# Theme 3 ACCT202-01: Intro Managerial Acctg

Homework 5

Theme 3

Two costs at Bradshaw Company appear below for specific months of operation.
Month Amount Units Produced
Delivery costs September $40,000 40,000 October 55,000 60,000 Utilities September$84,000 40,000
October 126,000 60,000
Which type of costs are these?

Delivery costs are mixed and utilities are variable.

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

fixed costs and a decrease in variable costs.

An activity index might be referred to as a cost

driver.

Which of the following costs are variable?
Cost 10,000 Units 30,000 Units
1. $100,000$300,000
2. 40,000 240,000
3. 90,000 90,000
4. 50,000 150,000

1 and 4

The relevant range of activity refers to the

levels of activity over which the company expects to operate.

Which of the following would be the least controllable fixed costs?

Property taxes

Which one of the following is a name for the range over which a company expects to operate?

Relevant range

Frazier Manufacturing Company collected the following production data for the past month:
Units Produced Total Cost
1,600 $44,000 1,300$38,000
1,500 $45,000 1,100$33,000
If the high-low method is used, what is the monthly total cost equation?

Total cost = $8,800 +$22/unit

At the high level of activity in November, 7,000 machine hours were run and power costs were $16,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to$8,000. Using the high-low method, the estimated fixed cost e

$4,800. Gribble Company's high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were$104,000 in May and $40,000 in November. Using the high-low method, determine an e$80,000

Which of the following is not a mixed cost?

Depreciation

If Qualls Quality Airline cuts its domestic fares by 30%,

a profit can be earned either by increasing the number of passengers or by decreasing variable costs.

In applying the high-low method, what is the unit variable cost?
Month Miles Total Cost
January 80,000 $144,000 February 50,000 120,000 March 70,000 141,000 April 90,000 195,000$1.88

For analysis purposes, the high-low method usually produces a (n)

reasonable estimate.

Portman Company's activity for the first three months of 2013 are as follows:
Jan 2100Mhrs 3600 Electrical Cost
Feb 2600Mhrs 4350 Electrical Cost
Mar 2900Mhrs 4800 Electrical Cost
Using the high-low method, how much is the cost per machine hour?

$1.50 In CVP analysis, the term "cost includes manufacturing costs plus selling and administrative expenses. Which one of the following is not an assumption of CVP analysis? All costs are variable costs. CVP analysis is not important in calculating depreciation expense. Hollis Industries produces flash drives for computers, which it sells for$20 each. Each flash drive costs $12 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were$2 per unit for a total of $1,000 for the month. How 40% If a company had a contribution margin of$750,000 and a contribution margin ratio of 40%, total variable costs must have been

$1,125,000. Which of the following would not be an acceptable way to express contribution margin? Sales minus unit costs A company has contribution margin per unit of$90 and a contribution margin ratio of 40%. What is the unit selling price?

$225 Bruno & Court is a nonprofit organization that captures stray deer bewildered within residential communities. Fixed costs are$15,000. The variable cost of capturing each deer is $10 each. Bruno & Court is funded by a local philanthropy in the amount of$

3,300

The following monthly data are available for Seasons Company which produces only one product: Selling price per unit, $42; Unit variable expenses,$14; Total fixed expenses, $84,000; Actual sales for the month of June, 5,000 units. How much is the margin$84,000

Bolton Industries had actual sales of $750,000 when break-even sales were$600,000. What is the margin of safety ratio?

20%

Homework 6

Theme 3

Cost-volume-profit analysis is the study of the effects of

changes in costs and volume on a company's profit.

Moonwalker's CVP income statement included sales of 4,000 units, a selling price of $100, variable expenses of$60 per unit, and fixed expenses of $88,000. Contribution margin is$160,000.

If contribution margin is $120,000, sales is$300,000, and net income is $40,000, then variable and fixed expenses are$180,000
$80,000 Hinge Manufacturing's cost of goods sold is$420,000 variable and $240,000 fixed. The company's selling and administrative expenses are$300,000 variable and $360,000 fixed. If the company's sales is$1,480,000, what is its contribution margin?

$760,000 Hinge Manufacturing's cost of goods sold is$420,000 variable and $240,000 fixed. The company's selling and administrative expenses are$300,000 variable and $360,000 fixed. If the company's sales is$1,480,000, what is its net income?

$160,000 For Pierce Company, sales is$500,000, variable expenses are $330,000, and fixed expenses are$140,000. Pierce's contribution margin ratio is

34%.

For Franklin, Inc., sales is $1,500,000, fixed expenses are$450,000, and the contribution margin ratio is 36%. What are the total variable expenses?

$960,000 In 2012, Teller Company sold 3,000 units at$400 each. Variable expenses were $280 per unit, and fixed expenses were$180,000. The same selling price, variable expenses, and fixed expenses are expected for 2013. What is Teller's break-even point in units

1,500

The required sales in units to achieve a target net income is

(fixed cost + target net income) divided by contribution margin per unit.

Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at$20 each), when the break-even point was 75,000 units. Warner's margin of safety ratio is

25%.

The margin of safety ratio is

margin of safety in dollars divided by expected sales.

In 2012, Carow sold 3,000 units at $500 each. Variable expenses were$250 per unit, and fixed expenses were $250,000. The same selling price is expected for 2013. Carow is tentatively planning to invest in equipment that would increase fixed costs by 20%, 1,000 Sales mix is the relative percentage in which a company sells its multiple products. Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of$60 and a selling price of $100. Q-Chip Plus has variable costs per unit of$70 and a selling price of $130.$54.

Roosevelt Corporation has a weighted-average unit contribution margin of $40 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are$1,800,000.
How many Standards would Roosevelt

18,000

Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $4,440,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it$12,000,000.

Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $4,440,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it$4,440,000

A shift from low-margin sales to high-margin sales

may increase net income, even though there is a decline in total units sold.

MacCloud Industries has two divisions�Standard and Premium. Each division has
hundreds of different types of tennis racquets and tennis products. The following
information is available:
Sales $400,000$600,000 $1,0$888,889

Brooks Corporation can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution margin of $120 and takes two machine hours to make and Fancy has a unit contribution margin of$150 and takes three machine hours

Make Plain which creates $10 more profit per machine hour than Fancy does. What is the key factor in determining sales mix if a company has limited resources? Contribution margin per unit of limited resource Curtis Corporation's contribution margin is$20 per unit for Product A and $24 for Product B. Product A requires 2 machine hours and Product B requires 4 machine hours. How much is the contribution margin per unit of limited resource for each product? A B$10.00
$6.00 The degree of operating leverage is computed by dividing total contribution margin by net income. Under absorption costing and variable costing, how are fixed manufacturing costs treated? Absorption Variable Product Cost Period Cost Which cost is not charged to the product under variable costing? Fixed manufacturing overhead Homework 7 Theme 3 A revenue that differs between alternatives and makes a difference in decision-making is called a(n) incremental revenue. Which of the following is an irrelevant cost? A sunk cost Incremental analysis is synonymous with differential analysis. Which of the following is not a true statement? Incremental analysis is the same as CVP analysis. Incremental analysis would not be appropriate for analysis of manufacturing variances. Which of the following is a true statement about cost behaviors in incremental analysis? 1. Fixed costs will not change between alternatives. 2. Fixed costs may change between alternatives. 3. Variable costs will always change between alternatives. 2 Baden Company manufactures a product with a unit variable cost of$100 and a unit sales price of $176. Fixed manufacturing costs were$480,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 uni

Income would increase by $40,000. Miley, Inc. has excess capacity. Under what situations should the company accept a special order for less than the current selling price? When incremental revenues exceed incremental costs If a company anticipates that other sales will be affected by the acceptance of a special order, then lost sales should be considered in the incremental analysis. Martin Company incurred the following costs for 70,000 units: Variable costs$420,000
Fixed costs 392,000
Martin has received a special order from a foreign company for 3,000 units. There is sufficient capacity to fill the order without jeopardizing regul

$8.10 A company is within plant capacity. It is contemplating whether a special order should be accepted. The order will not impact regular sales. If the company accepts the special order, what will occur? Net income will increase if the special sales price per unit exceeds the unit variable costs. A factory is operating at less than 100% capacity. Potential additional business will not use up the remainder of the plant capacity. Given the following list of costs, which one should be ignored in a decision to produce additional units of product? Fixed factory overhead A company's unit costs based on 100,000 units are: Variable costs$75
Fixed costs 30
The normal unit sales price per unit is $165. A special order from a foreign company has been received for 5,000 units at$135 a unit. In order to fulfill the order, 3,00

$270,000 Able Company's unit manufacturing cost is: Variable costs$50
Fixed costs 25
A special order for 2,000 units has been received from a foreign company. The unit price requested is $55. The normal unit price is$80. If the order is accepted, unit variable c

$6,000 What of the following would not be relevant in a make-or-buy decision? Unavoidable variable costs Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent: Direct materials$8,400
Direct labor 11,250
An outside supplier has offered to sell Clemente the subcomponent for $2.85 a un$3,750

Ortiz Co. produces 5,000 units of part A12E. The following costs were incurred for that level of production:
Direct materials $55,000 Direct labor 160,000 Variable overhead 75,000 Fixed overhead 175,000 If Ortiz buys the part from an outside supplier,$40

$66 Billings Company has the following costs when producing 100,000 units: Variable costs$600,000
Fixed costs 900,000
An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production f$315,000

The cost to produce Part A was $20 per unit in 2012. During 2013, it has increased to$23 per unit. In 2013, Supplier Company has offered to supply Part A for $18 per unit. For the make-or-buy decision, differential costs are$5 per unit.

Truckel, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows:
Direct materials and direct labor $11 Variable overhead 5 Fixed overhead 8 Total$24
The fixed overhead is an allocated common cost. How much is the rele

$24 Galley Industries can produce 100 units of a necessary component part with the following costs: Direct materials$20,000
Direct labor 9,000
If Galley Industries purchases the component externally, $2,000 of th$52,000

Opportunity cost must be considered in decisions involving

resources that have alternative uses.

Each of the following is a disadvantage of buying rather than making a component of a company's product except that

profitable product lines may be dropped.

Tex's Manufacturing Company can make 100 units of a necessary component part with the following costs:
Direct materials $120,000 Direct labor 25,000 Variable overhead 45,000 Fixed overhead 30,000 If Tex's Manufacturing Company can purchase the component e Buy and save$5,000.

Ruth Company produces 1,000 units of a necessary component with the following costs:
Direct materials $27,000 Direct labor 16,000 Variable overhead 4,000 Fixed overhead 7,000 None of Ruth Company's fixed overhead costs can be reduced, but another product$55,000