,000 per month. The company is currently selling 9,000 units per month. Consider each of the following questions independently.
This question is to be considered independently of all other questions relating to Robledo Corporation. Refer to the original data when answering this question.
Management is considering using a new component that would increase the unit variable cost by $3. Since the new component would increase the features of the company’s product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company’s monthly net operating income of this change?
decrease of $30,800
decrease of $3,800
increase of $30,800
increase of $3,800
28. Data concerning Homme Corporation’s single product appear below:
Selling Price- $190 per unit – 100% of sales
Variable Expenses- 114 per unit – 60% of sales
Contribution Margin- $76 per unit – 40% of sales
The company is currently selling 2,000 units per month. Fixed expenses are $130,000 per month. Consider each of the following questions independently.
This question is to be considered independently of all other questions relating to Homme Corporation. Refer to the original data when answering this question.
The marketing manager believes that a $12,000 increase in the monthly advertising budget would result in a 190 unit increase in monthly sales. What should be the overall effect on the company’s monthly net operating income of this change?
increase of $2,440
decrease of $12,000
increase of $14,440
decrease of $2,440
29. Data concerning Celenza Corporation’s single product appear below:
Selling Price- $230 per unit
Variable expenses per unit- $59.80
Fixed expenses per month – $697,820
Assume the company’s monthly target profit is $25,000. The unit sales to attain that target profit are closest to:
30. Kuhner Corporation produces and sells two products. Data concerning those products for the most recent month appear below:
Sales- $10,000 (Product B64P) – $46,000 (Product I00E)
Variable Exp.- $2,500 (Product B64P) – $15,420 (Product I00E)
Fixed expenses for the entire company were $33,100.
If the sales mix were to shift toward Product B64P with total dollar sales remaining constant, the overall break-even point for the entire company:
would not change.
could increase or decrease.