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Question 51

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Next year, Rad Shirt Company expects to sell 32,000 shirts. Rad is budgeting the
following operating results for next year:

What is Rad's degree of operating leverage for next year?

Select one:
a. 1.50

b. 1.56

c. 1.60

d. 2.50

Question 52

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The following monthly data are available for Wackadoos, 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?

Select one:
a. $70,000

b. $105,000

c. $63,000

d. $2,500

Question 53

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Clark Company produces flash drives for computers, which it sells for $22 each.
Each flash drive costs $14 of variable costs to make. During April, 1,360 drives
were sold. Fixed costs for March were $1 per unit for a total of $1,600 for the
month. How much is the contribution margin ratio? (Round to the nearest
percent)

Select one:
a. 27%

b. 36%

c. 64%

d. 73%

Question 54

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Biskra Corporation is a single product firm that expects the following operating
results next year:

Every unit that Biskra sells next year after the break-even point will increase net
operating income by:

Select one:
a. $0.12

b. $0.20

c. $0.32

d. $0.60

Question 55

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Maruska Corporation has provided the following data concerning its only product:

What is the margin of safety in dollars?

Select one:
a. $4,505,760

b. $858,240

c. $3,576,000

d. $5,364,000

Question 56

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In a sales mix situation, at any level of units sold, net income will be higher if

Select one:
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 57

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Scorpio Company's activity for the first three months of 2008 are as follows:
Machine Hours Electrical Cost
January 1,820 $2,400
February 2,020 $2,970
March 2,220 $3,540
Using the high-low method, how much is the cost per machine hour?

Select one:
a. $2.85

b. $1.42

c. $2.65

d. $5.70

Question 58

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Jack Company sells its product for $11,000 per unit. Variable costs per unit are:
manufacturing, $6,000, and selling and administrative, $125. Fixed costs are:
$30,000 manufacturing overhead, and $40,000 selling and administrative. There
was no beginning inventory at 1/1/07. Production was 20 units per year in 2007–
2009. Sales was 20 units in 2007, 16 units in 2008, and 24 units in 2009.
For the three years 2007–2009,

Select one:
a. absorption costing income exceeds variable costing income by $6,000.

b. absorption costing income equals variable costing income.

c. variable costing income exceeds absorption costing income by $6,000.

d. absorption costing income may be greater than, equal to, or less than
variable costing income, depending on the situation.

Question 59

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Starr Company has the following data:

costs are 60% of the unit selling price.
The contribution margin ratio is 40%.
The contribution margin per unit is $500.
The fixed costs are $400,000.
Which of the following does not express the break-even point?

Select one:
a. $400,000 + .60X = X

b. $400,000 + .40X = X

c. $400,000 ÷ $500 = X

d. $400,000 ÷ .40 = X

Question 60

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Which of the following is not an underlying assumption of CVP analysis?

Select one:
a. Changes in activity are the only factors that affect costs.

b. Cost classifications are reasonably accurate.

c. Beginning inventory is larger than ending inventory.

d. Sales mix is constant.

Question 61

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Target profit analysis is used to answer which of the following questions?

Select one:
a. What sales volume is needed to cover all expenses?

b. What sales volume is needed to cover fixed expenses?

c. What sales volume is needed to earn a specific amount of net operating

income?

d. What sales volume is needed to avoid a loss?

Question 62

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Heathman Inc. produces and sells a single product. The selling price of the
product is $230.00 per unit and its variable cost is $89.70 per unit. The fixed
expense is $308,660 per month.

The break-even in monthly unit sales is closest to:

Select one:
a. 2,328

b. 1,342

c. 3,441

d. 2,200

Question 63

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Fontain, Inc. collected the following production data for the past month:
Units Total Cost
Produced
1,600 $22,000
1,300 19,000
1,500 22,500
1,100 16,500
If the high-low method is used, what is the monthly total cost equation?

Select one:
a. Total cost = $4,400 + $11/unit

b. Total cost = $5,500 + $10/unit

c. Total cost = $0 + $15/unit

d. Total cost = $3,300 + $12/unit

Question 64

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Reese Company requires sales of $2,000,000 to cover its fixed costs of $700,000
and to earn net income of $500,000. What percent are variable costs of sales?

Select one:
a. 25%

b. 40%

c. 35%

d. 60%

Question 65

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Abdi Company, which has only one product, has provided the following data
concerning its most recent month of operations:

The total gross margin for the month under the absorption costing approach is:

Select one:
a. $105,000

b. $124,800

c. $7,000

d. $91,000

Question 66

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Select the correct statement concerning the cost-volume-profit graph at right:

Select one:
a. The point identified by "B" is the break-even point.

b. Line F is the variable cost line.

c. At point B, profits equal total costs.

d. Line E is the total cost line.

Question 67

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For Contreras Company, sales is $977,000, fixed expenses are $290,000, and the
contribution margin per unit is $40. What is the break-even point?

Select one:
a. $171,750 sales dollars

b. $725,000 sales dollars

c. 17,175 units

d. 7,250 units

Question 68

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Mediocre Manufacturing Company produces a single product. Management

budgeted the following costs for its first year of operations. These costs are
based on a budgeted volume of 4,000 units produced and sold:

During the first year of operations, Mediocre actually produced 4,000 units but
only sold 3,500 units. Actual costs did not fluctuate from the cost behavior
patterns described above. The 3,500 units were sold for $72 per unit. Assume
that direct labor is a variable cost.

What is the total cost that would be assigned to Mediocre's finished goods
inventory at the end of the first year of operations under the absorption costing
method?

Select one:
a. $12,250

b. $20,125

c. $23,000

d. $26,250

Question 69

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Hevesy Inc. produces and sells a single product. The selling price of the product
is $200.00 per unit and its variable cost is $80.00 per unit. The fixed expense is
$300,000 per month. The break-even in monthly unit sales is closest to:

Select one:
a. 2,500

b. 1,500

c. 3,750

d. 2,583

Question 70

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Rosal Corporation manufactures a variety of products. Variable costing net

operating income was $74,700 last year and was $82,300 this year. Last year,
ending inventory increased by 2,600 units. This year, ending inventory decreased
by 1,400 units. Fixed manufacturing overhead cost is $5 per unit.

What was the absorption costing net operating income this year?

Select one:
a. $75,300

b. $89,300

c. $76,300

d. $68,700

Question 71

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Salaries of accounts receivable clerks when one clerical worker is needed for
every 750 accounts receivable is an example of a:

Select one:
a. fixed cost

b. step-variable cost

c. mixed cost

d. curvilinear cost

Question 72

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Which is the true statement?

Select one:
a. In a CVP income statement, costs and expenses are classified only by
function.

b. The CVP income statement is prepared for both internal and external use.

c. The CVP income statement shows contribution margin instead of gross

profit.

d. In a traditional income statement, costs and expenses are classified as

either variable or fixed.

Question 73

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Inspection costs at one of Ratulowski Corporation's factories are listed below:

Management believes that inspection cost is a mixed cost that depends on units
produced.

Using the high-low method, the estimate of the variable component of inspection
cost per unit produced is closest to:

Select one:
a. $8.14

b. $7.05

c. $0.12

d. $12.89

Question 74

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The following monthly data are available for Wackadoos, 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 in June?

Select one:
a. 37.5%

b. 60%

c. 62.5%

d. 66.7%

Question 75

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An activity index might be referred to as a cost

Select one:
a. driver.

b. multiplier.

c. element.

d. correlation.

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