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- Most business decisions focus on a narrow range of activity called the: a. optimal range of production b. tactical operating range of production c. relevant range of production d. strategic range of production The following applies to questions 2 and 3: Behn Corporation uses the total cost concept of cost-plus product pricing. Below is cost information for the production and sale of 50,000 units of its single product. Behn’s owners want a profit equal to a 15% rate of return on invested assets of $650,000. Fixed factory overhead cost $280, Fixed selling and administrative costs 70, Variable direct materials cost per unit 4. Variable direct labor cost per unit 6. Variable factory overhead cost per unit 2. Variable selling and administrative cost per unit 2.
- Behn’s investors desire a total profit of: a. $ 50,000 c. $650, b. $297,500 d. $ 97,
- The selling price for Behn’s product is: a. $25.20 per unit c. $23.25 per unit b. $16.25 per unit d. $19.75 per unit
- Fuller Corporation is a merchandiser in the consumer goods industry. Fuller’s gross profit percentage in 2008 is 44%. If the industry’s average gross profit percentage is 40%, what can we say about Fuller Corporation at the gross profit level?
a. it had more receivables than the average company in the industry b. it was more profitable than the average company in the industry c. it incurred more expenses than the average company in the industry d. it was less profitable than the average company in the industry
- Winger Corporation overapplied factory overhead costs to work in process by $400. Which of the following will Winger record to correct this error? a. A $400 increase to work in process b. A $400 increase to cost of goods sold c. A $400 decrease to cost of goods sold d. A $400 decrease to factory overhead e. Both b. and d.
- Harris Company’s sales are $950,000. Its variable costs are 62% of sales, and operating income is $48,000. What is Harris’ total fixed cost? a. $589, b. $361, c. $380, d. $313, The following applies to questions 7-10: Hughes, Inc. manufactures personal security items. For July 2008, the first month of operations, it reports: Sales $610, Work in process inventory, end of month
Gross profit 200, Indirect labor 18, Indirect materials 35, Other factory overhead 12, Materials purchased 285, Total manufacturing costs 465,
- Slagle Company manufactures designer pens. Last year, fixed costs were $525,000, operating income was $195,000, unit selling price was $60, and unit variable costs were $45. What was Slagle’s break-even point? a. 11,667 units c. 35,000 units b. 48,000 units d. 13,000 units The following information applies to questions 12 and 13: On September 1, Seller Company sold merchandise on account to Buyer Company for $34,000, terms 2/10, n/eom, FOB shipping point. Seller’ cost of merchandise sold was $18,500. On September 2, Buyer paid $325 of transportation costs. On September 4, Buyer returned $1,000 of the goods.
- If Buyer Company pays within the discount period, what will be the total amount it pays to Seller Company? a. $32,340 c. $33, b. $33,320 d. $32,
- When Seller Company records the September 1 transaction, it will include which of the following? a. an increase to cash of $32, b. an increase to accounts receivable of $34, c. a decrease to merchandise inventory of $17, d. a decrease to merchandise inventory of $18,
- Becker Company purchased merchandise on account from Seymour Company for $102,000, terms 4/15, n/45, FOB destination. Seymour paid the transportation costs of $500. What will be Becker’s net cost of merchandise purchased, if it pays within the discount period? a. $98,900 c. $98, b. $98,400 d. $97,
- Stern Company reports the following selected account balances for 2008: Accounts receivable $ 14,000 Interest income $ 7,
Administrative expenses 37,000 Interest expense 35, Cost of merchandise sold 415,000 Merchandise inventory
Dividends 2,200 Net sales 852, Income tax expense 64,000 Selling expenses 96, What is Stern’s 2008 net income? a. $259,800 c. $212, b. $209,800 d. $226,
- The following information relates to Draughon Company in 2008: Net income $ 72, Gross profit 132, Income before tax 89, Net sales 315, Income from operations 95, What was Draughon’s cost of merchandise sold (COMS)? a. $204,700 c. $243, b. $182,900 d. $220,
- Fennell Corporation reports the following selected account balances for 2008: Cost of merchandise sold $ 410,000 Sales returns and allowances
Sales discounts 13,000 Selling expenses 95, Sales revenue 945,000 Transportation in 12, What is Fennell Corporation’s net sales? a. $ 442,000 c. $ 839, b. $ 852,000 d. $ 535,
- Costs that remain constant in total as the level of activity changes are:
- How does a purchase discount affect the buyer’s accounts? a. increases merchandise inventory cost b. increases accounts payable c. decreases merchandise inventory cost d. decreases cost of merchandise sold
- Bell Company purchased merchandise from Stone Company for $87,000 on account. Stone paid $ in transportation costs, as required by the purchase contract. The shipping terms must have been: a. FOB shipping point c. FOB transportation b. FOB merchandise d. FOB destination
- Businesses cannot use cost-volume-profit analysis for predicting future performance if which of the following occurs? a. costs cannot be properly classified into fixed and variable costs b. total fixed costs increase during the period c. per-unit variable costs increase during the period d. the business has more than one division
- In 2008, Copple Company’s sales were $200,000, variable costs were 58% of sales, and operating income was $30,000. If sales increase by $10,000 with no changes in cost constants (variable and fixed), by how much will operating income increase? a. $40,000 c. $ 5, b. $10,000 d. $ 4,
- For a manufacturer, conversion costs are: a. always variable
b. direct materials cost plus direct labor cost c. factory overhead costs plus cost of goods sold d. direct labor cost plus factory overhead cost e. both a. and b.
- Roth Corporation manufactures microwave ovens. In its most productive month last year, it made 34,000 units at a total manufacturing cost of $805,500. In its least productive month, it made 20,000 units at a total manufacturing cost of $690,000. What are Roth’s fixed cost in total and variable cost per unit? Fixed Cost Variable Cost a. $115,500 $14.00 per unit b. $525,000 $ 8.25 per unit c. $525,000 $23.69 per unit d. $115,500 $ 8.25 per unit
- In 2008, King Company’s fixed costs are $820,000. The company’s unit selling price is $140, and unit variable costs are $60. How many units must King sell to realize an operating income (target profit) of $80,000? a. 80,000 units c. 11,250 units b. 10,250 units d. 6,429 units
- Target costing is necessary when the company faces a(n): a. unreasonable desired profit b. demand for its product that is out of line with its competitors c. selling price for its product pre-set by the market d. production bottleneck
- What is the branch of Accounting that deals with issues internal to a business, such as cost control, product pricing, and differential analysis? a. managerial accounting c. internal systems accounting b. tax accounting d. financial accounting
- Sales returns and allowances is what kind of account? a. expense c. liability b. contra-revenue d. contra-asset
- Which of the following increases a manufacturer’s finished goods inventory? a. Cost of goods sold b. Cost of goods in process c. Cost of goods completed d. Cost of direct materials The following applies to questions 34 and 35: Papaik Company manufactures snow sleds and sells all it produces. The relevant range of production and sales is shown below, along with a flexible budget for manufacturing costs: 200,000 units 500,000 units Total: Variable? $1,900, Fixed? 875, Total manufacturing costs:
Per-unit: Variable?? Fixed?? Total per-unit manufacturing costs:
- What does Papaik predict total manufacturing cost will be if it makes and sells 200, units? a. $1,387,500 c. $1,635, b. $1,900,000 d. $1,110,
- What does Papaik predict total manufacturing cost per unit will be if it makes and sells 500,000 units? a. $3.80 per unit c. $8.18 per unit
b. $5.55 per unit d. $9.50 per unit
- Rimer Company is a merchandiser. This means that Rimer sells: a. goods that it purchased c. goods that it earned b. goods that it made d. any of the above
b. period costs d. administrative costs
- Hill Manufacturing Company applies factory overhead costs to production based on direct labor hours. It estimated total factory overhead costs of $680,000 and 10, direct labor hours for the current year. During 2008, Job #117 used 4,600 direct labor hours. Which of the following was the effect on Hill’s specific accounts of applying factory overhead costs to Job #117? a. finished goods increased and cost of goods sold increased, each by $680, b. finished goods increased and work in process decreased, each by $312, c. work in process increased and factory overhead decreased, each by $312, d. work in process increased and factory overhead decreased, each by $680,
- Kiger Company sells two products, Lights and Fans. Last year, Kiger’s sales mix was 25% lights and 75% fans. Related data are: Product Selling Price Variable Cost Contribu tion Margin Lights $80/un it $25/unit $55/unit Fans $120/ unit $48/unit $72/unit Kiger’s fixed costs for the year totaled $1,300,800. What was the break-even point for the whole company (enterprise) in units? Round to the nearest unit. a. 19,200 units b. 10,243 units c. 23,651 units d. 18,067 units
- Mautz Company manufactures clock radios, and it operated at 80% of capacity last year. Fixed costs were $800,000, variable costs were 55% of sales, and sales were $3,200,000. Income from operations was: a. $ 640,000 c. $2,400, b. $1,760,000 d. $1,440,
The following applies to questions 45 and 46: Hoag Company’s condensed income statement for 2008 in traditional format follows: Sales revenue $1,000, Cost of goods sold 780, Gross profit 220, Selling & administrative expenses 175, Income from operations 45, To predict future revenues, costs, and profit, Hoag needs an income statement in contribution format. Analysis of costs finds that 30% of cost of goods sold and 52% of selling and administrative expenses are variable.
- What will be Hoag’s contribution margin in the contribution format income statement? a. $780,000 c. $370, b. $675,000 d. $220,
- What will be Hoag’s income from operations in the contribution format income statement? a. $ 45,000 c. $675, b. $220,000 d. $370,
- Real Company’s variable costs are $100,000 and fixed costs are $125,000. Desired profit is $50,000, so total price is $275,000. Real’s markup percentage is: a. 18% b. 82% c. 50% d. 22%
- Costs that remain constant per unit as levels of activity change are: a. fixed costs c. mixed costs b. variable costs d. differential costs
- Cramer Company manufactures two products, Ups and Downs. Both products go through a coating process that is a production bottleneck due to the unavailability of labor hours. The following data applies to these products: Ups Downs Selling price $40/unit $35/unit Variable cost $12/unit $15/unit The Ups product spends 4 hours per unit in the coating process, and the Downs product spends 2 hours per unit in the coating process. Which product is the more profitable in the bottleneck conditions? a. Ups b. Downs c. Both products are equally profitable in the bottleneck d. Cannot tell from information given
- Thor Manufacturing makes two products: bikes and scooters. The following data are available: Per unit Per unit Selling price Variable cost Bikes $375 $ Scooters $500 $ Thor’s wheel installation process is experiencing a bottleneck (insufficient labor hours available). Bikes use 1.9 installation process hours per unit, and Scooters use 1.4 hours per unit. What is the contribution per bottleneck hour that Thor earns from Scooters? a. $220 c. $ 89 b. $157 d. $
27. C
28. A
29. D
30. C
31. B
32. B
33. C
34. C
35. B
36. A
37. B
38. B
39. D
40. C
41. C
42. C
43. A
44. A
45. B
46. A
47. D
48. B
49. B
50. B
