Response to the following multiple choice questions:
1. Locus Company has total fixed costs of $115,500. Its product sells for $45 per unit and variable costs amount to $31 per unit. Next year Locus Company wishes to earn a pretax income that equals 20% of fixed costs. How many units must be sold to achieve this target income level?
• 9,900.
• 8,250.
• 1,650.
• 7,942.
• 32,249.
2. During its most recent fiscal year, Dover, Inc. had total sales of $3,380,000. Contribution margin amounted to $1,590,000 and pretax income was $535,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?
• $2,845,000.
• $1,255,000.
• $1,790,000.
• $1,055,000.
• $2,125,000.
3. A company manufactures and sells a product for $50 per unit. The company's fixed costs are $80,000, and its variable costs are $30 per unit. The company's break-even point in dollars is: (Round your intermediate calculations to two decimal places.)
• $200,000.
• $4,000.
• $80,000.
• $133,333.
• $120,000.
4. Raven Company has a target of earning $72,000 pre-tax income. The contribution margin ratio is 32%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $40,000?
• $40,000.
• $293,750.
•$350,000.
• $225,000.
• $418,750.
5. A firm expects to sell 25,100 units of its product at $11.10 per unit and to incur variable costs per unit of $6.10. Total fixed costs are $71,000. The total contribution margin is:
• $125,500.
• $153,110.
• $224,110.
• $54,500.
• $71,000.
6. During its most recent fiscal year, Dover, Inc. had total sales of $3,380,000. Contribution margin amounted to $1,590,000 and pretax income was $535,000. What amount should have been reported as fixed costs in the company's contribution margin income statement for the year in question?
• $1,255,000.
• $2,845,000.
• $1,790,000.
• $2,125,000.
• $1,055,000.
7. A manufacturer reports the following costs to produce 13,000 units in its first year of operations: Direct materials, $13 per unit, Direct labor, $9 per unit, Variable overhead, $104,000, and Fixed overhead, $156,000. Of the 13,000 units produced, 12,000 were sold, and 1,000 remain in inventory at year-end. Under absorption costing, the value of the inventory is:
• $30,000.
• $42,000.
• $21,000.
• $22,000.
• $34,000.
8. The following information is available for a company's cost of sales over the last five months.
|
Month
|
Units sold
|
Cost of sales
|
|
January
|
410
|
$
|
31,400
|
|
February
|
810
|
$
|
37,500
|
|
March
|
1,650
|
$
|
49,500
|
|
April
|
2,450
|
$
|
61,500
|
Using the high-low method, the estimated variable cost of sales per unit sold is:
• $32.48.
• $14.75.
• $76.59.
• $30.00.
• $25.10.
9. Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are:
|
|
M
|
|
N
|
|
O
|
|
Unit sales price
|
$
|
10
|
|
$
|
7
|
|
$
|
9
|
|
Unit variable costs
|
|
5
|
|
|
4
|
|
|
7
|
Total fixed costs are $561,000. The break-even point in composite units for the current sales mix (round to the nearest unit) is:
• 21,577
• 25,500
• 76,500
• 170,000
• 51,000
10. Leeks Company's product has a contribution margin per unit of $11.88 and a contribution margin ratio of 22.0%. What is the selling price of the product?
• $22.
• $5.
• $43.
• $32.
• $54.
11. A company's product sells at $12.12 per unit and has a $5.18 per unit variable cost. The company's total fixed costs are $97,400. The break-even point in units is:
• 18,803.
• 7,018.
• 14,035.
• 5,383.
• 8,036.
12. Flannigan Company manufactures and sells a single product that sells for $600 per unit; variable costs are $342. Annual fixed costs are $924,500. Current sales volume is $4,350,000. Compute the current margin of safety in dollars for Flannigan Company.
• $2,150,000.
• $2,945,070.
• $1,623,035.
• $2,200,000.
• $3,342,714.
13. During a recent fiscal year, Creek Company reported pretax income of $129,000, a contribution margin ratio of 20% and total contribution margin of $440,000. Total variable costs must have been:
• $2,200,000.
• $1,555,000.
• $1,760,000.
• $645,000.
• $2,845,000.
14. McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $94; Z sells for $121. Variable costs for product A are $51; for Z $56. Fixed costs are $531,300. Compute the number of units of Product A McCoy must sell to break even.
• 7,700.
• 9,315.
• 3,080.
• 9,488.
• 1,540.
15. Use the following information to determine the break-even point in sales dollars:
|
Unit sales
|
54,800 Units
|
|
Dollar sales
|
$
|
548,000
|
|
Fixed costs
|
$
|
210,000
|
|
Variable costs
|
$
|
205,500
|
• $212,000.
• $210,000.
• $336,000.
• $132,500.
• $548,000.
16. The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $102,600.
|
Sales (40,000 units)
|
|
|
$
|
1,000,000
|
|
Costs:
|
|
|
|
|
|
Direct materials
|
$
|
289,300
|
|
|
|
Direct labor
|
|
240,900
|
|
|
|
Fixed factory overhead
|
|
104,500
|
|
|
|
Variable factory overhead
|
|
150,900
|
|
|
|
Fixed marketing costs
|
|
110,900
|
|
|
|
Variable marketing costs
|
|
50,900
|
|
947,400
|
|
Pretax income
|
|
|
$
|
52,600
|
• 32,149.
• 47,463.
• 37,287.
• 55,585.
• 50,900.
17. Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are:
|
|
M
|
|
N
|
|
O
|
|
Unit sales price
|
$
|
9
|
|
$
|
7
|
|
$
|
8
|
|
Unit variable costs
|
|
4
|
|
|
3
|
|
|
7
|
Total fixed costs are $525,000. The selling price per composite unit for the current sales mix (rounded to the nearest cent) is:
• $24.00.
• $26.00.
• $34.00.
• $ 8.00.
• $50.00.
18. Use the following information to determine the margin of safety in dollars:
|
Unit sales
|
69,000 Units
|
|
Dollar sales
|
$
|
690,000
|
|
Fixed costs
|
$
|
177,282
|
|
Variable costs
|
$
|
317,400
|
• $175,318.
• $328,300.
• $690,000.
• $361,700.
• $195,318.
19. During its most recent fiscal year, Raphael Enterprises sold 230,000 electric screwdrivers at a price of $15.90 each. Fixed costs amounted to $529,000 and pretax income was $759,000. What amount should have been reported as variable costs in the company's contribution margin income statement for the year in question?
• $1,288,000.
• $1,840,000.
• $3,657,000.
• $2,898,000.
• $2,369,000.
20. McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $88; Z sells for $109. Variable costs for product A are $43; for Z $49. Fixed costs are $510,600. Compute the break-even point in composite units.
• 2,269.
• 1,480.
• 1,534.
• 1,705.
• 4,255.
21. Kent Manufacturing produces a product that sells for $53.00. Fixed costs are $260,000 and variable costs are $28.00 per unit. Kent can buy a new production machine that will increase fixed costs by $13,600 per year, but will decrease variable costs by $3.80 per unit. What effect would the purchase of the new machine have on Kent's break-even point in units?
• 900 unit decrease.
• 900 unit increase.
• No effect on the break-even point in units.
• 3,934 unit decrease.
• 4,463 unit increase.
22. McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $80; Z sells for $100. Variable costs for product A are $26; for Z $40. Fixed costs are $423,500. Compute the contribution margin per composite unit.
• $390.
• $356.
• $410.
• $380.
• $270.
23. A product sells for $250 per unit, and its variable costs per unit are $181. The fixed costs are $430,000. If the firm wants to earn $25,400 pretax income, how many units must be sold?
• 6,900.
• 6,800.
• 6,600.
• 6,700.
• 7,000.
24. The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. If Burkett Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be (Do not round intermediate calculations.):
|
Sales (55,000 units)
|
|
$990,000
|
|
Costs:
|
|
|
|
Direct materials
|
$301,000
|
|
|
Direct labor
|
240,500
|
|
|
Fixed factory overhead
|
102,500
|
|
|
Variable factory overhead
|
150,500
|
|
|
Fixed marketing costs
|
110,500
|
|
|
Variable marketing costs
|
50,500
|
955,500
|
|
Pretax income
|
|
$34,500
|
• $150,500.
• $256,125.
• $202,000.
• $238,875.
• $138,000.
25. If a firm's forecasted sales are $236,000 and its break-even sales are $183,000, the margin of safety in dollars is:
• $53,000.
• $236,000.
• $419,000.
• $183,000.
• $23,300.
26. A company manufactures and sells a product for $123 per unit. The company's fixed costs are $71,760, and its variable costs are $93 per unit. The company's break-even point in units is:
• 332.
• 870.
• 772.
• 583.
• 2,392.
27. The following information is available for a company's utility cost for operating its machines over the last four months.
|
Month
|
Machine hours
|
Utility cost
|
|
January
|
980
|
$
|
5,530
|
|
February
|
1,880
|
$
|
7,060
|
|
March
|
2,560
|
$
|
8,900
|
|
April
|
680
|
$
|
4,200
|
Using the high-low method, the estimated total fixed cost for utilities is:
• $4,200.
• $3,540.
• $6,080.
• $1,580.
• $2,500.
28. A manufacturer reports the following costs to produce 11,000 units in its first year of operations: Direct materials, $11 per unit, Direct labor, $7 per unit, Variable overhead, $55,000, and Fixed overhead, $143,000. The total product cost per unit under absorption costing is:
• $31 per unit.
• $23 per unit.
• $16 per unit.
• $36 per unit.
• $18 per unit.
29. Gladstone Co. has expected sales of $362,000 for the upcoming month and its monthly break even sales are $345,000. What is the margin of safety as a percent of sales, rounded to the nearest whole percent?
• 95%.
• 195%.
• 5%.
• 105%.
• 6%.
30. Henderson Co. has fixed costs of $30,000 and a contribution margin ratio of 25%. If expected sales are $200,000, what is the margin of safety as a percent of sales?
• 20%.
• 40%.
• 22%.
• 67%.
• 60%.
31. A firm expects to sell 24,400 units of its product at $10.40 per unit and to incur variable costs per unit of $5.40. Total fixed costs are $64,000. The pretax net income is:
• $131,760.
• $122,000.
• $195,760.
• $58,000.
• $64,000.
32. Maroon Company's contribution margin ratio is 38%. Total fixed costs are $159,600. What is Maroon's break-even point in sales dollars?
• $420,000.
• $220,248.
• $159,600.
• $60,648.
• $199,752.
33. Fuschia Company's contribution margin per unit is $13. Total fixed costs are $91,390. What is Fuschia's break-even point in units?
rev: 04_17_2018_QC_CS-124760
• 6,947.
• 7,030.
• 70,300.
• 2,447.
• 4,740.
34. The following information is available for a company's cost of sales over the last five months.
|
Month
|
Units sold
|
Cost of sales
|
|
January
|
480
|
$
|
34,200
|
|
February
|
880
|
$
|
41,000
|
|
March
|
2,000
|
$
|
53,000
|
|
April
|
2,480
|
$
|
65,000
|
Using the high-low method, the estimated total fixed cost is:
• $107,232.
• $30,800.
• $26,808.
• $17,044.
• $53,616.
35. Kent Manufacturing produces a product that sells for $62.00 and has variable costs of $36.00 per unit. Fixed costs are $299,000. Kent can buy a new production machine that will increase fixed costs by $13,000 per year, but will decrease variable costs by $4.00 per unit. Compute the contribution margin per unit if the machine is purchased.
• $40.00.
• $22.00.
• $26.00.
• $35.00.
• $30.00.
36. A manufacturer reports the following information below for its first three years in operation.
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Income under variable costing
|
$
|
94,000
|
|
$
|
127,000
|
|
$
|
133,000
|
|
Beginning inventory (units)
|
|
0
|
|
|
980
|
|
|
590
|
|
Ending inventory (units)
|
|
980
|
|
|
590
|
|
|
0
|
|
Fixed manufacturing overhead per unit
|
$
|
11.00
|
|
$
|
11.00
|
|
$
|
11.00
|
Income for year 3 using absorption costing is:
• $122,710.
• $139,980.
• $127,000.
• $126,510.
• $133,000.
37. The following information is available for a company's utility cost for operating its machines over the last four months.
|
Month
|
Machine hours
|
Utility cost
|
|
January
|
1,040
|
$
|
6,590
|
|
February
|
1,940
|
$
|
7,180
|
|
March
|
2,680
|
$
|
8,100
|
|
April
|
740
|
$
|
4,650
|
Using the high-low method, the estimated variable cost per unit for utilities is:
• $4.14.
• $1.78.
• $6.47.
• $6.28.
• $3.02.
38. A manufacturer reports the following costs to produce 28,000 units in its first year of operations: Direct materials, $28 per unit, Direct labor, $24 per unit, Variable overhead, $280,000, and Fixed overhead, $364,000. Of the 28,000 units produced, 27,000 were sold, and 1,000 remain in inventory at year-end. Under variable costing, the value of the inventory is:
• $38,000.
• $75,000.
• $65,000.
• $52,000.
• $62,000.
39. Use the following information to determine the break-even point in units (rounded to the nearest whole unit):
|
Unit sales
|
44,000 Units
|
|
Unit selling price
|
$
|
15.30
|
|
Unit variable cost
|
$
|
9.10
|
|
Fixed costs
|
$
|
180,000
|
• 19,780
• 29,978
• 7,377
• 29,032
• 11,765
40. During March, a firm expects its total sales to be $170,000, its total variable costs to be $96,000, and its total fixed costs to be $26,000. The contribution margin for March is:
• $26,000.
• $74,000.
• $96,000.
• $122,000.
• $48,000.
41. Carver Packing Company reports total contribution margin of $96,600 and pretax net income of $21,000 for the current month. In the next month, the company expects sales volume to increase by 5%. The degree of operating leverage and the expected percent change in income, respectively, are:
• 0.22 and 5%
• 2.5 and 13%
• 4.6 and 23%
• 4.6 and 5%
• 0.22 and 4.1%
42. In Keegan Corporation's most recent fiscal year, the company reported pretax earnings of $218,000. Fixed costs totaled $455,700, the unit selling price of the firm's only product was $70, and the variable costs per unit were 30% of the selling price. Based on this information, the firm's break-even point in units was:
• 21,700 units.
• 13,750 units.
• 9,300 units.
• 22,688 units.
• 9,000 units.
43. A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,742,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is:
|
Product
|
Unit Sales Price
|
Variable Cost Per Unit
|
|
Regular
|
$
|
33
|
$
|
15
|
|
Ultra
|
|
36
|
|
9
|
• $18.
• $63.
• $27.
• $72.
• $45.
44. Mason Company manufactures and sells shoelaces for $4.00 per pair. Its variable cost per unit is $3.80. Mason's total fixed costs are $12,500. How many pairs must Mason Company sell to break even?
• 32,890.
• 3,289.
• 31,250.
• 3,125.
• 62,500.
45. A product sells for $30 per unit and has variable costs of $18.00 per unit. The fixed costs are $960,000. If the variable costs per unit were to decrease to $16.50 per unit, fixed costs increase to $1,080,000, and the selling price does not change, break-even point in units would:
• Equal 6,000.
• Not change.
• Decrease by 24,828.
• Increase by 24,828.
• Increase by 4,000.
46. Madison Corporation sells three products (M, N, and O) in the following mix: 2:1:2. Unit price and cost data are:
|
|
M
|
|
N
|
|
O
|
|
Unit sales price
|
$
|
20
|
|
$
|
14
|
|
$
|
10
|
|
Unit variable costs
|
|
10
|
|
|
7
|
|
|
5
|
Total fixed costs are $484,700. The break-even point in sales dollars for the current sales mix is:
• $484,700.
• $892,289.
• $407,589.
• $ 11,016.
• $969,400.
47. McCoy Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $89; Z sells for $118. Variable costs for product A are $44; for Z $53. Fixed costs are $523,900. Compute the number of units of Product Z McCoy must sell to break even.
• 9,885.
• 3,380.
• 10,447.
• 6,760.
• 1,457.
48. The Goldfarb Company manufactures and sells toasters. Each toaster sells for $23.65 and the variable cost per unit is $16.20. Goldfarb's total fixed costs are $24,900, and budgeted sales are 7,900 units. What is the contribution margin per unit?
• $58,855.
• $1.24.
• $16.20.
• $23.65.
• $7.45.
49. Flannigan Company manufactures and sells a single product that sells for $600 per unit; variable costs are $318. Annual fixed costs are $991,700. Current sales volume is $4,310,000. Compute the break-even point in units.
• 4,695.
• 398.
• 3,517.
• 1,653.
• 3,119.
50. Watson Company has monthly fixed costs of $85,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,200, what dollar amount of sales must be made to produce the target income?
• $174,500
• $38,000
• $212,500
• $100,200
• $250,500
51. A manufacturer reports the following information below for its first three years in operation.
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Income under variable costing
|
$
|
86,000
|
|
$
|
119,000
|
|
$
|
125,000
|
|
Beginning inventory (units)
|
|
0
|
|
|
900
|
|
|
550
|
|
Ending inventory (units)
|
|
900
|
|
|
550
|
|
|
0
|
|
Fixed manufacturing overhead per unit
|
$
|
12.00
|
|
$
|
12.00
|
|
$
|
12.00
|
Income for year 1 using absorption costing is:
• $86,000.
• $107,600.
• $96,800.
• $118,400.
• $114,800.
52. Mott Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $31, $41, and $51, respectively. Variable costs per unit are $19, $27, and $33, respectively. Fixed costs are $533,000. What is the break-even point in composite units?
• 1,851 composite units.
• 3,861 composite units.
• 1,514 composite units.
• 6,500 composite units.
• 5,330 composite units.
53. Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $310 and has a unit contribution margin of $110; the Adult model sells for $860 and has a unit contribution margin of $455; and the Recreational model sells for $1,010 and has a unit contribution margin of $505. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,510,000, calculate the firm's selling price per composite unit.
• $1,990.
• $15,350.
• $1,280.
• $7,825.
• $13,360.
54. A product sells for $200 per unit, and its variable costs are 65% of sales. The fixed costs are $420,000. What is the break-even point in sales dollars? (Do not round intermediate calculations.)
• $1,200,000.
• $420,000.
• $646,154.
• $6,000.
• $2,100.
55. A manufacturer reports the following costs to produce 23,000 units in its first year of operations: Direct materials, $23 per unit, Direct labor, $19 per unit, Variable overhead, $276,000, and Fixed overhead, $322,000. The total product cost per unit under variable costing is:
• $68 per unit.
• $54 per unit.
• $42 per unit.
• $56 per unit.
• $35 per unit.
56. A manufacturer reports the following information below for its first three years in operation.
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Income under variable costing
|
$
|
79,000
|
|
$
|
112,000
|
|
$
|
118,000
|
|
Beginning inventory (units)
|
|
0
|
|
|
830
|
|
|
515
|
|
Ending inventory (units)
|
|
830
|
|
|
515
|
|
|
0
|
|
Fixed manufacturing overhead per unit
|
$
|
7.00
|
|
$
|
7.00
|
|
$
|
7.00
|
Income for the 3-year period using absorption costing is:
• $309,000.
• $312,785.
• $316,210.
• $318,605.
• $289,790.
57. Morse Company reports total contribution margin of $51,240 and pretax net income of $12,200 for the current month. The degree of operating leverage is
• 4.2
• 1.24
• 2.5
• 247.6%
• 0.24
58. Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $350 and has a unit contribution margin of $130; the Adult model sells for $900 and has a unit contribution margin of $475; and the Recreational model sells for $1,050 and has a unit contribution margin of $525. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,550,000, calculate the firm's break-even point in composite units (rounded to the nearest whole unit).
• 406 composite units.
• 16,150 composite units.
• 1,380 composite units.
• 811 composite units.
• 8,075 composite units.
59. A manufacturer reports the following information below for its first three years in operation.
|
|
Year 1
|
|
Year 2
|
|
Year 3
|
|
Income under variable costing
|
$
|
80,000
|
|
$
|
113,000
|
|
$
|
119,000
|
|
Beginning inventory (units)
|
|
0
|
|
|
840
|
|
|
520
|
|
Ending inventory (units)
|
|
840
|
|
|
520
|
|
|
0
|
|
Fixed manufacturing overhead per unit
|
$
|
9.00
|
|
$
|
9.00
|
|
$
|
9.00
|
Income for year 2 using absorption costing is:
• $119,000.
• $113,000.
• $114,320.
• $122,360.
• $110,120.
60. At Midland Company's break-even point of 9,100 units, fixed costs are $154,700 and variable costs are $518,700 in total. The unit sales price is:
• $91.
• $57.
• $74.
• $17.
• $40.
61. Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $490 and has a unit contribution margin of $200; the Adult model sells for $1,040 and has a unit contribution margin of $545; and the Recreational model sells for $1,190 and has a unit contribution margin of $595. The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,690,000, calculate the firm's contribution margin per composite unit.
• $2,710.
•
$1,625.
• $1,000.
• $9,475.
• $1,730.
62. Flannigan Company manufactures and sells a single product that sells for $600 per unit; variable costs are $342. Annual fixed costs are $924,500. Current sales volume is $4,350,000. Compute the break-even point in dollars.
• $4,352,703.
• $2,945,070.
• $1,624,633.
• $2,150,000.
• $2,020,570.
63. Madison Corporation sells three products (M, N, and O) in the following mix: 3:1:2. Unit price and cost data are:
|
|
M
|
|
N
|
|
O
|
|
Unit sales price
|
$
|
8
|
|
$
|
6
|
|
$
|
7
|
|
Unit variable costs
|
|
5
|
|
|
4
|
|
|
6
|
Total fixed costs are $364,000. The contribution margin per composite unit for the current sales mix (round to the nearest cent) is:
• $13.00.
• $21.00.
• $ 7.00.
• $30.00.
• $44.00.
64. Flannigan Company manufactures and sells a single product that sells for $550 per unit; variable costs are $297. Annual fixed costs are $966,000. Current sales volume is $4,300,000. Flannigan Company management targets an annual pre-tax income of $1,225,000. Compute the unit sales to earn the target pre-tax net income.
• 8,660.
• 26,822.
• 3,818.
• 5,632.
• 6,682.
65. Management anticipates fixed costs of $73,500 and variable costs equal to 42% of sales. What will pretax income equal if sales are $335,000?
• $67,200.
• $191,100.
• $261,500.
• $140,700.
• $120,800.