Student ID: 21188324 Exam: 061682RR - Costs and Decision Making 1. Indiana Corporation produces a single product that it sells for $9 per unit. During the first year of operations, 100,000 units were produced, and 90,000 units were sold. Manufacturing costs and selling and administrative expenses for the year were as follows: What was Indiana Corporation's net operating income for the year using variable costing? Fixed Costs Variable Costs Raw materials $1.75 per unit produced Direct labor $1.25 per unit produced Factory overhead $100,000 $0.50 per unit produced Selling and administrative $70,000 $0.60 per unit sold A. $371,000 B. $281,000 C. $271,000 D. $181,000 2. Use the following information to answer this question. Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows: Direct materials $153,000 Direct labor $110,500 Variable manufacturing overhead $204,000 Fixed manufacturing overhead $255,000 labor is a variable cost. Under absorption costing, the carrying value on the balance sheet of the ending inventory for the year would be A. $230,800. B. $190,800. C. $170,000. D. $0. 3. Use the following information to answer this question. Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit. The best estimate of the total variable cost per unit is Sales volume (units) 4,000 5,000 Cost of sales $338,000 $422,500 Selling and administrative costs $89,600 $106,000 A. $106.90. B. $105.70. C. $100.90. D. $84.50. 4. Green Company's variable expenses are 75% of sales. At a sales level of $400,000, the company's degree of operating leverage is 8. At this sales level, fixed expenses are A. $75,000. B. $87,500. C. $50,000. D. $100,000. 5. A disadvantage of the high-low method of cost analysis is that A. it's too time-consuming to apply. B. it relies totally on the judgment of the person performing the cost analysis. C. it uses two extreme data points, which may not be representative of normal conditions. D. it can't be used when there are a very large number of observations. 6. Last year, Gransky Corporation's variable costing net operating income was $52,100, and its ending inventory increased by 400 units. Fixed manufacturing overhead cost was $7 per unit. What was the absorption costing net operating income last year? A. $2,800 B. $54,900 C. $52,100 D. $49,300 7. A cost driver is A. a fixed cost that can't be avoided. B. an indirect cost that's essential to the business. C. the largest single category of cost in a company. D. a factor that causes variations in a cost. 8. Purchase-order processing is an example of a/an _______ activity. A. product-level B. unit-level C. batch-level D. organization-sustaining 9. Daniele Corporation uses an activity-based costing system with the following three activity cost pools: The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: The distribution of resource consumption across activity cost pools is given below: Activity Cost Pool Total Activity Fabrication 50,000 machine-hours Order processing 500 orders Other not applicable Cost Data Wages and salaries $280,000 Depreciation $200,000 Occupancy $140,000 Total $620,000 Activity Cost Pools Fabrication Order Processing Other Total Wages and salaries 60% 30% 10% 100% Depreciation 20% 35% 45% 100% Occupancy 10% 50% 40% 100% The activity rate for the Fabrication activity cost pool is closest to _______ per machine hour. A. $1.24 B. $3.72 C. $7.44 D. $4.44 10. Rank the following methods of assigning overhead costs from least accurate to most accurate. A. Plantwide rate, activity-based costing, departmental rates B. Activity-based costing, departmental rates, plantwide rate C. Plantwide rate, departmental rates, activity-based costing D. Departmental rates, plantwide rate, activity-based costing 11. Murdoch Corporation has provided the following data concerning its only product: What is the margin of safety in dollars? Murdoch Product Data Selling price $230 per unit Current sales 39,100 units Break-even sales 29,716 units A. $8,993,000 B. $6,834,680 C. $2,158,320 D. $5,995,333 12. Use the following information to answer this question. Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit. The best estimate of the total monthly fixed cost is Sales volume (units) 4,000 5,000 Cost of sales $338,000 $422,500 Selling and administrative costs $89,600 $106,000 A. $427,600. B. $24,000. C. $528,500. D. $478,050. 13. Use the following information to answer this question. Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows: Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost. The contribution margin per unit was Production Cost Data Direct materials $153,000 Direct labor $110,500 Variable manufacturing overhead $204,000 Fixed manufacturing overhead $255,000 A. $17.50. B. $27.30. C. $32.50. D. $25.70. 14. Use the following information to answer this question. Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the past five months of operations. Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to which of the following? Machine Hours Electrical Cost August 1,000 $1,620 September 900 $1,510 October 1,500 $1,870 November 2,000 $1,950 December 1,300 $1,730 A. $1,306.50 B. $1,150.00 C. $1,290.00 D. $870.00 15. Use the following information to answer this question. Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the past five months of operations. Using the high-low method of analysis, the estimated variable cost per machine hour for electricity is closest to which of the following? Machine Hours Electrical Cost August 1,000 $1,620 September 900 $1,510 October 1,500 $1,870 November 2,000 $1,950 December 1,300 $1,730 A. $0.40 B. $2.50 C. $1.68 D. $0.98 16. Which of the following is true regarding the contribution margin ratio of a single-product company? A. If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales. B. As fixed expenses decrease, the contribution margin ratio increases. C. The contribution margin ratio multiplied by the variable expense per unit equals the contribution margin per unit. D. The contribution margin ratio increases as the number of units sold increases. 17. Use the following information to answer this question. Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: Assuming that the company charges $556.96 for the Smith wedding cake, what would be the overall margin on the order? Pyburn Wedding Smith Wedding Number of reception guests 72 189 Number of tiers on the cake 4 5 Cost of purchased decorations for cake $29.92 $68.75 A. $96.66 B. $152.45 C. $165.41 D. $460.30 18. An increase in the activity level within the relevant range results in a/an A. proportionate increase in total fixed costs. B. decrease in fixed cost per unit. C. unchanged fixed cost per unit. D. increase in fixed cost per unit. 19. Bear Publishing sells a nature guide. The following information was reported for a typical month (sales volume is constant each month): Bear is expecting a 20-cent increase in variable expenses. No other changes are expected or planned. How much contribution margin should Bear expect after the increase? A. $9,900 B. $7,700 C. Can't be determined D. $4,100 20. Which statement is true for a company that uses variable costing? A. Profit fluctuates with sales. B. The unit product cost changes because of changes in the number of units manufactured. C. Any underapplied overhead is included in the product cost. D. Product costs include variable administration costs.  |
