Professional Documents
Culture Documents
award:
10.00 points
James Company has a margin of safety percentage of 20% based on its actual sales. The break-even point is
$220,000 and the variable expenses are 45% of sales. Given this information, the actual profit is: (Do not round
intermediate calculations.)
$24,200
$30,250
$19,800
$25,000
2.
award:
10.00 points
If the sales volume decreases by 20%, the variable cost per unit increases by 10%, and all other factors remain the
same, net operating income will: (Do not round intermediate calculations.)
increase by $21,396.
decrease by $5,856.
decrease by $17,000.
decrease by $27,144.
3.
award:
10.00 points
The following information relates to Clyde Corporation which produced and sold 37,000 units last month.
Sales $555,000
Manufacturing costs:
Fixed $210,000
Variable $100,600
Selling and administrative:
Fixed $300,000
Variable $ 43,700
There were no beginning or ending inventories. Production and sales next month are expected to be 27,000 units.
The company's unit contribution margin next month should be: (Round your intermediate calculations and final
answer to 2 decimal places)
$8.38
$3.30
$11.10
$14.61
4.
award:
10.00 points
The contribution margin ratio is 25% for Grain Company and the break-even point in sales is $201,200. To obtain a
target net operating income of $63,000, sales would have to be: (Do not round intermediate calculations.)
$453,200
$264,200
$283,000
$238,800
5.
award:
10.00 points
Rothe Company manufactures and sells a single product that it sells for $100 per unit and has a contribution margin
ratio of 30%. The company's fixed expenses are $47,600. If Rothe desires a monthly target net operating income
equal to 10% of sales, the amount of sales in units will have to be: (Round your intermediate calculations to 2
decimal places and final answer to the nearest whole number.)
2,380 units
820 units
3,247 units
1,266 units
6.
award:
10.00 points
South Company sells a single product for $28 per unit. If variable expenses are 55% of sales and fixed expenses
total $14,400, the break-even point in sales dollars will be: (Do not round intermediate calculations.)
$32,000
$17,600
$14,400
$26,182
7.
award:
10.00 points
Darth Company sells three products. Sales and contribution margin ratios for the three products follow:
Given these data, the contribution margin ratio for the company as a whole would be: (Round your intermediate
calculations to 2 decimal places. Round your answer to whole percentage.)
24%
41%
31%
it is impossible to determine from the data given.
8.
award:
10.00 points
Cindy, Inc. sells a product for $10 per unit. The variable expenses are $3 per unit, and the fixed expenses total
$40,400 per period. By how much will net operating income change if sales are expected to increase by $46,000?
$39,480 increase
$26,600 decrease
$5,600 increase
$32,200 increase
9.
award:
10.00 points
Pool Company's variable expenses are 33% of sales. Pool is contemplating an advertising campaign that will cost
$19,700. If sales increase by $79,700, the company's net operating income should increase by: (Do not round
intermediate calculations.)
$9,259
$26,301
$66,598
$33,699
10.
award:
10.00 points
Last year, Flynn Company reported a profit of $77,000 when sales totaled $527,000 and the contribution margin
ratio was 25%. If fixed expenses increase by $10,700 next year, what amount of sales will be necessary in order for
the company to earn a profit of $87,000? (Do not round intermediate calculations.)
$573,350
$614,000
$609,800
$641,800
11.
award:
10.00 points
Kendall Company has sales of 2,000 units at $40 a unit. Variable expenses are 30% of the selling price. If total
fixed expenses are $46,000, the degree of operating leverage is:
rev: 03_06_2012
8.00
2.40
5.60
2.57
12.
award:
10.00 points
At a sales level of $78,000, Blue Company's contribution margin is $36,000. If the degree of operating leverage is 4
at a $78,000 sales level, net operating income must equal:
$27,000
$10,500
$19,500
$9,000
0
13.
award:
10.00 points
The variable expense per unit is: (Do not round intermediate calculations.)
$7.00 per unit
14.
award:
10.00 points
Mark Corporation produces two models of calculators. The Business model sells for $60, and the Math model sells
for $30. The variable expenses are given below:
Business Math
Model Model
Variable production costs per unit $20 $21
Variable selling and administrative expenses per unit $ 10 $7
The fixed expenses are $85,000 per month. The expected monthly sales of each model are: Business, 2,000 units;
Math, 1,500 units.
The contribution margin ratio for the Business model is: (Do not round intermediate calculations.)
30%
70%
50%
80%
15.
award:
10.00 points
Mark Corporation produces two models of calculators. The Business model sells for $42, and the Math model sells
for $35. The variable expenses are given below:
Business Math
Model Model
Variable production costs per unit $11 $15
Variable selling and administrative expenses per unit $11 $ 5
The fixed expenses are $75,200 per month. The expected monthly sales of each model are: Business, 1,250 units;
Math, 500 units.
The break-even point in unit sales for the expected sales mix is closest to: (Do not round intermediate
calculations.)
2,892 of each product
16.
award:
10.00 points
Product Product
L40O Y27L
Sales $22,600 $49,600
Variable expenses 9,040 18,250
Contribution margin $13,560 $31,350
If the sales mix were to shift toward Product L40O with total dollar sales remaining constant, the overall break-
even point for the entire company:
would not change.
would decrease.
would increase.
17.
award:
10.00 points
Roy Corporation produces a single product. During July, Roy produced 19,600 units. Costs incurred during the
month were as follows:
Under absorption costing, any unsold units would be carried in the inventory account at a unit product cost of:
$7.50
$6.80
$6.20
$5.90
18.
award:
10.00 points
Sproles Inc. manufactures a variety of products. Variable costing net operating income was $179,000 last year and
its inventory decreased by 3,970 units. Fixed manufacturing overhead cost was $9 per unit. What was the
absorption costing net operating income last year?
$179,000
$35,730
$143,270
$214,730
19.
award:
10.00 points
Craft Company produces a single product. Last year, the company had a net operating income of $80,000 using
absorption costing and $74,500 using variable costing. The fixed manufacturing overhead cost was $5 per unit.
There were no beginning inventories. If 21,500 units were produced last year, then sales last year were:
16,000 units
20,400 units
22,600 units
27,000 units
20.
award:
10.00 points
Hansen Company produces a single product. During the last year, Hansen had net operating income under
absorption costing that was $20,250 lower than its income under variable costing. The company sold 18,600 units
during the year, and its variable costs were $16 per unit, of which $11 was variable selling expense. If fixed
production cost is $15 per unit under absorption costing every year, then how many units did the company produce
during the year?
16,975 units
17,800 units
19,950 units
17,250 units
21.
award:
10.00 points
Hatch Company has two divisions, O and E. During the year just ended, Division O had a segment margin of
$9,000 and variable expenses equal to 80% of sales. Traceable fixed expenses for Division E were $26,000. Hatch
Company as a whole had a contribution margin ratio of 30%, a segment margin of $33,800, and sales of $258,000.
Given this data, the sales for Division E for last year were:
$125,000
$133,000
$191,667
$162,500
22.
award:
10.00 points
Stephen Company has the following data for its three stores last year:
A B C
Contribution margin ratio ? 30% 40%
Contribution margin ? $195,300 ?
Variable expenses $345,100 ? $198,000
Variable expenses as a percentage of sales 70% ? ?
$1,474,000
$1,674,000
$1,024,000
23.
award:
10.00 points
Johnson Company operates two plants, Plant A and Plant B. Last year, Johnson Company reported a contribution
margin of $44,000 for Plant A. Plant B had sales of $217,000 and a contribution margin ratio of 30%. Net operating
income for the company was $36,100 and traceable fixed expenses for the two stores totaled $54,800. Johnson
Company's common fixed expenses were:
$18,200
$54,800
$73,000
$109,100
24.
award:
10.00 points
Leis Retail Company has two Stores, M and N. Store N had sales of $200,000 during March, a segment margin of
$56,600, and traceable fixed expenses of $35,600. The company as a whole had a contribution margin ratio of 20%
and $99,800 in total contribution margin. Based on this information, total variable expenses in Store M for the
month must have been:
$399,200
$291,400
$191,600
$299,000
25.
award:
10.00 points
Carr Company produces a single product. During the past year, Carr manufactured 32,150 units and sold 26,900
units. Production costs for the year were as follows:
Sales totaled $1,277,750, variable selling expenses totaled $158,710, and fixed selling and administrative expenses
totaled $212,190. There were no units in beginning inventory. Assume that direct labor is a variable cost.
The contribution margin per unit would be: (Do not round intermediate calculations.)
$21.90
$26.70
$16.30
$20.80
26.
award:
10.00 points
Carr Company produces a single product. During the past year, Carr manufactured 29,010 units and sold 23,900
units. Production costs for the year were as follows:
Sales totaled $1,159,150, variable selling expenses totaled $126,670, and fixed selling and administrative expenses
totaled $205,971. There were no units in beginning inventory. Assume that direct labor is a variable cost.
Under absorption costing, the ending inventory for the year would be valued at: (Do not round intermediate
calculations.)
$158,410
$228,410
$185,910
$219,910
27.
award:
10.00 points
Kilihea Corporation produces a single product. The company's absorption costing income statement for July
follows:
Kilihea Corporation
Income Statement
For the month ended July 31
Sales (14,200 units) $766,800
Cost of goods sold 545,280
Gross margin 221,520
Selling and administrative expenses:
Fixed 113,600
Variable 71,000
Total selling and administrative expense 184,600
Net operating income $ 36,920
The company's variable production costs are $26.40 per unit and its fixed manufacturing overhead totals $178,500
per month.
Net operating income under the variable costing method for July would be:
$28,820
$36,920
$45,020
$25,620
28.
award:
10.00 points
Kilihea Corporation produces a single product. The company's absorption costing income statement for July
follows:
Kilihea Corporation
Income Statement
For the month ended July 31
Sales (12,100 units) $580,800
Cost of goods sold 320,650
Gross margin 260,150
Selling and administrative expenses:
Fixed 121,000
Variable 72,600
Total selling and administrative expense 193,600
Net operating income $ 66,550
The company's variable production costs are $19.50 per unit and its fixed manufacturing overhead totals $93,200
per month.
The contribution margin per unit during July was (Round your intermediate calculations and final answer to 2
decimal places):
$22.50
$25.50
$18.50
$5.50
29.
award:
10.00 points
Kilihea Corporation produces a single product. The company's absorption costing income statement for July
follows:
Kilihea Corporation
Income Statement
For the month ended July 31
Sales (9,700 units) $446,200
Cost of goods sold 285,180
Gross margin 161,020
Selling and administrative expenses:
Fixed 67,900
Variable 38,800
Total selling and administrative expense 106,700
Net operating income $ 54,320
The company's variable production costs are $21.40 per unit and its fixed manufacturing overhead totals $90,200
per month.
The break-even point in units for the month under variable costing is (Round your intermediate calculations and
final answer to nearest whole number):
4,025 units
5,925 units
4,825 units
7,675 units
0
30.
award:
10.00 points
Eagle Corporation manufactures a picnic table. Shown below is Eagle's cost structure:
In its first year of operations, Eagle produced and sold 10,520 tables. The tables sold for $153 each.
If Eagle had sold only 9,250 tables in its first year, what total amount of cost would have been assigned to the 1,270
tables in finished goods inventory under the absorption costing method?
$71,755
$114,300
$50,800
$143,510
31.
award:
10.00 points
Eagle Corporation manufactures a picnic table. Shown below is Eagle's cost structure:
In its first year of operations, Eagle produced and sold 11,580 tables. The tables sold for $179 each.
How would Eagle's variable costing net operating income be affected in its first year if only 9,900 tables were sold
instead of 11,580?
net operating income would have been $111,720 lower
net operating income would have been $104,160 lower
32.
award:
10.00 points
Eagle Corporation manufactures a picnic table. Shown below is Eagle's cost structure:
In its first year of operations, Eagle produced and sold 11,300 tables. The tables sold for $176 each.
How would Eagle's absorption costing net operating income be affected in its first year if 14,060 tables were
produced instead of 11,300 and Eagle still sold 11,300 tables? (Round your intermediate calculations to 2
decimal places.)
net operating income would have been $39,889 higher
33.
award:
10.00 points
Deboer Company, which has only one product, has provided the following data concerning its most recent month of
operations:
What is the total period cost for the month under the variable costing approach?
$56,400
$27,690
$45,090
$28,710
34.
award:
10.00 points
Deboer Company, which has only one product, has provided the following data concerning its most recent month of
operations:
What is the total period cost for the month under the absorption costing approach?
$29,510
$14,420
$9,940
$19,570
35.
award:
10.00 points
If sales for Division F increase $42,100 with a $14,500 increase in the Division's traceable fixed costs, the overall
company net operating income should:
increase by $27,600
increase by $4,445
decrease by $10,055
increase by $2,334
36.
award:
10.00 points
The Rial Company's income statement for June is given below:
During June, the sales clerks in Division F received salaries totaling $35,000. Assume that during July the salaries
of these sales clerks are discontinued and instead they are paid a commission of 18% of sales. If sales in Division F
increase by $65,000 as a result of this change, the July segment margin for Division F should be:
$19,400
$42,700
$54,400
$94,000
37.
award:
10.00 points
If the sales in Division L increase by 35% while common fixed expenses in the company decrease by $10,500, the
segment margin for Division L should:
increase by $45,281
increase by $23,681
decrease by $34,781
decrease by $78,481
38.
award:
10.00 points
A proposal has been made that will lower variable expenses in Division L to 30% of sales. However, this reduction
can only be accomplished by a $17,500 increase in Division L's traceable fixed expenses. If this proposal is
implemented and if sales remain constant, overall company net operating income should:
decrease by $15,610
increase by $17,500
increase by $19,390
decrease by $17,500
39.
award:
10.00 points
Pong Incorporated's income statement for the most recent month is given below.
If Store G sales increase by $48,100 with no change in fixed costs, the overall company net operating income
should:
increase by $9,620
increase by $27,417
increase by $32,227
increase by $4,810
40.
award:
10.00 points
Pong Incorporated's income statement for the most recent month is given below.
decrease by $4,849
increase by $1,292
increase by $5,700
41.
award:
10.00 points
Schemm Inc. regularly uses material F04E and currently has in stock 447 liters of the material for which it paid
$2,609 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $5.11
per liter. New stocks of the material can be purchased on the open market for $5.71 per liter, but it must be
purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 700 liters of the material to
be used in a job for a customer. The relevant cost of the 700 liters of material F04E is:
$3,734
$3,577
$3,997
$5,710
42.
award:
10.00 points
Lampshire Inc. is considering using stocks of an old raw material in a special project. The special project would
require all 160 kilograms of the raw material that are in stock and that originally cost the company $1,836 in total.
If the company were to buy new supplies of this raw material on the open market, it would cost $7.60 per kilogram.
However, the company has no other use for this raw material and would sell it at the discounted price of $6.90 per
kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the
purchaser at a total cost of $82 for all 160 kilograms. What is the relevant cost of the 160 kilograms of the raw
material when deciding whether to proceed with the special project?
$1,104
$1,216
$1,022
$1,207
43.
award:
10.00 points
Iwasaki Inc. is considering whether to continue to make a component or to buy it from an outside supplier. The
company uses 12,500 of the components each year. The unit product cost of the component according to the
company's cost accounting system is given as follows:
Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 40% is avoidable if the component
were bought from the outside supplier. In addition, making the component uses 2 minutes on the machine that is the
company's current constraint. If the component were bought, this machine time would be freed up for use on
another product that requires 4 minutes on this machine and that has a contribution margin of $4.70 per unit.
When deciding whether to make or buy the component, what cost of making the component should be compared to
the price of buying the component? (Round your intermediate calculations and final answer to 2 decimal
places.)
$18.29
$19.05
$20.15
$15.94
44.
award:
10.00 points
Consider the following production and cost data for two products, X and Y:
Product X Product Y
Contribution margin per unit $20 $14
Machine-hours needed per unit 4 hours 2 hours
The company has 14,100 machine hours available each period, and there is unlimited demand for each product.
What is the largest possible total contribution margin that can be realized each period?
$112,800
$98,700
$84,600
$89,150
45.
award:
10.00 points
The constraint at Mcglathery Corporation is time on a particular machine. The company makes three products that
use this machine. Data concerning those products appear below:
UE BI CR
Selling price per unit $335.21 $228.49 $199.24
Variable cost per unit $259.20 $173.02 $159.55
Minutes on the constraint 7.80 4.60 5.80
Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable
product. Up to how much should the company be willing to pay to acquire more of the constrained resource?
(Round your intermediate calculations and final answer to 2 decimal places.)
$12.06 per minute
46.
award:
10.00 points
Wright Company produces products I, J, and K from a single raw material input. Budgeted data for the next month
follows:
If the cost of the raw material input is $69,000, which of the products should be processed beyond the split-off
point?
Option A
Option C
Option B
47.
award:
10.00 points
Two products, IF and RI, emerge from a joint process. Product IF has been allocated $22,300 of the total joint costs
of $43,000. A total of 2,900 units of product IF are produced from the joint process. Product IF can be sold at the
split-off point for $10 per unit, or it can be processed further for an additional total cost of $10,900 and then sold for
$12 per unit. If product IF is processed further and sold, what would be the effect on the overall profit of the
company compared with sale in its unprocessed form directly after the split-off point?
$31,000 less profit
0
48.
award:
10.00 points
Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly
to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn.
Current cost and revenue data for the spindles of yarn and for the afghans are as follows:
Each month 4,300 spindles of yarn are produced that can either be sold outright or processed into afghans.
If Austin chooses to produce 4,300 afghans each month, the change in the monthly net operating income as
compared to selling 4,300 spindles of yarn is:
$17,200 increase
$34,400 decrease
$17,200 decrease
$34,400 increase
49.
award:
10.00 points
Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly
to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn.
Current cost and revenue data for the spindles of yarn and for the afghans are as follows:
Each month 5,100 spindles of yarn are produced that can either be sold outright or processed into afghans.
What is the lowest price Austin should be willing to accept for one afghan as long as it can sell spindles of yarn to
the outside market for $15 each?
$45
$33
$46
$39
50.
award:
10.00 points
The Tingey Company has 600 obsolete microcomputers that are carried in inventory at a total cost of $864,000. If
these microcomputers are upgraded at a total cost of $200,000, they can be sold for a total of $260,000. As an
alternative, the microcomputers can be sold in their present condition for $40,000.
Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the
company be as well off upgrading the computers as if it just sold the computers in their present condition?
$100
$210
$452
$400
51.
award:
10.00 points
Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce
150,000 wheels annually are as follows:
An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from
the outside supplier, $18,000 of annual fixed manufacturing overhead would be avoided and the facilities now
being used to make the wheels would be rented to another company for $46,500 per year.
If Talboe chooses to buy the wheel from the outside supplier, then the change in annual net operating income is a:
$4,500 decrease
$30,000 increase
$46,500 increase
$42,000 increase
52.
award:
10.00 points
Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce
120,000 wheels annually are as follows:
An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from
the outside supplier, $15,000 of annual fixed manufacturing overhead would be avoided and the facilities now
being used to make the wheels would be rented to another company for $40,200 per year.
What is the highest price that Talboe could pay the outside supplier for each wheel and still be economically
indifferent between making or buying the wheels? (Round your answer to 2 decimal places.)
$1.11
$1.06
$0.78
$1.15
53.
award:
10.00 points
Elhard Company produces a single product. The cost of producing and selling a single unit of this product at the
company's normal activity level of 41,000 units per month is as follows:
An order has been received from an overseas customer for 2,100 units to be delivered this month at a special
discounted price. This order would have no effect on the company's normal sales and would not change the total
amount of the company's fixed costs. The variable selling and administrative expense would be $0.20 less per unit
on this order than on normal sales.
Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the
special order would require cutting back on production of 210 units for regular customers. The minimum acceptable
price per unit for the special order is closest to: (Round your intermediate calculations and final answer to 2
decimal places.)
$51.20
$32.28
$30.40
$45.60
0
54.
award:
10.00 points
The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000
Homs per year. Per unit costs to produce and sell one Hom at that activity level are:
The regular selling price for one Hom is $85. A special order has been received at Varone from the Fairview
Company to purchase 6,800 Homs next year at 20% off the regular selling price. If this special order were accepted,
the variable selling expense would be reduced by 30%. However, Varone would have to purchase a specialized
machine to engrave the Fairview name on each Hom in the special order. This machine would cost $11,300 and it
would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are
constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
If Varone can expect to sell 33,000 Homs next year through regular channels and the special order is accepted at
20% off the regular selling price, the effect on net operating income next year due to accepting this order would be
a:
$63,500 increase
$68,000 increase
$51,300 increase
$25,700 decrease
55.
award:
10.00 points
The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000
Homs per year. Per unit costs to produce and sell one Hom at that activity level are:
Direct materials $28
Direct labor $18
Variable manufacturing overhead $13
Fixed manufacturing overhead $15
Variable selling expense $10
Fixed selling expense $2
The regular selling price for one Hom is $95. A special order has been received at Varone from the Fairview
Company to purchase 7,600 Homs next year at 20% off the regular selling price. If this special order were accepted,
the variable selling expense would be reduced by 30%. However, Varone would have to purchase a specialized
machine to engrave the Fairview name on each Hom in the special order. This machine would cost $11,600 and it
would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are
constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
If Varone can expect to sell 30,000 Homs next year through regular channels, at what special order price per unit
from Fairview should Varone be economically indifferent between either accepting or not accepting this special
order? (Round your answer to 1 decimal place.)
$81.3
$67.5
$64.6
$76.0
56.
award:
10.00 points
The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000
Homs per year. Per unit costs to produce and sell one Hom at that activity level are:
The regular selling price for one Hom is $95. A special order has been received at Varone from the Fairview
Company to purchase 7,600 Homs next year at 20% off the regular selling price. If this special order were accepted,
the variable selling expense would be reduced by 30%. However, Varone would have to purchase a specialized
machine to engrave the Fairview name on each Hom in the special order. This machine would cost $11,600 and it
would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are
constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
If Varone has an opportunity to sell 35,930 Homs next year through regular channels and the special order is
accepted for 20% off the regular selling price, the effect on net operating income next year due to accepting this
order would be a:
$29,540 decrease
$29,540 increase
$27,380 decrease
$27,380 increase
57.
award:
10.00 points
The constraint at Dalbey Corporation is time on a particular machine. The company makes three products that use
this machine. Data concerning those products appear below:
FE MB WP
Selling price per unit $239.00 $344.80 $160.40
Variable cost per unit $168.00 $251.88 $109.44
Minutes on the constraint 4.30 6.10 3.90
Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable
product. Up to how much should the company be willing to pay to acquire more of this constrained resource?
(Round your intermediate calculations and final answer to 2 decimal places.)
$50.96 per unit
58.
award:
10.00 points
Broze Company makes four products in a single facility. These products have the following unit product costs:
Products
A B C D
Direct materials $13.10 $9.00 $9.80 $9.40
Direct labor 18.20 26.20 32.40 39.20
Variable manufacturing overhead 3.10 1.50 1.40 2.00
Fixed manufacturing overhead 25.30 33.60 25.40 36.00
Unit product cost $59.70 $70.30 $69.00 $86.60
Products
A B C D
Grinding minutes per unit 2.60 3.20 3.10 2.20
Selling price per unit $74.90 $92.30 $86.20 $103.00
Variable selling cost per unit $ 1.00 $ .00 $ 2.10 $ .40
Monthly demand in units 2,800 2,800 1,800 2,000
The grinding machines are potentially the constraint in the production facility. A total of 52,500 minutes are
available per month on these machines.
Up to how much should the company be willing to pay for one additional minute of grinding machine time if the
company has made the best use of the existing grinding machine capacity? (Round your intermediate
calculations and final answer to 2 decimal places.)
$23.64
$17.25
$13.06
$6.53
1.
award:
10.00 points
James Company has a margin of safety percentage of 20% based on its actual sales. The break-even point is
$210,000 and the variable expenses are 40% of sales. Given this information, the actual profit is: (Do not round
intermediate calculations.)
$23,750
$16,800
$25,200
$31,500
CM ratio = 1 - Variable expense ratio
= 1 - .40 = .60
Dollar sales to break even = Fixed expenses CM ratio
$210,000 = Fixed expenses .60
Fixed expenses = $210,000 .60 = $126,000
Margin of safety in dollars = Total actual sales - Break-even sales
Margin of safety percentage = Margin of safety in dollars Total actual sales
Margin of safety percentage = (Total actual sales - Break-even sales) Total actual sales
Margin of safety percentage = 1 - Break-even sales Total actual sales
Break-even sales Total actual sales = 1 - Margin of safety percentage
Total actual sales = Break-even sales (1 - Margin of safety percentage)
= $210,000 (1 - 0.20) = $262,500
Profit = (CM ratio Sales) - Fixed expenses
= (.60 $262,500) - $126,000 = $31,500
2.
award:
10.00 points
If the sales volume decreases by 20%, the variable cost per unit increases by 10%, and all other factors remain the
same, net operating income will: (Do not round intermediate calculations.)
decrease by $16,000.
decrease by $28,084.
decrease by $5,916.
increase by $21,406.
3.
award:
10.00 points
The following information relates to Clyde Corporation which produced and sold 55,000 units last month.
Sales $1,210,000
Manufacturing costs:
Fixed $210,000
Variable $185,500
Selling and administrative:
Fixed $300,000
Variable $ 45,500
There were no beginning or ending inventories. Production and sales next month are expected to be 45,000 units.
The company's unit contribution margin next month should be: (Round your intermediate calculations and final
answer to 2 decimal places)
$21.58
$3.60
$8.98
$17.80
Variable expenses per unit = Variable expenses Quantity sold
= ($185,500 + $45,500) 55,000 units
= $231,000 55,000 units = $4.20 per unit
Selling price per unit = Sales Quantity sold
= $1,210,000 55,000 units = $22.00 per unit
Unit CM = Selling price per unit - Variable expenses per unit
= $22.00 per unit - $4.20 per unit = $17.80 per unit
4.
award:
10.00 points
The contribution margin ratio is 25% for Grain Company and the break-even point in sales is $196,800. To obtain a
target net operating income of $78,000, sales would have to be: (Do not round intermediate calculations.)
$508,800
$274,800
$285,000
$217,200
Rothe Company manufactures and sells a single product that it sells for $50 per unit and has a contribution margin
ratio of 35%. The company's fixed expenses are $46,700. If Rothe desires a monthly target net operating income
equal to 15% of sales, the amount of sales in units will have to be: (Round your intermediate calculations to 2
decimal places and final answer to the nearest whole number.)
3,110 units
3,556 units
4,670 units
5,537 units
6.
award:
10.00 points
South Company sells a single product for $24 per unit. If variable expenses are 55% of sales and fixed expenses
total $12,600, the break-even point in sales dollars will be: (Do not round intermediate calculations.)
$22,909
$15,400
$12,600
$28,000
CM ratio = 1 - Variable expense ratio
CM ratio = 1 - 0.55 = 0.45
Dollar sales to break even = Fixed expenses CM ratio
=$12,600 0.45 = $28,000
7.
award:
10.00 points
Darth Company sells three products. Sales and contribution margin ratios for the three products follow:
Given these data, the contribution margin ratio for the company as a whole would be: (Round your intermediate
calculations to 2 decimal places. Round your answer to whole percentage.)
26%
44%
34%
Contribution margin ratio for the company = Total contribution margin for the company Total sales for the
company = $42,630 $163,000 = 0.26
8.
award:
10.00 points
Cindy, Inc. sells a product for $20 per unit. The variable expenses are $12 per unit, and the fixed expenses total
$30,000 per period. By how much will net operating income change if sales are expected to increase by $44,000?
$17,600 increase
$3,600 decrease
$40,000 increase
$14,000 increase
Pool Company's variable expenses are 34% of sales. Pool is contemplating an advertising campaign that will cost
$19,800. If sales increase by $79,800, the company's net operating income should increase by: (Do not round
intermediate calculations.)
$27,132
$65,736
$32,868
$9,108
10.
award:
10.00 points
Last year, Flynn Company reported a profit of $69,000 when sales totaled $519,000 and the contribution margin
ratio was 25%. If fixed expenses increase by $9,900 next year, what amount of sales will be necessary in order for
the company to earn a profit of $79,000? (Do not round intermediate calculations.)
$560,950
$622,600
$598,000
$598,600
Profit = (CM ratio Sales) Fixed expenses
$69,000 = (0.25 $519,000) Fixed expenses
Fixed expenses = (0.25 $519,000) $69,000
Fixed expenses = $129,750 $69,000
Fixed expenses = $60,750
Dollar sales to attain a target profit = (Target profit + Fixed expenses) CM ratio
= ($79,000 + $60,750 + $9,900) 0.25
= $149,650 0.25
= $598,600
11.
award:
10.00 points
Kendall Company has sales of 2,375 units at $40 a unit. Variable expenses are 20% of the selling price. If total
fixed expenses are $66,000, the degree of operating leverage is:
rev: 03_06_2012
1.90
9.50
7.60
2.07
Kendall Company
Contribution Income Statement
Total
Sales (2,375 units $40 per unit) $95,000
Variable expenses (.20 $95,000) 19,000
Contribution margin 76,000
Fixed expenses (given) 66,000
Net operating income $10,000
12.
award:
10.00 points
At a sales level of $84,000, Blue Company's contribution margin is $30,000. If the degree of operating leverage is 5
at a $84,000 sales level, net operating income must equal:
$6,000
$16,800
$24,000
$10,800
The variable expense per unit is: (Do not round intermediate calculations.)
$18.00 per unit
$3.60 per unit
14.
award:
10.00 points
Mark Corporation produces two models of calculators. The Business model sells for $60, and the Math model sells
for $40. The variable expenses are given below:
Business Math
Model Model
Variable production costs per unit $21 $22
Variable selling and administrative expenses per unit $ 3 $0
The fixed expenses are $70,000 per month. The expected monthly sales of each model are: Business, 1,700 units;
Math, 1,200 units.
The contribution margin ratio for the Business model is: (Do not round intermediate calculations.)
79%
60%
40%
81%
15.
award:
10.00 points
Mark Corporation produces two models of calculators. The Business model sells for $60, and the Math model sells
for $40. The variable expenses are given below:
Business Math
Model Model
Variable production costs per unit $15 $16
Variable selling and administrative expenses per unit $9 $ 6
The fixed expenses are $75,000 per month. The expected monthly sales of each model are: Business, 1,000 units;
Math, 500 units.
The break-even point in unit sales for the expected sales mix is closest to: (Do not round intermediate
calculations.)
1,667 Business Model and 833 Math Model
1,667 of each product
Business Math
Model Model
Variable production costs per unit $15 $16
Variable selling and administrative expenses per unit $9 $6
Variable expenses $24 $22
Business Math
Model Model Total Percent
Number of units 1,000 500
Sales revenue $60,000 $20,000 $80,000 100.00%
Variable expenses 24,000 11,000 35,000 43.75%
Contribution margin $36,000 $ 9,000 $45,000 56.25%
Business Math
Total Model Model
Number of units 1,000 500
Sales revenue $ 80,000 $ 60,000 $20,000
Percentage of total 100% 75% 25%
Sales to break even $133,333 $100,000 $33,333
Selling price per unit $ 60 $ 40
Unit sales to break even 1,667 833
16.
award:
10.00 points
Product Product
L40O Y27L
Sales $22,600 $49,600
Variable expenses 9,040 18,250
Contribution margin $13,560 $31,350
If the sales mix were to shift toward Product L40O with total dollar sales remaining constant, the overall break-
even point for the entire company:
would decrease.
would increase.
could increase or decrease.
Product Product
L40O Y27L
Sales (a) $22,600 $49,600
Variable expenses 9,040 18,250
Contribution margin (b) $13,560 $31,350
Contribution margin ratio (b) (a) 60% 63%
The overall break-even point for the entire company would increase if the sales mix shifts toward Product L40O
because Product L40O has a lower contribution margin (60%) than Product Y27L (63%).
17.
award:
10.00 points
Roy Corporation produces a single product. During July, Roy produced 19,100 units. Costs incurred during the
month were as follows:
Under absorption costing, any unsold units would be carried in the inventory account at a unit product cost of:
$7.90
$7.20
$6.60
$6.30
Absorption costing unit product cost = $137,520 19,100 units = $7.20 per unit
18.
award:
10.00 points
Sproles Inc. manufactures a variety of products. Variable costing net operating income was $144,000 last year and
its inventory decreased by 4,390 units. Fixed manufacturing overhead cost was $7 per unit. What was the
absorption costing net operating income last year?
$144,000
$30,730
$113,270
$174,730
19.
award:
10.00 points
Craft Company produces a single product. Last year, the company had a net operating income of $86,100 using
absorption costing and $78,700 using variable costing. The fixed manufacturing overhead cost was $5 per unit.
There were no beginning inventories. If 26,100 units were produced last year, then sales last year were:
18,700 units
24,620 units
27,580 units
33,500 units
Since absorption costing net operating income was greater than its variable costing net operating income by $7,400,
it must have deferred $7,400 of fixed manufacturing overhead costs in inventory under absorption costing.
Fixed manufacturing overhead costs deferred in inventory under absorption costing = Fixed manufacturing
overhead cost per unit Increase in units in inventory
$7,400 = $5 per unit Increase in units in inventory
Increase in units in inventory = $7,400 $5 per unit = 1,480 units
Therefore, since there were no beginning inventories and 1,480 units of the 26,100 units that were produced were in
ending inventories, sales must have been 24,620 units.
20.
award:
10.00 points
Hansen Company produces a single product. During the last year, Hansen had net operating income under
absorption costing that was $13,560 lower than its income under variable costing. The company sold 9,200 units
during the year, and its variable costs were $19 per unit, of which $7 was variable selling expense. If fixed
production cost is $12 per unit under absorption costing every year, then how many units did the company produce
during the year?
7,795 units
8,620 units
10,330 units
8,070 units
Since net operating income under absorption costing was $13,560 lower than under variable costing, inventories
must have decreased. A reduction in inventories results in releasing fixed manufacturing overhead from inventories.
Fixed manufacturing overhead costs released from inventory under absorption costing = Fixed manufacturing
overhead per unit Reduction in the units in inventory
$13,560 = $12 per unit Reduction in the units in inventory
Reduction in the units in inventory = $13,560 $12 per unit = 1,130 units
Units in beginning inventory + Units produced = Units sold + Units in ending inventory
Units in beginning inventory - Units in ending inventory = Units sold - Units produced
Reduction in the units in inventory = Units sold - Units produced
1,130 units = 9,200 units - Units produced
Units produced = 9,200 units - 1,130 units = 8,070 units
21.
award:
10.00 points
Hatch Company has two divisions, O and E. During the year just ended, Division O had a segment margin of
$9,000 and variable expenses equal to 80% of sales. Traceable fixed expenses for Division E were $26,000. Hatch
Company as a whole had a contribution margin ratio of 30%, a segment margin of $33,800, and sales of $258,000.
Given this data, the sales for Division E for last year were:
$191,667
$125,000
$133,000
$162,500
Total O E
Sales $258,000
Variable expenses
Contribution margin
Traceable fixed expenses 26,000
Segment margin 33,800 $9,000 ?
Common fixed expenses
Net operating income
E segment margin = Total segment margin - O segment margin = $33,800 - $9,000 = $24,800
Total O E
Sales $258,000
Variable expenses
Contribution margin ?
Traceable fixed expenses 26,000
Segment margin 33,800 $9,000 $24,800
Common fixed expenses
Net operating income
Total O E
Sales $258,000
Variable expenses
Contribution margin ? 50,800
Traceable fixed expenses 26,000
Segment margin 33,800 $9,000 $24,800
Common fixed expenses
Net operating income
Total contribution margin = Total sales Total contribution margin ratio = $258,000 0.30 = $77,400
Total O E
Sales $258,000
Variable expenses
Contribution margin 77,400 ? 50,800
Traceable fixed expenses 26,000
Segment margin 33,800 $9,000 $24,800
Common fixed expenses
Net operating income
Total O E
Sales $258,000 $133,000 ?
Variable expenses
Contribution margin 77,400 26,600 50,800
Traceable fixed expenses 26,000
Segment margin 33,800 $9,000 $24,800
Common fixed expenses
Net operating income
22.
award:
10.00 points
Stephen Company has the following data for its three stores last year:
A B C
Contribution margin ratio ? 25% 30%
Contribution margin ? $166,500 ?
Variable expenses $319,800 ? $180,600
Variable expenses as a percentage of sales 65% ? ?
$966,000
$1,616,000
$1,416,000
A B C
Contribution margin ratio 25% 30%
Contribution margin $166,500
Variable expenses $319,800 $180,600
Variable expenses as a percentage of sales 65%
Sales ?
A B C
Contribution margin ratio 25% 30%
Contribution margin $166,500
Variable expenses $319,800 $180,600
Variable expenses as a percentage of sales 65%
Sales $492,000 ?
A B C
Contribution margin ratio 25% 30%
Contribution margin $166,500
Variable expenses $319,800 $180,600
Variable expenses as a percentage of sales 65%
Sales $492,000 $666,000
A B C
Contribution margin ratio ? 25% 30%
Contribution margin ? $166,500 ?
Variable expenses $319,800 ? $180,600
Variable expenses as a percentage of sales 65% ? ?
Sales $492,000 $666,000 $258,000
Total sales = $492,000 + $666,000 + $258,000 = $1,416,000
23.
award:
10.00 points
Johnson Company operates two plants, Plant A and Plant B. Last year, Johnson Company reported a contribution
margin of $49,300 for Plant A. Plant B had sales of $242,000 and a contribution margin ratio of 25%. Net operating
income for the company was $29,600 and traceable fixed expenses for the two stores totaled $51,600. Johnson
Company's common fixed expenses were:
$28,600
$51,600
$80,200
$109,800
Plant B Contribution margin = Plant B CM ratio Plant B Sales = 0.25 $242,000 = $60,500
24.
award:
10.00 points
Leis Retail Company has two Stores, M and N. Store N had sales of $200,000 during March, a segment margin of
$56,600, and traceable fixed expenses of $35,600. The company as a whole had a contribution margin ratio of 20%
and $99,800 in total contribution margin. Based on this information, total variable expenses in Store M for the
month must have been:
$299,000
$399,200
$291,400
$191,600
Store N Segment margin = Store N Contribution margin - Segment N Traceable fixed expenses
$56,600 = Store N Contribution margin - $35,600
Store N Contribution margin = $56,600 + $35,600 = $92,200
25.
award:
10.00 points
Carr Company produces a single product. During the past year, Carr manufactured 26,160 units and sold 20,900
units. Production costs for the year were as follows:
Sales totaled $971,850, variable selling expenses totaled $108,680, and fixed selling and administrative expenses
totaled $190,968. There were no units in beginning inventory. Assume that direct labor is a variable cost.
The contribution margin per unit would be: (Do not round intermediate calculations.)
$21.20
$26.40
$16.70
$22.30
Selling price per unit = $971,850 20,900 units = $46.50 per unit
Unit CM = Selling price per unit Variable expenses per unit
= $46.50 per unit $25.30 per unit = $21.20 per unit
26.
award:
10.00 points
Carr Company produces a single product. During the past year, Carr manufactured 33,100 units and sold 27,800
units. Production costs for the year were as follows:
Sales totaled $1,320,500, variable selling expenses totaled $164,020, and fixed selling and administrative expenses
totaled $205,220. There were no units in beginning inventory. Assume that direct labor is a variable cost.
Under absorption costing, the ending inventory for the year would be valued at: (Do not round intermediate
calculations.)
$202,460
$272,460
$263,960
$229,960
Unit
Direct materials ($248,250 33,100 units produced) $7.50
Direct labor ($145,640 33,100 units produced) 4.40
Variable manufacturing overhead ($274,730 33,100 units produced) 8.30
Fixed manufacturing overhead cost ($595,800 33,100 units produced) 18
27.
award:
10.00 points
Kilihea Corporation produces a single product. The company's absorption costing income statement for July
follows:
Kilihea Corporation
Income Statement
For the month ended July 31
Sales (10,600 units) $487,600
Cost of goods sold 326,480
Gross margin 161,120
Selling and administrative expenses:
Fixed 74,200
Variable 53,000
Total selling and administrative expense 127,200
Net operating income $ 33,920
The company's variable production costs are $21.80 per unit and its fixed manufacturing overhead totals $109,100
per month.
Net operating income under the variable costing method for July would be:
$33,920
$17,020
$20,220
$47,620
Sales $487,600
Variable expenses:
Variable cost of goods sold
($21.80 per unit 10,600 units) $231,080
Variable selling and administrative 53,000 284,080
Contribution margin per unit $203,520
Fixed expenses:
Fixed manufacturing overhead 109,100
Fixed selling and administrative 74,200 183,300
Net operating income $ 20,220
28.
award:
10.00 points
Kilihea Corporation produces a single product. The company's absorption costing income statement for July
follows:
Kilihea Corporation
Income Statement
For the month ended July 31
Sales (13,400 units) $696,800
Cost of goods sold 462,300
Gross margin 234,500
Selling and administrative expenses:
Fixed 134,000
Variable 80,400
Total selling and administrative expense 214,400
Net operating income $ 20,100
The company's variable production costs are $26.50 per unit and its fixed manufacturing overhead totals $115,200
per month.
The contribution margin per unit during July was (Round your intermediate calculations and final answer to 2
decimal places):
$19.50
$1.50
$24.50
$32.50
29.
award:
10.00 points
Kilihea Corporation produces a single product. The company's absorption costing income statement for July
follows:
Kilihea Corporation
Income Statement
For the month ended July 31
Sales (13,400 units) $696,800
Cost of goods sold 462,300
Gross margin 234,500
Selling and administrative expenses:
Fixed 134,000
Variable 80,400
Total selling and administrative expense 214,400
Net operating income $ 20,100
The company's variable production costs are $26.50 per unit and its fixed manufacturing overhead totals $115,200
per month.
The break-even point in units for the month under variable costing is (Round your intermediate calculations and
final answer to nearest whole number):
12,779 units
11,029 units
9,929 units
9,129 units
Fixed expenses = Fixed selling and administrative expense + Fixed manufacturing overhead
= $134,000 + $115,200 = $249,200
Unit sales to break even = Fixed expenses Unit CM
= $249,200 $19.50
= 12,779 units
30.
award:
10.00 points
Eagle Corporation manufactures a picnic table. Shown below is Eagle's cost structure:
In its first year of operations, Eagle produced and sold 11,140 tables. The tables sold for $177 each.
If Eagle had sold only 9,940 tables in its first year, what total amount of cost would have been assigned to the 1,200
tables in finished goods inventory under the absorption costing method?
$169,200
$150,000
$84,600
$43,200
31.
award:
10.00 points
Eagle Corporation manufactures a picnic table. Shown below is Eagle's cost structure:
In its first year of operations, Eagle produced and sold 10,420 tables. The tables sold for $180 each.
How would Eagle's variable costing net operating income be affected in its first year if only 9,260 tables were sold
instead of 10,420?
net operating income would have been $27,840 lower
32.
award:
10.00 points
Eagle Corporation manufactures a picnic table. Shown below is Eagle's cost structure:
How would Eagle's absorption costing net operating income be affected in its first year if 13,790 tables were
produced instead of 11,760 and Eagle still sold 11,760 tables? (Round your intermediate calculations to 2
decimal places.)
net operating income would not have been affected
Absorption costing income statement with production of 13,790 units and sales of 11,760 units:
Therefore, net operating income would have been $32,928 higher (= $636,216.00 - $603,288.00)
33.
award:
10.00 points
Deboer Company, which has only one product, has provided the following data concerning its most recent month of
operations:
What is the total period cost for the month under the variable costing approach?
$20,100
$43,470
$54,540
$34,440
34.
award:
10.00 points
Deboer Company, which has only one product, has provided the following data concerning its most recent month of
operations:
What is the total period cost for the month under the absorption costing approach?
$30,360
$19,700
$45,540
$65,240
35.
award:
10.00 points
If sales for Division F increase $41,400 with a $14,400 increase in the Division's traceable fixed costs, the overall
company net operating income should:
increase by $3,402
decrease by $10,998
increase by $27,000
increase by $1,291
36.
award:
10.00 points
During June, the sales clerks in Division F received salaries totaling $43,700. Assume that during July the salaries
of these sales clerks are discontinued and instead they are paid a commission of 21% of sales. If sales in Division F
increase by $123,000 as a result of this change, the July segment margin for Division F should be:
$138,300
$63,700
$98,700
$87,000
Projected sales = $299,000 + $123,000 = $422,000
Current variable expense ratio = $161,460 $299,000 = 0.54
Projected variable expense ratio = 0.54 + 0.21 = 0.75
Projected variable expenses = 0.75 $422,000 = $316,500
Projected traceable fixed expenses = $62,200 - $43,700 = $18,500
Sales $422,000
Variable expenses 316,500
Contribution margin 105,500
Traceable fixed expenses 18,500
37.
award:
10.00 points
If the sales in Division L increase by 50% while common fixed expenses in the company decrease by $15,400, the
segment margin for Division L should:
increase by $35,409
decrease by $41,609
increase by $57,009
decrease by $90,209
38.
award:
10.00 points
The Rial Company's income statement for June is given below:
A proposal has been made that will lower variable expenses in Division L to 31% of sales. However, this reduction
can only be accomplished by a $17,000 increase in Division L's traceable fixed expenses. If this proposal is
implemented and if sales remain constant, overall company net operating income should:
decrease by $17,000
decrease by $2,240
increase by $31,760
increase by $17,000
39.
award:
10.00 points
Pong Incorporated's income statement for the most recent month is given below.
If Store G sales increase by $44,100 with no change in fixed costs, the overall company net operating income
should:
increase by $25,137
increase by $29,547
increase by $4,410
increase by $8,820
40.
award:
10.00 points
Pong Incorporated's income statement for the most recent month is given below.
The marketing department believes that a promotional campaign for Store H costing $9,100 will increase the store's
sales by $22,400. If the campaign is adopted, overall company net operating income should:
decrease by $6,496
decrease by $7,146
increase by $6,804
increase by $13,300
41.
award:
10.00 points
Schemm Inc. regularly uses material F04E and currently has in stock 466 liters of the material for which it paid
$2,628 several weeks ago. If this were to be sold as is on the open market as surplus material, it would fetch $5.32
per liter. New stocks of the material can be purchased on the open market for $5.72 per liter, but it must be
purchased in lots of 1,000 liters. You have been asked to determine the relevant cost of 750 liters of the material to
be used in a job for a customer. The relevant cost of the 750 liters of material F04E is:
$5,720
$4,290
$4,008
$3,990
The relevant cost is the current market value: 750 liters current market $5.72 per liter = $4,290
42.
award:
10.00 points
Lampshire Inc. is considering using stocks of an old raw material in a special project. The special project would
require all 160 kilograms of the raw material that are in stock and that originally cost the company $1,336 in total.
If the company were to buy new supplies of this raw material on the open market, it would cost $7.35 per kilogram.
However, the company has no other use for this raw material and would sell it at the discounted price of $6.65 per
kilogram if it were not used in the special project. The sale of the raw material would involve delivery to the
purchaser at a total cost of $77 for all 160 kilograms. What is the relevant cost of the 160 kilograms of the raw
material when deciding whether to proceed with the special project?
$987
$1,162
$1,064
$1,176
The company's relevant cost in this case is how much it could earn by selling the 160 kilograms at the discounted
price of $6.65 per kilogram, less delivery costs of $77 for all 160 kilograms.
Proceeds of sale at the discounted price: 160 kgs $6.65 per kg $1,064
Less delivery cost 77
Relevant cost $ 987
43.
award:
10.00 points
Iwasaki Inc. is considering whether to continue to make a component or to buy it from an outside supplier. The
company uses 13,800 of the components each year. The unit product cost of the component according to the
company's cost accounting system is given as follows:
Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 25% is avoidable if the component
were bought from the outside supplier. In addition, making the component uses 1 minute on the machine that is the
company's current constraint. If the component were bought, this machine time would be freed up for use on
another product that requires 2 minutes on this machine and that has a contribution margin of $6.00 per unit.
When deciding whether to make or buy the component, what cost of making the component should be compared to
the price of buying the component? (Round your intermediate calculations and final answer to 2 decimal
places.)
$26.00
$22.60
$22.70
$19.70
Consider the following production and cost data for two products, X and Y:
Product X Product Y
Contribution margin per unit $20 $14
Machine-hours needed per unit 4 hours 2 hours
The company has 14,100 machine hours available each period, and there is unlimited demand for each product.
What is the largest possible total contribution margin that can be realized each period?
$112,800
$84,600
$98,700
$89,150
Product X Product Y
Contribution margin per unit (a) $20 $14
Machine-hours per unit (b) 4 2
Contribution margin per minute (a) (b) $ 5 $ 7
Rank in terms of profitability 2 1
Since there is unlimited demand for each product, all of the available capacity should be used to produce Product Y.
45.
award:
10.00 points
The constraint at Mcglathery Corporation is time on a particular machine. The company makes three products that
use this machine. Data concerning those products appear below:
UE BI CR
Selling price per unit $335.15 $228.43 $199.18
Variable cost per unit $259.32 $173.14 $159.67
Minutes on the constraint 7.20 4.00 5.20
Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable
product. Up to how much should the company be willing to pay to acquire more of the constrained resource?
(Round your intermediate calculations and final answer to 2 decimal places.)
$7.60 per minute
$13.82 per minute
UE BI CR
Selling price per unit $335.15 $228.43 $199.18
Variable cost per unit 259.32 173.14 159.67
Contribution margin per unit (a) $ 75.83 $ 55.29 $ 39.51
Amount of the constrained resource
required to produce one unit (b) 7.20 4.00 5.20
Contribution margin per unit of the
constrained resource (a) (b) $ 10.53 $ 13.82 $ 7.60
Ranking 2 1 3
The company should be willing to pay up to $7.60 per minute to produce more CR.
46.
award:
10.00 points
Wright Company produces products I, J, and K from a single raw material input. Budgeted data for the next month
follows:
If the cost of the raw material input is $68,000, which of the products should be processed beyond the split-off
point?
Option C
Option A
Only Product I and Product K should be processed beyond the split-off point.
47.
award:
10.00 points
Two products, IF and RI, emerge from a joint process. Product IF has been allocated $26,300 of the total joint costs
of $47,000. A total of 2,100 units of product IF are produced from the joint process. Product IF can be sold at the
split-off point for $10 per unit, or it can be processed further for an additional total cost of $10,100 and then sold for
$12 per unit. If product IF is processed further and sold, what would be the effect on the overall profit of the
company compared with sale in its unprocessed form directly after the split-off point?
$5,900 less profit
$15,100 more profit
Product
IF
Final sales value after further processing ($12 per unit 2,100 units) $25,200
Less sales value at split-off point ($10 per unit 2,100 units) 21,000
Incremental revenue from further processing 4,200
Less cost of further processing 10,100
Profit (loss) from further processing $ (5,900)
48.
award:
10.00 points
Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly
to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn.
Current cost and revenue data for the spindles of yarn and for the afghans are as follows:
Each month 4,400 spindles of yarn are produced that can either be sold outright or processed into afghans.
If Austin chooses to produce 4,400 afghans each month, the change in the monthly net operating income as
compared to selling 4,400 spindles of yarn is:
$22,000 decrease
$22,000 increase
$35,200 decrease
$35,200 increase
Afghans
Final sales value after further processing (4,400 afghans $28
per afghan) $123,200
Less sales value at split-off point (4,400 spindles of yarn $10
per spindle) 44,000
Incremental revenue from further processing 79,200
Less cost of further processing ((4,400 afghans $7 per afghan)
+ (4,400 afghans $3 per afghan)) 44,000
Profit (loss) from further processing $35,200
49.
award:
10.00 points
Austin Wool Products purchases raw wool and processes it into yarn. The spindles of yarn can then be sold directly
to stores or they can be used by Austin Wool Products to make afghans. Each afghan requires one spindle of yarn.
Current cost and revenue data for the spindles of yarn and for the afghans are as follows:
Each month 4,800 spindles of yarn are produced that can either be sold outright or processed into afghans.
What is the lowest price Austin should be willing to accept for one afghan as long as it can sell spindles of yarn to
the outside market for $15 each?
$42
$37
$35
$41
Market value of a spindle of yarn $15
Variable production cost to process the yarn into an afghan 15
Avoidable fixed production cost to process the yarn into an afghan
(based on 4,800 afghans produced) 11
Total cost $41
50.
award:
10.00 points
The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If
these microcomputers are upgraded at a total cost of $120,000, they can be sold for a total of $180,000. As an
alternative, the microcomputers can be sold in their present condition for $50,000.
Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the
company be as well off upgrading the computers as if it just sold the computers in their present condition?
$120
$770
$340
$250
The selling price of the upgraded computers would have to cover the opportunity cost of $50,000 for selling the
computers as is as well as the $120,000 cost of upgrading.
The point of indifference would be $170,000 500 computers = $340 per computer.
51.
award:
10.00 points
Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce
250,000 wheels annually are as follows:
An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from
the outside supplier, $30,000 of annual fixed manufacturing overhead would be avoided and the facilities now
being used to make the wheels would be rented to another company for $82,500 per year.
If Talboe chooses to buy the wheel from the outside supplier, then the change in annual net operating income is a:
$72,500 increase
$75,000 increase
$50,000 increase
$7,500 decrease
Make Buy
Direct materials $ 50,000
Direct labor 75,000
Variable overhead 37,500
Allocated Fixed manufacturing overhead
(avoidable only) 30,000
Outside purchase price (250,000 units $0.80 per unit) $200,000
Opportunity cost (82,500)
Total cost $192,500 $117,500
52.
award:
10.00 points
Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce
170,000 wheels annually are as follows:
An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from
the outside supplier, $20,000 of annual fixed manufacturing overhead would be avoided and the facilities now
being used to make the wheels would be rented to another company for $49,700 per year.
What is the highest price that Talboe could pay the outside supplier for each wheel and still be economically
indifferent between making or buying the wheels? (Round your answer to 2 decimal places.)
$1.01
$0.77
$1.03
$1.06
Relevant cost to make:
Direct materials $ 34,000
Direct labor 51,000
Variable overhead 25,500
Allocated Fixed manufacturing overhead (avoidable only) 20,000
Total relevant cost to make 130,500
Opportunity cost 49,700
Total $180,200
The company could pay up to $1.06 per unit ($180,200 170,000 units).
53.
award:
10.00 points
Elhard Company produces a single product. The cost of producing and selling a single unit of this product at the
company's normal activity level of 33,000 units per month is as follows:
Direct materials $23.00
Direct labor $ 7.30
Variable manufacturing overhead $ 2.90
Fixed manufacturing overhead $12.10
Variable selling & administrative expense $ 2.40
Fixed selling & administrative expense $ 5.60
An order has been received from an overseas customer for 2,500 units to be delivered this month at a special
discounted price. This order would have no effect on the company's normal sales and would not change the total
amount of the company's fixed costs. The variable selling and administrative expense would be $0.20 less per unit
on this order than on normal sales.
Suppose there is not enough idle capacity to produce all of the units for the overseas customer and accepting the
special order would require cutting back on production of 250 units for regular customers. The minimum acceptable
price per unit for the special order is closest to: (Round your intermediate calculations and final answer to 2
decimal places.)
$51.60
$35.60
$37.00
$45.20
54.
award:
10.00 points
The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000
Homs per year. Per unit costs to produce and sell one Hom at that activity level are:
The regular selling price for one Hom is $90. A special order has been received at Varone from the Fairview
Company to purchase 6,900 Homs next year at 20% off the regular selling price. If this special order were accepted,
the variable selling expense would be reduced by 30%. However, Varone would have to purchase a specialized
machine to engrave the Fairview name on each Hom in the special order. This machine would cost $12,600 and it
would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are
constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
If Varone can expect to sell 33,000 Homs next year through regular channels and the special order is accepted at
20% off the regular selling price, the effect on net operating income next year due to accepting this order would be
a:
$70,200 increase
$52,600 increase
$69,000 increase
$24,400 decrease
55.
award:
10.00 points
The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000
Homs per year. Per unit costs to produce and sell one Hom at that activity level are:
The regular selling price for one Hom is $70. A special order has been received at Varone from the Fairview
Company to purchase 6,600 Homs next year at 10% off the regular selling price. If this special order were accepted,
the variable selling expense would be reduced by 20%. However, Varone would have to purchase a specialized
machine to engrave the Fairview name on each Hom in the special order. This machine would cost $11,100 and it
would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are
constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
If Varone can expect to sell 31,000 Homs next year through regular channels, at what special order price per unit
from Fairview should Varone be economically indifferent between either accepting or not accepting this special
order? (Round your answer to 1 decimal place.)
$45.8
$62.5
$63.0
$53.7
Incremental costs:
Direct materials (6,600 units $23 per unit) $151,800
Direct labor (6,600 unit $13 per unit) 85,800
Variable manufacturing overhead (6,600 units $8 per unit) 52,800
Variable selling expense (6,600 units $8 per unit) 52,800
Special machine 11,100
Total incremental cost $354,300
Varone is economically indifferent between either accepting or not accepting this special order at the point where
revenue equals cost, so the selling price would have to be at least $53.7 per unit (= $354,300 6,600 units).
56.
award:
10.00 points
The Varone Company makes a single product called a Hom. The company has the capacity to produce 40,000
Homs per year. Per unit costs to produce and sell one Hom at that activity level are:
The regular selling price for one Hom is $90. A special order has been received at Varone from the Fairview
Company to purchase 8,700 Homs next year at 10% off the regular selling price. If this special order were accepted,
the variable selling expense would be reduced by 20%. However, Varone would have to purchase a specialized
machine to engrave the Fairview name on each Hom in the special order. This machine would cost $12,900 and it
would have no use after the special order was filled. The total fixed costs, both manufacturing and selling, are
constant within the relevant range of 30,000 to 40,000 Homs per year. Assume direct labor is a variable cost.
If Varone has an opportunity to sell 38,050 Homs next year through regular channels and the special order is
accepted for 10% off the regular selling price, the effect on net operating income next year due to accepting this
order would be a:
$56,700 decrease
$58,860 decrease
$56,700 increase
$58,860 increase
Capacity 40,000
Less: Special order 8,700
Capacity available for normal sales 31,300
Demand for normal sales 39,050
Displaced normal sales 7,750
Since the special order would displace 7,750 units of normal sales, the lost contribution margin would be $139,500
(= $18 per unit 7,750 units).
Consequently, accepting the special order would generate incremental net operating income of $82,800, but would
displace normal sales generating a contribution margin of $139,500,so the net effect would be a $56,700 decrease
(= $139,500 $82,800) in net operating income.
57.
award:
10.00 points
The constraint at Dalbey Corporation is time on a particular machine. The company makes three products that use
this machine. Data concerning those products appear below:
FE MB WP
Selling price per unit $235.00 $340.80 $156.40
Variable cost per unit $160.00 $243.88 $101.44
Minutes on the constraint 3.90 5.70 4.30
Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable
product. Up to how much should the company be willing to pay to acquire more of this constrained resource?
(Round your intermediate calculations and final answer to 2 decimal places.)
$19.23 per minute
The company should be willing to pay up to the contribution margin per minute for the marginal job, which is
$12.78 per minute for WP.
58.
award:
10.00 points
Broze Company makes four products in a single facility. These products have the following unit product costs:
Products
A B C D
Direct materials $13.30 $9.20 $10.00 $9.60
Direct labor 18.40 26.40 32.60 39.40
Variable manufacturing overhead 3.30 1.70 1.60 2.20
Fixed manufacturing overhead 25.50 33.80 25.60 36.20
Unit product cost $60.50 $71.10 $69.80 $87.40
Products
A B C D
Grinding minutes per unit 2.80 3.60 3.30 2.40
Selling price per unit $75.10 $92.50 $86.40 $103.20
Variable selling cost per unit $ 1.20 $ .20 $ 2.30 $ .60
Monthly demand in units 3,000 3,000 2,000 2,200
The grinding machines are potentially the constraint in the production facility. A total of 52,700 minutes are
available per month on these machines.
Up to how much should the company be willing to pay for one additional minute of grinding machine time if the
company has made the best use of the existing grinding machine capacity? (Round your intermediate
calculations and final answer to 2 decimal places.)
$21.42
$6.05
$12.09
$16.02
Products
A B C D
Direct materials $13.30 $9.20 $10.00 $9.60
Direct labor 18.40 26.40 32.60 39.40
Variable manufacturing overhead 3.30 1.70 1.60 2.20
Variable selling cost per unit 1.20 .20 2.30 .60
Variable cost per unit $36.20 $37.50 $46.50 $51.80
A B C D
Selling price per unit $75.10 $92.50 $86.40 $103.20
Variable cost per unit 36.20 37.50 46.50 51.80
Contribution margin per unit (a) $38.90 $55.00 $39.90 $51.40
Amount of the constrained resource required
to produce one unit (b) 2.80 3.60 3.30 2.40
Contribution margin per unit of the
constrained resource (a) (b) $13.89 $15.28 $12.09 $21.42
Ranking 3 2 4 1
The company should be willing to pay up to the contribution margin per minute for the marginal job, which is
$12.09 per minute for Product C.