1)Under a relevant range of production, when total quantities sold increase, total fixed costs
| a. | increase | |
| b. | decrease | |
| c. | remain equal | |
| d. | there is no relationship |
2)Conversion costs are
| a. | only direct material | |
| b. | only direct labor | |
| c. | only overhead | |
| d. | overhead and direct labor |
3)XY Company sells its unique product at $30.00. Variable costs per unit are $20.00. Total fixed sales salaries per month $40,000.00. Other fixed costs per month $60,000.00. Assume that the company wants to change the sales salaries as follows: Total fixed sales salaries per month 25,000. Sales commission of 10% of sales.?Find at what sale-level is the company indifferent between the two alternatives
| a. | $5,000 | |
| b. | 5,000 units | |
| c. | 10,000 | |
| d. | 7,500 units |
| 4) AJ Company makes three products. | ? | ? | ? |
| Current selling price per unit, variable cost per unit, and machine hours required are as follows: | |||
| ? | ? | Products | ? |
| ? | X | Y | Z |
| Current selling price per unit | $20 | $30 | $20 |
| Variable cost per unit | 10 | 18 | 12 |
| Machine hours required for each unit | 2 | 3 | 4 |
| The company has a maximum of 1000 machine hours available per month. | |||
Assume the company produces all products; find the total contribution margin per hour.
| a. | $13.50 | |
| b. | $12 | |
| c. | $9 | |
| d. | $4 |
| 5) TC Company makes several printing works using two machines (X and Y). | ||
| Data on the two machines for June 2010 are as follows: | ||
| X | Y | |
| Direct material | 10 | 15 |
| Time required for each unit (TR) | 2 | 3 |
| Expected volume during the month (EV) | 2,000 | 500 |
| Expected labor cost per hour | 50 | |
| Budgeted overhead costs | 660,000 | |
| Determine | ||
| The overhead rate per labor hour | ||||
| 1. | FOAR = $120.00 per hour worked | |||
| 2. | FOAR = 120.00 per dollar | |||
| 3. | FOAR = $60.00 per hour worked | |||
| 4. | FOAR = $120.00 per overhead costs | |||
6) Assume the cost structure is as follows: TC = 25,000 + 5q, where TC = total costs, q = quantities sold. Under relevant range of sales, selling price per unit is $8.00. Total fixed costs are
| $100,000 | |||||
| $50,000 | |||||
| $25,000 | |||||
| More information is needed | |||||
| 7) The income statements of Tahany Company for June and July 2005 are as follows: | |||||
| June | July | ||||
| Sales | 610 | 650 | |||
| Cost of goods sold | 420 | 460 | |||
| Gross margin | 190 | 190 | |||
| Selling and administrative expenses | 185 | 195 | |||
| Income before tax | 5 | -5 | |||
Using High Low Method, the variable component of cost of goods sold is
| a. | 1.00 | |
| b. | .25 | |
| c. | 1.25 | |
| d. | 0 |
8) Non value added activities are
| a. | Direct material (only) | |
| b. | Direct labor (only) | |
| c. | Overhead (only) | |
| d. | Not essential costs to make/manufacture a product |
| 9) Tany Corporation is a small table manufacturing company operating in the north of Puerto Rico. | |
| Managers estimate the following costs per unit (one table) | |
| Direct material (DM) | $6.00 |
| Direct labor (DL) | $4.00 |
| Variable manufacturing overhead (VMO) | $3.00 |
| Variable administrative expenses (VAE) | $1.00 |
| The estimated contribution margin is | 30% |
| Monthly fixed costs are | |
| Manufacturing | $10,000.00 |
| Administrative | $5,000.00 |
| a. | 2,000 | |
| b. | 2,200 | |
| c. | 2,500 | |
| d. | 2,750 |
| 10) Tany Corporation is a small table manufacturing company operating in the north of Puerto Rico. | |
| Managers estimate the following costs per unit (one table) | |
| Direct material (DM) | $6.00 |
| Direct labor (DL) | $4.00 |
| Variable manufacturing overhead (VMO) | $3.00 |
| Variable administrative expenses (VAE) | $1.00 |
| The estimated contribution margin is | 30% |
| Monthly fixed costs are | |
| Manufacturing | $10,000.00 |
| Administrative | $5,000.00 |
Total unit sold during last month is 2525, what is the total operating income.
| a. | between $100 and $120 | |
| b. | between $120 and $140 | |
| c. | between $140 and $160 | |
| d. | between $160 and $180 |
11) BC Company estimates the following data for the coming month: total variable costs $60,000.00, income tax rate 30%, contribution margin percentage 60%. Find the estimated total sales for the coming month.
| a. | $100,000 | |
| b. | $60,000 / 40% | |
| c. | $60,000 / 60% | |
| d. | $60,000 X 60% |
12) If a company raises its required net income
| a. | the tax rate will decrease | |
| b. | break even point is negative | |
| c. | required contribution margin increases | |
| d. | required contribution margin decreases |
13)If a company raises its required operating profit
| a. | break even point is negative | |
| b. | break even point is zero | |
| c. | required contribution margin increases | |
| d. | required contribution margin decreases |
14) Copy of
XYZ has three products X, Y and Z. The following information pertains to these products X, Y, and Z. Contribution margin percentages are 40%, 50%, and 40% respectively. Sales mix percentages are 20%, 30%, and 50% respectively. Monthly fixed costs are estimated to be $100.00. The weighted average contribution margin percentage is
| a. | 43% | |
| b. | 40% | |
| c. | 30% | |
| d. | 0 |
15) Which of the following examples is a short term decision?
| a. | Make or buy decision | |
| b. | Purchase of land | |
| c. | Issuing bonds | |
| d. | Joint venture | |
| e. | Purchase of building |
| 16) Sales (in units) | 60,000 |
| Selling price per unit | 25 |
| Manufacturing costs per unit: | |
| Materials | 5 |
| Direct labor | 4 |
| Overhead | |
| Variable | 4 |
| Fixed | 6 |
| Total | 19 |
| Gross margin | 6 |
| Selling and admin. Expenses per unit | 2 |
| Operating income | 4 |
| A company in a foreign market offer to buy and the offer specifies the following data | |
| units to be sold | 10000 |
| price per unit | 20 |
| If the Company accepts the special offer, the incremental profit would be | |
| a. | $70,000.00 | ||||
| b. | ($70,000.00) | ||||
| c. | $10,000.00 | ||||
| d. | ($10,000.00) | ||||
| 17) Total Costs | Unit Cost | ||||
| Direct materials | 20,000 | 2.00 | |||
| Direct labor | 25,000 | 2.50 | |||
| Variable overhead | 15,000 | 1.50 | |||
| Fixed overhead (non-avoidable) | 24000 | 2.40 | |||
| Fixed overhead (avoidable) | 26,000 | 2.60 | |||
| Purchase cost | 85,999 | ||||
Should the company produce the product internally?
| a. | Yes | |||
| b. | No | |||
| c. | Indifferent to to make or to buy | |||
| d. | Yes if the market price per unit covers the fixed cost per unit. | |||
| 18) Sales (in units) | 60,000 | |||
| Selling price per unit | 25 | |||
| Manufacturing costs per unit: | ||||
| Materials | 5 | |||
| Direct labor | 4 | |||
| Overhead | ||||
| Variable | 4 | |||
| Fixed | 6 | |||
| Total | 19 | |||
| Gross margin | 6 | |||
| Selling and admin. Expenses per unit (fixed) | 2 | |||
| Operating income | 4 | |||
| A company in a foreign market offer to buy and the offer specifies the following data | ||||
| units to be sold | 10,000 | |||
| price per unit | 13.1 | |||
| Should the company sell this special order? | ||||
| a. | Yes, accept | |||
| b. | No, reject | |||
| c. | Indifferent to reject or not | |||
| d. | Always reject | |||
| Which of the following costs should be considered in short term decisions? | |||||
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