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Question1

1/1point
Renting a scooter and paying $30 per day plus $.20 per mile driven is an example of what type of
cost?
A) Mixed cost
B) Variable cost
C) Conversion cost
D) Fixed cost
Question2
1/1point
Total fixed costs for Randolph Manufacturing are $754,000. Total costs, including both fixed and
variable, are $1,000,000 if 150,000 units are produced. The fixed cost per unit at 188,500 units
would be closest to
A) $4.00/unit.
B) $5.31/unit.
C) $5.03/unit.
D) $1.31/unit.
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Question3
0/1point
Total costs for Locke & Company at 120,000 units are $289,000, while total fixed costs are $145,000.
The total variable costs at a level of 250,000 units would be
A) $602,083.
B) $138,720.
C) $302,083.
D) $300,000.
Hide
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Cost
Equation y
= vx + f
$289,000 =
120,000x +
$145,000
X = 1.20
Then $1.20
250,000 =
$300,000
Question4
1/1point
Ifproductionincreasesby30%,howwilltotalvariablecostslikelyreact?
A) Increase by 15%
B) Decrease by 30%
C) Increase by 30%

D) Remain the same


Question
5
Ifacompany'soverheadcostequationisy=$8.80x+$120,020.The"x"is
A) the variable costs.

1/1
point

B) total fixed costs.


C) the cost driver in units.
D) total overhead costs.
Question
6
Intheequationy=$11.75x+$550,
A) $550 are the total variable costs.

1/1
point

B) $550 are the total step costs.


C) $550 are the total overhead costs.
D) $550 are the total fixed costs.
Question
1/1
point
7
BestBirdiesproducesornatebirdcages.Thecompany'saveragecostperunitis$18.00ataproductionlevel
of2,200birdcages.Whatisthetotalcostofproducing2,200birdcages?
A) $122
B) $2,218
C) $18.00
D) $39,600
Hide
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$18
2,200 =
$39,600
$18
2,200 =
$39,600
Question8
1/1point
The Akron Slugger Company produces various types of wooden baseball bats. It has calculated
the average cost per unit of a production level of 7,500 bats to be $10.00. If $22,500 of the total
costs are fixed, what is the variable cost of producing each bat?
A) $7.00
B) $3.00
C) $52,500
D) $10.00
HideFeedback

Total cost = $10 7,500 = $75,000


$75,000 = Variable cost per unit (7,500 ) + $22,500
$7.00 = Variable cost per unit
Total cost = $10 7,500 = $75,000
$75,000 = Variable cost per unit (7,500 ) + $22,500
$7.00 = Variable cost per unit
Question9
0/1point
Sea Side Enterprises is trying to predict the cost associated with producing its anchors. At a
production level of 5,000 anchors, Sea Side Enterprises average cost per anchor is $52.00. If
$15,000 of the costs are fixed, and the plant manager uses the average cost per unit to predict total
costs, her forecast for 6,000 anchors will be
A) $312,000.
B) $260,000.
C) $309,000.
D) $52,000.
Hide
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$52
6,000 =
$312,000
Question10
1/1point
Tasty Treats is a snow cone stand near the local park. To plan for the future, Tasty Treats wants to
determine its cost behavior patterns. It has the following information available about its operating
costs and the number of snow cones served.
Month

Number of snow cones

Total operating costs

January

6,400

$5,980

February

7,000

$6,400

March

6,200

$5,840

April

6,900

$6,330

May

7,600

$6,820

June

7,250

$6,575

Thevariablecostpersnowconeusingthehighlowmethodis
A) $0.90.
B) $0.94.
C) $0.70.
D) $1.43.
HideFeedback

Highest cost$6,820Highest activity7,600


Lowest cost $5,840Lowest activity6,200
Difference$9801,400
NOW divide the difference in the cost by the difference in the activity equals Variable cost per
unit. $980/1,400 = $ .70
Highest cost$6,820Highest activity7,600
Lowest cost $5,840Lowest activity6,200
Difference$9801,400
NOW divide the difference in the cost by the difference in the activity equals Variable cost per
unit. $980/1,400 = $ .70
Question11
0/1point
Jones Ice Cream Stand is operated by Mr. Jones and experiences different sales patterns
throughout the year. To plan for the future, Mr. Jones wants to determine its cost behavior
patterns. He has the following information available about the ice cream stand's operating costs
and the number of soft serve cones served.
Month

Number of ice cream cones

Total operating costs

April

800

$950

May

825

$975

June

1,125

$1,000

July

2,000

$1,250

August

1,500

$1,875

900

$1,500

September

Usingthehighlowmethod,themonthlyoperatingcostsifMr.Jonessells1,436icecreamconesina
monthare
A) $859.
B) $750.
C) $359.
D) $1,109.
HideFeedback

Highest cost$1,250Highest activity2,000


Lowest cost$950 Lowest activity800
Difference$3001,200
NOW divide the difference in the cost by the difference in the activity equals Variable cost per
unit. $300/1,200 = $ .25
Put the numbers into the Cost Equation: $1,250 = $ .25 (2000) + f
$750 = f

Finish the equation: y = $ .25 (1,436) + 750


y = $1,109
Question12
0/1point
To follow is information about the units produced and total manufacturing costs for Pine
Enterprises for the past six months.
Month

Number of units produced

Total manufacturing costs

January

7,800

$8,150

February

7,500

$8,000

March

6,600

$7,550

April

6,800

$7,650

May

4,500

$6,500

June

7,000

$7,750

Usingthehighlowmethod,whatwillthetotalmonthlymanufacturingcostsbeifthecompanyproduces
9,000units?
A) $8,400
B) $4,500
C) $4,250
D) $8,750
HideFeedback

Highest cost$8,150Highest activity7,800


Lowest cost$6,500Lowest activity4,500
Difference$1,6503,300
NOW divide the difference in the cost by the difference in the activity equals Variable cost per
unit. $1,650/3,300 = $ .50
Put the numbers into the Cost Equation: $8,150 = $.50 (7,800) + f
$4,250 = f
Finally y = $ .50 (9,000) + $4,250
y = $8,750
Question13
0/1point
The managerial accountant at Flat Screen Manufacturing reported that the organization contains
an automated production line to manufacture and produce its products for consumers to enjoy in
the marketplace. The managerial accountant reported that the company uses the highlow
method to estimate the costs in the new budget. The managerial accountant reported the
following information:

Month

Total MachineHours

Total Costs

January

250,000

$5,500,000

February

248,000

$5,260,000

March

249,000

$5,400,000

April

248,000

$5,220,000

May

238,000

$5,180,000

June

230,000

$5,130,000

a.Compute the slope of the mixed cost, or the variable cost per unit of activity.
b.Compute the vertical intercept, or the fixed cost component of the mixed cost.
c.What is the mixed cost equation?
(<fontface="PalatinoLinotype">Slopeofthemixedcost,variablecostperunit:
</font><br/><fontface="PalatinoLinotype">$5,500,000</font><font
face="PalatinoLinotype">$5,130,000</font>=<fontface="PalatinoLinotype">
$370,000</font><br/><fontface="PalatinoLinotype">250,000</font><font
face="PalatinoLinotype">230,000</font>=<fontface="PalatinoLinotype">
20,000</font><br/><fontface="PalatinoLinotype">$370,000/20,000</font>=<font
face="PalatinoLinotype">$18.50variablecostperunit(slopeofthemixed
cost)</font><br/><fontface="PalatinoLinotype"><i>y</i></font><i>=<font
Answer:
face="PalatinoLinotype">vx</font>+<fontface="PalatinoLinotype">
f</font><br/></i><fontface="PalatinoLinotype">$5,500,000</font>=<font
face="PalatinoLinotype">($18.50</font><fontface="PalatinoLinotype">
250,000)</font>+<fontface="PalatinoLinotype"><i>f</i></font><br/><font
face="PalatinoLinotype"><i>f</i></font>=<fontface="PalatinoLinotype">
$875,000</font><br/><fontface="PalatinoLinotype"><i>y</i></font>=<font
face="PalatinoLinotype">$18.50<i>x</i></font>+<fontface="Palatino
Linotype">$875,000</font>)
Question
0/1
point
14
Yourclient'scompanywantstodeterminetherelationshipbetweenitsmonthlyoperatingcostsanda
potentialcostdriver.Theoutputofregressionanalysisshowedthefollowinginformation:
InterceptCoefficient=89,500
XVariable1Coefficient=62.50
Rsquare=0.9855
Whatisthecompany'smonthlycostequation?
A) y = $98.55x + $89,500
B) y = $89,500x + $98.55
C) y = $62.50x + $89,500
D) y = $89,500x + $62.98
Question
0/1
point
15
ChecakIncorporatedwantedtodeterminetherelationshipbetweenitsmonthlyoperatingcostsanda
potentialcostdriver,machinehours.Theoutputofaregressionanalysisshowedthefollowinginformation
(note:onlyaportionoftheregressionanalysisresultsispresentedhere):

Whatisclosesttothetotalcostifthefirmuses6,000machinehours?
A) $1,365.59
B) $14,729,732.60
C) $7,257.49
D) $6,538.90
Hide
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y = .71859
(6,000) +
$2,945.95
y=
$7,257.49
Question16
0/1point
The managerial accountant at the Bookcase Factory prefers regression analysis to the highlow
method because it is a more accurate method. The managerial accountant uses regression output
and analyzes the following data to predict future costs:
y =$250x + $625
where,

y = total monthly utility cost


x = number of guests

Whatistheinterceptcoefficient,ortheverticalinterceptofthefixedcostline,intheequationlistedabove?
A) $250x + $625
B) $625
C) y
D) $250x
Question
0/1
point
17
How is operating income affected if the number of units sold exceeds the number of units
produced?
A) Operating income would be higher under a variable costing income statement.
B)

Operating income would be the same under both a variable costing and
absorption costing income statement.

C)

Operating income would be higher under an absorption costing income


statement.

D) Operating income would be lower under a variable costing income statement.


Question
0/1
point
18
ItcostsHomer'sManufacturing$0.75toproducebaseballsandHomersellsthemfor$4.00apiece.Homer
paysasalescommissionof5%ofsalesrevenuetohissalesstaff.Homeralsopays$12,000amonthrent
forhisfactoryandstore,andalsopays$75,000amonthtohisstaffinadditiontothecommissions.Homer
sold67,500baseballsinJune.IfHomerpreparesacontributionmarginincomestatementforthemonthof
June,whatwouldbehiscontributionmargin?
A) $334,125
B) $205,875
C) $270,000
D) $64,125
HideFeedback

Sales$4 67,500 = $270,000


Less: Variable costs$ 0.75 67,500 = $ 50,625
Commission$275,000 5% = $ 13,500
Contribution Margin $ 205,875
Question19
0/1point
Jeans's Fitness Club provides monthly memberships as well as personal training sessions. The
personal trainers earn 50% of the revenue for all personal training sessions. The Fitness Club also
sells nutrition products. Jeans's general ledger accounts indicate the following for the year. The
front desk staff wages expense remains the same throughout the year.
Account

Amount

Account

Amount

Membership revenue

$140,000

Personal trainer wages expense

Personal training revenue

$75,000

Space rental expense

$11,000

Product sales

$65,000

Straight line depreciation


expense

$6,000

Cost of product sold

$35,000

Rental insurance expense

$3,000

Front desk staff wages expense $12,000


Ifacontributionmarginincomestatementispreparedfortheyear,whatisthecontributionmargin?
A) $72,500
B) $352,500
C) $207,500
D) $280,000
HideFeedback

Membership$140,000
Personal Training75,000
Product Sales65,000
Total Revenue280,000
LESS:
Variable expense35,000
Personal Trainer commissions $60,000 50% 37,500
Contribution Margin $207,500
Question20
0/1point
Neon Company manufactures widgets. The following data is related to sales and production of
the widgets for last year.
Selling price per unit
Variable manufacturing costs per unit
Variable selling and administrative expenses per unit
Fixed manufacturing overhead (in total)
Fixed selling and administrative expenses (in total)

$130.00
$62.00
$5.00
$30,000
$8,000

Units produced during the year

1,500

Units sold during year

1,100

Usingabsorptioncosting,whatisgrossprofitforlastmonth?
A) $233,200
B) $143,000
C) $104,800
D) $52,800
HideFeedback

Fixed MOH $30,000 divided by units produced 1,500 = $20 Fixed MOH
Add Variable manufacturing cost 62
= Total Manufacturing cost $82
1,100 sales
= $90,200 Cost of goods sold
So: Sales $130 1100 =$143,000
Less Cost of Goods Sold 90,200
Equals Gross Profit $52,800
Question21
0/1point
The HF Corporation manufactures and sells toy gyroscopes. The following data is related to sales
and production of the toy gyroscopes for last year.
Selling price per unit

$8.00

Variable manufacturing costs per unit

$1.83

Variable selling and administrative expenses per unit

$4.45

Fixed manufacturing overhead (in total)

$75,000

Fixed selling and administrative expenses (in total)

$80,000

Units produced during the year

500,000

Units sold during the year

150,000

Usingabsorptioncosting,whatisoperatingincomeforlastyear?
A) $1,650,500
B) $155,500
C) $1,200,000
D) $749,500
HideFeedback

Fixed MOH $75,000 divided by units produced 500,000 = $0.15 Fixed MOH
Add Variable manufacturing cost 1.83
= Total Manufacturing cost 1.98
150,000 sales
= $297,000 Cost of goods sold
So: Sales $8 150,000 =$1,200,000
Less Cost of Goods Sold 297,000
Equals Gross Profit $903,000
Less Variable selling667,500
Less fixed selling 80,000
Operating Income $155,500
Question22

0/1point

MomandPop'sIceCreamShoppesellsicecreamconesfor$5.00percustomer.Variablecostsare$2.25
percone.Fixedcostsare$3,000permonth.Whatisthecompany'scontributionmarginpericecream
cone?
A) $0.55
B) $1.82
C) $2.25
D) $2.75
Hide
Feedback

Sales$5.00
Less Variable
costs 2.25
= Contribution
Margin2.75
Question23
0/1point
TheSettler'sChuckWagonsellsticketsfordinnerandashowfor$50each.Thecostofprovidingdinneris
$23perticketandthefixedcostofoperatingthetheateris$115,000permonth.Thecompanycan
accommodate13,500patronseachmonth.Whatistheprojectedmonthlyincomeif5,500patronsvisitthe
theatereachmonth?
A) $263,500
B) $33,500
C) $148,500
D) $249,500
HideFeedback

Sales $50
Less Variable costs 23
= Contribution Margin 27 5,500 = $148,500
Less fixed = 115,000
Operating Income $33,500
Question24
0/1point
The following selected data relates to Ivory Corporation:
Total fixed costs

$25,000

Selling price per unit

$22

Variable costs per unit

$15

If sales revenue per unit increases to $27 and 8,500 units are sold, what is the contribution
margin?
A) $102,000
B) $59,500
C) $357,000

D) $77,000
HideFeedback

Sales $27
Less Variable costs 15
= Contribution Margin 12 8,500 = $102,000
Question25
DJ's TShirt Factory Contribution Margin

0/1point

Sales price per TShirt

$24

Less: Variable cost per TShirt

$15

Unit contribution margin per TShirt

$________

ThemanagerialaccountantatDJ'sTShirtFactoryreportedthepricepershirtis$24.Theonlyvariablecost
is$15pershirt.Themanagerialaccountantalsoreportedthatthesalesgoalswereincreasedto1,000shirts
duringthenextquarter.First,computetheunitcontributionmarginpershirt.Iffixedexpensesare$8,000,
whatistheforecastedoperatingincomeif1,000shirtsaresoldinthenextquarter?
A) 6; $700
B) 8; $900
C) 7; $800
D) 9; $1,000
HideFeedback

Unit contribution margin: $24 $15 = $9


Operating Income: 1,000 9 = $9,000 $8,000 = $1,000
Question26
0/1point
Ifthesellingpriceperunitis$10,theunitcontributionmarginis$5,andtotalfixedexpensesare$15,000,
whatarethebreakevensalesinunits?
A) 1,500
B) 75,000
C) 150,000
D) 3,000
HideFeedback

Fixed Expenses $15,000 divided by Contribution Margin $5 = 3,000 Breakeven


Question27
0/1point
Martin Enterprises provides the following information about its single product.
Targeted operating income

$50,830

Selling price per unit

$6.55

Variable cost per unit

$4.25

Total fixed cost

$94,070

How many units must be sold to earn the targeted operating income?
A) 63,000
B) 22,100
C) 40,900
D) 13,417
HideFeedback

Sales$6.55
Less Variable costs4.25
= Contribution Margin$2.30
Fixed expenses $94,070 + Target Income $50,830 = $144,900 divided by Contribution Margin
$2.30 = 63,000 BE units
Question28
0/1point
Cedar Mills Incorporated desires an operating income of $72,000. Its variable expenses are
$20,000 and its total fixed expenses have increased from $32,000 to $60,000. Its unit contribution
margin is $10. Its sales in units to achieve the target profit is
A) 13,200.
B) 15,200.
C) 11,200.
D) 1,200.
HideFeedback

Fixed expenses $60,000 + Target Income $72,000 = $132,000 divided by


Contribution Margin $10 = 13,200 BE units
Question29
0/1point
ThesellingpriceofaRoadKingbicycleis$700,unitvariablecostsare$350,andtotalfixedcostsare
$12,600.HowmanybicycleswillRoadKingneedtoselltobreakeven?
A) 18
B) 12
C) 25,200
D) 36
HideFeedback

Sales $700
Less Variable costs350
= Contribution Margin$350
Fixed expenses $12,600 divided by Contribution Margin $350 = 36 BE units
Question30
0/1point

The managerial accountant at Boone Furriers reported the following contribution margin
statement information:
Sales Revenue
Variable Expenses =
Fixed Expenses
= $850 per unit
$205 per unit number
= $340,000
number of units sold of units sold.

Operating Income
=$0

Sales price per unit Variable cost per unit


= $850
= $645 units sold

Fixed expenses
= $340,000

Operating Income
= $0

NA

Variable cost per unit


$645 units sold

NA

Operating Income
= Fixed expenses
= $645

NA

Units Sold

NA

Fixed Expenses / Variable


cost per unit

NA

X number of units
necessary to reach the
breakeven point.

NA

Sales in Units

Use the data listed above to compute the following:


a.Compute the sales in units.
b.Compute the breakeven point in sales revenue.
A) 528 units; $448,800
B) 650 units; $525,000
C) 1,659 units; $338,900
D) 323 units; $512,000
HideFeedback

Sales per unit: = $850 $205 = $645; $340,000 / $645 = 527.13 ~ 528 units
Breakeven point: Fixed Expenses = 528 units $850 = $448,800 is the breakeven point in sales
revenue
Question31
0/1point
Monroe Manufacturing produces and sells a product with a price of $100/unit. The following
data has been prepared for its estimated upper and lower levels of activity.
Production Category

Lower Limit

Upper Limit

4,000 units

6,000 units

Direct Materials

$60,000

$90,000

Direct Labor

$80,000

$120,000

Indirect materials

$25,000

$37,500

Indirect labor

$40,000

$50,000

Depreciation

$20,000

$20,000

Units of Production

Manufacturing Overhead:

Selling and Admin. Expenses:


Sales salaries

$50,000

$65,000

Office salaries

$30,000

$30,000

Advertising

$45,000

$45,000

Other

$15,000

$20,000

Totals

$365,000

$477,500

Thefixedexpensesforthiscompanyare
A) indirect materials, indirect labor, and depreciation.
B) sales salaries, office salaries, and advertising.
C) direct materials, direct labor, and depreciation.
D) depreciation, office salaries, and advertising.
Question
0/1
point
32
Ifthesellingpriceperunitis$32,thevariableexpenseperunitis$19.50,andthebreakevensalesin
dollarsis$44,800,whataretotalfixedexpenses?
A) $112
B) $17,500
C) $1,400
D) $28,718
HideFeedback

Sales$32.00
Less Variable expenses19.50
Contribution Margin$12.50
Breakeven Sales 44,800 divided by Sales $32 Contribution Margin $12.50 = $17,500
Question33
0/1point
Claudia Enterprises has budgeted the following amounts for its next fiscal year:
Total fixed expenses

$48,200

Selling price per unit

$60

Variable expenses per unit

$30

If Claudia Enterprises can reduce fixed expenses by $12,000, how will breakeven sales in units be
affected?
A) Decrease by 400 units
B) Increase by 133 units
C) Increase by 400 units
D) Decrease by 133 units

HideFeedback

Sales$60.00
Less Variable expenses30.00
Contribution Margin$30.00
12,000 / $30 CM = 400 decrease in Break Even units
Question34
0/1point
FranklinProducerssellsitscoreproductfor$8perunitandhasvariablecostsof$6perunit.Totalfixed
costsare$28,000.Supposevariablecostsincreaseby20%duetoanincreaseinthecostofdirectmaterials.
Whatwillbetheeffectonthebreakevenpointinunits?
A) Decrease from 4,667 units to 3,889 units
B) Decrease from 14,000 units to 4,118 units
C) Increase from 14,000 units to 35,000 units
D) Decrease from 2,000 units to 1,842 units
HideFeedback

Sales$8.00
Less Variable expenses6.00
Contribution Margin$2.00
Fixed expense$28,000/ $2.00 CM = 14,000 BE units
Sales$8.00
Less Variable expenses7.20
Contribution Margin$ 0.80
Fixed expense $28,000/ $0.80 CM = 35,000 BE units
Question35
0/1point
GabeIndustriessellstwoproducts,BasicmodelsandDeluxemodels.Basicmodelssellfor$42perunit
withvariablecostsof$30perunit.Deluxemodelssellfor$50perunitwithvariablecostsof$40perunit.
Totalfixedcostsforthecompanyare$75,400.GabeIndustriestypicallysellsfourBasicmodelsforevery
Deluxemodel.Whatisthebreakevenpointintotalunits?
A) 3,900 units
B) 9,921 units
C) 5,953 units
D) 6,500 units
HideFeedback

BasicDeluxeTotal
Sales$42$50
Variable Costs3040
Contribution Margin1210
Sales Mix415
Contribution margin$48$10$58
Contribution Margin$58 / 5 Sales Mix = $11.60 Weighted CM

Fixed costs $75,400 / 11.60 = 6,500 BE units


Question36
0/1point
Jackie's Creamery sells fudge, cookies, and popcorn to patrons in the local community. The
manager at the creamery sold 12,000 total boxes of merchandise last year. The popcorn outsold
fudge by a margin of 2 to 1. The sales of caramels equaled the sales of popcorn. Total fixed costs
for Jackie's Creamery total $14,000. The managerial accountant at Jackie's Creamery reported the
following information:
Product

Unit Sales Prices

Unit Variable Cost

Fudge

$5.00

$4.00

Caramels

$8.00

$5.00

Popcorn

$6.00

$4.00

Whichformulashouldthemanagerialaccountantusetodeterminethenumberofboxesofeachdifferent
snacksold?
A) 3x + 2x + x = 12,000
B) x + y + z = 12,000
C) x + 2x + 2x = 12,000
D) none of the above
Question
0/1
point
37
IScreamForIceCreamsellsspecialtyicecreaminthreeflavors:RockyRoad,PeanutButter,andFruity
Tooty.Itsold15,000gallonslastyear.Foreveryfivegallonsoficecreamsold,onepoundisFruityTooty
andtheremainderissplitevenlybetweenPeanutButterandRockyRoad.FixedcostsforIScreamForIce
Creamare$27,000andadditionalinformationfollows:
Rocky Road

Peanut Butter

Fruity Tooty

Sales price per pound

$5.50

$4.00

$3.50

Variable cost per pound

$3.00

$2.00

$2.50

ThesalesmixpercentageofFruityTootybaseduponpoundsis
A) 40%.
B) 75%.
C) 71%.
D) 20%.
Hide
Feedback

Rocky
Road2
Peanut
Butter2

Fruity
Tooty1
Total5
Sales mix
Peanuts
1/5 = 20%
Question38
0/1point
Matthew'sFishFryhasamonthlytargetoperatingincomeof$7,200.Variableexpensesare60%ofsales
andmonthlyfixedexpensesare$1,800.Whatisthemonthlymarginofsafetyindollarsifthebusiness
achievesitsoperatingincomegoal?
A) $27,000
B) $22,500
C) $13,500
D) $18,000
HideFeedback

Monthly fixed expense$1,800


Targeted operating income7,200
Contribution margin9,000 divided by
Contribution margin %40%(1 variable expense of 60%)
Targeted income= 22,500(11,200 / 40%)
Less Breakeven4,500(fixed expense 1,800 / 40% CM)
Margin Safety dollars18,000
Question39
0/1point
Tom'sTaxidermyhasamonthlytargetoperatingincomeof$25,000.Variableexpensesare75%ofsales
andmonthlyfixedexpensesare$15,000.WhatisTom'soperatingleveragefactoratthetargetlevelof
operatingincome?
A) 2.67
B) 0.63
C) 0.40
D) 1.60
Hide
Feedback

Target
income
25,000
+ Fixed
expense
15,000
40,000
Divided by
target Inc.

25,000
Operating
leverage=
1.60
Question40
0/1point
FancyFurniturehasvariableexpensesof40%ofsalesandmonthlyfixedexpensesof$240,000.The
monthlytargetoperatingincomeis$60,000.WhatisthemonthlymarginofsafetyindollarsifFancy
Furnitureachievesitsoperatingincomegoal?
A) $500,000
B) $100,000
C) $900,000
D) $(300,000)
HideFeedback

Fixed expenses240,000
Target income60,000
300,000
Contribution margin60%(Variable expense of 40%)
Target sales500,000
Fixed expense240,000
Contribution margin60%
Breakeven sales400,000(240,000 / .60)
Target sales500,000
Breakeven sales400,000
Margin safety100,000
Question41
0/1point
Garfield Corporation is considering building a new plant in Canada. It predicts sales at the new
plant to be 50,000 units at $5.00/unit. Below is a listing of estimated expenses:

Category

Total Annual Expenses

% of Annual Expense
that are Fixed

Materials

$50,000

10%

Labor

$90,000

20%

Overhead

$40,000

30%

Marketing/Admin

$20,000

50%

ACanadianfirmwascontractedtoselltheproductandwillreceiveacommissionof10%ofthesales
price.NoU.S.homeofficeexpenseswillbeallocatedtothenewfacility.
TheunitvariablecostforGarfieldCorporationis
A) $4.50.
B) $3.60.

C) $1.40.
D) $3.10.
HideFeedback

Question42
0/1point
Comfort Cloud manufactures seats for airplanes. The company has the capacity to produce
100,000 seats per year, but is currently produces and sells 75,000 seats per year. The following
information relates to current production of seats:
Sale price per unit

$400

Variable costs per unit:


Manufacturing
Marketing and administrative

$220
$50

Total fixed costs:


Manufacturing

$750,000

Marketing and administrative

$200,000

Ifaspecialsalesorderisacceptedfor6,500seatsatapriceof$325perunit,andfixedcostsremain
unchanged,howwouldoperatingincomebeaffected?(NOTE:Assumeregularsalesarenotaffectedbythe
specialorder.)
A) Increase by $5,500,000
B) Increase by $2,112,500
C) Increase by $357,500
D) Decrease by $357,500
Hide
Feedback


Variable Mfg.
Cost$220
Variable
Marketing$50
Total Variable
$270
NOWSales
Price$325
Less Total
Variable Cost
270
= Contribution
Margin$55
Times units
sold 6,500
= Additional
Profit$357,500
Question43
0/1point
Samson Incorporated provided the following information regarding its only product:
Sale price per unit

$50.00

Direct materials used

$160,000

Direct labor incurred

$185,000

Variable manufacturing overhead

$120,000

Variable selling and administrative expenses

$70,000

Fixed manufacturing overhead

$65,000

Fixed selling and administrative expenses

$12,000

Units produced and sold

20,000

Assume no beginning inventory


Assumingthereisexcesscapacity,whatwouldbetheeffectonoperatingincomeofacceptingaspecial
orderfor3,000unitsatasalepriceof$45perproductassumingadditionalfixedmanufacturingoverhead
costsof$5,000isincurred?(NOTE:Assumeregularsalesarenotaffectedbythespecialorder.)
A) Increase by $54,750
B) Increase by $135,000
C) Decrease by $49,750
D) Increase by $49,750
HideFeedback

Direct Materials$160,000
Direct Labor 185,000
Variable Mfg. O/H 120,000
Variable Selling 70,000
Total Mfg. Cost $535,000 / units produced 20,000 = $26.75 Mfg. cost per unit
Then
Sales Price $45.00
Less Mfg. cost per Unit26.75
= Contribution Margin$18.25
Times units sold 3,000
Total Contribution Margin=$54,750
Less Add'l Fixed cost 5,000
Add'l Profit49,750
Question44
0/1point
Pluto Incorporated provided the following information regarding its single product:
Direct materials used

$240,000

Direct labor incurred

$420,000

Variable manufacturing overhead

$160,000

Fixed manufacturing overhead

$100,000

Variable selling and administrative expenses

$60,000

Fixed selling and administrative expenses

$20,000

The regular selling price for the product is $80. The annual quantity of units produced and sold is
40,000 units (the costs above relate to the 40,000 units production level). The company has excess
capacity and regular sales will not be affected by this special order. There was no beginning
inventory.
What would be the effect on operating income of accepting a special order for 3,500 units at a sale
price of $55 per product?
A) Increase by $115,500
B) Decrease by $115,500
C) Decrease by $269,500
D) Increase by $269,500
HideFeedback

Direct Materials

$240,000

Direct Labor

420,000

Variable Overhead

160,000

Variable Selling

60,000

Total

$880,000

Total

$880,000

Divided by production

40,000

Cost per unit

$22.00

Selling Price

$55.00

Less cost per unit


Contribution Margin
units sold
Operating Income

22.00
$33.00
3,500
$115,500

Question45
0/1point
Elite Office Furniture received a special order for 1,200 units of its executive chairs at a selling
price of $90 per chair. Elite Office Furniture has enough capacity to accept the order. No
additional selling costs will be incurred. Unit costs to make and sell this product are as follows:
Direct Materials $45; Direct Labor $19; Variable Manufacturing Overhead $6; Fixed
Manufacturing Overhead $12; and Variable Selling Costs $5.
What will be Elite Office Furniture's change in operating income if they accept the special order?
Should Elite Office Furniture accept the order? Explain why or why not.
Notextentered
Thisquestionhasnotbeengraded.
ThecorrectanswerisnotdisplayedforLongAnswertypequestions.
Question46
0/1point
PhiladelphiaSwimClubisplanningforthecomingyear.Investorswouldliketoearna10%returnonthe
company's$30millionofassets.Thecompanyprimarilyincursfixedcoststomaintaintheswimming
pools.Fixedcostsareprojectedtobe$12,500,000fortheyear.About500,000membersareexpectedto
swimeachyear.Variablecostsareabout$10perswimmer.PhiladelphiaSwimClubisapricetakerand
won'tbeabletochargemorethanitscompetitorswhocharge$37.00foramembership.Whatprofitwillit
earnintermsofdollars?
A) $11,000,000

HideFeedback

B) $1,000,000

C) $(1,000,000)

D)

$(12,500,000
)

Question47
0/1point
Green Pastures golf course is planning for the coming season. Investors would like to earn a 12%
return on the company's $40 million of assets. The company primarily incurs fixed costs to groom
the greens and fairways. Fixed costs are projected to be $20 million for the golfing season. About
500,000 golfers are expected each year. Variable costs are about $12 per golfer. Green Pastures golf
course is a pricetaker and won't be able to charge more than $60 per round because of local
competition.
What will Green Pasture's expected profit shortfall be if it charges $60/round?
Notextentered
Thisquestionhasnotbeengraded.
ThecorrectanswerisnotdisplayedforLongAnswertypequestions.
Question48
0/1point
Contributionmarginincomestatementdataforthemostrecentyearfollow:
Total

Cat Food

Dog Food

Sales revenue

$385,000

$300,000

$85,000

Variable expenses

$205,000

$165,000

$40,000

Contribution margin

$180,000

$135,000

$45,000

Fixed expenses

$102,000

$50,000

$52,000

$78,000

$85,000

$(7,000)

Operating income (loss)

AssumingtheDogfoodisdiscontinued,totalfixedcostsremainunchanged,andthespaceformerlyusedto
producethelineisrentedfor$25,000peryear,howwilloperatingincomebeaffected?

A)

Increase
$184,000

B)

Increase
$20,000

C)

Decrease
$20,000

D)

Increase
$58,000

HideFeedback

Question49
0/1point
Mama'sFavoriteAppliancesmanufacturestwoproducts:FoodProcessorsandEspressoMakers.The
followingdataareavailable:

Sales price
Variable costs

Food Processors

Espresso Makers

$125

$225

$50

$150

Thecompanycanmanufacturetwofoodprocessorspermachinehourandthreeespressomachinesper
machinehour.Thecompany'sproductioncapacityis1,200machinehourspermonth.

Whatisthecontributionmarginratioforfoodprocessors?

A) 150.00%

B) 33.33%

C) 140.00%

D) 60.00%

HideFeedback

Question50
0/1point
BrittanyFurnituremanufacturestwoproducts:CouchesandBeds.Thefollowingdataareavailable:
Couches

Beds

Sales price

$500.00

$700.00

Variable costs

$350.00

$375.00

Thecompanycanmanufacturetwocouchespermachinehourandonebedpermachinehour.The
company'sproductioncapacityis900machinehourspermonth.
WhatisthecontributionmarginratioforCouches?

HideFeedback

A) 42.86%

B) 170.00%

C) 30.0%

D) 23.08%

Question51
0/1point
BrittanyFurnituremanufacturestwoproducts:FutonsandRecliners.Thefollowingdataareavailable:
Futons

Recliners

Sales price

$500.00

$480.00

Variable costs

$325.00

$120.00

Thecompanycanmanufacturetwofutonspermachinehourandonereclinerpermachinehour.The
company'sproductioncapacityis900machinehourspermonth.
Whatisthecontributionmarginpermachinehourforrecliners?

A) $600

B) $720

C) $360

D) $1,080

HideFeedback

Question52
0/1point
Cuyahoga Valley Bicycles uses a standard part in the manufacture of several of its bikes. The cost
of producing 40,000 parts is $138,000, which includes fixed costs of $68,000 and variable costs of
$70,000. By outsourcing the part, the company can avoid 30% of the fixed costs.
If Cuyahoga Valley Bicycles buys the part, what is the most Cuyahoga Valley Bicycles can spend
per unit so that operating income equals the operating income from making the part?
A) $2.26
B) $2.33
C) $4.64

D) $1.33
HideFeedback

Cost to Build
Variable Costs$70,000
Fixed Costs68,000
Total$138,000
Less Unavoidable Fixed Cost47,600
Adjusted Cost of part90,400 Divided by 40,000 = $2.26
Question53
0/1point
Moon Appliance manufactures a variety of appliances which all use Part B89. Currently, Moon
Appliance manufactures Part B89 itself. It has been producing 9,000 units of Part B89 annually.
The annual costs of producing Part B89 at the level of 9,000 units include:
Direct materials

$3.00

Direct labor

$8.00

Variable manufacturing overhead

$4.00

Fixed manufacturing overhead

$3.00

Total cost

$18.00

AllofthefixedmanufacturingoverheadcostswouldcontinuewhetherPartB89ismadeinternallyor
purchasedfromanoutsidesupplier.MoonAppliancehasnoalternativeuseforitsmanufacturingfacilities.
NadalPartsCompanyhasofferedtosell9,000unitsofPartB89toMoonAppliancefor$20.00perunit.
WhatisthehighestpriceperunitthatMoonApplianceshouldbewillingtopayforthepart?
A) $11
B) $18
C) $15
D) $7
Hide
Feedback

Direct
Materials
$3.00
Direct
Labor8.00
Variable
MOH4.00
Total
Variable
Cost$15.00
Question54

0/1point

Zach has the following information to evaluatehis current salary of $75,000 versus total
revenues of $100,000 and expenses of $67,000 from starting a new business. How much is the
opportunity cost associated with staying at his current job?
A) $33,000
B) $(8,000)
C) $167,000
D) $75,000
Hide
Feedback

Revenues
$100,000
Expenses
67,000
Potential
income
$33,000
Question55
0/1point
StoogeEnterprisesmanufacturesceilingfansthatnormallysellfor$90each.Thereare300defectivefans
ininventory,whichcost$55eachtomanufacture.Thesedefectiveunitscanbesoldasisfor$20each,or
theycanbeprocessedfurtherforacostof$40eachandthensoldforthenormalsellingprice.Stooge
Enterpriseswouldbebetteroffbya

$9,000
net
increase
in
operatin
A) g income
if the
ceiling
fans are
sold as
is.

$21,000
net
increase
in
operatin
B)
g income
if the
ceiling
fans are
repaired.

C) $21,000
net

increase
in
operatin
g income
if the
ceiling
fans are
sold as
is.

$9,000
net
increase
in
operatin
D)
g income
if the
ceiling
fans are
repaired.

HideFeedback

Question56
0/1point
CatNapCompanyhastwoproducts:KittyzandKatz.AMarchsalesforecastprojects20,000unitsof
Kittyzand15,000unitsofKatzaregoingtobesoldatpricesof$15and$12,respectively.Thedesired
endinginventoryofKittyzis20%higherthanthebeginninginventory,whichwas2,000units.Howmuch
aretotalMarchsalesforKittyzanticipatedtobe?
A) $100,000
B) $180,000
C) $240,000
D) $300,000
Hide
Feedback


20,000
$15 =
$300,000
Question57
0/1point
RubinoCorporationdesiresaDecember31endinginventoryof900units.BudgetedsalesforDecember
are2,650units.TheNovember30inventorywas850units.Whatarebudgetedpurchasesinunits?
A) 4,400
B) 2,600
C) 2,700
D) 3,550
Hide
Feedback

Sales2,650
Less: BI850
= Need to
produce
1,800
+ desired EI
900
= Total
Production
2,700
Question58
0/1point
Fosnight Enterprises prepared the following sales budget:
Month

Budgeted Sales

March

$6,000

April

$13,000

May

$12,000

June

$14,000

Theexpectedgrossprofitrateis30%andtheinventoryattheendofFebruarywas$10,000.Desired
inventorylevelsattheendofthemonthare20%ofthenextmonth'scostofgoodssold.
WhatisthedesiredbeginninginventoryonJune1?
A) $1,680
B) $9,800
C) $1,960
D) $840
HideFeedback

Sales = 100% 30% Gross Profit = 70% Cost of Goods Sold (CGS)
Now: June Sales $14,000 70% = 9,800 (CGS) 20% = $1,960
Question59
0/1point
Alampstorepurchased$3,800oflampsinSeptember.Thestorehad$1,600oflampsonhandatthe
beginningofSeptember,andexpectedtohave$1,300oflampsattheendofSeptembertocoverpartof
anticipatedOctobersales.WhatisthebudgetedcostofgoodssoldforSeptember?
A) $3,500
B) $5,400
C) $6,700
D) $4,100
Hide
Feedback

BI$1,600
+ Purchases
3,800
= Goods
Available
5,400
Less: EI
1,300
= Cost of
Goods Sold
$4,100
Question60
0/1point
Victoria Corporation manufactures quality vases. Budgeted sales and production data for the
vases are as follows:
Month 1 budgeted unit sales

2,000

Month 2 budgeted unit sales

2,500

Month 3 budgeted unit sales

3,200

Month 1 budgeted unit production

2,400

Month 2 budgeted unit production

2,700

Month 3 budgeted unit production

3,400

Raw material required for each finished unit (in pounds)

Theendinginventoryforeachmonthshouldbeequalto20%ofthenextmonth'sproductionneeds.Each
vaserequiresonepoundofclayinitsmanufacture.VictoriaCorporationhasapolicythattheinventoryof
clayattheendofeachmonthneedstobeequalto20%oftheproductionneedsforthefollowingmonth.At
thebeginningofJanuary,480poundsofclaywereininventory.HowmanypoundsofclaywouldVictoria
CorporationneedtopurchaseinFebruary(Month2?
A) 2,660
B) 2,840

C) 2,940
D) 3,620
Hide
Feedback

Production
Month 2
2,700
Less BI
(2,700
20%) 540
Plus EI
(3,400
20%)+
680
Equals
Purchases
2,840
Question61
0/1point
Natcher Corporation collects 30% of a month's sales in the month of sale, 55% in the month
following sale, and 10% in the second month following sale. The company has found that 5% of
their sales are uncollectible. Budgeted sales for the upcoming four months are:
August budgeted sales

$300,000

September budgeted sales

$280,000

October budgeted sales

$330,000

November budgeted sales

$260,000

The amount of cash that will be collected in November is budgeted to be


A) $287,500.
B) $78,000.
C) $291,500.
D) $283,000.
Hide
Feedback

Sept. Sales
$280,000
10% =
$28,000
Oct. Sales
330,000
55% =
181,500

Nov. Sales
260,000
30% =
78,000
Total
$287,500
Question62
0/1point
PurchasesinMaywere$60,000,whileexpectedpurchasesforJuneandJulyare$75,000and$92,000,
respectively.Allpurchasesarepaid35%inthemonthofpurchaseand65%inthefollowingmonth.At
whatamountareJunepaymentsforpurchasesbudgeted?
A) $69,750
B) $65,250
C) $97,450
D) $86,050
Hide
Feedback

May
$60,000
65% =
$39,000
June
75,000
35%=
26,250
Total
$65,250
Question63
0/1point
Two Brothers Moving prepared the following sales budget:
Month

Cash Sales

Credit Sales

March

$20,000

$10,000

April

$36,000

$16,000

May

$42,000

$40,000

June

$54,000

$48,000

Creditcollectionsare25%inthemonthofsale,60%inthemonthfollowingthesale,and10%twomonths
followingthesale.Theremaining5%isexpectedtobeuncollectible.
WhatarethetotalcashcollectionsinJuneatTwoBrothersMoving?
A) $37,600
B) $86,800
C) $91,600

D) $96,300
HideFeedback

June credit sales

$48,000

Credit collections month of sale

25%

Collections from June credit sales

$12,000

May credit sales

$40,000

Credit collections month after sale

60%

Collections from May credit sales

$24,000

April credit sales

$16,000

Credit collections 2 months after sale

10%

Collections from April credit sales

$1,600

June cash sales

$54,000

Collections from June credit sales

$12,000

Collections from May credit sales

$24,000

Collections from April credit sales

$1,600

Total June cash collections

$91,600

Question64
0/1point
Goliath Company prepared the following purchases budget:
Month

Budgeted Purchases

June

$35,600

July

$42,500

August

$39,600

September

$45,800

October

$49,400

Allpurchasesarepaidforasfollows:30%inthemonthofpurchase,45%inthefollowingmonth,and25%
twomonthsafterpurchase.
WhatarethecashdisbursementsinAugusttoaccountfortheJunepurchasesatGoliathCompany?
A) $20,610
B) $8,900
C) $16,020

D) $10,680
Hide
Feedback

$35,600
25% =
$8,900
Question65
0/1point
Assume the Air Conditioning division of the General Appliance Corporation had the following
results last year (in thousands). Management's target rate of return is 15% and the weighted
average cost of capital is 10%. Its effective tax rate is 35%.
Sales

$10,000,000

Operating income

2,000,000

Total assets

2,500000

Current liabilities

820,000

Whatisthedivision'scapitalturnover?
A) 5.00
B) 4.00
C) 1.25
D) 3.05
HideFeedback

Sales $10,000,000/Total assets 2,500,000 = 4.00


Question66
0/1point
The Box Manufacturing Division of the Allied Paper Company reported the following results
from the past year. Shareholders require a return of 7%. Management calculated a weighted
average cost of capital (WACC) of 5%. Allied's corporate tax rate is 30%.
Sales

$700,000

Operating income

$175,000

Total assets
Current liabilities
Whatisthedivision'scapitalturnover?
A) 8.57
B) 0.47
C) 4.00
D) 2,50
HideFeedback

$1,500000
600,000


Sales $700,000 / Total assets 1,500,000 = 0.47
Question67
0/1point
CamdenCorporationhasoperatingincomeof$87,000,asalesmarginof15%,andcapitalturnoverof2.5.
Thereturnoninvestment(ROI)forCamdenCorporationmaybeclosestto
A) 2%.
B) 107%.
C) 38%.
D) 6%.
Hide
Feedback

Operating
income/Sales
Margin = Sales
87,000/15% =
580,000
Sales/Capital
Turnover =
Total Assets
580,000/2.5 =
232,000
Operating
income/Total
Assets = ROI
87,000/232,000
= 38%
Question68
0/1point
DoveIncorporatedhasoperatingincomeof$650,000,asalesmarginof10%,andacapitalturnoverrateof
2.0.WhatamountwouldDovereportforsales?
A) $1,300,000

B) $6,500,000

C) $325,000

D) $65,000

HideFeedback

Question69

0/1point

The Top Hat Division of Blandon's Fine Menswear had the following results last year (in
thousands).
Sales

$4,500,000

Operating income
Total assets
Current liabilities

$675,000
$3,000,000
$250,000

Management's target rate of return is 12% and the weighted average cost of capital is 9%.
What is the Top Hat Division's Residual Income (RI)?
A) $315,000
B) $225,000
C) $405,000
D) $135,000
HideFeedback

Target Return = Total Assets Required Return


360,000 = 3,000,000 12%
Residual Income = Operating Income Target Return
315,000 = 675,000 360,000
Question70
0/1point
Selected financial data for The Portland Porcelain Works Coffee Mug Division is as follows:
Sales

$2,300,000

Operating income

$414,000

Total assets

$718,750

Current liabilities

$180,000

Target rate of return

10%

Weighted average cost of capital


WhatisThePortlandPorcelainWorksCoffeeMugDivisionresidualincome?
A) $71,875
B) $342,125
C) $396,000
D) $356,500
HideFeedback

Residual income = Operating income (Target rate of return Total assets)


= 414,000 (10% 718,750)

8%

= 414,000 71,875
= 342,125
Question71
0/1point
The Southern Division of Amelia Corporation had sales of $6,500,000 and operating income of
$1,200,000 last year. The total assets of the Southern Division were $3,000,000, while current
liabilities were $450,000. Amelia Corporation's target rate of return is 10%, while its weighted
average cost of capital is 6%. The effective tax rate for the company is 30%.
What is the Southern Division's Return on Investment (ROI)?
A) 40.00%
B) 6.00%
C) 25.00%
D) 200.00%
HideFeedback

Return on investment = Operating income/Total assets


= 1,200,000/3,000,000 = 40%
Question72
1/1point
Agraphofaflexiblebudgetformulareflectsfixedcostsof$45,000permonthandtotalcostsof$100,000
atavolumeof5,000units.Assumingtherelevantrangeis1,000to20,000units,thegraphwouldreflect
totalmonthlycostsat15,000unitsofwhatdollaramount?
A) $345,000
B) $165,000
C) $210,000
D) $100,000
HideFeedback

Total costs$100,000
Fixed costs$(45,000)
Variable costs$55,000
Initial volume5,000
Variable cost per unit $11 = 55,000 / 5,000
Variable cost per unit $11
Target units15,000
Variable costs at target volume$165,000 = 15,000 11
Fixed costs+
45,000
Total costs at target volume$210,000
Total costs$100,000
Fixed costs$(45,000)
Variable costs$55,000
Initial volume5,000
Variable cost per unit $11 = 55,000 / 5,000

Variable cost per unit $11


Target units15,000
Variable costs at target volume$165,000 = 15,000 11
Fixed costs+
45,000
Total costs at target volume$210,000

AttemptScore:

OverallGrade(highestattempt):

9/
72
12.5
%
9/
72
12.5
%

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