Quiz 2 Managerial Accounting Study Guide Chapters 4 and 5

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Quiz #2 Chapters 4 and 5 – This exam will consist of 30 multiple choice questions. You will have 3 hours to complete the exam. 58. A cost is $3,600 at 1,000 units, $7,000 at 2,000 units, and $9,200 at 3,000 units. This cost is a A. variable cost. B. fixed cost. C. mixed cost . D. step cost. 60. A company has a cost that is $6.00 per unit at a volume of 9,000 units and $6.00 per unit at a volume of 12,000 units. The cost is: A. fixed B. variable C. mixed D. incremental 68. The range of activity for which estimates and predictions are likely to be accurate is the A. incremental range. B. margin of safety. C. relevant range. D. range of opportunity. 69. A cost is $50,000 at an activity level of 30,000 units, and $53,000 at an activity level of 33,000 units. The cost is: A. fixed B. variable C. mixed D. sunk 70. Duradyne, Inc. has total costs of $18,000 when 2,000 units are produced and $26,000 when 5,200 units are produced. During March, 4,000 units were produced and sold for $8 each. What is the variable cost per unit? A. $2.50 B. $0.40 C. $2.00 D. $4.00 71. Clearance Depot has total monthly costs of $8,000 when 2,500 units are produced and $12,400 when 5,000 units are produced. What is the estimated total monthly fixed cost? A. $4,400 B. $6,580 C. $3,600 D. $8,800

72. ByteTown Computers has collected the following production data for the past four months: Units produced Total cost 7,000 $16,500 10,000 22,500 8,500 17,750 9,000 21,000 If the high-low method is used, what is the monthly total cost equation? A. Total cost = $2,500 + ($2.00 × units produced) B. Total cost = $3,750 + ($2.75 × units produced) C. Total cost = $1,500 + ($ 2.17 × units produced) D. Total cost = $500 + ($2.25 × units produced) 74. Total costs were $75,800 when 30,000 units were produced and $95,800 when 40,000 units were produced. Use the high-low method to find the estimated total costs for a production level of 32,000 units. A. $80,115 B. $76,000 C. $79,800 D. $91,800 75. Randall Sports has collected the following information over the last six months. Month Units produced Total costs March 10,000 $25,600 April 12,000 26,200 May 18,000 27,600 June 13,000 26,450 July 12,000 26,000 August 15,000 26,500 Using the high-low method, what is the variable cost per unit? A. $0.22 B. $0.25 C. $2.00 D. $2.56 76. Randall Sports has collected the following information over the last six months. Month Units produced Total costs March 10,000 $25,600 April 12,000 26,200 May 18,000 27,600 June 13,000 26,450 July 12,000 26,000

August 15,000 26,500 Using the high-low method, what is the total fixed cost? A. $23,100 B. $1,000 C. $5,600 D. $4,500 77. Randall Sports has collected the following information over the last six months. Month Units produced Total costs March 10,000 $25,600 April 12,000 26,200 May 18,000 27,600 June 13,000 26,450 July 12,000 26,000 August 15,000 26,500 Using the high-low method, what is the estimated total cost in a month when 12,000 units are produced? A. $26,000 B. $24,000 C. $26,200 D. $26,100 78. Michelman Company sells health insurance. It is interested in determining the cost equation for claims processing so it can more accurately budget its claims department. Information concerning costs and volumes for three months during 2010 appear below: Month Activity Cost May 55,000 claims $79,700 October 49,000 claims $66,000 December 46,000 claims $68,000 Using the high-low method, what is the level of fixed costs? A. $8,200 B. $3,900 C. $8,480 D. $11,700 79. Stetson University teaches a large range of undergraduate courses. It is interested in determining the cost equation for the facilities cost as a function of student credit hours so that it an more accurately budget its facilities costs as enrollment grows. Information for the high and low cost semesters and volumes for last 5 years appears below Semester Student Credit Hours Facilities Cost

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Spring 2007 250,000 $500,000 Fall 2004 300,000 $530,000 Using the high low method, with student credit hours as the activity driver, what is the equation for facilities cost (FC) as a function of student credit hours? A. FC = $2 / student credit hour B. FC = $1.77 / student credit hour C. FC = $350,000 + $0.60 / student credit hour D. FC = -$585,100 + $1.67 / student credit hour 86. MiniMaids is interested in estimating fixed and variable costs. The following data are available for the month of March when 210 homes were cleaned: Detail of Cost: Cleaning supplies $ 4,500 Hourly wages 4,000 Transportation (variable) 1,500 Office rent 800 Depreciation - equipment 600 Owner’s salary 1 ,500 Total $12 ,900 Using account analysis, how much is estimated variable cost per ticket? A. $61.43 B. $47.62 C. $26.19 D. $54.76 87. Jason Janitorial provided data concerning the costs incurred to clean hotel rooms for which hotel customers pay $150 per night. Data for the past 7 months are as follows: January February March April May June July Number of rooms cleaned 250 160 200 150 270 170 260 Cleaning cost $6,450 $4,060 $5,100 $4,100 $6,530 $4,200 $6,640 How much are estimated monthly variable costs using the high-low method? A. $20.25 B. $23.09 C. $22.45 D. $21.50 88. Jason Janitorial provided data concerning the costs incurred to clean hotel rooms for which hotel customers pay $150 per night. Data for the past 7 months are as follows: January February March April May June July

Number of rooms cleaned 250 160 200 150 270 170 260 Cleaning cost $6,450 $4,060 $5,100 $4,100 $6,530 $4,200 $6,640 How much are estimated monthly fixed costs using the high-low method? A. $636.50 B. $568.50 C. $835.00 D. $1,062.50 104. Werth Company produces tie racks. The estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 units at a price of $20 per unit. How much is the break-even point in units? A. 48,000 B. 72,000 C. 3,600 D. 8,471 105. Werth Company produces tie racks. The estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 units at a price of $20 per unit. By how much can sales revenue drop before Werth incurs a loss? A. $12,000 B. $240,000 C. $72,000 D. $360,000 106. At Havana Cafe, the break-even point is 2,000 units. If fixed costs total $300,000 and variable costs are $30 per unit, what is the selling price per unit? A. $5 B. $210 C. $150 D. $180 107. Darnley Company’s break-even point is 12,200 units. Each unit generates variable costs of $2.20 and is sold for $4.90. What are the total fixed costs? A. $24,400 B. $26,840 C. $59,780 D. $32,940 110. Circle K Furniture has a contribution margin ratio of 16%. If fixed costs are $176,800, how many dollars of revenue must the company generate in order to reach the break-even point? A. $1,105,000 B. $282,880 C. $1060,800

D. $208,476 111. Paula Corporation sells a single product at a price of $275 per unit. Variable cost per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, what is Paula’s margin of safety? A. $468,140 B. $124,025 C. $700,975 D. $405,000 112. Donough Company had the following income statement: Sales revenue (800 units) $80,000 Cost of goods sold: Fixed costs $20,000 Variable costs 18 ,500 38 ,500 Gross profit 41,500 Operating expenses: Fixed costs 12,000 Variable costs 13 ,500 25 ,500 Operating income $16 ,000 How much is Donough's total contribution margin? A. $41,500 B. $61,500 C. $28,000 D. $48,000 113. Randy Company produces a single product that is sold for $85 per unit. If variable costs per unit are $26 and fixed costs total $47,500, how many units must Randy sell in order to earn a profit of $100,000? A. 1,735 B. 618 C. 890 D. 2,500 115. Donough Company had the following income statement: Sales revenue (800 units) $80,000 Cost of goods sold: Fixed costs $20,000 Variable costs 18 ,500 38 ,500 Gross profit 41,500 Operating expenses: Fixed costs 12,000 Variable costs 13 ,500 25 ,500

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Operating income $16 ,000 How many units must Donough sell in order to break-even? A. 534 units B. 492 units C. 400 units D. More information is needed to answer 116. Martin Company has fixed costs of $34,000 per month. Martin sells a single product with variable costs of $5.60 per unit. If 8,000 units can be sold this month, what price must Martin charge in order to break-even? A. $4.25 B. $5.60 C. $9.85 D. Not enough information is provided. 117. Marshal Corporation sells a single product at a price of $62 per unit. Fixed costs total $640,000 and variable costs per unit are $22. Marshal is considering the purchase of new equipment which would reduce variable costs per unit to $16, but fixed costs would increase to $820,000. Above what volume would Marshal be better off with the new machine? A. 30,000 B. 16,000 C. 17,827 D. The problem does not provide enough information to answer the question. 118. Diaz Donuts sells boxes of donuts each with a variable cost of 37.5% of sales. Its fixed costs are $46,875 per year. How much sales dollars does Diaz need to break-even per year if donuts are its only product? A. $75,000 B. $29,297 C. $17,578 D. $125,000 119. Trin Company needs to reduce the selling price of its product in order to be competitive. Currently, Trin has fixed costs of $346,400 and variable costs per unit of $2.50. If Trin can sell 80,000 units, what price should it charge in order to break-even? A. $7.44 B. $4.33 C. $6.83 D. $17.05 120. Rambles Toyland makes a product that sells for $70 per unit and has $45 per unit in variable costs. Annual fixed costs are $24,000. How much will profits increase if 600 more units are sold? A. $15,000

B. $42,000 C. $27,000 D. $9,000 121. Rambles Toyland makes a product that sells for $70 per unit and has $45 per unit in variable costs. Annual fixed costs are $24,000. How many units must be sold to earn a profit of $12,000? A. 960 B. 1,440 C. 480 D. 171 122. Rambles Toyland makes a product that sells for $70 per unit and has $45 per unit in variable costs. Annual fixed costs are $24,000. If Rambles sells 10 units less than breakeven, how much loss would the company recognize on its income statement? A. $700 B. $450 C. $250 D. $960 123. Screen Time is a direct marketer of popular DVD movies. Following is information about its revenue and cost structure: Selling Price $13.00 per DVD Variable Costs: Production (manufacturing costs) $3.00 per DVD Selling and Administration (non-manufacturing costs) $1.00 per DVD Fixed Costs: Production (manufacturing costs) $1,000,000 per year Selling and Administration (non-mfg costs) $3,000,000 per year In which range does the break-even point fall? A. Between 300,000 and 350,000 units B. Between 350,001 and 400,000 units C. Between 400,001 and 450,000 units D. Between 450,001 and 500,000 units 124. Screen Time is a direct marketer of popular DVD movies. Following is information about its revenue and cost structure: Selling Price $13.00 per DVD Variable Costs: Production (manufacturing costs) $3.00 per DVD Selling and Administration (non-manufacturing costs) $1.00 per DVD Fixed Costs: Production (manufacturing costs) $1,000,000 per year

Selling and Administration (non-mfg costs) $3,000,000 per year The royalty paid to the film’s creators is equal to two-thirds of the variable production cost. Assume the creators are willing to cut the royalty in half if the price is reduced by the same dollar amount as the reduction in royalty. What is the new contribution margin ratio? A. 69% B. 75% C. 85% D. 72% 125. Screen Time is a direct marketer of popular DVD movies. Following is information about its revenue and cost structure: Selling Price $13.00 per DVD Variable Costs: Production (manufacturing costs) $3.00 per DVD Selling and Administration (non-manufacturing costs) $1.00 per DVD Fixed Costs: Production (manufacturing costs) $1,000,000 per year Selling and Administration (non-mfg costs) $3,000,000 per year Assume that the current sales level is 600,000 units. What impact would a 15% increase in sales have on income? A. Income would increase 15% B. Income would increase 52% C. Income would increase $1,170,000 D. Income would increase 58% 126. Screen Time is a direct marketer of popular DVD movies. Following is information about its revenue and cost structure: Selling Price $13.00 per DVD Variable Costs: Production (manufacturing costs) $3.00 per DVD Selling and Administration (non-manufacturing costs) $1.00 per DVD Fixed Costs: Production (manufacturing costs) $1,000,000 per year Selling and Administration (non-mfg costs) $3,000,000 per year Assume that sales are expected to fall from 600,000 units this year to 500,000 units next year. Screen Time would like to raise the price next year (from the current $13.00) to achieve the same profits next year as they have this year. What would the sales price have to be next year, to generate the same profits next year as this year? A. Somewhere between $15.00 and $15.99

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B. Somewhere between $14.00 and $14.99 C. Somewhere between $13.00 and $13.99 D. Somewhere between $16.00 and $16.99 127. Michael Vick has written a self improvement book that has the following cost characteristics: Selling price $16.00 per book Variable cost per unit : Production $4.00 Selling & administrative 2.00 Fixed costs: Production $ 88,000 per year Selling & administrative 18,000 per year How many units must be sold to break-even? A. 7,333 B. 10,600 C. 8,800 D. 6,625 128. Michael Vick has written a self improvement book that has the following cost characteristics: Selling price $16.00 per book Variable cost per unit : Production $4.00 Selling & administrative 2.00 Fixed costs: Production $ 88,000 per year Selling & administrative 18,000 per year What is the cost formula for total cost for this company, where TC = Total cost and X = units sold? A. TC = 10 X – 106,000 B. TC = 6 X + 106,000 C. TC = 6 X – 106,000 D. TC = 16 X + 106,000 129. Michael Vick has written a self improvement book that has the following cost characteristics: Selling price $16.00 per book Variable cost per unit : Production $4.00 Selling & administrative 2.00 Fixed costs: Production $ 88,000 per year

Selling & administrative 18,000 per year Assume that the current sales level is 30,000 units. What impact would a 30% increase in sales have on profit? A. Profit would increase 30%. B. Profit would increase 100%. C. Profit would increase $90,000. D. Profit would increase $44,000. 131. Berha’s Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and administrative costs total $2,500. What is the contribution margin per phone? A. $40 B. $60 C. $50 D. More information is needed. 132. Berha’s Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and administrative costs total $2,500. How many phones must be sold to achieve the breakeven point? A. 94 B. 63 C. 31 D. 21 133. Berha’s Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10%. Fixed manufacturing costs total $1,250 per month, while fixed selling and administrative costs total $2,500. Berha’s expects sales of $11,000 during next year. How much is the margin of safety estimated for next year? A. $1,600 B. $9,400 C. $11,000 D. $3,125 134. Happy Reading, a producer of children’s books, has provided the following calculations: Selling price per unit $6.60 Contribution margin per unit $3.00 Total fixed costs $46,200.00 What is the break-even point in books? A. 20,790 B. 15,400 C. 12,833 D. 7,000

135. Salt Fish Café has estimated that fixed costs per month are $113,750 and variable cost per dollar of sales is 65%. Sales during June totaled $400,000. What is the break-even point per month in sales? A. $39,813 B. $140,000 C. $253,750 D. $325,000 136. Salt Fish Café has estimated that fixed costs per month are $113,750 and variable cost per dollar of sales is 65%. Sales during June totaled $400,000. What level of sales is needed for a monthly profit of $60,000? A. $496,429 B. $260,000 C. $253,750 D. $325,000 137. Salt Fish Café has estimated that fixed costs per month are $113,750 and variable cost per dollar of sales is 65%. For the month of July, the cafe anticipates sales of $550,000. What is the expected level of profit? A. $192,500 B. $436,250 C. $78,750 D. $306,250 140. Jondro Company sells 3 types of umbrellas. Umbrella A sells for $20 and has variable cost of $9.00 per unit. Umbrella B sells for $17.00 and has variable cost of $12.00 per unit. Umbrella C sells for $9.00 and has variable costs of $6.00 per unit. Carlos sells in a mix of 2 units of A, 3 units of B and 5 units of C. What is the weighted average contribution margin per unit for Jondro? A. $5.20 B. $13.60 C. $10.00 D. $6.33 141. Verret, Inc. produces tacos and burritos with a stable sales mix. Its financial information follows for the month of June: Tacos Burritos Sales revenue $50,000 $150,000 Fixed costs 6,000 38,000 Variable costs 12 ,000 78 ,000 Income 32 ,000 34 ,000 How much is the breakeven point in total sales dollars for Verret? A. $115,385 B. $200,000

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C. $135,333 D. $80,000 142. CarryCo produces two models of buckets, Tiny and Jumbo. Information regarding these products for May follows: Jumbo Tiny Number of units 6 ,000 14 ,000 Sales revenue $120,000 $140,000 Fixed costs 24,000 50,000 Variable costs 60 ,000 42 ,000 Net Income $36 ,000 $48 ,000 Selling price per unit 20 10 How much is CarryCo’s weighted average contribution margin ratio? A. 60.00% B. 32.31% C. 60.77% D. 71.53% 143. Music Company produces two models, Usher and Kanye. Information regarding the products is summarized for the month of April in the following table: Usher Kanye Total Number of units 1 ,200 1 ,800 3 ,000 Sales $48,000 $36,000 $84,000 Fixed costs 15,000 12,000 27,000 Variable costs 21 ,000 14 ,400 35 ,400 Profit $12 ,000 $9 ,600 $21 ,600 Profit per unit $10.00 $ 5.33 If Music Company’s weighted average contribution margin ratio is 57.86%, and the weighted average contribution margin per unit is $16.20, how much will Music’s total sales be at breakeven? A. $46,664 B. $48,602 C. $16,667 D. $83,996 144. WallTime makes 2 products, frames and hangers. Frames have a contribution margin per unit of $6.00 and hanger has a contribution margin per unit of $11.00. WallTime has annual fixed costs of $290,000 units. Assume that frames and hangers are sold in a 3:1 mix (3 frames are sold for each hanger). How many units of each must be sold to break-even? A. 30,000 frames; 10,000 hangers

B. 7,500 frames; 2,500 hangers C. 18,913 frames; 6,304 hangers D. 40,000 frames; 0 hangers 145. WallTime makes 2 products, frames and hangers. Frames have a contribution margin per frame of $6.00 and hangers has a contribution margin per hanger of $11.00. WallTime has annual fixed costs of $290,000 units. Assume that there are only 20,000 machine hours available to make the two products. Each frame takes 2 machine hours and each hanger takes 4 machine hours. Demand for each product is 4,000 units. How many units of each product should be produced? A. 4,000 frames; 4,000 hangers B. 4,000 frames; 3,000 hangers C. 2,000 frames; 4,000 hangers D. 3,333 frames; 3,333 hangers 149. GoGrow produces shovels and rakes. Sales and costs for the most recent year are indicated below: Shovels Rakes Total Units 8 ,000 20 ,000 28 ,000 Sales revenue $160,000 $40,000 $200,000 Variable costs 98,000 18,000 116,000 Fixed costs 28 ,000 12 ,000 40 ,000 Profit $ 34 ,000 $10 ,000 $ 44 ,000 The number of units and selling price per unit appears to be stable for the foreseeable future. How much total revenue will GoGrow have at breakeven? A. $95,238 B. $13,333 C. $146,663 D. $156,000 150. GoGrow produces shovels and rakes. Sales and costs for the most recent year are indicated below: Shovels Rakes Total Units 8 ,000 20 ,000 28 ,000 Sales revenue $160,000 $40,000 $200,000 Variable costs 98,000 18,000 116,000 Fixed costs 28 ,000 12 ,000 40 ,000 Profit $ 34 ,000 $10 ,000 $ 44 ,000 The number of units and selling price per unit appears to be stable for the foreseeable future. How much is the weighted average contribution margin per unit? A. $4.43

B. $1.57 C. $0.42 D. $3.00 151. Byters on Call provides computer repairs on-site and has a contribution margin ratio of 32%, a contribution margin per service call of $5, and fixed costs of $21,160 per month. During March, it made 5,000 service calls. How much will Byters on Call’s profit increase if 160 more service calls are made? A. $1,354 B. $800 C. $6,771 D. $4,232 158. During 2010, ABT Corporation reported total revenues of $891,640 and profit of $91,486. Fixed costs were $332,043, and 44,582 units were sold. If costs and prices are expected to stay the same in 2011, and ABT expects to sell 50,000 units, what will be the company’s budgeted profit? A. $142,957 B. $525,000 C. $667,957 D. $475,000 159. Verna Trotteria Inc. makes a product that sell for $50 per unit and has $38 per unit in variable costs. Annual fixed costs are $12,000. Verna Trotteria expects to sell 2,000 units this year. How much would profits increase if 100 more units are sold than expected? A. $5,000 B. $3,800 C. $600 D. $1,200 161. Dance Town and Salsa City reported the following results for 2011: Dance Town Salsa City Sales $3,000,000 $3,000,000 Variable costs 1,200,000 1,800,000 Fixed costs 1,000,000 400,000 Due to an economic downturn, it is estimated that sales for both companies will decrease next year by $400,000. Which company will have the higher profit next year? A. Neither; both companies will have the same profit. B. Dance Town will have higher profit C. Salsa City will have higher profit. D. More information is needed to answer.

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166. Oxo, Inc. makes two models of titanium pens—Grande and Petite. Operations information appears below for the current year: Grande Petite Units 2,500 4,500 Sales revenue $160,000 $96,000 Variable cost 64,000 42,000 Fixed costs 40,000 16,000 Profit $ 56,000 $ 38,000 Profit per pen $22.40 $8.44 Contribution margin per pen $38.40 $12.00 Ounces of titanium per pen 8.50 2.50 Due to a supplier problem, only 1,400 pounds (22,400 ounces) of titanium will be available during each of the next few months. Each ounce of titanium costs $0.80. Oxo needs to make at least 900 of each model to stay competitive and can sell all it produces. Given the limited resource, how many Petite’s should Oxo produce to maximize profits? A. 5,900 B. 900 C. 8,960 D. 5,625 44. Nilsan Company experienced the following costs in 2010: Direct materials $2.25 / unit Direct labor $4.10 / unit Variable manufacturing overhead $0.75 / unit Variable selling $3.00 / unit Fixed manufacturing overhead $60,000 Fixed selling $35,000 Fixed administrative $20,000 During 2010 the company manufactured 120,000 units and sold 145,000 units. Assume the same unit costs in all years. Total variable costs on the company’s 2010 contribution income statement will be: A. $1,464,500 B. $1,029,500 C. $1,102,000 D. $1,537,000 45. Washington Supply Company experienced the following costs in 2010: Direct materials $3.50 / unit Direct labor $2.55 / unit

Manufacturing Overhead Costs Variable $1.50 / unit Fixed $20,000 Selling & Administrative Costs Variable selling $2.15 / unit Fixed selling $8,000 Fixed administrative $7,000 During the year the company manufactured 95,000 units and sold 80,000 units. If the average selling price per unit was $20, how much was the company’s contribution margin? A. $996,000 B. $776,000 C. $824,000 D. $1,116,000 46. Spacet Excavating Company experienced the following costs in 2010: Direct materials $1.75 / unit Direct labor $2.00 / unit Variable manufacturing overhead $2.50 / unit Variable selling $.75 / unit Fixed manufacturing overhead $50,000 Fixed selling $15,000 Fixed administrative $5,000 During the year the company manufactured 100,000 units and sold 80,000 units. If the average selling price per unit was $22.65 what is the company’s contribution margin per unit? A. $16.40 B. $15.65 C. $18.90 D. $13.65 47. Data from Madison Company for 2010 is as follows: Sales $20 / unit Variable cost of goods sold ?? Fixed manufacturing overhead $85,000 Variable selling & administrative ?? Fixed selling & administrative $150,000 The company produced 145,000 units during the year and sold 130,000 units. Variable production costs per unit and fixed costs have remained constant all year. Profit for the year was $1,000,000. How much was the company’s contribution margin? A. $765,000

B. $1,235,000 C. $1,365,000 D. Not enough information provided to determine the answer. 48. During the past year, Cutt Company manufactured 25,000 units and sold 20,000 units. Production costs during the year were as follows: Fixed manufacturing overhead $550,000 Variable manufacturing overhead $380,000 Direct labor $278,000 Direct materials $214,000 Sales totaled $1,270,000, variable selling and administrative costs totaled $110,000, and fixed selling and administrative costs totaled $170,000. There were no units in beginning inventory. How much is the contribution margin per unit? A. $6.62 B. $23.12 C. $28.62 D. $24.22 49. Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct material per unit $20 Direct labor per unit 12 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per year $148,500 In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. What is variable cost of goods sold? A. $1,408,500 B. $1,260,000 C. $1,359,900 D. $2,038,500 50. Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct material per unit $20 Direct labor per unit 12 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per year $148,500

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In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. How much is net income using variable costing? A. $1,440,000 B. $1,740,000 C. $1,491,000 D. $1,441,500 51. The following information relates to Carmin Industries for fiscal 2011, the company’s first year of operations: Units produced 100,000 Units sold 80,000 Units in ending inventory 20,000 Fixed manufacturing overhead $650,000 How much fixed manufacturing overhead would be expensed in 2011 using variable costing? A. $520,000 B. $130,000 C. $650,000 D. $0 52. Lenat’s contribution income statement utilizing variable costing appears below: Lenat Company Income Statement For the Year ended December 31, 2010 Sales ($28 / unit) $1,120,000 Less variable costs: Cost of goods sold 560,000 Selling & administrative costs 96 ,000 656 ,000 Contribution margin 464,000 Less fixed costs: Manufacturing overhead 80,000 Selling & administrative costs 90 ,000 170 ,000 Profit $294 ,000 Lenat Company produced 50,000 units during the year. Variable costs per unit and fixed production costs have remained constant the entire year. There were no beginning inventories. How much is the dollar value of the ending inventory using full costing? A. $140,000 B. $160,000 C. $156,000 D. $128,000

53. Eisler Company experienced the following costs in 2010: Direct materials $2 / unit Direct labor $5 / unit Variable manufacturing overhead $1 / unit Variable selling $4 / unit Fixed manufacturing overhead $70,000 Fixed selling $50,000 Fixed administrative $30,000 During 2010, the company manufactured 70,000 units and sold 80,000 units. Assume the same unit costs in all years. Beginning inventory consists of 20,000 units. How much are total variable costs on the company’s 2010 contribution margin income statement? A. $640,000 B. $960,000 C. $1,760,000 D. $560,000 54. Swoop, Inc’s contribution income statement utilizing variable costing appears below: Swoop, Inc Income Statement For the Year Ended December 31, 2010 Sales ($15 / unit) $1,200,000 Less variable costs: Cost of goods sold $780,000 Selling & administrative 40 ,000 820 ,000 Contribution margin 380,000 Less fixed costs: Manufacturing overhead 118,000 Selling & administrative costs 170 ,000 288 ,000 Net Income $ 92 ,000 Swoop, Inc produced 100,000 units during the year. Variable and fixed production costs have remained constant the entire year. There were no beginning inventories. How much is the dollar value of the ending inventory using full costing? A. $195,000 B. $228,600 C. $156,000 D. $218,600

55. Sonic Company had 4,000 units in beginning inventory. During 2011 the company manufactured 100,000 units and sold 92,000 units. The company experienced the following costs: Direct materials $5.75 / unit Direct labor $3.25 / unit Variable manufacturing overhead $2.80 / unit Variable selling $1.75 / unit Fixed manufacturing overhead $250,000 Fixed selling $35,000 Fixed administrative $25,000 If the company uses full costing the ending inventory for the year would be valued at: A. $171,600 B. $114,400 C. $141,600 D. $192,600 56. Picture All had 20,000 units in beginning inventory. During 2011, the company manufactured 90,000 units and sold 100,000 units. The company experienced the following costs (assume the same unit costs in all years): Direct materials $11.00 / unit Direct labor $2.25 / unit Other variable costs Manufacturing overhead $3.80 / unit Selling $1.75 / unit Other fixed costs Manufacturing overhead $180,000 Selling $25,000 Administrative $20,000 If the company uses variable costing, at what amount is the ending inventory for the year valued? A. $170,500 B. $188,000 C. $190,500 D. $213,000

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58. Super Sip Soda experienced the following costs in 2011 (assume the same unit costs in all years): Direct materials $4.85 / unit Direct labor $2.10 / unit Manufacturing Overhead Costs Variable $2.25 / unit Fixed $75,075 Selling & Administrative Costs Variable selling $0.95 / unit Fixed selling $8,000 Fixed administrative $2,000 There were 6,000 units in beginning inventory. During the year the company manufactured 45,500 units and sold 48,000 units. If net income using variable costing was $82,500, how much is net income using full costing? A. $78,375 B. $86,625 C. $76,725 D. $88,275 59. Slider Slicker experienced the following costs in 2011 (assume the same unit costs in all years): Direct materials $8.75 / unit Direct labor $5.50 / unit Manufacturing Overhead Costs Variable $4.85 / unit Fixed $87,250 Selling & Administrative Costs Variable selling $1.05 / unit Fixed selling $8,000 Fixed administrative $2,000 There were 6,000 units in beginning inventory. During the year the company manufactured 60,000 units and sold 63,500 units. If net income using variable costing was $109,750, how much is net income using full costing? A. $105,375 B. $113,375 C. $111,375 D. $103,375 66. Skiply Company experienced the following costs in 2011: Direct materials $4 / unit Direct labor $8 / unit Manufacturing Overhead Costs

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Variable $2 / unit Fixed $150,000 Selling & Administrative Costs Fixed selling $30,000 Variable selling $1 / unit Fixed administrative $20,000 During the year the company manufactured 50,000 units and sold 45,000 units. If net income for the year was $265,000 using full costing, what would net income be if the company used variable costing? Assume no beginning inventories. A. $250,000 B. $265,000 C. $270,000 D. $450,000 67. Waterloo Skyline experienced the following costs in 2010: Direct materials $3.15 / unit Direct labor $2.80 / unit Variable manufacturing overhead $1.45 / unit Fixed manufacturing overhead $12.60 / unit There was no beginning inventory. During the year the company sold 190,000 units. If net income using full and variable costing was $939,020 and $905,000, respectively, how many units did the company produce in 2010? A. 192,700 B. 2,700 C. 187,300 D. 46,951 71. Last month, BigTime Productions manufactured 25,000 units and sold 23,000 of these units at a price of $10.00 per unit. Manufacturing costs consisted of direct labor, $30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled $24,000. Beginning inventory consists of no units. What is BigTime Production’s income before taxes using variable costing? A. $125,960 B. $149,960 C. $169,740 D. $124,240 72. Last month, BigTime Productions manufactured 25,000 units and sold 23,000 of these units at a price of $10.00 per unit. Manufacturing costs consisted of direct labor, $30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled $24,000. Beginning inventory consists of no units. What is BigTime Production’s income before taxes using full costing?

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A. $124,240 B. $125,960 C. $169,740 D. $149,760 73. Last month, BigTime Productions manufactured 25,000 units and sold 23,000 of these units at a price of $10.00 per unit. Manufacturing costs consisted of direct labor, $30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled $24,000. Beginning inventory consists of no units. Assume BigTime Production uses variable costing. How much would the company’s contribution margin increase if sales increased 10%? A. $16,974 B. $23,000 C. $14,996 D. $12,420 74. Last month, BigTime Productions manufactured 25,000 units and sold 23,000 of these units at a price of $10.00 per unit. Manufacturing costs consisted of direct labor, $30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled $24,000. Beginning inventory consists of no units. Assume BigTime Production uses full costing. How much would the company’s gross margin increase if sales increased 10%? A. less than 10% B. more than 10% C. 10% D. It depends on other factors not given. 76. Bjorni Inc. makes a single product, the Bjorn. Information for 2010 appears below: Sales in units 200,000 Production in units 250,000 Beginning inventory 0 Variable production cost per unit $1.00 Variable selling cost per unit $0.30 Fixed production cost per year $100,000 Fixed selling and administrative cost per year $50,000 Selling price per unit $3.00 How much is the full cost per unit of inventory? A. $1.00 B. $1.30 C. $1.40 D. $1.70 77. Bjorni Inc. makes a single product, the Bjorn. Information for 2010 appears below:

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Sales in units 200,000 Production in units 250,000 Beginning inventory 0 Variable production cost per unit $1.00 Variable selling cost per unit $0.30 Fixed production cost per year $100,000 Fixed selling and administrative cost per year $50,000 Selling price per unit $3.00 How much is the profit for the year under variable costing? A . $190,000 B. $275,000 C. $185,000 D. $125,000 78. Bjorni Inc. makes a single product, the Bjorn. Information for 2010 appears below: Sales in units 200,000 Production in units 250,000 Beginning inventory 0 Variable production cost per unit $1.00 Variable selling cost per unit $0.30 Fixed production cost per year $100,000 Fixed selling and administrative cost per year $50,000 Selling price per unit $3.00 How much is the profit for the year under full costing? A. $190,000 B. $275,000 C. $185,000 D. $210,000 79. Bjorni Inc. makes a single product, the Bjorn. Information for 2010 appears below: Sales in units 200,000 Production in units 250,000 Beginning inventory 0 Variable production cost per unit $1.00 Variable selling cost per unit $0.30 Fixed production cost per year $100,000 Fixed selling and administrative cost per year $50,000 Selling price per unit $3.00 Will income be higher under variable or full costing? A. Variable

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B. Full C. They will be the same. D. Cannot be determined. 80. Bjorni Inc. makes a single product, the Bjorn. Information for 2010 appears below: Sales in units 200,000 Production in units 250,000 Beginning inventory 0 Variable production cost per unit $1.00 Variable selling cost per unit $0.30 Fixed production cost per year $100,000 Fixed selling and administrative cost per year $50,000 Selling price per unit $3.00 How much will the ending inventory value in total be using variable costing? A. $250,000 B. $50,000 C. $65,000 D. $0 81. Sherbert Company makes glow sticks. The costs and prices for the sticks follow. Selling price $23.00 per stick Variable costs: Production $11.00 per stick Selling $2.00 per stick Fixed Costs: Production $900,000 per year Selling and administrative $540,000 per year Assume that Sherbert produced 250,000 units for the year and sold 200,000. There was no beginning inventory, and all costs were incurred as expected. What would the ending inventory be under variable costing? A. $550,000 B. $650,000 C. $730,000 D. $1,450,000 82. Sherbert Company makes glow sticks. The costs and prices for the sticks follow. Selling price $23.00 per stick Variable costs: Production $11.00 per stick Selling $2.00 per stick Fixed Costs:

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Production $900,000 per year Selling and administrative $540,000 per year Assume that Sherbert produced 250,000 units for the year and sold 200,000. There was no beginning inventory, and all costs were incurred as expected. What would the ending inventory be under full costing? A. $730,000 B. $550,000 C. $650,000 D. $938,000 83. Sherbert Company makes glow sticks. The costs and prices for the sticks follow. Selling price $23.00 per stick Variable costs: Production $11.00 per stick Selling $2.00 per stick Fixed Costs: Production $900,000 per year Selling and administrative $540,000 per year Assume that Sherbert produced 250,000 units for the year and sold 200,000. There was no beginning inventory, and all costs were incurred as expected. How much would profit be under variable costing? A. $740,000 B. $848,000 C. $560,000 D. $2,000,000 84. Sherbert Company makes glow sticks. The costs and prices for the sticks follow. Selling price $23.00 per stick Variable costs: Production $11.00 per stick Selling $2.00 per stick Fixed Costs: Production $900,000 per year Selling and administrative $540,000 per year Assume that Sherbert produced 250,000 units for the year and sold 200,000. There was no beginning inventory, and all costs were incurred as expected. How much would profit be under full costing? A. $560,000 B. $848,000 C. $1,680,000 D. $740,000

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85. Sherbert Company makes glow sticks. The costs and prices for the sticks follow. Selling price $23.00 per stick Variable costs: Production $11.00 per stick Selling $2.00 per stick Fixed Costs: Production $900,000 per year Selling and administrative $540,000 per year Assume that Sherbert produced 250,000 units for the year and sold 200,000. There was no beginning inventory, and all costs were incurred as expected. How much higher or lower would variable costing be than full costing income? A. $180,000 higher B. $320,000 higher C. $320,000 lower D. $180,000 lower 86. Sherbert Company makes glow sticks. The costs and prices for the sticks follow. Selling price $23.00 per stick Variable costs: Production $11.00 per stick Selling $2.00 per stick Fixed Costs: Production $900,000 per year Selling and administrative $540,000 per year Assume that Sherbert produced 250,000 units for the year and sold 200,000. There was no beginning inventory, and all costs were incurred as expected. What would be the difference in income between variable costing income and full costing income if Sherbert had produced 215,000 sticks instead of 250,000? Assume that sales are 200,000 units. A. $62,790 B. $54,000 C. $46,400 D. $77,400 87. Chairry’s is a direct marketer of popular music. The following information about its revenue and cost structure is available: Selling price $13.00 / CD Variable costs: Production $3.00 / CD Selling and administration $1.00 / CD Fixed Costs: Production $1,000,000 / year

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Selling and administration $3,000,000 / year Assume that 500,000 CDs are produced and 450,000 are sold in 2011. What is income under variable costing? A. $50,000 B. $500,000 C. $150,000 D. $1,850,000 88. Chairry’s is a direct marketer of popular music. The following information about its revenue and cost structure is available: Selling price $13.00 / CD Variable costs: Production $3.00 / CD Selling and administration $1.00 / CD Fixed Costs: Production $1,000,000 / year Selling and administration $3,000,000 / year Assume that 500,000 CDs are produced and 450,000 are sold in 2011. What is income under full costing? A. $50,000 B. $500,000 C. $150,000 D. $1,850,000 89. Chairry’s is a direct marketer of popular music. The following information about its revenue and cost structure is available: Selling price $13.00 / CD Variable costs: Production $3.00 / CD Selling and administration $1.00 / CD Fixed Costs: Production $1,000,000 / year Selling and administration $3,000,000 / year Assume that 500,000 CDs are produced and 450,000 are sold in 2011. What is ending inventory under variable costing? A. $150,000 B. $200,000 C. $250,000 D. $300,000

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90. Chairry’s is a direct marketer of popular music. The following information about its revenue and cost structure is available: Selling price $13.00 / CD Variable costs: Production $3.00 / CD Selling and administration $1.00 / CD Fixed Costs: Production $1,000,000 / year Selling and administration $3,000,000 / year Assume that 500,000 CDs are produced and 450,000 are sold in 2011. What is ending inventory under full costing? A. $150,000 B. $200,000 C. $250,000 D. $300,000 91. T-Shirt Man is a direct marketer of popular t-shirts. Following is information about its revenue and cost structure: Selling Price $15.00 / t-shirt Variable Costs: Production (manufacturing costs) $3.00 / t-shirt Selling & Administration (non-mfg costs) $1.00 / t-shirt Fixed Costs: Production (manufacturing costs) $1,000,000 / year Selling & Administration (non-mfg costs) $2,000,000 / year Assume 400,000 t-shirts are produced and 350,000 are sold in 2011. What is income under variable costing? A. $975,000 B. $1,400,000 C. $850,000 D. $2,250,000 92. T-Shirt Man is a direct marketer of popular t-shirts. Following is information about its revenue and cost structure: Selling Price $15.00 / t-shirt Variable Costs: Production (manufacturing costs) $3.00 / t-shirt Selling & Administration (non-mfg costs) $1.00 / t-shirt Fixed Costs: Production (manufacturing costs) $1,000,000 / year Selling & Administration (non-mfg costs) $2,000,000 / year

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Assume 400,000 t-shirts are produced and 350,000 are sold in 2011. What is income under full costing? A. $975,000 B. $1,400,000 C. $850,000 D. $2,250,000 93. T-Shirt Man is a direct marketer of popular t-shirts. Following is information about its revenue and cost structure: Selling Price $15.00 / t-shirt Variable Costs: Production (manufacturing costs) $3.00 / t-shirt Selling & Administration (non-mfg costs) $1.00 / t-shirt Fixed Costs: Production (manufacturing costs) $1,000,000 / year Selling & Administration (non-mfg costs) $2,000,000 / year Assume 400,000 t-shirts are produced and 350,000 are sold in 2011. What is ending inventory under variable costing? A. $150,000 B. $275,000 C. $200,000 D. $325,000 94. T-Shirt Man is a direct marketer of popular t-shirts. Following is information about its revenue and cost structure: Selling Price $15.00 / t-shirt Variable Costs: Production (manufacturing costs) $3.00 / t-shirt Selling & Administration (non-mfg costs) $1.00 / t-shirt Fixed Costs: Production (manufacturing costs) $1,000,000 / year Selling & Administration (non-mfg costs) $2,000,000 / year Assume 400,000 t-shirts are produced and 350,000 are sold in 2011. What is ending inventory under full costing? A. $150,000 B. $275,000 C. $200,000 D. $325,000 95. Jamba Company makes ceramic mugs and has the following costs for 2010, 2011, and 2012:

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Selling price $8.00 / mug Variable production cost $2.20 / mug Variable selling cost $0.40 / mug Fixed production cost $360,000 / year Fixed selling and administrative cost $80,000 / year Production and sales in units for 2010 – 2012 are as follows: Year Production Sales 2010 100,000 90,000 2011 120,000 110,000 2012 90,000 110,000 What would income be for 2010 using variable costing? A. $46,000 B. $486,000 C. $82,000 D. $720,000 96. Jamba Company makes ceramic mugs and has the following costs for 2010, 2011, and 2012: Selling price $8.00 / mug Variable production cost $2.20 / mug Variable selling cost $0.40 / mug Fixed production cost $360,000 / year Fixed selling and administrative cost $80,000 / year Production and sales in units for 2010 – 2012 are as follows: Year Production Sales 2010 100,000 90,000 2011 120,000 110,000 2012 90,000 110,000 What would income be for 2011 using full costing assuming FIFO? A. $46,000 B. $486,000 C. $178,000 D. $720,000 99. Jamba Company makes ceramic mugs and has the following costs for 2010, 2011, and 2012: Selling price $8.00 / mug Variable production cost $2.20 / mug

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Variable selling cost $0.40 / mug Fixed production cost $360,000 / year Fixed selling and administrative cost $80,000 / year Production and sales in units for 2010 – 2012 are as follows: Year Production Sales 2010 100,000 90,000 2011 120,000 110,000 2012 90,000 110,000 How many units would be in inventory at the end of 2011? A. 10,000 B. 20,000 C. 30,000 D. 0 100. Jamba Company makes ceramic mugs and has the following costs for 2010, 2011, and 2012: Selling price $8.00 / mug Variable production cost $2.20 / mug Variable selling cost $0.40 / mug Fixed production cost $360,000 / year Fixed selling and administrative cost $80,000 / year Production and sales in units for 2010 – 2012 are as follows: Year Production Sales 2010 100,000 90,000 2011 120,000 110,000 2012 90,000 110,000 What is full costing inventory cost per unit be for 2010, 2011, and 2012, respectively? A. $2.20; $2.20; $2.20 B. $2.60; $2.60; $2.60 C. $5.80; $5.20; $6.20 D. $5.68; $5.68; $5.68 102. A company with fixed manufacturing costs of $500,000 produces 100,000 units in 2011 and 125,000 units in 2010. The company sells 90,000 units each in 2011 and 2012. Other costs and selling price are unchanged for 2011 and 2012. Which of the following would be most correct? A. Variable costing income would be greater in 2012 than in 2011. B. Full costing income would be greater in 2012 than in 2011. C. Variable costing income will be the same in 2011 and 2012. D. Both B and C are correct.

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103. A company has fixed manufacturing costs of $400,000 and produces 100,000 units and sells 85,000 units. There is no beginning inventory. Which of the following conclusions can be drawn? A. Variable costing income will be $60,000 higher than full costing income. B. Full costing income will be $60,000 higher than variable costing income. C. Variable and full costing income will be the same. D. There is not enough information to draw a conclusion. 104. Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct Material per unit $20 Direct Labor per unit 12 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per year $148,500 In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. What is the value of ending inventory using full costing? A. $679,500 B. $630,000 C. $652,500 D. $780,000 105. Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct Material per unit $20 Direct Labor per unit 12 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per year $148,500 In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. What is the value of ending inventory using variable costing? A. $679,500 B. $630,000 C. $652,500 D. $780,000 106. Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct Material per unit $20 Direct Labor per unit 12 Variable manufacturing overhead per unit 10

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Fixed manufacturing overhead per year $148,500 In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. How much is cost of goods sold using full costing? A. $1,359,000 B. $1,260,000 C. $2,038,500 D. $1,408,500 107. Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct Material per unit $20 Direct Labor per unit 12 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per year $148,500 In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. How much is net income using full costing? A. $1,641,000 B. $1,590,000 C. $1,441,500 D. $1,491,000

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Quiz 2 Managerial Accounting Study Guide Chapters 4 and 5

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