Mardist Corporation

1. Mardist Corporation has sales of \$100,000, variable expenses of \$75,000, fixed expenses of \$30,000,and a net loss of \$5,000. How much would Mardist have to sell to achieve a profit of 10% of sales?

A. \$187,500

B. \$225,500

C. \$180,000

D. \$200,000

1. Use the following information to answer this question.

Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has

compiled the following data for the past five months of operations.

Using the high-low method of analysis, the estimated variable cost per machine hour for electricity is

closest to which of the following?

Machine

Hours

Electrical

Cost

August 1,000 \$1,620

September 900 \$1,510

October 1,500 \$1,870

November 2,000 \$1,950

December 1,300 \$1,730

A. \$0.40

B. \$1.68

C. \$2.50

D. \$0.98

1. Use the following information to answer this question.

Callaham Corporation is a wholesaler that sells a single product. Management has provided the following

cost data for two levels of monthly sales volume. The company sells the product for \$115.80 per unit.

Sales volume (units)The best estimate of the total variable cost per unit is

4,000 5,000

Cost of sales \$338,000 \$422,500

Selling and administrative costs \$89,600 \$106,000

A. \$84.50.

B. \$105.70.

C. \$106.90.

D. \$100.90.

1. Viren Corporation has provided the following data from its activity-based costing system:

The company makes 240 units of product T91H a year, requiring a total of 550 machine hours, 90 orders,

and 40 inspection hours per year. The product’s direct materials cost is \$16.98 per unit, and its direct labor

cost is \$12.09 per unit. According to the activity-based costing system, the average cost of product T91H is

closest to _______ per unit.

Activity Cost Pool Total Cost Total Activity

Assembly \$387,000 25,000 machine-hours

Processing orders \$68,510 1,700 orders

Inspection \$129,117 1,930 inspection-hours

A. \$90.81

B. \$75.70

C. \$79.66

D. \$29.07

1. Indiana Corporation produces a single product that it sells for \$9 per unit. During the first year of

operations, 100,000 units were produced, and 90,000 units were sold. Manufacturing costs and selling and

administrative expenses for the year were as follows:

What was Indiana Corporation’s net operating income for the year using variable costing?

Fixed Costs Variable Costs

Raw materials \$1.75 per unit

produced

Direct labor \$1.25 per unit

produced

Factory

produced

Selling and

sold

A. \$371,000

1. \$281,000C. \$271,000

D. \$181,000

1. Use the following information to answer this question.

Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000

units. Production costs for the year were as follows:

Sales were \$780,000 for the year, variable selling and administrative expenses were \$88,400, and fixed

selling and administrative expenses were \$170,000. There was no beginning inventory. Assume that direct

labor is a variable cost.

The contribution margin per unit was

Production Cost Data

Direct materials \$153,000

Direct labor \$110,500

A. \$27.30.

B. \$32.50.

C. \$17.50.

D. \$25.70.

1. Last year, Gransky Corporation’s variable costing net operating income was \$52,100, and its ending

inventory increased by 400 units. Fixed manufacturing overhead cost was \$7 per unit. What was the

absorption costing net operating income last year?

A. \$49,300

B. \$52,100

C. \$54,900

D. \$2,800

1. Rank the following methods of assigning overhead costs from least accurate to most accurate.

A. Plantwide rate, departmental rates, activity-based costing

B. Plantwide rate, activity-based costing, departmental rates

C. Activity-based costing, departmental rates, plantwide rate

D. Departmental rates, plantwide rate, activity-based costing

1. Use the following information to answer this question.

Callaham Corporation is a wholesaler that sells a single product. Management has provided the following

cost data for two levels of monthly sales volume. The company sells the product for \$115.80 per unit.The best estimate of the total contribution margin when 4,300 units are sold is

Sales volume (units)

4,000 5,000

Cost of sales \$338,000 \$422,500

Selling and administrative costs \$89,600 \$106,000

A. \$64,070.

B. \$38,270.

C. \$134,590.

D. \$43,430.

1. A company increased the selling price for its product from \$5 to \$6 per unit when total fixed expenses

increased from \$100,000 to \$200,000 and variable expense per unit remained unchanged. How would

these changes affect the break-even point?

A. The break-even point in units would decrease.

B. The effect can’t be determined from the information given.

C. The break-even point in units would increase.

D. The break-even point in units would remain unchanged.

11. Use the following information to answer this question.

Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000

units. Production costs for the year were as follows:

Sales were \$780,000 for the year, variable selling and administrative expenses were \$88,400, and fixed

selling and administrative expenses were \$170,000. There was no beginning inventory. Assume that direct

labor is a variable cost.

Under variable costing, the company’s net operating income for the year would be _______ than under

absorption costing.

Production Cost Data

Direct materials \$153,000

Direct labor \$110,500

A. \$108,000 higher

B. \$60,000 higher

C. \$60,000 lower

D. \$108,000 lower

1. An increase in the activity level within the relevant range results in a/an

A. increase in fixed cost per unit.

1. unchanged fixed cost per unit.C. proportionate increase in total fixed costs.

D. decrease in fixed cost per unit.

1. Use the following information to answer this question.

Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has

compiled the following data for the past five months of operations.

Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to which

of the following?

Machine

Hours

Electrical

Cost

August 1,000 \$1,620

September 900 \$1,510

October 1,500 \$1,870

November 2,000 \$1,950

December 1,300 \$1,730

A. \$870.00

B. \$1,150.00

C. \$1,306.50

D. \$1,290.00

1. Use the following information to answer this question.

Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the

company has provided the following data concerning the activity rates in its activity-based costing system:

l The measure of activity for the size-related activity cost pool is the number of planned guests at the

wedding reception. The greater the number of guests, the larger the cake.

l The measure of complexity is the number of tiers in the cake.

l The activity measure for the order-related cost pool is the number of orders. (Each wedding involves

one order.)

l The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The

activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding

bells, which are accounted for separately.

Data concerning two recent orders are listed here:

Activity Cost Pools Activity Rate

Size-related \$0.94 per guest

Complexity-related \$31.62 per tier

Order-related \$55.79 per orderAssuming that the company charges \$556.96 for the Smith wedding cake, what would be the overall

margin on the order?

Pyburn

Wedding

Smith

Wedding

Number of reception guests 72 189

Number of tiers on the cake 4 5

Cost of purchased decorations for cake \$29.92 \$68.75

A. \$460.30

B. \$165.41

C. \$96.66

D. \$152.45

1. Which statement is true for a company that uses variable costing?

A. The unit product cost changes because of changes in the number of units manufactured.

B. Profit fluctuates with sales.

C. Product costs include variable administration costs.

D. Any underapplied overhead is included in the product cost.

1. Use the following information to answer this question.

Callaham Corporation is a wholesaler that sells a single product. Management has provided the following

cost data for two levels of monthly sales volume. The company sells the product for \$115.80 per unit.

The best estimate of the total monthly fixed cost is

Sales volume (units)

4,000 5,000

Cost of sales \$338,000 \$422,500

Selling and administrative costs \$89,600 \$106,000

A. \$478,050.

B. \$427,600.

C. \$24,000.

D. \$528,500.

1. Murdoch Corporation has provided the following data concerning its only product:

Murdoch Product Data

Selling price \$230 per unit

Current sales 39,100 units

Break-even sales 29,716 unitsWhat is the margin of safety in dollars?

A. \$8,993,000

B. \$5,995,333

C. \$2,158,320

D. \$6,834,680

1. Use the following information to answer this question.

Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the

company has provided the following data concerning the activity rates in its activity-based costing system:

l The measure of activity for the size-related activity cost pool is the number of planned guests at the

wedding reception. The greater the number of guests, the larger the cake.

l The measure of complexity is the number of tiers in the cake.

l The activity measure for the order-related cost pool is the number of orders. (Each wedding involves

one order.)

l The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The

activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding

bells, which are accounted for separately.

Data concerning two recent orders are listed here:

Assuming that the company charges \$556.96 for the Smith wedding cake, what would be the overall

margin on the order?

Activity Cost Pools Activity Rate

Size-related \$0.94 per guest

Complexity-related \$31.62 per tier

Order-related \$55.70 per order

Pyburn

Wedding

Smith

Wedding

Number of reception guests 72 189

Number of tiers on the cake 4 5

Cost of purchased decorations for cake \$29.92 \$68.75

A. \$96.66

B. \$152.45

C. \$165.41

D. \$460.30

1. Daniele Corporation uses an activity-based costing system with the following three activity cost pools:

Activity Cost Pool Total ActivityEnd of exam

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.

The company has provided the following data concerning its costs:

The distribution of resource consumption across activity cost pools is given below:

The activity rate for the Fabrication activity cost pool is closest to _______ per machine hour.

Fabrication 50,000 machine-hours

Order processing 500 orders

Other not applicable

Cost Data

Wages and salaries \$280,000

Depreciation \$200,000

Occupancy \$140,000

Total \$620,000

Activity Cost Pools

Fabrication Order

Processing Other Total

Wages and

salaries 60% 30% 10% 100%

Depreciation 20% 35% 45% 100%

Occupancy 10% 50% 40% 100%

A. \$7.44

B. \$1.24

C. \$3.72

D. \$4.44

1. Green Company’s variable expenses are 75% of sales. At a sales level of \$400,000, the company’s

degree of operating leverage is 8. At this sales level, fixed expenses are

A. \$50,000.

B. \$75,000.

C. \$87,500.

D. \$100,000.

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