Costs and Decision Making1. At a break-even point of 400 units sold, variable expenses were $4,000, and fixed expenses were $2,000. What will the 401st unit sold contribute to profit?A. $15 B. $10 C. $0 D. $52. A disadvantage of the high-low method of cost analysis is thatA. it can’t be used when there are a very large number of observations.B. it uses two extreme data points, which may not be representative of normal conditions.C. it’s too time-consuming to apply.D. it relies totally on the judgment of the person performing the cost analysis3. Murdoch Corporation has provided the following data concerning its only product:Murdoch Product DataSelling price $230 per unit Current sales 39,100 units Break-even sales 29,716 unitsWhat is the margin of safety in dollars? A. $6,834,680 B. $8,993,000 C. $5,995,333 D. $2,158,3204. An increase in the activity level within the relevant range results in a/anA. increase in fixed cost per unit. B. unchanged fixed cost per unit.C. proportionate increase in total fixed costs. D. decrease in fixed cost per unit.5. 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 areA. $100,000. B. $50,000. C. $87,500. D. $75,000.6. A cost driver isA. the largest single category of cost in a company. B. an indirect cost that’s essential to the business.C. a fixed cost that can’t be avoided. D. a factor that causes variations in a cost7. Rank the following methods of assigning overhead costs from least accurate to most accurate.A. Plantwide rate, departmental rates, activity-based costingB. Activity-based costing, departmental rates, plantwide rateC. Departmental rates, plantwide rate, activity-based costingD. Plantwide rate, activity-based costing, departmental rates8. 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 year were as follows:Production Cost Data. Direct materials $153,000 Direct labor $110,500Variable manufacturing overhead $204,000. Fixed manufacturing overhead $255,000Sales were $780,000 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 year would be _______ than under absorption costing.A. $60,000 higher B. $108,000 lower C. $60,000 lower D. $108,000 higher9. 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 levels of monthly sales volume. The company sells the product for $115.80 per unit.Sales volume (units)4,000 5,000Cost of sales $338,000 $422,500Selling and administrative costs $89,600 $106,000The best estimate of the total contribution margin when 4,300 units are sold isA. $38,270. B. $64,070. C. $43,430. D. $134,590.10. 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:Activity Cost Pools Activity RateSize-related $0.94 per guestComplexity-related $31.62 per tierOrder-related $55.79 per orderâ¢The measure of activity 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.â¢The measure of complexity is the number of tiers in the cake.â¢The activity measure order-related cost pool is the number of orders. (Each wedding involves one order.)â¢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 .Data concerning two recent orders are listed here:Pyburn Wedding Smith WeddingNumber of reception guests 72 189Number of tiers on the cake 4 5Cost of purchased decorations $29.92 $68.75Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, which amount would the company have to charge Pyburn wedding cake to just break even?A. $29.92 B. $338.64 C. $55.79 D. $279.8711. 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 past five months of operations.Machine Hours Electrical CostAugust 1,000 $1,620September 900 $1,510October 1,500 $1,870November 2,000 $1,950December 1,300 $1,730Using the high-low method of analysis, the estimated fixed cost per month is closest to which of the following?A. $870.00 B. $1,290.00 C. $1,306.50 D. $1,150.0012. 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 levels of monthly sales volume. The company sells the product for $115.80 per unit.Sales volume (units)4,000 5,000Cost of sales $338,000 $422,500Selling and administrative costs $89,600 $106,000The best estimate of the total monthly fixed cost isA. $427,600. B. $528,500. C. $24,000. D. $478,050.13. A company increased the selling price 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 remain unchanged.D. The break-even point in units would increase14. Which statement is true company that uses variable costing?A. Any underapplied overhead is included in the product cost.B. Product costs include variable administration costs.C. The unit product cost changes because of changes in the number of units manufactured.D. Profit fluctuates with sales.15. 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. $52,100 B. $2,800 C. $54,900 D. $49,30016. 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 year were as follows:Production Cost DataDirect materials $153,000 .Direct labor $110,500Variable manufacturing overhead $204,000 . Fixed manufacturing overhead $255,000Sales were $780,000 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 wasA. $27.30. B. $25.70. C. $17.50. D. $32.50.17. 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. $200,000 B. $180,000 C. $187,500 D. $225,50018. Purchase-order processing is an example of a/an _______ activity.A. batch-level B. unit-level C. organization-sustaining D. product-level19. Which of the following is true regarding the contribution margin ratio of a single-product company?A. The contribution margin ratio increases as the number of units sold increases.B. If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales.C. As fixed expenses decrease, the contribution margin ratio increases.D. The contribution margin ratio multiplied by the variable expense per unit equals the contribution margin per unit.20. 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 year were as follows:Fixed Costs Variable CostsRaw materials $1.75 per unit producedDirect labor $1.25 per unit producedFactory overhead $100,000 $0.50 per unit producedSelling and administrative $70,000 $0.60 per unit soldWhat was Indiana Corporation’s net operating income year using variable costing?A. $271,000 B. $181,000 C. $281,000 D. $371,000
