1. Haywood Company sells a single product with a contribution margin of $5 per unit, fixed costs of $74,400, and sales for the current year of $100,000. What is the break-even point?
a. 5,120 units
b. $25,600
c. 6,200 units
d. 14,880 units
2. Bumpkin Incorporated's variable costs are 40% of sales. The company is contemplating an advertising campaign that will cost $20,000. If sales are expected to increase $60,000, by how much will net income increase?
a. $24,000
b. $40,000
c. $16,000
d. $ 4,000
3. Jackson Inc. wants target net income of $30,000 from the sale of its product. If the unit sales price is $15, unit variable cost is $9, and total fixed costs are $90,000, the number of units that must be sold to earn the target net income is
a. 8,000 units.
b. 20,000 units.
c. 16,000 units.
d. 12,000 units.
4. A company's break-even point can be lowered by decreasing
a. the contribution margin ratio.
b. the contribution margin.
c. the selling price.
d. variable costs per unit.
5 Knox has the following total production costs:
Total Costs Units
October $30,000 6,000
July $12,000 2,000
The total fixed costs are
a. $18,000
b. $3,000
c. $9,000
d. $6,000
6. Swain Corporation reported the following information for 2013:
October November December
Budgeted sales $230,000 $220,000 $270,000
Budgeted purchases $120,000 $128,000 $144,000
- Cost of goods sold is 35% of sales.
- Purchases of merchandise are paid for 40% in the month of acquisition and 60% in the following month.
- Accounts payable is used only for inventory acquisitions.
How much is the budgeted balance for Accounts Payable at October 31, 2013?
a. $48,000
b. $72,000
c. $102,000
d. $51,200
7. Boyd plans to sell 2,000 units during December, 1,900 in January, and 2,000 during February. The company keeps 15% of the next month's sales as ending inventory. How many units should be produced during January?
a. 1,915
b. 2,200
c. 1,885
d. Not enough information to determine.
8. Woodford is planning to sell 600 units and produce 700 units in October. Each unit requires one-half hour of direct labor. Employees are paid $10 per hour. How much is the total amount of budgeted direct labor for October?
a. $3,000
b. $48,000
c. $3,500
d. $2,400
9. The following credit sales are budgeted by Bruce Co.:
January $175,000
February 165,000
March 180,000
April 185,000
The company's past experience indicates that 70% of the accounts receivable are collected in the month of sale and 30% in the month following the sale. The anticipated cash inflow for the month of April is:
a. $120,250
b. $175,000
c. $167,500.
d. $183,500
10. Inventory accounts for a manufacturer consist of
a. raw materials, work in process, and finished goods.
b. direct labor, work in process, and finished goods.
c. manufacturing overhead, direct materials, and direct labor.
d. work in process, direct labor, and manufacturing overhead.
11. During 2013, Matthew Manufacturing expected total production costs to be $300,000 of overhead, $500,000 of materials, and $200,000 in labor. Matthew applied overhead based on direct labor cost. Actual total production included overhead cost of $280,000, $550,000 in materials used, and $220,000 in labor. All of the goods were completed. What was the cost of goods transferred to Finished Goods Inventory during the year?
a. $1,100,000
b. $1,050,000
c. $1,070,000
d. $1,000,000
12. Ching Company reported net income of $20,000 for the year. During the year, inventories decreased by $3,000, accounts payable decreased by $4500, depreciation expense was $5,000 and a loss on disposal of equipment of $2250 was recorded. Net cash provided by operations using the indirect method was
a. $19,250
b. $21,250
c. $25,750.
d. $34,750
13. Lucas Lamps has the following information available.
Net Income $18,000
Average Total Liabilities 35,000
Average Current Liabilities 18,000
Cash Provided by Operations 28,000
Cash Sales 90,000
Capital Expenditures 13,000
Dividends Paid 6,000
What is the current cash debt coverage ratio?
a. .51 times
b. 1.56 times
c. .80 times
d. .833 times
14. Flores Inc. has $40,000 in current assets and $60,000 in current liabilities when it gives a supplier a long-term note payable in payment of a $5,000 current liability. As a result of this transaction, the current ratio and working capital will
a. both decrease.
b. both increase.
c. increase and remain the same, respectively.
d. remain the same and decrease, respectively.
15. Nutt Manufacturing Company reported the following year-end information:
Beginning work in process inventory $ 23,000
Beginning raw materials inventory 12,000
Ending work in process inventory 25,000
Ending raw materials inventory 10,000
Raw materials purchased 340,000
Direct labor 120,000
Manufacturing overhead applied 50,000
How much is cost of goods manufactured for the year?
a. $342,000
b. $510,000
c. $512,000
d. $514,000
16. Ross Manufacturing Company reported the following information for 2013: beginning work in process inventory, $96,000; cost of goods manufactured, $1,176,000; beginning finished goods inventory, $60,000; ending work in process inventory, $84,000; and ending finished goods inventory, $48,000. How much is cost of goods sold for the year?
a. $1,176,000
b. $1,200,000
c. $1,188,000.
d. $1,164,000
17. Willis expected its annual overhead costs to be $300,000 and direct labor costs to be $500,000. Actual overhead was $290,000, and actual labor costs totaled $550,000. How much is the company's predetermined overhead rate to the nearest cent?
a. $0.58
b. $0.53
c. $0.55
d. $0.60
18. Pace Manufacturing expected total production costs for the year to include $270,000 of overhead, $450,000 of materials, and $180,000 in direct labor. Overhead is applied based on direct labor cost. Actual production costs were overhead of $268,000, $505,000 in materials used, and $198,000 in labor. All of the goods were completed. How much is the amount of over- or under-applied overhead?
a. $2,000 under-applied
b. $27,000 over-applied
c. $29,000 over-applied
d. $29,000 under-applied
19. The first step in activity-based costing is to
a. assign manufacturing overhead costs for each activity cost pool to products.
b. compute the activity-based overhead rate per cost driver.
c. identify and classify the major activities involved in the manufacture of specific products.
d. identify the cost driver that has a strong correlation to the activity cost pool.
20. Which of the following is not a benefit of activity-based costing (ABC)?
a. ABC is less costly than traditional costing.
b. ABC uses more cost pools to assign overhead costs to products.
c. ABC enhances control over overhead costs.
d. ABC leads to better management decisions.
21. Which of the following is true about discounted cash flow techniques?
a. A project with an internal rate of return that is zero or positive is acceptable.
b. A project with a net present value that is zero is not acceptable.
c. Potential salvage value is ignored since it is not a cash flow.
d. These methods are not the best capital budgeting methods available.
22. Chase, Inc. produces multiple fruit desserts, including fruit pies, all at the same production facility. Costs for producing one pie are:
Direct materials $2
Direct labor 1
Variable overhead 1
Fixed overhead 3
An outside supplier has offered to produce the pies for $5 each. Chase sells 1,000 pies per month. Should Chase accept the offer?
a. Yes, it will reduce Chase's costs by $2 per pie.
b. No, it will increase Chase's costs $5 per pie.
c. No, it is $1 per pie cheaper to make the pies.
d. More information is needed to answer the question.
23. Miles, Inc. Can sell unassembled bikes for $75. Costs incurred to this point total $45. It can assemble the bikes at an additional cost of $8 and increase the selling price to $85. Fixed costs are the same under both options. Miles should
a. assemble the bikes since it increases sales by $10 per unit.
b. assemble the bikes since it increases net income by $2 per bike.
c. do not assemble the bikes because it increases costs by $8 per bike.
d. Miles should assemble the bikes as long as the new price is over $75.
24. Snerd Products only has machine hours to produce and sell one of the following two products:
Machine Hours Contribution
Required Margin Per Unit
Product X 0.3 $6
Product Y 0.1 $5
The company has machine capacity of 900 hours. Snerd should produce
a. X because it has the highest contribution margin per machine hour
b. X because it uses fewer machine hours per unit
c. Y because it has the highest contribution margin per machine hour
d. Y because more units can be produced per machine hour than with X
25. LayO Corporation manufactures a face cream.
- Per bottle variable costs are $3 and unit sales price is$15.
- Based on budgeted fixed costs for the year of $80,000 and expected production of 20,000 bottles, the predetermined fixed overhead rate per bottle is $4.
- A one-time offer has been received to sell an additional 5,000 bottles at $13 each in an international market which would not affect present sales.
- Acceptance of the special order would require a new bottling machine be purchased at a cost of $2000 because the customer's bottles are shaped differently than Layo's bottles.
- LayO has sufficient capacity to produce the additional cream.
How much will profit change if LayO accepts the offer?
a. $65,000
b. $50,000
c. $48,000
d. $28,000
Use the following information for questions 26 and 27.
In the month of October the Finishing department had the following:
- 500 units in the beginning work in process inventory that were 60% complete.
- Beginning work in process had $1600 of materials cost and $1,200 of conversion costs.
- Materials are added at the beginning of the process and conversion costs are added uniformly throughout the process.
- During October, 1,000 units were completed and transferred to the finished goods inventory and there were 200 units that were 25% complete in the ending work in process inventory on October 31.
- During October, manufacturing costs charged to the department were: Materials $38,600; Conversion costs $81,600.
26. The cost per equivalent unit for conversion costs during October was
a. $ 77.784
b. $ 78.857
c. $ 68.00.
d. $ 69.00
27. The cost assigned to the units in the ending work in process inventory on Oct. 31 would be
a. $ 10, 643.
b. $ 22,471
c. $ 5,618
d. $ 10,319
A. 28. The following information is available for Sally Jo Sales:
Average operating assets $440,000
Controllable fixed costs 11,000
Contribution margin 55,000
Minimum rate of return 8%
What is the residual income?
a. $ 8,800
b. $ 35,200
c. $ 74,000
d. $396,000