Question 1
Which of the following would be classified as a discretionary fixed cost?
a. Depreciation
b. Research and Development
c. Property Taxes
d. Interest on Bonds
Question 2
As volume increases, average cost per unit decreases because:
a. Total fixed costs increase
b. Total variable costs increase
c. Total fixed costs stay the same
d. Total variable costs stay the same
Question 3
Which of the following methods of cost estimation utilizes all observations and relies on statistical measures to determine the cost estimation model?
a. High-Low Method
b. Scatter Diagram
c. Least Squares Regression
d. Linear Programming
Question 4
Which of the following methods of cost estimation utilizes judgment to determine the cost estimation model?
a. High-Low Method
b. Scatter Diagram
c. Least Squares Regression
d. Linear Programming
Question 5
Anka Company manufactures and sells specialty items. The following representative direct labor-hours and production costs are provided for a four-month period:
|
Month
|
Hrs. Direct Labor
|
Production Costs
|
|
January
|
3,000
|
$ 45,000
|
|
February
|
4,000
|
52,500
|
|
March
|
7,000
|
81,000
|
|
April
|
4,000
|
45,000
|
|
Total
|
18,000
|
$223,500
|
a. Calculate the variable cost per direct labor hour.
b. Calculate the total fixed costs.
c. Estimate total monthly production costs for May using the high-low method, assuming the direct labor hours for May are expected to be 4,500.
Question 6
The total monthly operating costs of Caroline's Yogurt Ice Cream Shack are:
$1,700 + $0.45X, where X = 12 ounce serving
Calculate the average cost per serving at each of the following monthly volumes: 1,000, 2,000, 3,000 and 5,000.
Question 7
The J. Page Furniture Company has the following information available regarding costs at various levels of monthly production:
|
Production volume (units)
|
16,000 Units
|
22,000 Units
|
|
Direct materials
|
$ 70,000
|
$100,000
|
|
Direct labor
|
66,000
|
90,000
|
|
Indirect materials
|
21,000
|
30,000
|
|
Supervisors' salaries
|
12,000
|
12,000
|
|
Depreciation on plant and equipment
|
10,000
|
10,000
|
|
Maintenance
|
32,000
|
44,000
|
|
Utilities
|
15,000
|
21,000
|
|
Insurance on plant and equipment
|
1,600
|
1,600
|
|
Property taxes on plant and equipment
|
2,000
|
2,000
|
|
Total
|
$229,600
|
$310,600
|
Identify each of the costs above as being variable, fixed, or mixed.
Question 8
Contribution margin can be defined as:
a. sales revenue minus variable expenses
b. The amount of sales revenue necessary to cover variable expenses
c. The amount of sales revenue necessary to cover fixed and variable expenses
d. Sales revenue minus fixed expenses
Question 9
If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in:
a. net operating income
b. variable expenses
c. unit contribution margin
d. revenue
Question 10
1. Excareno Corp. has provided its contribution format income statement for June. The company produces and sells a single product.
|
Sales (8,400 units)
|
$764,400
|
|
variable expenses
|
445,200
|
|
Contribution margin
|
319,200
|
|
Fixed expenses
|
250,900
|
|
Net operating income
|
68,300
|
2. Calculate the company's total contribution margin if the company sells 8,200 units.
Question 11
Hopi Corp. expects the following operating results for next year:
|
Sales
|
$400,000
|
|
Contribution margin ratio
|
75%
|
|
Degree of operating leverage
|
4
|
What is Hopi expecting total fixed expenses to be next year?
a. $75,000
b. $100,000
c. $225,000
d. $200,000
Question 12
Rovinsky Corp, a company that produces and sells a single product, has provided its contribution margin format income statement for November.
|
Sales (5,700 units)
|
$319,200
|
|
variable expenses
|
188,100
|
|
Contribution margin
|
131,100
|
|
Fixed expenses
|
106,500
|
|
Net operating income
|
24,600
|
Calculate the company's Net Operating Income if the company sales 5,300 units.
Question 13
The Bronco Birdfeed company reported the following information:
|
sales (400 cases)
|
$100,000
|
|
variables expenses
|
60,000
|
|
contribution margin
|
40,000
|
|
fixed expenses
|
35,000
|
|
net operating income
|
5,000
|
1. How much will the sales of one additional case add to Bronco's net operating income?
Question 14
Gayne Corp. contribution margin ratio is 12% and its fixed monthly expenses are $84,000. If the company's sales for a month are $738,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change.
Question 15
Wilson Company prepared the following preliminary budget assuming no advertising expenditures:
|
selling price
|
$10 per unit
|
|
unit sales
|
100,000
|
|
variable expenses
|
$600,000
|
|
fixed expenses
|
$300,000
|
Based on a market study, the company estimated that it could increase the unit selling price by 15% and increase the unit sales volume by 10% if $100,000 were spent on advertising. Assuming that these changes are incorporated in its budget, what should be the budgeted net operating income?
Question 16
Data concerning Strite Corporation's single product appear below:
|
selling price per unit
|
$150.00
|
|
variable expense per unit
|
$42.00
|
|
Fixed expenses per month
|
$421,200
|
Assume the company's monthly target profit is $17,000. What would be the unit sales to attain that target profit of $17,000?