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Question 1 (1 point)

A typical use of managerial accounting is to:

Question 1 options:
help investors and creditors assess the financial position of the company.
help management get a clean audit report
help the marketing manager decide which product promotion to implement
help the SEC decide whether management is in compliance of its policies.

Question 2 (1 point)

Three costs incurred by Pitt Company are summarized below:

1,000 units 2,000 units

Cost A $10,000 $15,000

Cost B $21,000 $21,000

Cost C $16,000 $32,000

Which of these costs are variable?

Question 2 options:
A, B, and C
A and B
A only
C only

Question 3 (1 point)

Bubba's Steakhouse has budgeted the following costs for a month in which 1,600 steak dinners
will be produced and sold: Materials, $4,080; hourly labor (variable), $5,200; rent (fixed),
$1,550; depreciation, $790; and other fixed costs, $460. Each steak dinner sells for $12.20 each.
How much would Shula’s profit increase if 10 more dinners were sold?

Your Answer:
Ans: $64
Question 3 options:


Question 4 (1 point)

Bellfont Company produces door stoppers. August production costs are below:

Door Stoppers produced 76,000

Direct material (variable) $20,000

Direct labor (variable) 40,000

Supplies (variable) 20,000

Supervision (fixed) 28,500

Depreciation (fixed) 23,100

Other (fixed) 4,300

In September, Bellfont expects to produce 100,000 door stoppers. Assuming no structural

changes, what is Bellfont’s production cost per door stopper for September?

Your Answer:
Ans: 1.61
Question 4 options:


Question 5 (1 point)
Aaron's chairs is in the process of preparing a production cost budget for August. Actual costs in
July for 120 chairs were:

Materials cost $4,750

Labor cost 2,960
Rent 1,500
Depreciation 2,500
Other fixed costs 3,200

Materials and labor are the only variable costs. If production and sales are budgeted to increase
to 100 chairs in August, how much is the expected total variable cost on the August budget?

Your Answer:
Ans: $6425

Question 5 options:


Question 6 (1 point)

Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of
$22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $23,400 to
buy 670 units from Carry-ALL. Total fixed costs are $7,000 per year. This offer does not affect
Carry-ALL's other planned operations. The incremental revenues for this situation are

Your Answer:
Ans: 23400
Question 6 options:


Question 7 (1 point)
Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by
$10,000 then their profit increases/decreases by how much?

Sales $50,000

Variable Costs $8,300

Fixed Costs $28,000

Your Answer:
Ans: Increase by $8340
Question 7 options:


Question 8 (1 point)

Susan is trying to decide whether or not to attend college during the next 12-week session. She
has the following options:

1. Attend college full-time at a cost of $1,200.

2. Attend college part-time at a cost of $700 and work part-time earning $2,000.

3. Work full-time earning $5,000.

What is Susan's incremental profit if she chooses option 3 over option 2?

Your Answer:
Ans: $3700

Question 8 options:


Question 9 (1 point)
Total costs were $76,700 when 29,000 units were produced and $93,600 when 40,000 units were
produced. Use the high-low method to find the estimated total costs for a production level of
32,000 units.

Your Answer:
Ans: $81309.09
Question 9 options:


Question 10 (1 point)

Professional University teaches a large range of undergraduate courses. It is interested in

determining the cost equation for the facilities cost as a function of student credit hours so that it
an more accurately budget its facilities costs as enrollment grows. Information for the high and
low cost semesters and volumes for last 5 years appears below

Student Credit
Semester Facilities Cost
Spring 2007 250,000 $500,000
Fall 2004 300,000 $530,000

Using the high low method, with student credit hours as the activity driver, what is the equation
for facilities cost (FC) as a function of student credit hours?

Question 10 options:
FC = $350,000 + $0.60 / student credit hour
FC = -$585,100 + $1.67 / student credit hour
FC = $1.77 / student credit hour
FC = $2 / student credit hour

Question 11 (1 point)
Randy's tireland makes a product that sells for $65 per unit and has $49 per unit in variable costs.
Annual fixed costs are $24,000. If Rambles sells 10 units less than breakeven, how much loss
would the company recognize on its income statement?

Your Answer:
Ans : $160
Question 11 options:


Question 12 (1 point)

Ritz Furniture has a contribution margin ratio of 0.15. If fixed costs are $177,900, how many
dollars of revenue must the company generate in order to reach the break-even point?

Your Answer:
Ans: 1186000

Question 12 options:


Question 13 (1 point)

U.S. Telephone Cellular sells phones for $100. The unit variable cost per phone is $50 plus a
selling commission of 10% (based on the unit sales price per phone). Fixed manufacturing costs
total $1,270 per month, while fixed selling and administrative costs total $2,260. How many
phones must be sold to achieve the breakeven point?

Your Answer:
Ans: 88.25
Question 13 options:

Question 14 (1 point)

Swimkids is a swimsuit manufacturer. They sell swim suits at a selling price is $30 per
unit. Swimkids variable costs are $18 per unit. Fixed costs are $70,300. Swimkids expects sales
of $274,800 next year. What is Swimkids's margin of safety?

Your Answer:

Ans: 99050

Question 14 options:


Question 15 (1 point)

Lambardi Company sells 3 types of bags. Bag A sells for $20 and has variable cost of $9.00 per
unit. Bag B sells for $14 and has variable cost of $12.00 per unit. Bag C sells for $7 and has
variable costs of $6.00 per unit. Lambardi sells in a mix of 2 units of A, 3 units of B and 5 units
of C. What is the weighted average contribution margin per unit for Lambardi?

Your Answer:
Ans: 3.3
Question 15 options:


Question 16 (1 point)

Product A has a contribution margin per unit of $500 and required 2 hours of machine time.
Product B has a contribution margin per unit of $1,000 and requires 5 hours of machine time.
How much of each product should be produced given there are 100 hours of available machine
Question 16 options:
50 units of A and 25 units of B.
25 units of B.
50 units of A.
None of the above

Question 17 (1 point)

Delfi Company produces two models of seats, Toro and Prep. Information regarding these
products for May follows:

Toro Prep
Number of units 3,000 7,000
Sales revenue $120,000 $140,000
Variable costs 60,000 42,000
Fixed costs 24,000 50,000
Net Income $36,000 $48,000
Pounds of plastic to produce one bucket 4.0 1.6
Contribution margin per unit $20 $14

Due to increased demand of plastic in the market, Delfi Company can obtain only 9,000 pounds
of plastic per month. Delfi can sell as many seats as it can produce of either model. How many of
each model should Delfi produce to maximize profit in May considering the constraint?

Question 17 options:
Toro: 0; Prep: 4,375
Toro: 2,250; Prep: 0
Toro: 1,125; Prep: 2,812
Toro: 0; Prep: 5,625

Question 18 (1 point)

Abagail Corp. uses activity-based costing system with three activity cost pools. The following
information is provided:
Costs: Wages and salaries $ 202,000

Depreciation 105,000

Utilities 119,000

Total $440,000

Activity Cost Pools

Assembly Setting Up Other

Wages and salaries 0.56 30% 10%

Depreciation 0.32 45% 20%

Utilities 0.23 40% 30%

How much total cost would be allocated to the Assembly activity cost pool?

Your Answer:
Ans: 174090

Question 18 options:


Question 19 (1 point)

Maxx Inc. has provided the following data from its activity-based costing system:

Activity Cost Pools Total Cost Total Activity

Designing products $377,800 6,310 product design hours

Setting up batches $52,678 7366 batch set-ups

Assembling products $25,122 4,018 assembly hours

The activity rate for the “designing products” activity cost pool is:

Your Answer:
Ans: $59.87 per product design hours
Question 19 options:


Question 20 (1 point)

Sasha Company allocates the estimated $196,100 of its accounting department costs to its
production and sales departments since the accounting department supports the other two
departments particularly with regard to payroll and accounts payable functions. The costs will
be allocated based on the number of employees using the direct method. Information regarding
costs and employees follows:

Department Employees
Accounting 4
Production 32
Sales 15

How much of the accounting department costs will be allocated to the production?

Your Answer:
Ans: 133514.89

Question 20 options:


Question 21 (1 point)
Medusa Company allocates costs from the payroll department (S1) and the maintenance
department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll
department costs are allocated based on the number of employees in the department and
maintenance department costs are allocated based on the number of square feet which the
production department occupies within the factory. Information about the departments is
presented below:

Number of Number of Square

Department Costs Employees Feet Occupied
Payroll (S1) $143,000 2 2,000
Maintenance (S2) $220,000 8 64,000
Molding (P1) 60 100,000
Finishing (P2) 49 60,000
Packaging (P3) 20 40,000

Medusa uses the direct method to allocate costs. Round all answers to the nearest dollar.
What amount of the payroll department costs will be allocated to the molding department?

Your Answer:
Ans: 66511.63

Question 21 options:


Question 22 (1 point)

The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of
$9,600. If these keyboards are upgraded at a cost of $7,500, they could be sold for $19,100.
Alternatively, the keyboards could be sold “as is” for $7,800. What is the net advantage or
disadvantage of re-working the keyboards?

Your Answer:
Ans: $3800
Question 22 options:

Question 23 (1 point)

Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in
the shipping department have been divided into three cost pools. The first cost pool contains
costs that are related to packaging and shipping and Rand has determined that the number of
boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of
costs related to the final inspection of each item before it is shipped and the cost driver for this
pool is the number of individual items that are inspected and shipped. The final cost pool is used
for general operations and supervision of the department and the cost driver is the number of
shipments. Information about the department is summarized below:

Cost Pool Total Costs Cost Driver
Packaging and shipping $162,400 Number of boxes shipped 25,000 boxes
Number of individual items
Final inspection $197,600 96,500 items
General operations and
$80,600 Number of orders 8,100 orders

During the period, the Far East sales office generated 656 orders for a total of 6,130 items. These
orders were shipped in 1,408 boxes. What amount of shipping department costs should be
allocated to these sales?

Your Answer:
Ans: 28226.18

Question 23 options:


Question 24 (1 point)

Baller Financial is a banking services company that offers many different types of checking
accounts. The bank has recently adopted an activity-based costing system to assign costs to their
various types of checking accounts. The following data relate to the money market checking
accounts, one of the popular checking accounts, and the ABC cost pools:
Annual number of accounts = 54,000 accounts Checking account cost pools:
Cost Pool Cost Cost Drivers
Returned check costs $2,910,000 Number of returned checks
Checking account reconciliation Number of account reconciliation
costs requests
New account setup 635,000 Number of new accounts
Number of cancelled check copy
Copies of cancelled checks 397,000
Online banking web site
193,000 Per product group (type of account)

Annual activity information related to cost drivers:

Cost Pool All Products Money Market Checking

Returned check 200,000 returned checks 18,000
397,000 checking
Check reconciliation costs 420
New accounts 50,000 new accounts 15,000
Cancelled check copy requests 98,000 cancelled check 60,000
Web site costs 6 types of accounts 1

Calculate the overhead cost per account for the Money Market Checking.

Your Answer:
Ans: 10.55
Question 24 options:


Question 25 (1 point)

Sosa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs.
Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total
cost is used to determine the price?

Your Answer:
Ans: 71.24
Question 25 options:

Question 26 (1 point)

Bob's Company sells one product with a variable cost of $5 per unit. The company is unsure
what price to charge in order to maximize profits. The price charged will also affect the
demand. If fixed costs are $100,000 and the following chart represents the demand at various
prices, what price should be charged in order to maximize profits?

Units Sold Price

30,000 $10

40,000 $9

50,000 $8

60,000 $7

Question 26 options:

Question 27 (1 point)

A retailer purchased some trendy clothes that have gone out of style and must be marked down to
30% of the original selling price in order to be sold. Which of the following is a sunk cost in this

Question 27 options:
the original selling price
the anticipated profit
the original purchase price
the current selling price
Question 28 (1 point)

Carlton Products Company has analyzed the indirect costs associated with servicing its various
customers in order to assess customer profitability. Results appear below:

Cost Pool Annual Cost Cost Driver Annual Driver Quantity

Processing electronic orders $1,000,000 Number of orders 500,000
Processing non-electronic orders $2,000,000 Number of orders 400,000
Picking orders $3,000,000 Number of different products ordered 800,000
Packaging orders $1,500,000 Number of items ordered 50,000,000
Returns $2,000,000 Number of returns 50,000

If all costs were assigned to customers based on the number of items ordered, what would be the
cost per item ordered?

Your Answer:
Ans: .19
Question 28 options:


Question 29 (1 point)

Costa Company has a capacity of 40,000 units per year and is currently selling 35,000 for $400
each. Barton Company has approached Costa about buying 2,000 units for only $300 each. The
units would be packaged in bulk, saving Costa $20 per unit when compared to the normal
packaging cost. Normally, Costa has a variable cost of $280 per unit. The annual fixed cost of
$2,000,000 would be unaffected by the special order. What would be the impact on profits if
Costa were to accept this special order?

Question 29 options:
Profits would increase $40,000.
Profits would increase $60,000.
Profits would decrease $200,000.
Profits would increase $80,000
Question 30 (1 point)

A company has $6.60 per unit in variable costs and $3.30 per unit in fixed costs at a volume of
50,000 units. If the company marks up total cost by 0.51, what price should be charged if 55,000
units are expected to be sold?

Your Answer:
Ans: 14.5
Question 30 options:


Question 31 (1 point)

Customer profitability analysis might result in:

Question 31 options:
dropping some customers that are unprofitable.
lowering price or offering incentives to profitable customers.
giving incentives to all customers to place orders online.
All of the above.

Question 32 (1 point)

The Estrada Company uses cost-plus pricing with a 0.43 mark-up. The company is currently
selling 100,000 units at $12 per unit. Each unit has a variable cost of $4.70. In addition, the
company incurs $190,400 in fixed costs annually. If demand falls to 79,900 units and the
company wants to continue to earn a 0.43 return, what price should the company charge?

Your Answer:
Ans: 10.13
Question 32 options:

Question 33 (1 point)

A new product is being designed by an engineering team at Golem Security. Several managers
and employees from the cost accounting department and the marketing department are also on
the team to evaluate the product and determine the cost using a target costing methodology. An
analysis of similar products on the market suggests a price of $122.00 per unit. The company
requires a profit of 0.22 of selling price. How much is the target cost per unit?

Your Answer:
Ans: 95.16
Question 33 options:


Question 34 (1 point)

A company using activity based pricing marks up the direct cost of goods by 0.27 plus charges
customers for indirect costs based on the activities utilized by the customer. Indirect costs are
charged as follows: $6.50 per order placed; $2.80 per separate item ordered; $27.10 per return. A
customer places 7 orders with a total direct cost of $2,700, orders 300 separate items, and
makes 3 returns. What will the customer be charged?

Your Answer:
Ans: 4395.80

Question 34 options:


Question 35 (1 point)

A law firm uses activity-based pricing. The company’s activity pools are as follows:

Cost Pool Annual Estimated Cost Cost Driver Annual Driver Quantity
Consultation 196,000 Number of consultations 80 consultations
Administrative Costs 134,000 Admin labor hours 9,800 labor hours
Client Service 79,000 Number of clients 120 clients

The firm had two consultations with this client and required 130 administrative labor hours.
What additional costs will be charged to this customer?

Your Answer:

Ans: 6677.55

Question 35 options: