Question 1. Stacker requires sales of $500,000 to cover its fixed costs of $100,000 and to earn net income of $80,000. What percent are variable costs of sales?
A) 36%
B) 2.77%
C) 20%
D) 64%
Question 2. Which budget provides the information needed to prepare the direct labor budget?
A) Income budget
B) Production budget
C) Materials budget
D) Sales budget
Question 3. What sometimes makes implementation of activity-based costing difficult in service industries is
A) the labeling of activities as value-added.
B) identifying activities, activity cost plus, and cost drivers.
C) that a larger proportion of overhead costs are company-wide costs.
D) attempting to reduce or eliminate nonvalue-added activities.
Question 4. Which of the following is true of activity-based costing?
A) More cost pools
B) Same base as traditional costing
C) Less costly to use
D) Eliminates arbitrary allocations
Question 5. Jaime Inc. manufactures 2 products, sweaters and jackets. The company has estimated its overhead in the order-processing department to be $180,000. The company produces 50,000 sweaters and 80,000 jackets each year. Sweater production requires 25,000 machine hours, jacket production requires 50,000 machine hours. The company places raw materials orders 10 times per month, 2 times for raw materials for sweaters and the remainder for raw materials for jackets. How much of the order processing overhead should be allocated to jackets?
A) $90,000
B) $120,000
C) $110,770
D) $144,000
Question 6. When units sold exceeds units produced,
A) net income under absorption costing is higher than net income under variable costing.
B) net income under absorption costing is lower than net income under variable costing.
C) net income under absorption costing equals net income under variable costing.
D) the relationship between net income under absorption costing and net income under variable costing cannot be predicted.
Question 7. Sales are $75,000 and variable costs are $30,000. How much is the contribution margin ratio?
A) 67%
B) 40%
C) 60%
D) Cannot be determined without more information
Question 8. Why do most manufacturers use a perpetual inventory system?
A) It is a requirement of the IRS for all US companies.
B) It is generally accepted accounting principles.
C) It is required for all manufacturers.
D) It is a characteristic of a proper cost accounting system.
Question 9. What are the components of total manufacturing costs?
A) Direct materials and direct labor only
B) Direct labor and manufacturing overhead only
C) Manufacturing overhead only
D) Direct materials, direct labor, and manufacturing overhead
Question 10. GoFish Inc. has an overhead rate for machine setups of $200 per machine setup, for a total of $56,000 of overhead. The company produces two products, Product Salamander and Product Gold, which require 160 and 120 setups each, respectively. The overhead assigned to each product is Salamander Gold
A) $28,000 $28,000
B) $24,000 $32,000
C) $30,000 $26,000
D) $32,000 $24,000
Question 11. Which one of the following is part of 'total manufacturing costs'?
A) Estimated overhead costs
B) Actual overhead costs
C) Incurred overhead costs
D) Applied overhead costs
Question 12. 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.
Question 13. In a sales mix situation, at any level of units sold, net income will be higher if
A) more higher contribution margin units are sold than lower contribution margin units.
B) more lower contribution margin units are sold than higher contribution margin units
C) more fixed expenses are incurred.
D) weighted-average unit contribution margin decreases.
Question 14. A process with no beginning work in process, completed and transferred out 10,000 units during a period and had 5,000 units in the ending work in process that were 50% complete as to conversion costs. Materials are added 80% at the beginning of the process and 20% when the units are 90% complete. What are the equivalent units of production for the period for conversion costs if the FIFO method is used?
A) 12,000 equivalent units
B) 15,000 equivalent units
C) 11,000 equivalent units
D) 12,500 equivalent units
Question 15. How is cost of goods manufactured calculated?
A) Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP
B) Direct materials used + direct labor + manufacturing overhead - beginning WIP + ending WIP
C) Beginning WIP + direct materials used + direct labor + manufacturing overhead - ending WIP
D) Direct materials used + direct labor + manufacturing overhead - ending WIP - beginning WIP
Question 16. Variable costing
A) is required under GAAP.
B) is required for external reporting purposes.
C) allows income to be manipulated through production decisions.
D) highlights differences between variable and fixed costs.
Question 17. If 20,000 units are started into production and 12,000 units are in process at the end of the period, how many units were completed and transferred out if there was no beginning work in process?
A) 20,000
B) 12,000
C) 8,000
D) 42,000
Question 18. Which one of the factors below is not a major influence of the length of budget periods?
A) The nature of the organization
B) The type of budget
C) Prevailing business conditions
D) The profitability of the company
Question 19. Tiny Tots Toys has actual sales of $400,000 and a break-even point of $260,000. How much is its margin of safety ratio?
A) 35%
B) 65%
C) 286%
D) 53.8%
Question 20. Which one of the following will appear as a credit in the Work in Process account of a first department in a two stage production process?
A) Materials used
B) Overhead applied
C) Cost of goods sold
D) Cost of products transferred into the second department
Question 21. Which one of the following is the correct calculation of cost of goods sold for a manufacturing company?
A) Beginning FG inventory - cost of goods manufactured - ending FG inventory
B) Ending FG inventory - cost of goods manufactured + beginning FG inventory
C) Beginning FG inventory + cost of goods purchased - ending FG inventory
D) Beginning FG inventory + cost of goods manufactured - ending FG inventory
Question 22. Hanker Company had the following department data on physical units:
Work in process, beginning 1,000
Completed and transferred out 4,000
Work in process, ending 800
Materials are added at the beginning of the process. What is the total number of equivalent units for materials during the period if the weighted average method is used?
A) 4,200
B) 800
C) 4,800
D) 3,000
Question 23. What happens to total costs if the activity level increases 10%?
A) They remain the same.
B) They increase by less than 10%.
C) They decrease by less than 10%.
D) They increase 10%.
Question 24. DaDumCompany desired 12,000 pounds of raw material on hand on June 1 and 10,500 on June 30. The number of pounds required for production for June totaled 240,000 pounds. How many pounds of raw material should DaDum purchase in June?
A) 238,500 pounds
B) 241,500 pounds
C) 250,500 pounds
D) 228,000 pounds
Question 25. At what point in time are costs of raw materials debited to Work in Process Inventory?
A) When the materials are put into production
B) When the bill for the materials is paid
C) When the materials are ordered
D) When the materials are received
Question 26. Which one of the following is correct concerning contribution margin?
A) It is calculated by subtracting product variable costs from sales.
B) It excludes selling costs from its calculation.
C) It is calculated by subtracting total manufacturing costs from sales revenue.
D) It equals sales revenue minus total variable costs.
Question 27. Madonna Company's high and low levels of activity were 8,000 units during March and 3,000 units produced in August. Machine maintenance costs were $29,000 in March and $12,000 in August. Using the high-low method, how much will total maintenance cost be in January of the following year if production is expected to be 7,000 units?
A) $1,800
B) $23,800
C) $25,600
D) $14,875
Question 28. Hess, Inc. sells a single product with a contribution margin of $12 per unit, fixed costs of $74,400, and sales for the current year of $100,000. How much is Hess's break even point?
A) 4,600 units
B) $25,600
C) 6,200 units
D) 2,133 units
Question 29. Hartley, Inc. has one product with a selling price per unit of $200, the unit variable cost is $75, and the total monthly fixed costs are $300,000. How much is Hartley's contribution margin ratio?
A) 62.5%.
B) 37.5%.
C) 150%.
D) 266.6%.
Question 30. Sarks Company has a contribution margin of $150,000 and a contribution margin ratio of 30%. How much are total variable costs?
A) $45,000
B) $350,000
C)$105,000
D) $500,000
Question 31. Whitey's Fish Camp has sales of $1,500,000 for the first quarter of 2006. In making the sales, the company incurred the following costs and expenses.
Variable Fixed
Product costs $400,000 $550,000
Selling expenses 100,000 75,000
Administrative expenses 80,000 67,000
Calculate net income under CVP for 2006.
Question 32. Strom Widget Company reported actual sales of $1,800,000, and fixed costs of $400,000. The contribution margin ratio is 25%. Compute the margin of safety in dollars and the margin of safety ratio.