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Study Guide Managerial Accounting 1. Whirl Company sells cordless razors for $50. aria!

le costs are "0# of sales and total fi$ed costs are $"0%000. What is the firm&s magnitude of operating le'erage if (%000 units are sold) A* +.0 ,* (.0 C* 1.5 -* .one of the a!o'e (. Select the incorrect statement regarding costs and e$penses. A* Some costs are initially recorded as e$penses /hile others are initially recorded as assets. ,* 0$penses are incurred /hen assets are used to generate re'enue. C* Manufacturing1related costs are initially recorded as e$penses. -* .on1manufacturing costs should !e e$pensed in the period in /hich they are incurred. +. All of the follo/ing are features of managerial accounting e$cept2 A* 3nformation is historically !ased and reported annually. ,* 3nformation includes economic and non1financial data as /ell as financial data. C* 3nformation is pro'ided primarily to insiders such as managers. -* 3nformation is reported continuously /ith a present or future orientation. ". -uring her first year /ith the company% Ann mista4enly accumulated some of the company&s period costs in ending in'entory. Which of the follo/ing indicates ho/ this error affects the company&s financial statements assuming num!er of units produced e$ceeded num!er of units sold during the period) A* Cash flo/s from operations are understated. ,* Gross margin is understated C* .et income is understated -* 3n'entory is o'erstated 5. 5he e$cess of a product&s selling price o'er its 'aria!le costs is referred to as2 A* Gross profit. ,* Contri!ution margin. C* Gross margin. -* Manufacturing margin.

6. Assuming a company&s in'entory increased during the period% /hich of the follo/ing misclassifications increases net income) A* 7ecording administrati'e salaries as a product cost ,* recording depreciation on production e8uipment as an e$pense C* 0$pensing ra/ material costs instead of including them in in'entory -* , and C 9. ,ased on the follo/ing cost data% items la!eled :a* and :!* in the ta!le !elo/ are /hich of the follo/ing amounts% respecti'ely)

A* :a* ; $+.00< :!* ; $+.00 ,* :a* ; $5.00< :!* ; $(.00 C* :a* ; $(.50< :!* ; $(.00 -* :a* ; $5.00< :!* ; $".00 =. 3dentify the true statement regarding ho/ product costs in a manufacturing company differ from product costs in a ser'ice company. A* Manufacturing companies incur costs for supplies !ut ser'ice companies do not. ,* Manufacturing companies accumulate product costs in in'entory accounts% /hile ser'ices companies do not. C* Ser'ice companies generally incur less la!or costs than manufacturing companies. -* Ser'ice companies are less competiti'e than manufacturing companies. >. ?ico ,ottling Company pays its production manager a salary of $5%000 per month. Salespersons are paid strictly on commission% at $( for each case of product sold. @or ?ico ,ottling Company% the salespersons& commissions are an e$ample of2 A* A 'aria!le cost. ,* A fi$ed cost. C* A mi$ed cost.

-* .one of the a!o'e. 10. Casters% 3nc. normally produces !et/een 150%000 and 195%000 units each year. Aroducing more than 195%000 units alters the company&s cost structure. @or e$ample% fi$ed costs increase !ecause more space must !e rented% and additional super'isors must !e hired. 5he production range !et/een 150%000 and 195%000 is called the2 A* -ifferential range. ,* 7ele'ant range. C* Bpportunity range. -* Ce'erage range. 11. Gypsy Doe&s operates a chain of coffee shops. 5he company pays rent of $10%000 per year for each shop. Supplies :nap4ins% !ags and condiments* are purchased as needed. 5he managers of each shop are paid a salary of $(%500 per month and all other employees are paid on an hourly !asis. 5he costs of supplies relati'e to the num!er of customers in a particular shop and relati'e to the num!er of customers in the entire chain of shops are /hich 4ind of cost% respecti'ely) A* aria!le cost E fi$ed cost ,* @i$ed cost E fi$ed cost C* aria!le cost E fi$ed cost -* aria!le cost E 'aria!le cost 1(. Select the correct statement from the follo/ing. A* A fi$ed cost structure offers less ris4 :i.e.% less earnings 'olatility* and higher opportunity for profita!ility than does a 'aria!le cost structure. ,* A 'aria!le cost structure offers less ris4 and higher opportunity for profita!ility than does a fi$ed cost structure. C* A fi$ed cost structure offers greater ris4 !ut higher opportunity for profita!ility than does a 'aria!le cost structure. -* A 'aria!le cost structure offers greater ris4 !ut higher opportunity for profita!ility than does a fi$ed cost structure. 1+. 5he follo/ing income statement is pro'ided for ,arron Company in (0062

What amount /as the company&s contri!ution margin) A* $11%000 ,* $(5%000 C* $(6%000 -* $+0%000 1". 5he follo/ing information relates to Minimart&s (009 accounting period2

,ased on this information% /hat is the company&s net income for (009) A* $15%000 ,* $+5%000 C* $1=%000 -* $(1%000 15. 5he follo/ing information is pro'ided for Stein!erg Company2

What is this company&s contri!ution margin)

A* $1+5%000 ,* $+5%000 C* $>0%000 -* $60%000 16. Wall Company incurred $+0%000 of fi$ed cost and $"0%000 of 'aria!le cost /hen (%000 units of product /ere made and sold. 3f the company&s 'olume increases to (%500 units% the company&s total costs /ill !e2 A* $=0%000. ,* $90%000. C* $=9%500. -* $1"0%000. 19. What is the effect on the financial statements of recording a $100 purchase of ra/ materials)

A* 3tem A ,* 3tem , C* 3tem C -* 3tem 1=. Which of the follo/ing costs is not considered to !e a product cost) A* 7a/ materials costs ,* -epreciation of deli'ery 'ehicles C* Wages paid to production /or4ers -* @actory utilities costs 1>. Which of the follo/ing should !e recorded as an asset) A* Aaid for a ne/ ad'ertising campaign ,* Aaid rent on the /arehouse used to store finished goods C* Aaid salary for the 'ice president of mar4eting -* Aaid for ra/ materials to !e used in production