Accounting 2 Final 2 – Flashcards
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The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents:
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the break-even point
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The three most common cost behavior classifications are:
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fixed costs, variable costs, and mixed costs
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Cost behavior refers to the manner in which:
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a cost changes as the related activity changes
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The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed:
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cost-volume-profit analysis
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If fixed costs are $500,000, the unit selling price is $55, and the unit variable costs are $30, what is the break-even sales (units) if fixed costs are increased by $80,000?
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23,200 units
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If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point in sales dollars?
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$1,875,000
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Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are:What was Carter Co.'s weighted average variable cost?
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$ 64
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Which of the following activity bases would be the most appropriate for food costs of a hospital?
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Number of patients who stay in the hospital
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When units manufactured exceed units sold:
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variable costing income is less than absorption costing income
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Spice Inc.'s unit selling price is $60, the unit variable costs are $35, fixed costs are $125,000, and current sales are 10,000 units. How much will operating income change if sales increase by 8,000 units?
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$200,000 increase
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Given the following cost data, what type of cost is shown? Total Cost # of units $3,500 1 $4,000 2 $4,500 3 $5,000 4
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mixed cost
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Zipee Inc.'s unit selling price is $90, the unit variable costs are $40.50, fixed costs are $170,000, and current sales are 12,000 units. How much will operating income change if sales increase by 5,000 units?
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$247,500 increase
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If fixed costs are $700,000 and the unit contribution margin is $17, what amount of units must be sold in order to realize an operating income of $100,000?
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47,059
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A firm operated at 80% of capacity for the past year, during which fixed costs were $210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:
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$90,000
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Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of X's and 35,000 units of Y's. Related data are: What was Rusty Co.'s sales mix last year?
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12.5% X's, 87.5% Y's
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Manley Co. manufactures office furniture. During the most productive month of the year, 4,500 desks were manufactured at a total cost of $86,625. In its slowest month, the company made 1,800 desks at a cost of $49,500. Using the high-low method of cost estimation, total fixed costs are:
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$24,750
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Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is:
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expected to increase by 48%
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Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:
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52% and $11 per unit
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Which of the following conditions would cause the break-even point to decrease?
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Unit variable cost decreases
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Given the following costs and activities for Downing Company electrical costs, use the high-low method to calculate Downing's variable electrical costs per machine hour.
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$0.60
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Given the following cost data, what type of cost is shown? Cost per unit # of units $5,000 1 $2,500 2 $1,667 3 $1,250 4
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none of the above
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Calzone Co. has budgeted salary increases to factory supervisors totaling 8%. If selling prices and all other cost relationships are held constant, next year's break-even point:
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will increase by 8%
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If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24, what is the break-even sales (units)?
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2,600
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Assuming that last year's fixed costs totaled $675,000. What was Rusty Co.'s break-even point in units?
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30,000 units
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A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:
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($30,000)
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If sales are $525,000, variable costs are 53% of sales, and operating income is $50,000, what is the contribution margin ratio?
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47%
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The manufacturing cost of Prancer Industries for three months of the year are provided below: Total Cost Production April $ 60,700 1,200 Units May 80,920 1,800 June 100,300 2,400 Using the high-low method, the variable cost per unit, and the total fixed costs are:
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$33 per unit and $21,100 respectively.
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If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
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increase
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Cool-It Company manufactures and sells commercial air conditioners. Because of current trends, it expects to increase sales by 10 percent next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs. Variable Costs Fixed Costs Mixed Costs
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increase no change increase
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What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost?
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Variable costing
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Costs that can be influenced by management at a specific level of management are called:
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controllable costs.
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On the variable costing income statement, the figure representing the difference between manufacturing margin and contribution margin is the:
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variable selling and administrative expenses
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In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields:
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contribution margin
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In contribution margin analysis, the increase or decrease in unit sales price or unit cost on the number of units sold is referred to as the:
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unit price or unit cost factor
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Management will use both variable and absorption costing in all of the following activities except:
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controlling inventory levels
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The systematic examination of the differences between planned and actual contribution margin is termed the:
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contribution margin analysis
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Under variable costing, which of the following costs would not be included in finished goods inventory?
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fixed factory overhead cost
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For a supervisor of a manufacturing department, which of the following costs is controllable?
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direct materials
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Another name for variable costing is:
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direct costing
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A business operated at 100% of capacity during its first month, with the following results: Sales (90 units) $90,000 Production costs (100 units): Direct materials $40,000 Direct labor 20,000 Variable factory overhead 2,000 Fixed factory overhead 7,000 69,000 Operating expenses: Variable operating expenses $ 8,000 Fixed operating expenses 1,000 9,000 What is the amount of the contribution margin that would be reported on the variable costing income statement?
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$26,200
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The level of inventory of a manufactured product has increased by 4,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $22.00 $11.00 Unit operating expenses of the period 7.00 5.00 What would be the effect on income from operations if absorption costing is used rather than variable costing?
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$44,000 increase
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The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured:
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are less than units sold
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A business operated at 100% of capacity during its first month, with the following results: Sales (90 units) $90,000 Production costs (100 units): Direct materials $40,000 Direct labor 20,000 Variable factory overhead 2,000 Fixed factory overhead 7,000 69,000 Operating expenses: Variable operating expenses $ 8,000 Fixed operating expenses 1,000 9,000 What is the amount of the gross profit that would be reported on the absorption costing income statement?
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$27,900
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The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $24.00 $10.00 Unit operating expenses of the period 8.00 3.00 What would be the effect on income from operations if absorption costing is used rather than variable costing?
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$80,000 increase
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A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (5,000 units): Direct materials $70,000 Direct labor 20,000 Variable factory overhead 10,000 Fixed factory overhead 2,000 $102,000 Operating expenses: Variable operating expenses $17,000 Fixed operating expenses 1,000 18,000 If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the manufacturing margin that would be reported on the absorption costing income statement?
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not reported
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Accountants prefer the variable costing method over absorption costing method for evaluating the performance of a company because
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by using the absorption costing method, income could appear to be higher by producing more inventory.
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A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $ 80,000 Direct labor 120,000 Variable factory overhead 140,000 Fixed factory overhead 40,000 $380,000 Operating expenses: Variable operating expenses $ 65,000 Fixed operating expenses 25,000 90,000 If 1,000 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?
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$38,000
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If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 (15,000 units at $5.75 each), the effect of the quantity factor on the change in variable cost of goods sold is
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Not$5,750 decrease
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In contribution margin analysis, the unit price or unit cost factor is computed as:
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the difference between the actual unit price or unit cost and the planned unit price or cost, multiplied by the actual quantity sold
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Which of the following would not be an appropriate activity base for cost analysis in a service firm?
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inventory produced
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A business operated at 100% of capacity during its first month and incurred the following costs:Production costs (20,000 units): Direct materials $180,000 Direct labor 240,000 Variable factory overhead 280,000 Fixed factory overhead 100,000 $800,000 Operating expenses: Variable operating expenses $130,000 Fixed operating expenses 50,000 180,000 If 1,500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?
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$52,500
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A business operated at 100% of capacity during its first month and incurred the following costs:Production costs (5,000 units): Direct materials $70,000 Direct labor 20,000 Variable factory overhead 10,000 Fixed factory overhead 2,000 $102,000 Operating expenses: Variable operating expenses $17,000 Fixed operating expenses 1,000 18,000 If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the contribution margin that would be reported on the variable costing income statement?
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$53,000
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A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $ 80,000 Direct labor 120,000 Variable factory overhead 140,000 Fixed factory overhead 40,000 $380,000 Operating expenses: Variable operating expenses $ 65,000 Fixed operating expenses 25,000 90,000 If 600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?
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$22,800
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Under variable costing, which of the following costs would be included in finished goods inventory?
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Not straight-line depreciation on factory equipment
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The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured:
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exceed units sold
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A business operated at 100% of capacity during its first month, with the following results: Sales (90 units) $90,000 Production costs (100 units): Direct materials $40,000 Direct labor 20,000 Variable factory overhead 2,000 Fixed factory overhead 7,000 69,000 Operating expenses: Variable operating expenses $ 8,000 Fixed operating expenses 1,000 9,000 What is the amount of the income from operations that would be reported on the absorption costing income statement?
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$18,900
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S Enterprises sold 10,000 units of inventory during a given period. The level of inventory of a manufactured product remained unchanged. The manufacturing costs were as follows: Variable Fixed Unit manufacturing costs of the period $11.00 $7.00 Unit operating expenses of the period 3.00 2.50 Which of the following statements is true?
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Net income will be the same under both variable and absorption costing.
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Management should focus its sales and production efforts on the product or products that will provide
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NOT the highest sales revenue
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On what effects does contribution margin analysis focus?
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A. the unit sales price factor B. the unit cost factor C. the quantity factor __>. all of the above
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A company is preparing its their Cash Budget. The following data has been provided for cash receipts and payments. January February March Cash Receipts $1,061,200 $1,182,400 $1,091,700 Cash Payments $984,500 $1,210,000 $1,075,000 The company's cash balance at January 1st is $290,000. This company desires a minimum cash balance of $340,000. What is the amount of excess cash or deficiency of cash (after considering the minimum cash balance required) for March?
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$15,800 excess
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Gilbert's expects its September sales to be 20% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $7,500. The ending balance on September 30 would be:
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$61,500
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The first budget customarily prepared as part of an entity's master budget is the:
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sales budget
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Which of the following budgets provides the starting point for the preparation of the direct labor cost budget?
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Production budget
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The budgeted finished goods inventory and cost of goods sold for a manufacturing company for the year 2012 are as follows: January 1 finished goods, $765,000; December 31 finished goods, $640,000; cost of goods sold for the year, $2,560,000. The budgeted costs of goods manufactured for the year is?
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$2,435,000
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A series of budgets for varying rates of activity is termed a(n):
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flexible budget
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Budgeting supports the planning process by encouraging all of the following activities except:
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directing and coordinating operations during the period
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The budget that needs to be completed first when preparing the master budget is the:
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Sales Budget
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Management accountants usually provide for a minimum cash balance in their cash budgets for which of the following reasons:
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it provides a safety buffer for variations in estimates
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The production budgets are used to prepare which of the following budgets.
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Direct materials purchases, direct labor cost, factory overhead cost
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Estimated cash payments are planned reductions in cash from all of the following except:
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notes and accounts receivable collections
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Which of the following budgets is not directly associated with the production budget?
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Capital Expenditures budget
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If the expected sales volume for the current period is 8,000 units, the desired ending inventory is 1,400 units, and the beginning inventory is 1,200 units, the number of units set forth in the production budget, representing total production for the current period, is:
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8,200
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Finch Company began its operations on March 31 of the current year. Finch Co. has the following projected costs:Manufacturing costs(1) $156,800 $195,200 $217,600 Insurance expense (2) $1,000 $1,000 $1,000 Depreciation expense $2,000 $2,000 $2,000 Property tax expense(3) $500 $500 $500 (1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is paid in the following month. (2) Insurance expense is $1,000 a month, however, the insurance is paid four times yearly in the first month of the quarter, i.e. January, April, July, and October. (3) Property tax is paid once a year in November.The cash payments for Finch Company in the month of April are:
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$120,600
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If the expected sales volume for the current period is 7,000 units, the desired ending inventory is 400 units, and the beginning inventory is 300 units, the number of units set forth in the production budget, representing total production for the current period, is:
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7,100
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Tara Company's budget includes the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Tara Company expect to collect in November as a result of current and past credit sales?
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$31,100
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Production and sales estimates for March for the Robin Co. are as follows: Estimated inventory (units), March 1 18,000 Desired inventory (unit), March 31 21,300 Expected sales volume (units): Area M 7,000 Area L 8,000 Area O 9,000 Unit sales price $15 The number of units expected to be manufactured in March is:
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27,300
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Production estimates for July are as follows: Estimated inventory (units), July 1 8,500 Desired inventory (units), July 31 10,500 Expected sales volume (units), July 76,000 For each unit produced, the direct materials requirements are as follows: Direct material A ($5 per lb.) 3 lbs. Direct material B ($18 per lb.) 1/2 lb. The number of pounds of materials A and B required for July production
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234,000 lbs. of A; 39,000 lbs. of B
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Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $260,000, $375,000, and $400,000, respectively, for September, October, and November. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale. The cash collections in October from accounts receivable are:
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$246,400
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Below is budgeted production and sales information for Flushing Company for the month of December: Product XXX Product ZZZ Estimated beginning inventory 32,000 units 20,000 units Desired ending inventory 34,000 units 17,000 units Region I, anticipated sales 320,000 units 260,000 units Region II, anticipated sales 180,000 units 140,000 units The unit selling price for product XXX is $5 and for product ZZZ is $15. Budgeted production for product ZZZ during the month is:
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397,000 units
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The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales. What would be the budgeted production for March?
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NOT 256,000
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Yadkin Valley's April sales forecast projects that 6,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units. Budgeted purchases of units in April would be:
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6,300 units
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Bob and Sons' static budget for 10,000 units of production includes $50,000 for direct materials, $44,000 for direct labor, variable utilities of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000 units of production would show:
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direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $25,000
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Production and sales estimates for June are as follows: Estimated inventory (units), June 1 16,000 Desired inventory (units), June 30 18,000 Expected sales volume (units): Area X 4,000 Area Y 6,000 Area Z 5,500 Unit sales price $20 The number of units expected to be manufactured in June is:
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17,500
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Tanya Inc.'s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor salaries of $20,000. A flexible budget for 12,000 units of production would show:
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direct materials of $72,000, direct labor of $52,800, utilities of $5,000, and supervisor salaries of $20,000
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Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12 per unit, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted purchases of Product A for the year would be:
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20,400 units
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As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March of 2012 were as follows: $120,000, $140,000 and $150,000. 20% of each month's sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of January?
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$131,600
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For March, sales revenue is $1,000,000; sales commissions are 5% of sales; the sales manager's salary is $80,000; advertising expenses are $75,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are $2,100 plus 1% of sales. Total selling expenses for the month of March are:
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$227,100
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As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000 and $150,000. 20% of each month's sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of March?
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$146,800
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Below is budgeted production and sales information for Flushing Company for the month of December: Product XXX Product ZZZ Estimated beginning inventory 32,000 units 20,000 units Desired ending inventory 34,000 units 17,000 units Region I, anticipated sales 320,000 units 260,000 units Region II, anticipated sales 180,000 units 140,000 units The unit selling price for product XXX is $5 and for product ZZZ is $15. Budgeted production for product XXX during the month is:
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502,000 units
