Questions -

Q1. Abco Bread sells a box of bagels with a contribution margin of 62.5%. Its fixed costs are $150,000 per year. How much sales dollars does Abco Bread need to break-even per year if bagels are its only product?

a. $93,750

b. $150,000

c. $240,000

d. $90,000

Q2. Showroom, Inc. collected the following production data for the past month:

Units produced - Total Cost

1,600 - $44,000

1,300 - 38,000

1,500 - 45,000

1,100 - 33,000

If the high-low method is used, what is the monthly total cost equation?

a. Total cost = $8,800 + ($22 x units produced)

b. Total cost = $11,000 + ($20 x units produced)

c. Total cost = $0 + ($30 x units produced)

d. Total cost = $6,600 + ($24 x units produced)

Q3. FH is a non-profit organization that captures stray deer from residential communities. Fixed costs are $10,000. The variable cost of capturing each deer is $10.00 each. FH is funded by a local philanthropy in the amount of $32,000 for 2012. How many deer can FH capture during 2012?

a. 2,200

b. 3,200

c. 4,200

d. 2,000

Q4. Pointer Company's accountants use the high-low method to estimate costs. They provided the following information for its sales and production of one product:

Which month's data will the accountants use to estimate costs?

a. January and May

b. February and April

c. January and April

d. February and May

Q5. Smith Worldwide sells a single product with a contribution margin of $12 per unit and fixed costs of $24,000. How much is Martin's break even point?

a. 2,500 units

b. $12,000

c. $24,000

d. 2,000 units

Q6. The following monthly data are available for Winters. Inc. which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 4,000 units. How much is the margin of safety for the company for June?

a. $70,000

b. $105,000\

c. $63,000

d. $2,500

Q7. Wimple, Inc. produced 200 items and had the following costs: Hourly labor, $5,000; depreciation, $2,000; materials, $2,000; and rent, $3,000. How much is the variable cost per unit?

a. $60

b. $50

c. $25

d. $35

Q8. A division sold 200,000 calculators during 2011:

Sales                                                        $2,000,000

Variable costs:

Materials                                $200,000

Order processing                      150,000

Billing labor                              110,000

Delivery costs                           180,000

Selling expenses                         60,000

Total variable costs                                     700,000

Fixed costs                                                 1,000,000

How much is the contribution margin per unit?

a. $1.00

b. $3.50

c. $8.50

d. $6.50

Q9. What effect do changes in activity have on fixed costs per unit?

a. No effect. Fixed costs stay the same at every activity level

b. An inverse effect

c. A directly proportional effect

d. It depends on the particular level of activity

Q10. What is cost behavior analysis?

a. It is a study of how a firm's costs relate to competitors' costs

b. It is a study of how specific costs respond to activity level changes

c. It is a variation of the high-low method

d. It is an assumption that all costs increase over time

Q11. Regardless of the system used in departmental cost analysis:

a. Direct costs are allocated, indirect costs are not

b. Indirect costs are allocated, direct costs are not

c. Both direct and indirect costs are allocated

d. Neither direct nor indirect costs are allocated

e. Total departmental costs will always be the same

Q12. A company rents a building with a total of 100,000 square feet which are evenly divided between two floors. The space on the first floor is considered twice as valuable as that on the second floor. The total monthly rent for the building is $30,000. How much of the monthly rental expense should be allocated to a department that occupies 10,000 square feet on the first floor?

a. $6,000

b. $5,000

c. $3,000

d. $4,000

e. $2,000

Q13. A company has two departments, A and B, that incur delivery expenses. An analysis of the total delivery expense of $9,000 indicates that Dept A had a direct expense of $1,000 for deliveries. None of the $9,000 is a direct expense to Dept. B The analysis also indicates that 60% of regular delivery requests originate in Dept A and 40% in Dept B The delivery expenses that should be charged to Dept A and Dept B respectively are:

a. $4,500; $4,500

b. $5,800; $3,200

c. $5,500; $3,500

d. $5,500; $4,500

e. $5,400; $3,600

Q14. A system of assigning costs to departments and products on the basis of a variety of activities instead of only one allocation base is called:

a. A responsibility accounting system

b. A cost center accounting system

c. Controllable costing

d. Activity based costing

e. Performance costing

Q15. Which of the following would definitely not be considered a cost center?

a. Accounting department

b. Purchasing department

c. Research department

d. Advertising department

e. All of the above could be considered cost centers

Problem 1 - Speakerboxx Music, Inc. produces a hip-hop CD that is sold for $15. The contribution margin ratio is 30%. Fixed expenses total $6,750.

Instructions

A. Compute the variable cost per unit.

B. Compute how many CDs that Speakerboxx will have to sell in order to break even.

C. Compute how many CDs that Speakerboxx will have to sell in order to make a target net income of $16,200.

D. Fill in the dollar amounts for the summary income statement below based on your answer to part C.