managerial accounting exam ch

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1. . A company produces a single product. Last year, fixed manufacturing overhead was $30,000, variable production costs were $48,000, fixed selling and administration costs were $20,000, and variable selling administrative expenses were $9,600. There was no beginning inventory. During the year, 3,000 units were produced and 2,400 units were sold at a price of $40 per unit. Under variable costing, net operating income would be a loss of $2,000. 2. . A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: The total gross margin for the month under absorption costing is: A. $42,000 B. $14,700 C. $69,000 D. $79,800 $42,000 3. . Avitia Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 3,700 direct labor-hours will be required in September. The variable overhead rate is $5.70 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $48,100 per month, which includes depreciation of $5,550. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for September should be: $18.70 4. . Clayton Company produces a single product. Last year, the company's variable production costs totaled $8,000 and its fixed manufacturing overhead costs totaled $4,800. The company produced 4,000 units during the year and sold 3,600 units. Assuming no units in the beginning inventory: the ending inventory under variable costing will be $480 lower than the ending inventory under absorption costing 5. . In an income statement segmented by product line, a fixed expense that cannot be allocated among product lines on a cause-and-effect basis should be classified as a common fixed expense and not allocated. 6. . More Company has two divisions, L and M. During July, the contribution margin in Division L was $60,000. The contribution margin ratio in Division M was 40% and its sales were $250,000. Division M's segment margin was $60,000. The common fixed expenses were $50,000 and the company net operating income was $20,000. The segment margin for Division L was: $10,000 7. . Roberts Company produces a single product. This year, the company's net operating income under absorption costing was $2,000 lower than under variable costing. The company sold 8,000 units during the year, and its variable costs were $8 per unit, of which $2 was variable selling and administrative expense. If production cost was $10 per unit under absorption costing, then how many units did the company produce during the year? (The company produced the same number of units last year.) 7,500 8. 54. Sproles Inc. manufactures a variety of products. Variable costing net operating income was $90,500 last year and its inventory decreased by 3,500 units. Fixed manufacturing overhead cost was $6 per unit. What was the absorption costing net operating income last year? A. $90,500 B. $21,000 C. $69,500 D. $111,500 $69,500 9. Absorption costing is more compatible with cost-volume-profit analysis than is variable costing. True 10. Activity-based costing is a costing method that is designed to provide managers with product cost information for external financial reports. False 11. An activity-based costing system should include all of the activities carried out in an organization because any simplification will inevitably result in inaccuracy False Managerial Accounting Exam CH 5-8 Study online at quizlet.com/_h18q0

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Page 1: Managerial Accounting Exam CH

1. . A company produces a single product. Last year, fixed manufacturing overhead was $30,000,variable production costs were $48,000, fixed selling and administration costs were $20,000, andvariable selling administrative expenses were $9,600. There was no beginning inventory. During theyear, 3,000 units were produced and 2,400 units were sold at a price of $40 per unit. Under variablecosting, net operating income would be

a loss of $2,000.

2. . A manufacturing company that produces a single product has provided the following dataconcerning its most recent month of operations:The total gross margin for the month under absorption costing is: A. $42,000B. $14,700C. $69,000D. $79,800

$42,000

3. . Avitia Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The directlabor budget indicates that 3,700 direct labor-hours will be required in September. The variableoverhead rate is $5.70 per direct labor-hour. The company's budgeted fixed manufacturing overheadis $48,100 per month, which includes depreciation of $5,550. All other fixed manufacturingoverhead costs represent current cash flows. The company recomputes its predetermined overheadrate every month. The predetermined overhead rate for September should be:

$18.70

4. . Clayton Company produces a single product. Last year, the company's variable production coststotaled $8,000 and its fixed manufacturing overhead costs totaled $4,800. The company produced4,000 units during the year and sold 3,600 units. Assuming no units in the beginning inventory:

the endinginventory undervariable costingwill be $480 lowerthan the endinginventory underabsorption costing

5. . In an income statement segmented by product line, a fixed expense that cannot be allocated amongproduct lines on a cause-and-effect basis should be

classified as acommon fixedexpense and notallocated.

6. . More Company has two divisions, L and M. During July, the contribution margin in Division L was$60,000. The contribution margin ratio in Division M was 40% and its sales were $250,000. DivisionM's segment margin was $60,000. The common fixed expenses were $50,000 and the company netoperating income was $20,000. The segment margin for Division L was:

$10,000

7. . Roberts Company produces a single product. This year, the company's net operating income underabsorption costing was $2,000 lower than under variable costing. The company sold 8,000 unitsduring the year, and its variable costs were $8 per unit, of which $2 was variable selling andadministrative expense. If production cost was $10 per unit under absorption costing, then howmany units did the company produce during the year? (The company produced the same number ofunits last year.)

7,500

8. 54. Sproles Inc. manufactures a variety of products. Variable costing net operating income was$90,500 last year and its inventory decreased by 3,500 units. Fixed manufacturing overhead cost was$6 per unit. What was the absorption costing net operating income last year? A. $90,500B. $21,000C. $69,500D. $111,500

$69,500

9. Absorption costing is more compatible with cost-volume-profit analysis than is variable costing. True

10. Activity-based costing is a costing method that is designed to provide managers with product costinformation for external financial reports.

False

11. An activity-based costing system should include all of the activities carried out in an organizationbecause any simplification will inevitably result in inaccuracy

False

Managerial Accounting Exam CH 5-8Study online at quizlet.com/_h18q0

Page 2: Managerial Accounting Exam CH

12. An activity-based costing system that is designed for internal decision-makingwill not conform to generally accepted accounting principles because:

. all of the above are reasons why anactivity-based costing system that isdesigned for internal decision-making willnot conform to generally acceptedaccounting principles

13. All other things being equal, if a division's traceable fixed expenses increase: the division's segment margin will decrease

14. All other things equal, if a division's traceable fixed expenses decrease the division's segment margin will increase.

15. All other things the same, which of the following would be true of thecontribution margin and variable expenses of a company with high fixed costsand low variable costs as compared to a company with low fixed costs and highvariable costs?

Option C (Higher-Lower)

16. The amount by which a company's sales can decline before losses are incurredis called the

margin of safety

17. The ARB Company has two divisions: Electronics and DVD/Video Sales.Electronics has traceable fixed expenses of $146,280 and the DVD/Video Saleshas traceable fixed expenses of $81,765. If ARB Company has a total of$322,490 in fixed expenses, what are its common fixed expenses?

$94,445

18. Assuming that a segment has both variable expenses and traceable fixedexpenses, an increase in sales should increase profits by an amount equal tothe sales times the segment margin ratio.

Falsw

19. At the break-even point: Sales - Variable expenses = Fixed expenses. True

20. Balonek Inc.'s contribution margin ratio is 57% and its fixed monthly expensesare $41,000. Assuming that the fixed monthly expenses do not change, what isthe best estimate of the company's net operating income in a month when salesare $112,000?

$22,840

21. Berol Company plans to sell 200,000 units of finished product in July andanticipates a growth rate in sales of 5% per month. The desired monthly endinginventory in units of finished product is 80% of the next month's estimatedsales. There are 150,000 finished units in inventory on June 30.Berol Company's production requirement in units of finished product for thethree-month period ending September 30 is

665,720 units

22. Both planning and control are needed for an effective budgeting system True

23. Both variable and fixed manufacturing overhead costs are included in themanufacturing overhead budget.

True

24. Brasher Company manufactures and sells a single product that has a positivecontribution margin. If the selling price and variable expenses both decreaseby 5% and fixed expenses do not change, then what would be the effect on thecontribution margin per unit and the contribution margin ratio?

Option B (decrease-no change)

25. Break-even analysis assumes that: the average variable expense per unit isconstant

26. The break-even point in unit sales increases when variable expenses increase and the selling price remainsunchanged

27. The break-even point in unit sales is found by dividing total fixed expenses by the contribution margin per unit.

28. The break-even point in units can be obtained by dividing total fixed expensesby the contribution margin ratio.

False

29. The budgeted amount of raw materials to be purchased is determined by. adding the desired ending inventory of rawmaterials to the raw materials needed tomeet the production schedule andsubtracting the beginning inventory of rawmaterials

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30. Budgeted production needs are determined by addingbudgeted salesin units to thedesired endinginventory inunits anddeducting thebeginninginventory inunits from thistotal.

31. Budgeted sales in Allen Company over the next four months are given below:Twenty-five percent of the company's sales are for cash and 75% are on account. Collections for sales onaccount follow a stable pattern as follows: 50% of a month's credit sales are collected in the month of sale,30% are collected in the month following sale, and 15% are collected in the second month following sale.The remainder are uncollectible. Given these data, cash collections for December should be:

$103,500

32. Butteco Corporation has provided the following cost data for last year when 100,000 units wereproduced and sold:Raw Material---$200,000Direct Labor----$100,000Manufacturing Overhead------$200,000Selling and administrative expense---$150,000

All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling andadministrative expense. There are no beginning or ending inventories. If the selling price is $10 per unit,the net operating income from producing and selling 110,000 units would be

$405,000

33. The Carlquist Company makes and sells a product called Product K. Each unit of Product K sells for $24dollars and has a unit variablecost of $18. The company has budgeted the following data forNovember:•Sales of $1,152,200, all in cash.•A cash balance on November 1 of $48,000.•Cashdisbursements (other than interest) during November of $1,160,000.•A minimum cash balance onNovember 30 of $60,000.If necessary, the company will borrow cash from a bank. The borrowing will bein multiples of $1,000 and will bear interest at 2% per month. All borrowing will take place at thebeginning of the month. The November interest will be paid in cash during November.The amount ofcash needed to be borrowed on November 1 to cover all cash disbursements and to obtain the desiredNovember 30 cash balance is

$21,000

34. Christiansen Corporation uses an activity-based costing system with the following three activity costpools:

Activity Cost Pool Total Activity

Fabrication..............................70,000 Machine HoursOrder Processing.....................500 OrdersOther..........................................Not Applicable

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustainingcosts.The company has provided the following data concerning its costs:

Wages and salaries.............$420,000Deprecition.........................$160,000Occupancy...........................$200,000Total......................................$780,000

The distribution of resource consumption across activity cost pools is given below

$560 per order

Page 4: Managerial Accounting Exam CH

35. Cindy, Inc. sells a product for $10 per unit. The variable expenses are $6 per unit, and the fixedexpenses total $35,000 per period. By how much will net operating income change if sales areexpected to increase by $40,000?

$16,000 increase

36. Cockriel Inc., which produces a single product, has provided the following data for its mostrecent month of operations

$37

37. Colasuonno Corporation has two divisions: the West Division and the East Division. Thecorporation's net operating income is $88,800. The West Division's divisional segmentmargin is $39,500 and the East Division's divisional segment margin is $166,900. What is theamount of the common fixed expense not traceable to the individual divisions?

...

38. A common cost that should not be assigned to a particular product on a segmented incomestatement is

the salary of thecorporation president.

39. A company has provided the following dataSales----3,000 unitsSales Price----- $70 per unitVariable Price -----$50 per unitFixed Cost ------$25,000If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all otherfactors remain the same, net operating income will:

decrease by $31,875.

40. A company using lean production methods likely would show approximately the same netoperating income under both absorption and variable costing because

production is geared tosales under leanproduction and thus therewould be little or noending inventory.

41. A company with a degree of operating leverage of 4 would expect net operating income toincrease by 200% if sales increased from $100,000 to $150,000

True

42. A continuous (or perpetual) budget is a plan that is updatedmonthly or quarterly,dropping one period andadding another.

43. Contribution margin and segment margin mean the same thing. False

44. The contribution margin is viewed as a better gauge of the long run profitability of a segmentthan the segment margin.

...

45. The contribution margin ratio is 25% for Grain Company and the break-even point in sales is$200,000. To obtain a target net operating income of $60,000, sales would have to be

$440,000

46. The contribution margin ratio is 30% for the Honeyville Company and the break-even point insales is $150,000. If the company's target net operating income is $60,000, sales would have tobe:

$350,000

47. The contribution margin tells us what happens to profits as volume changes if a segment'scapacity and fixed costs change as well

...

48. Costs classified as batch-level costs should depend on the number of batches processed ratherthan on the number of units produced, the number of units sold, or other measures of volume

True

49. The costs of a particular department should not be split up among activity cost pools in anactivity-based costing system.

False

50. Craft Company produces a single product. Last year, the company had a net operating incomeof $80,000 using absorption costing and $74,500 using variable costing. The fixedmanufacturing overhead cost was $5 per unit. There were no beginning inventories. If 21,500units were produced last year, then sales last year were

20,400 units

51. Customer-level activities relate to specific customers and are not tied to any specific products True

Page 5: Managerial Accounting Exam CH

52. Danneman Corporation's fixed monthly expenses are $13,000 and its contribution margin ratio is 56%.Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's netoperating income in a month when sales are $41,000?

$9,960

53. Darth Company sells three products. Sales and contribution margin ratios for the three products followProduct X product Y Product ZSales in dollars....................20,000 $40,000 $100,000Contibution Margin ration.....45% 40% 15%

Given these data, the contribution margin ratio for the company as a whole would be

25%

54. Data concerning Knipp Corporation's single product appear below:Per Unit Percent of SalesSelling Price $230 100%Variable Expense 46 20%Contribution Margin 184 80%

Increase of$9,800

55. Data concerning Lancaster Corporation's single product appear below:Per Unit Percent of SalesSelling Price $200 100%Variable Expense 60 30%Contribution Margin 140 70

Fixed expenses are $105,000 per month. The company is currently selling 1,000 units per month.Management is considering using a new component that would increase the unit variable cost by $44. Sincethe new component would increase the features of the company's product, the marketing manager predictsthat monthly sales would increase by 400 units. What should be the overall effect on the company'smonthly net operating income of this change?

Increase of$5,600

56. Data concerning Moscowitz Corporation's single product appear below

Per Unit Percent of SalesSelling Price $160 100%Variable Expense 96 60%Contribution Margin 64 40%

Fixed expenses are $375,000 per month. The company is currently selling 8,000 units per month. Themarketing manager would like to cut the selling price by $15 and increase the advertising budget by$23,000 per month. The marketing manager predicts that these two changes would increase monthly salesby 3,100 units. What should be the overall effect on the company's monthly net operating income of thischange?

Increase of$8,900

57. Data concerning Runnells Corporation's single product appear below:

Per Unit Percent of SalesSelling Price $160 100%Variable Expense 80 50%Contribution Margin 80 50

The company is currently selling 6,000 units per month. Fixed expenses are $424,000 per month. Themarketing manager believes that a $7,000 increase in the monthly advertising budget would result in a 100unit increase in monthly sales. What should be the overall effect on the company's monthly net operatingincome of this change?

Increase of$1,000

58. The degree of operating leverage can be calculated as: contributionmargindivided bynetoperatingincome

Page 6: Managerial Accounting Exam CH

59. Designing a new product is an example of (an): Product-levelactivity.

60. The difference between total sales in dollars and total variable expenses is called The contributionmargin

61. Dimitrov Corporation, a company that produces and sells a single product, has provided itscontribution format income statement for July

Sales (7,000 units)..............$315,000Variable Expenses...............$175,000Contribution Margin...............140,000Fixed Expenses.......................103,500Net operating Income...............36,500

If the company sells 6,900 units, its net operating income should be closest to:

$34,500

62. Dull Corporation has been producing and selling electric razors for the past ten years. Shown beloware the actual net operating incomes for the last three years of operations at Dull:

Dull Corporation's cost structure and selling price has not changed during its ten years of operations.Based on the information presented above, which of the following statements is true?

...

63. A duration driver is: A measure of theamount of timerequired toperform anactivity.

64. During April, Division D of Carney Company had a segment margin ratio of 15%, a variable expenseratio of 60% of sales, and traceable fixed expenses of $15,000. Division D's sales were closest to

$60,000

65. East Company manufactures and sells a single product with a positive contribution margin. If theselling price and the variable expense per unit both increase 5% and fixed expenses do not change,what is the effect on the contribution margin per unit and the contribution margin ratio?

C. Option C(Increase-NoChange)

66. Evans Company produces a single product. During the most recent year, the company had a netoperating income of $90,000 using absorption costing and $84,000 using variable costing. The fixedoverhead application rate was $6 per unit. There were no beginning inventories. If 22,000 units wereproduced last year, then sales for last year were

21,000

67. Even departmental overhead rates will not correctly assign overhead costs in situations where acompany has a range of products that differ in volume, lot size, or complexity of production.

True

68. Fixed costs that are traceable to a segment may become common if the segment is divided into smallerunits.

True

69. Fixed manufacturing overhead is included in product costs under Option D (Yes-No)

Page 7: Managerial Accounting Exam CH

70. The following data have been taken from the budget reports of Brandon company, a merchandisingcompany.

Forty percent of purchases are paid for in cash at the time of purchase, and 30% are paid for in each of thenext two months. Purchases for the previous November and December were $150,000 per month. Employeewages are 10% of sales for the month in which the sales occur. Selling and administrative expenses are 20%of the following month's sales. (July sales are budgeted to be $220,000.) Interest payments of $20,000 arepaid quarterly in January and April. Brandon's cash disbursements for the month of April would be:

$254,000

71. The following information relates to Clyde Corporation which produced and sold 50,000 units last month.

Sales.......$850,000Manufacturing Cost:Fixed..............................$210,000Variable..........................$140,000Selling and administrative expenses:Fixed................................$300,000Variable............................$45,000

There were no beginning or ending inventories. Production and sales next month are expected to be 40,000units. The company's unit contribution margin next month should be

$13.30

72. For a given level of sales, a low contribution margin ratio will produce less net operating income than a highcontribution margin ratio

True

73. Gangwer Corporation produces a single product and has the following cost structure $95

74. Gaudy Inc. produces and sells a single product. The company has provided its contribution format incomestatement for May

Sales (4,5000 units)........ $427,500Variable Expenses...........265,500Contribution Margin........162,000Fixed Expenses..............135,300Net operating income.......$26,700

$19,500

75. Gore Corporation has two divisions: the Business Products Division and the Export Products Division.The Business Products Division's divisional segment margin is $55,700 and the Export Products Division'sdivisional segment margin is $70,600. The total amount of common fixed expenses not traceable to theindividual divisions is $107,400. What is the company's net operating income? A. $233,700B. $(126,300)C. $126,300D. $18,900

18,900

76. Hagos Corporation is working on its direct labor budget for the next two months. Each unit of outputrequires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The productionbudget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fullyadjusted to the total direct labor-hours needed each month, what would be the total combined direct laborcost for the two months?

$31,584.00

77. Hansen Company produces a single product. During the last year, Hansen had net operating income underabsorption costing that was $5,500 lower than its income under variable costing. The company sold 9,000units during the year, and its variable costs were $10 per unit, of which $6 was variable selling expense. Iffixed production cost is $5 per unit under absorption costing every year, then how many units did thecompany produce during the year?

7,900

78. Hatch Company has two divisions, O and E. During the year just ended, Division O had a segment marginof $9,000 and variable expenses equal to 70% of sales. Traceable fixed expenses for Division E were$19,000. Hatch Company as a whole had a contribution margin ratio of 40%, a segment margin of $25,000,and sales of $200,000. Given this data, the sales for Division E for last year were:

$50,000

Page 8: Managerial Accounting Exam CH

79. The Herald Company manufactures and sells a single product which sells for $50 per unit and has acontribution margin ratio of 30%. The company's monthly fixed expenses are $25,000. If Herald desiresa monthly target net operating income equal to 20% of sales dollars, sales in units will have to be(rounded)

5,000 units

80. Hirt Corporation sells its product for $12 per unit. Next year, fixed expenses are expected to be $400,000and variable expenses are expected to be $8 per unit. How many units must the company sell to generatenet operating income of $80,000?

120,000 units

81. If fixed expenses increase by $10,000 per year, then the level of sales needed to break even will alsoincrease by $10,000.

False

82. If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F isthe fixed expense, then the break-even point in units is

F � (P-V). Fdivided by (p-v)

83. If the fixed expenses increase in a company, and all other factors remain unchanged, then one wouldexpect the margin of safety to decrease.

True

84. If the number of units produced exceeds the number of units sold, then net operating income underabsorption costing will

be greaterthan netoperatingincome undervariablecosting

85. If two companies have the same total sales and total expenses and make the same product, the volatilityof net operating income with changes in sales will tend to be greater in the company with a higherproportion of fixed expenses in its cost structure.

True

86. If two companies produce the same product and have the same total sales and same total expenses,operating leverage will be lower in the company with a higher proportion of fixed expenses in its coststructure.

False

87. The impact on net operating income of a given dollar change in sales can be computed by applying thecontribution margin ratio to the dollar change in sales.

True

88. In activity-based costing, some manufacturing costs may be excluded from product costs True

89. In activity-based costing, there are a number of activity cost pools, each of which is allocated to productsand other costing objects using its own unique measure of activity

True

90. In general, duration drivers are more accurate measures of the consumption of resources thantransaction drivers.

True

91. In responsibility accounting, each segment in an organization should be charged with the costs forwhich it is responsible and over which it has control plus its share of common organizational costs

False

92. In segment reporting, sales dollars is usually an appropriate allocation base for selling, general, andadministrative expenses.

...

93. In the selling and administrative budget, the non-cash charges (such as depreciation) are added to thetotal budgeted selling and administrative expenses to determine the expected cash disbursements forselling and administrative expenses

False

94. Incremental analysis is an analytical approach that focuses only on those revenues and costs that willchange as a result of a decision.

True

95. James Company has a margin of safety percentage of 20% based on its actual sales. The break-even pointis $200,000 and the variable expenses are 45% of sales. Given this information, the actual profit is

$27,500

96. Johnson Company operates two plants, Plant A and Plant B. Last year, Johnson Company reported acontribution margin of $40,000 for Plant A. Plant B had sales of $200,000 and a contribution marginratio of 40%. Net operating income for the company was $27,000 and traceable fixed expenses for thetwo stores totaled $50,000. Johnson Company's common fixed expenses were:

$43,000

Page 9: Managerial Accounting Exam CH

97. Knoke Corporation's contribution margin ratio is 29% and its fixed monthly expenses are $17,000. If thecompany's sales for a month are $98,000, what is the best estimate of the company's net operating income?Assume that the fixed monthly expenses do not change

$11,420

98. Last year, Flynn Company reported a profit of $70,000 when sales totaled $520,000 and the contributionmargin ratio was 40%. If fixed expenses increase by $10,000 next year, what amount of sales will benecessary in order for the company to earn a profit of $80,000?

$570,000

99. Last year, Heidenescher Corporation's variable costing net operating income was $63,600 and its inventorydecreased by 600 units. Fixed manufacturing overhead cost was $1 per unit. What was the absorptioncosting net operating income last year?

$63,000

100. Last year, Salada Corporation's variable costing net operating income was $97,000. Fixed manufacturingoverhead costs released from inventory under absorption costing amounted to $14,000. What was theabsorption costing net operating income last year?

$83,000

101. Loren Company's single product has a selling price of $15 per unit. Last year the company reported totalvariable expenses of $180,000, fixed expenses of $90,000, and a net operating income of $30,000. A studyby the sales manager discloses that a 15% increase in the selling price would reduce unit sales by 10%. If herproposal is adopted, net operating income would

increaseby$28,500

102. Lunderville Inc. bases its selling and administrative expense budget on budgeted unit sales. The salesbudget shows 3,200 units are planned to be sold in December. The variable selling and administrativeexpense is $3.10 per unit. The budgeted fixed selling and administrative expense is $60,800 per month,which includes depreciation of $6,720 per month. The remainder of the fixed selling and administrativeexpense represents current cash flows. The cash disbursements for selling and administrative expenses onthe December selling and administrative expense budget should be:

$64,000

103. Managing and sustaining product diversity requires many more overhead resources such as productionschedulers and product design engineers than managing and sustaining a single product. The costs of theseresources can be accurately allocated to products on the basis of direct labor-hours.

True

104. Mancuso Corporation has provided its contribution format income statement for January. The companyproduces and sells a single product

Sales (2,900 units).....................$269,700Variable Expense ......................$107,300Contribution Margin....................162,400Fixed Expenses..........................137,100Net Operating Income.................$25,300

If the company sells 3,100 units, its total contribution margin should be closest to

$173,600

105. A manufacturing company that produces a single product has provided the following data concerning itsmost recent month of operations

What is the variable costing unit product cost for the month? A. $103B. $99C. $94D. $90

$90

106. A manufacturing company that produces a single product has provided the following data concerning itsmost recent month of operationsWhat is the net operating income for the month under variable costing? A. $21,600B. $(15,200)C. $8,000D. $13,600

...

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107. A manufacturing company that produces a single product has provided the following data concerning itsmost recent month of operations:A. $58,300B. $37,100C. $259,900D. $201,600

...

108. A manufacturing company that produces a single product has provided the following data concerning itsmost recent month of operations:A. $102B. $130C. $97D. $125

$125

109. A manufacturing company that produces a single product has provided the following data concerning itsmost recent month of operations:The total contribution margin for the month under variable costing is: A. $183,600B. $90,000C. $70,400D. $169,200

$169,200

110. A manufacturing company that produces a single product has provided the following data concerning itsmost recent month of operations:What is the net operating income for the month under absorption costing? A. $5,300B. $3,000C. $(12,700)D. $8,300

$8,300

111. A manufacturing company that produces a single product has provided the following data concerning itsmost recent month of operations:What is the total period cost for the month under variable costing? A. $185,000B. $117,600C. $273,200D. $302,600

...

112. The manufacturing overhead budget at Cutchin Corporation is based on budgeted direct labor-hours. Thedirect labor budget indicates that 2,800 direct labor-hours will be required in September. The variableoverhead rate is $7.00 per direct labor-hour. The company's budgeted fixed manufacturing overhead is$43,120 per month, which includes depreciation of $3,640. All other fixed manufacturing overhead costsrepresent current cash flows. The September cash disbursements for manufacturing overhead on themanufacturing overhead budget should be:

$59,080

113. The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-hours. Thedirect labor budget indicates that 7,100 direct labor-hours will be required in August. The variable overheadrate is $8.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $132,770 permonth, which includes depreciation of $24,850. All other fixed manufacturing overhead costs representcurrent cash flows. The company recomputes its predetermined overhead rate every month. Thepredetermined overhead rate for August should be:

$27.30

114. The margin of safety percentage is computed as (Totalsales -Break-evensales) �Totalsales

115. The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in dollars. True

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116. Mark Company currently sells a video recorder with a selling price of $300 per unit. Thevariable expense per unit is $175 and fixed expenses are $100,000. If the company reducesvariable expenses by $20 per unit and increases the fixed expenses by $10,000, the break-even point will increase.

False

117. The master budget is a network consisting of many separate budgets that are interdependent True

118. McCaskey Corporation uses an activity-based costing system with the following three activitycost pools:

Activity Cost Pool Total Activity

Fabrication..............................40,000 Machine HoursOrder Processing.....................500 OrdersOther..........................................Not Applicable

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.The company has provided the following data concerning its costs:

Wages and salaries.............$420,000Deprecition.........................$100,000Occupancy...........................$120,000Total......................................$640,000

The distribution of resource consumption across activity cost pools is given below

The activity rate for the Fabrication activity cost pool is closest to

$1.65 per machine-hour

119. Menlove Company had the following income statement for the most recent year:Sales (17,000 units)...... $357,000Variable Expenses...........$255,000Contribution Margin...........102,000Fixed Expenes...................68,000Net operating income.........34,000

Given this data, the unit contribution margin was:

$6 per unit

120. Montgomery Corporation produces and sells a single product. Data concerning that productappear belowPer Unit Percent of SalesSelling Price $240 100%Variable Expense 144 60%Contribution Margin 96 40%

Fixed expenses are $239,000 per month. The company is currently selling 3,000 units permonth. The marketing manager would like to cut the selling price by $12 and increase theadvertising budget by $12,000 per month. The marketing manager predicts that these twochanges would increase monthly sales by 500 units. What should be the overall effect on thecompany's monthly net operating income of this change

Decrease of $6,000

121. Moore Company produces a single product. During last year, Moore's variable productioncosts totaled $10,000 and its fixed manufacturing overhead costs totaled $6,800. Thecompany produced 5,000 units during the year and sold 4,600 units. There were no units inthe beginning inventory. Which of the following statements is true?

The net operating incomeunder absorption costingfor the year will be $544higher than net operatingincome under variablecosting

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122. Mosbey Inc. is working on its cash budget for June. The budgeted beginning cash balance is $16,000.Budgeted cash receipts total$188,000 and budgeted cash disbursements total $187,000. The desiredending cash balance is $40,000. The excess (deficiency) of cashavailable over disbursements for Junewill be

$17,000

123. Mowrer Corporation produces and sells a single product. Data concerning that product appear belowPer Unit Percent of SalesSelling Price $120 100%Variable Expense 48 60%Contribution Margin 72 40%

Fixed expenses are $567,000 per month. The company is currently selling 9,000 units per month. Themarketing manager would like to introduce sales commissions as an incentive for the sales staff. Themarketing manager has proposed a commission of $11 per unit. In exchange, the sales staff would accepta decrease in their salaries of $84,000 per month. (This is the company's savings for the entire salesstaff.) The marketing manager predicts that introducing this sales incentive would increase monthlysales by 600 units. What should be the overall effect on the company's monthly net operating income ofthis change?

Increase of$21,600

124. National Telephone company has been forced by competition to put much more emphasis on planningand controlling its costs. Accordingly, the company's controller has suggested initiating a formalbudgeting process. Which of the following steps will NOT help the company gain maximum acceptanceby employees of the proposed budgeting system

Implementingthe changequickly.

125. Net operating income reported under absorption costing will exceed net operating income reportedunder variable costing for a given period if:

productionexceeds salesfor thatperiod.

126. Olds Inc., which produces a single product, has provided the following data for its most recent month ofoperations

$130

127. On a CVP graph for a profitable company, the total expense line will be steeper than the line representingfixed costs.

True

128. On a CVP graph for a profitable company, the total revenue line will be steeper than the total expenseline.

True

129. One benefit of budgeting is that it coordinates the activities of the entire organization True

130. One difficulty with self-imposed budgets is that they are not subject to any type of review False

131. Only those costs that would disappear over time if a segment were eliminated should be consideredtraceable costs of the segment

True

132. Organization-sustaining activities are activities of the general organization that support specificproducts.

False

133. Over an extended period of time in which the final ending inventories are zero, the accumulated netoperating income figures reported under absorption costing will be

the same asthose reportedundervariablecosting

134. Patterson Company's variable expenses are 55% of sales. At a $400,000 sales level, the degree ofoperating leverage is 5. If sales increase by $30,000, the new degree of operating leverage will be(rounded)

3.91

135. Perona Corporation produces and sells a single product. Data concerning that product appear below:Selling price per unit..............$160.00Variable Expense per unit $70.40Fixed expense per month $385,280The unit sales to attain the company's monthly target profit of $9,000 is closest to

4,400 units

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136. Personnel administration is an example of (an): Organization-sustaining activity.

137. Planning and control are essentially the same thing False

138. Pool Company's variable expenses are 36% of sales. Pool is contemplating an advertisingcampaign that will cost $20,000. If sales increase by $80,000, the company's net operatingincome should increase by:

$31,200

139. A portion of the total fixed manufacturing overhead cost incurred during a period may be excluded from costof goods sold underabsorption costing.

140. The practice of assigning the costs of idle capacity to products can result in unstable unit productcosts.

True

141. Prestwich Company has budgeted production for next year as follows:

Two pounds of material A are required for each unit produced. The company has a policy ofmaintaining a stock of material A on hand at the end of each quarter equal to 25% of the nextquarter's production needs for material A. A total of 30,000 pounds of material A are on hand tostart the year. Budgeted purchases of material A for the second quarter would be

165,000 pounds

142. A product sells for $20 per unit and has a contribution margin ratio of 40 percent. Fixedexpenses total $240,000 annually. How many units of the product must be sold to yield a profit of$60,000?

37,500 units

143. The production budget is typically prepared prior to the sales budget False

144. Property taxes are an example of a cost that would be considered to be Organization-sustaining.

145. Reynold Enterprises sells a single product for $25. The variable expense per unit is $15 and thefixed expense per unit is $5 at the current level of sales. The company's net operating income willincrease by $5 if one more unit is sold.

False

146. Ribb Corporation produces and sells a single product. Data concerning that product appearbelow:

Per Unit Percent of SalesSelling Price $190 100%Variable Expense 57 30%Contribution Margin 133 70%

Fixed expenses are $913,000 per month. The company is currently selling 9,000 units per month.Management is considering using a new component that would increase the unit variable cost by$6. Since the new component would increase the features of the company's product, the marketingmanager predicts that monthly sales would increase by 400 units. What should be the overalleffect on the company's monthly net operating income of this change?

Decrease of $3,200

147. Rothe Company manufactures and sells a single product that it sells for $90 per unit and has acontribution margin ratio of 35%. The company's fixed expenses are $46,800. If Rothe desires amonthly target net operating income equal to 15% of sales, the amount of sales in units will have tobe (rounded):

2,600 units

148. Routsong Company had the following sales and production data for the past four years:

Selling price per unit, variable cost per unit, and total fixed cost are the same in each year. Whichof the following statements is not correct?

Because of thechanges inproduction levels,under variablecosting the unitproduct cost willchange each year.

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149. Roy Corporation produces a single product. During July, Roy produced 10,000 units. Costs incurredduring the month were as follows:Under absorption costing, any unsold units would be carried in the inventory account at a unitproduct cost of: A. $5.10B. $4.40C. $3.80D. $3.50

$4.40

150. The salary of the treasurer of a corporation is an example of a common cost which normally cannot betraced to product segments.

True

151. The salary paid to a store manager is a traceable fixed expense of the store. True

152. A sales budget is a detailed schedule showing the expected sales for the budget period; typically, it isexpressed in both dollars and units of product

True

153. Sales forecasts are drawn up after the cash budget has been completed because only then are thefunds available for marketing known

False

154. A segment is any portion or activity of an organization about which a manager seeks revenue, cost, orprofit data.

True

155. Segment margin is sales minus: variableexpenses andtraceable fixedexpenses.

156. Segmented statements for internal use should be prepared in the contribution format. True

157. Self-imposed budgets typically are: subject to reviewby higher levelsof managementin order toprevent thebudgets frombecoming tooloose

158. The selling and administrative expense budget of Breckinridge Corporation is based on budgeted unitsales, which are 5,500 units for June. The variable selling and administrative expense is $1.00 perunit. The budgeted fixed selling and administrative expense is $101,200 per month, which includesdepreciation of $6,050 per month. The remainder of the fixed selling and administrative expenserepresents current cash flows. The cash disbursements for selling and administrative expenses onthe June selling and administrative expense budget should be:

$100,650

159. Selling and administrative expenses are considered to be: a period costunder variablecosting.

160. Sensabaugh Inc., a company that produces and sells a single product, has provided its contributionformat income statement for January

Sales (1,800 units)......$91,800Variable expense...........59,400contribution Margin.......32,400Fixed Expenes................27,000Net operating income......5,400

$28,800

161. A shift in the sales mix from products with a low contribution margin ratio toward products with ahigh contribution margin ratio will lower the break-even point in the company as a whole

True

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162. Shown below is the sales forecast for Cooper Inc. for the first four months of the coming year.On average, 50% of credit sales are paid for in the month of the sale, 30% in the month following sale, andthe remainder are paid two months after the month of the sale. Assuming there are no bad debts, theexpected cash inflow in March is

$119,000

163. Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct laborbudget indicates that 8,100 direct labor-hours will be required in May. The variable overhead rate is $1.40per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,440 per month,which includes depreciation of $8,910. All other fixed manufacturing overhead costs represent currentcash flows. The May cash disbursements for manufacturing overhead on the manufacturing overheadbudget should be

$102,870

164. Sinclair Company's single product has a selling price of $25 per unit. Last year the company reported aprofit of $20,000 and variable expenses totaling $180,000. The product has a 40% contribution marginratio. Because of competition, Sinclair Company will be forced in the current year to reduce its selling priceby $2 per unit. How many units must be sold in the current year to earn the same profit as was earned lastyear?

15,000units

165. South Company sells a single product for $20 per unit. If variable expenses are 60% of sales and fixedexpenses total $9,600, the break-even point will be

$24,000

166. Stephen Company has the following data for its three stores last year:Given the above data, the total company sales were

1,250,000

167. Stephen Company produces a single product. Last year, the company had 20,000 units in its endinginventory. During the year, Stephen's variable production costs were $12 per unit. The fixed manufacturingoverhead cost was $8 per unit in the beginning inventory. The company's net operating income for the yearwas $9,600 higher under variable costing than it was under absorption costing. The company uses a last-in-first-out (LIFO) inventory flow assumption. Given these facts, the number of units of product in thebeginning inventory last year must have been:

21,200

168. Street Company's fixed expenses total $150,000, its variable expense ratio is 60% and its variable expensesare $4.50 per unit. Based on this information, the break-even point in units is

50,000units

169. Swiatek Corporation produces a single product and has the following cost structure: $153

170. To facilitate decision-making, fixed expenses should be expressed on a per-unit basis False

171. A total of 30,000 units were sold last year. The contribution margin per unit was $2, and fixed expensestotaled $20,000 for the year. This year fixed expenses are expected to increase to $26,000, but thecontribution margin per unit will remain unchanged at $2. How many units must be sold this year to earnthe same profit as was earned last year?

43,000units

172. The total volume in sales dollars that would be required to attain a given target profit is determined bydividing the sum of the fixed expenses and the target profit by the contribution margin ratio.

True

173. A transaction driver is A simplecount ofthenumber oftimes anactivityoccurs.

174. Transaction drivers usually take more effort to record than duration drivers. True

175. Tsuchiya Corporation manufactures a variety of products. Last year, the company's variable costing netoperating income was $57,500. Fixed manufacturing overhead costs deferred in inventory underabsorption costing amounted to $35,400. What was the absorption costing net operating income last year?

$92,900

176. Turner Company's contribution margin ratio is 15%. If the degree of operating leverage is 12 at the $150,000sales level, net operating income at the $150,000 sales level must equal

$1,875

177. Under variable costing, all variable costs are treated as product costs True

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178. Under variable costing, costs that are treated as period costs include all fixed costs.

179. Under variable costing, fixed manufacturing overhead cost is treated as a product cost True

180. The unit product cost under absorption costing does not include fixed manufacturing overhead cost. False

181. Unit-level activities are performed each time a unit is produced. True

182. The variable expense per unit is $12 and the selling price per unit is $40. Then the contribution marginratio is 70%.

True

183. Variable manufacturing overhead costs are treated as period costs under both absorption and variablecosting

False

184. Veltri Corporation is working on its direct labor budget for the next two months. Each unit of outputrequires 0.77 direct labor-hours. The direct labor rate is $11.20 per direct labor-hour. The productionbudget calls for producing 7,100 units in October and 6,900 units in November. The companyguarantees its direct labor workers a 40-hour paid work week. With the number of workers currentlyemployed, that means that the company is committed to paying its direct labor work force for at least5,480 hours in total each month even if there is not enough work to keep them busy. What would be thetotal combined direct labor cost for the two months?

A.$122,752.00

185. Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000units in June. The company desires that the inventory on hand at the end of each month be equal to 40%of the next month's expected unit sales. Due to excessive production during March, on March 31 therewere 25,000 units of Product W in the ending inventory. Given this information, Walsh Company'sproduction of Product W for the month of April should be

75,000 units

186. Weinreich Corporation produces and sells a single product. Data concerning that product appearbelow

Per Unit Percent of SalesSelling Price $180 100%Variable Expense 90 50%Contribution Margin 90 50%

The company is currently selling 2,000 units per month. Fixed expenses are $131,000 per month. Themarketing manager believes that an $18,000 increase in the monthly advertising budget would result ina 170 unit increase in monthly sales. What should be the overall effect on the company's monthly netoperating income of this change?

Decrease of$2,700

187. When production is less than sales for the period, absorption costing net operating income willgenerally be less than variable costing net operating income

True

188. When reconciling variable costing and absorption costing net operating income, fixed manufacturingoverhead costs deferred in inventory under absorption costing should be added to variable costing netoperating income to arrive at the absorption costing net operating income.

True

189. Which of the following activities would be classified as a batch-level activity? Setting upequipment

190. Which of the following are considered to be product costs under absorption costing? I. Variablemanufacturingoverhead.II. Fixedmanufacturingoverhead.

191. Which of the following are considered to be product costs under variable costing? I. Variablemanufacturingoverhead

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192. Which of the following formulas is used to calculate the contributionmargin ratio?

(Sales - Variable expenses) � Sales

193. Which of the following is not a benefit of budgeting? It reduces the need for tracking actual costactivity.

194. Which of the following is not a limitation of activity-based costing More accurate product costs may result inincreasing the selling prices of some products.

195. Which of the following is not correct regarding the manufacturingoverhead budget?

Total budgeted cash disbursements formanufacturing overhead is equal to the total ofbudgeted variable and fixed manufacturingoverhead

196. Which of the following represents the correct order in which theindicated budget documents for a manufacturing company would beprepared?

Selling and administrative expense budget, cashbudget, budgeted income statement, budgetedbalance sheet

197. Which of the following represents the normal sequence in which theindicated budgets are prepared?

Production, Cash, Income Statement

198. Which of the following statements is not correct? The cash budget must be prepared prior to thesales budget because managers want to know theexpected cash collections on sales made tocustomers in prior periods before projecting salesfor the current period.

199. The Willsey Merchandise Company has budgeted $40,000 in sales for themonth of December. The company's cost of goods sold is 30% of sales. Ifthe company has budgeted to purchase $18,000 in merchandise duringDecember, then the budgeted change in inventory levels over the month ofDecember is:

$6,000 increase

200. With regard to the CVP graph, which of the following statements is notcorrect?

. The CVP graph assumes that variable costs godown as volume goes up.

201. Would the following activities at a manufacturer of canned soup be bestclassified as unit-level, batch-level, product-level, or organization-sustaining activities?

Researching recipes Shipping orders to G. Storesunit unitbatch batchProduct unitproduct batch

Option DProduct/batch

202. Would the following costs be classified as product or period costs undervariable costing at a retail clothing store

B. Product -Period

203. Zee Corporation has provided the following data concerning its overheadcosts for the coming year:The activity rate for the Assembly activity cost pool is closest toA. $2.70 per labor-hourB. $4.25 per labor-hourC. $4.05 per labor-hourD. $8.10 per labor-hour

$4.25 per labor-hour