Question 1
Which of the following would be an example of a fixed cost?
Answer
| raw materials | ||
| sales commissions | ||
| utilities | ||
| property taxes |
3 points
Question 2
A mixed cost
Answer
| contains both a fixed and variable component | ||
| is always easy to separate | ||
| will decrease as output increases | ||
| none of the answers are correct |
3 points
Question 3
When a mixed cost is graphed the slope of the line equals
Answer
| the fixed cost per unit of output | ||
| the total cost per unit | ||
| the sales price per unit | ||
| the variable cost per unit of the activity driver |
3 points
Question 4
The scatter graph method
Answer
| is the most accurate method | ||
| has the advantage of objectivity | ||
| may reveal the presence of outliers | ||
| none of the answers are correct |
3 points
Question 5
The relevant range
Answer
| is the normal range of output | ||
| is the range of output where cost relationships are valid | ||
| may change from period to period | ||
| all of the answers are correct |
3 points
Question 6
Which of the following would probably be a discretionary fixed cost for a law firm?
Answer
| salary of receptionist | ||
| cost of television commercials | ||
| depreciation on furniture and equipment | ||
| cost of legal forms |
3 points
Question 7
Figure 3 2.
| Lassiter Toys, Inc. Cost of Materials |
|
| No. of toys | Total cost |
| produced | of materials |
| 100,000 | $20,000 |
| 200,000 | $40,000 |
| 300,000 | $60,000 |
See Figure 3 2: The cost behavior of the materials cost is
Answer
| fixed | ||
| mixed | ||
| variable | ||
| step |
3 points
Question 8
Figure 3 2.
| Lassiter Toys, Inc. Cost of Materials |
|
| No. of toys | Total cost |
| produced | of materials |
| 100,000 | $20,000 |
| 200,000 | $40,000 |
| 300,000 | $60,000 |
See Figure 3 2: What should the total materials cost be at a production level of 220,000 toys?
Answer
| $88,000 | ||
| $44,000 | ||
| $22,000 | ||
| $132,000 |
3 points
Question 9
Figure 3 2.
| Lassiter Toys, Inc. Cost of Materials |
|
| No. of toys | Total cost |
| produced | of materials |
| 100,000 | $20,000 |
| 200,000 | $40,000 |
| 300,000 | $60,000 |
See Figure 3 2: What is the materials cost per unit of output?
Answer
| $.20 | ||
| $.10 | ||
| $.60 | ||
| $.40 |
3 points
Question 10
Figure 3 3.
Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected.
| Month | Lease cost | Machine hours |
| April | $ 21,000 | 550 |
| May | 16,500 | 420 |
| June | 19,000 | 510 |
| July | 22,230 | 570 |
See Figure 3 3: Using the high low method calculate the variable rate for the lease cost
Answer
| $38.20 | ||
| $38.18 | ||
| $61.50 | ||
| $37.25 |
3 points
Question 11
Figure 3 3.
Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected.
| Month | Lease cost | Machine hours |
| April | $ 21,000 | 550 |
| May | 16,500 | 420 |
| June | 19,000 | 510 |
| July | 22,230 | 570 |
See Figure 3 3: Using the high low method calculate the fixed cost of leasing
Answer
| $482 | ||
| $516 | ||
| $420 | ||
| $456 |
3 points
Question 12
Figure 3 3.
Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected.
| Month | Lease cost | Machine hours |
| April | $ 21,000 | 550 |
| May | 16,500 | 420 |
| June | 19,000 | 510 |
| July | 22,230 | 570 |
See Figure 3 3: What would Okafor Company’s cost formula be to estimate the cost of leasing within the relevant range?
Answer
| total lease cost = $456 + ($38.20 ´ machine hours) | ||
| total lease cost = $516 + ($38.18 ´ machine hours) | ||
| total lease cost = $420 + ($37.25 ´ machine hours) | ||
| none of the answers are correct |
3 points
Question 13
Figure 3 3.
Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected.
| Month | Lease cost | Machine hours |
| April | $ 21,000 | 550 |
| May | 16,500 | 420 |
| June | 19,000 | 510 |
| July | 22,230 | 570 |
See Figure 3 3: What would the estimate of Okafor Company’s total lease cost be at a level of 500 machine hours?
Answer
| $19,606 | ||
| $19,556 | ||
| $16,464 | ||
| $18,546 |
3 points
Question 14
Figure 3 6.
Taran Company incurred the following costs for the months of January and February.
| Type of Cost | January | February |
| Insurance | $ 5,000 | $ 5,000 |
| Utilities | 4,000 | 6,000 |
| Depreciation | 3,500 | 3,500 |
| Materials | 10,000 | 20,000 |
See Figure 3 6: From the information above we can assume that
Answer
| insurance and depreciation are fixed costs | ||
| output decreased from January to February | ||
| output stayed the same from January to February | ||
| insurance is a mixed cost |
3 points
Question 15
Figure 3 6.
Taran Company incurred the following costs for the months of January and February.
| Type of Cost | January | February |
| Insurance | $ 5,000 | $ 5,000 |
| Utilities | 4,000 | 6,000 |
| Depreciation | 3,500 | 3,500 |
| Materials | 10,000 | 20,000 |
See Figure 3 6: Assume that output was 5,000 units in January and 10,000 units in February, utility cost is a mixed cost, and the fixed cost of utilities was $3,000. What was the variable rate per unit of output for utilities cost in January?
Answer
| $.20 | ||
| $.40 | ||
| $.60 | ||
| $.30 |
3 points
Question 16
Figure 3 6.
Taran Company incurred the following costs for the months of January and February.
| Type of Cost | January | February |
| Insurance | $ 5,000 | $ 5,000 |
| Utilities | 4,000 | 6,000 |
| Depreciation | 3,500 | 3,500 |
| Materials | 10,000 | 20,000 |
See Figure 3 6: If output was 5,000 units in January and 10,000 units in February we can assume that
Answer
| utilities and materials are variable costs | ||
| utilities, insurance, and depreciation are fixed costs | ||
| insurance and depreciation are mixed costs | ||
| materials is the only variable cost |
3 points
Question 17
Figure 4 1.
Foster Company makes power tools. The budgeted sales are $420,000, budgeted variable costs are $147,000, and budgeted fixed costs are $227,500.
Refer to Figure 4 1. What is the budgeted operating income?
Answer
| $273,000 | ||
| $227,500 | ||
| $45,500 | ||
| $374,500 | ||
| $567,000 |
3 points
Question 18
Figure 4 1.
Foster Company makes power tools. The budgeted sales are $420,000, budgeted variable costs are $147,000, and budgeted fixed costs are $227,500.
Refer to Figure 4 1. What is the variable cost ratio?
Answer
| 35% | ||
| 54% | ||
| 89% | ||
| 19% | ||
| 50% |
3 points
Question 19
Figure 4 1.
Foster Company makes power tools. The budgeted sales are $420,000, budgeted variable costs are $147,000, and budgeted fixed costs are $227,500.
Refer to Figure 4 1. What is the breakeven point in sales dollars?
Answer
| $350,000 | ||
| $420,000 | ||
| $650,000 | ||
| $780,000 | ||
| $567,000 |
3 points
Question 20
Figure 4 1.
Foster Company makes power tools. The budgeted sales are $420,000, budgeted variable costs are $147,000, and budgeted fixed costs are $227,500.
Refer to Figure 4 1. What is the contribution margin?
Answer
| $90,000 | ||
| $183,000 | ||
| $36,000 | ||
| $273,000 | ||
| $374,500 |
3 points
Question 21
Figure 4 1.
Foster Company makes power tools. The budgeted sales are $420,000, budgeted variable costs are $147,000, and budgeted fixed costs are $227,500.
Refer to Figure 4 1. What is the contribution ratio?
Answer
| 35% | ||
| 65% | ||
| 54% | ||
| 89% | ||
| 50% |
3 points
Question 22
Figure 4 6.
Xeller Company makes electronic keyboards. The practice model price is $220 and variable expenses are $190. The deluxe model price is $340 and variable expenses are $250. The professional model price is $1,200 and variable expense per unit is $800. Total fixed expenses are $187,000. Generally, Xeller sells 6 practice models and 3 deluxe models for every professional model sold.
Refer to Figure 4 6. Using the sales mix stated in the facts from Figure 4 6 to form a package, what is the total package contribution margin?
Answer
| $850 | ||
| $450 | ||
| $520 | ||
| $1,890 | ||
| $587 |
3 points
Question 23
Figure 4 6.
Xeller Company makes electronic keyboards. The practice model price is $220 and variable expenses are $190. The deluxe model price is $340 and variable expenses are $250. The professional model price is $1,200 and variable expense per unit is $800. Total fixed expenses are $187,000. Generally, Xeller sells 6 practice models and 3 deluxe models for every professional model sold.
Refer to Figure 4 6. What is the number of practice models sold at breakeven?
Answer
| 850 | ||
| 220 | ||
| 180 | ||
| 1,320 | ||
| 440 |
3 points
Question 24
Figure 4 6.
Xeller Company makes electronic keyboards. The practice model price is $220 and variable expenses are $190. The deluxe model price is $340 and variable expenses are $250. The professional model price is $1,200 and variable expense per unit is $800. Total fixed expenses are $187,000. Generally, Xeller sells 6 practice models and 3 deluxe models for every professional model sold.
Refer to Figure 4 6. What is the number of deluxe models sold at breakeven
Answer
| 220 | ||
| 660 | ||
| 1,320 | ||
| 850 | ||
| 440 |
3 points
Question 25
Figure 4 6.
Xeller Company makes electronic keyboards. The practice model price is $220 and variable expenses are $190. The deluxe model price is $340 and variable expenses are $250. The professional model price is $1,200 and variable expense per unit is $800. Total fixed expenses are $187,000. Generally, Xeller sells 6 practice models and 3 deluxe models for every professional model sold.
Refer to Figure 4 6. What is the number of professional models sold at breakeven?
Answer
| 220 | ||
| 850 | ||
| 400 | ||
| 4,675 | ||
| 440 |
3 points
Question 26
Figure 4 6.
Xeller Company makes electronic keyboards. The practice model price is $220 and variable expenses are $190. The deluxe model price is $340 and variable expenses are $250. The professional model price is $1,200 and variable expense per unit is $800. Total fixed expenses are $187,000. Generally, Xeller sells 6 practice models and 3 deluxe models for every professional model sold.
Refer to Figure 4 6. What is the overall sales revenue at breakeven?
Answer
| $778,800 | ||
| $387,200 | ||
| $1,288,700 | ||
| $2,067,800 | ||
| $968,000 |
3 points
Question 27
If fixed costs increase, the break even point in units will
Answer
| increase | ||
| decrease | ||
| remain the same | ||
| remain the same; however, contribution per unit will decrease |
3 points
Question 28
If the contribution margin per unit decreases, the break even point in units
Answer
| will increase | ||
| will decrease | ||
| will remain the same | ||
| cannot be determined from the information given |
3 points
Question 29
Firm X and Firm Y are competitors within the same industry. Firm X produces its product using large amounts of direct labor. Firm Y has replaced direct labor with investment in machinery. Projected sales for both firms are 15% LESS than in the prior year. Which statement regarding projected profits is TRUE?
Answer
| Firm X will lose more profit than Firm Y | ||
| Firm Y will lose more profit than Firm X | ||
| Firm X and Firm Y will lose the same amount of profit. | ||
| Neither Firm X nor Firm Y will lose profit. |
3 points
Question 30
Figure 4 10.
A company provided the following data:
| Sales | $540,000 |
| Variable costs | $378,000 |
| Fixed costs | $120,000 |
| Expected production and sales in units | 40,000 |
Refer to Figure 4 10. What is the break even point in sales dollars?
Answer
| $498,000 | ||
| $400,000 | ||
| $171,429 | ||
| $112,500 | ||
| $150,000 |
4 points
Question 31
Figure 4 10.
A company provided the following data:
| Sales | $540,000 |
| Variable costs | $378,000 |
| Fixed costs | $120,000 |
| Expected production and sales in units | 40,000 |
Refer to Figure 4 10. How much sales in dollars is necessary to generate a profit of $30,000?
Answer
| $528,000 | ||
| $500,000 | ||
| $214,286 | ||
| $100,000 | ||
| $150,000 |
3 points
Question 32
If sales remain the same and the margin of safety increases, which of the following is true?
Answer
| the breakeven point has increased | ||
| the breakeven point has decreased | ||
| fixed costs have increased | ||
| none of these is true |
3 points
Question 33
Operating leverage is the relative mix of
Answer
| revenues earned and manufacturing costs | ||
| fixed and variable costs | ||
| high volume and low volume products | ||
| manufacturing costs and period costs | ||
| revenues earned and variable costs |
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5130 mod2.doc