Solution

Question 1 (1 point)

A typical use of managerial accounting is to: Question 1 options: help investors and creditors assess the financial position of the company. help management get a clean audit report help the marketing manager decide which product promotion to implement help the SEC decide whether management is in compliance of its policies.

Question 2 (1 point)

Three costs incurred by Pitt Company are summarized below: 1,000 units

2,000 units

Cost A

$10,000

$15,000

Cost B

$21,000

$21,000

Cost C

$16,000

$32,000

Which of these costs are variable? Question 2 options: A, B, and C A and B A only C only

Question 3 (1 point)

Bubba's Steakhouse has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials, $4,080; hourly labor (variable), $5,200; rent (fixed),

$1,550; depreciation, $790; and other fixed costs, $460. Each steak dinner sells for $12.20 each. How much would Shula’s profit increase if 10 more dinners were sold? Your Answer:

Ans: $64 Question 3 options: Answer

Question 4 (1 point)

Bellfont Company produces door stoppers. August production costs are below: Door Stoppers produced

76,000

Direct material (variable)

$20,000

Direct labor (variable)

40,000

Supplies (variable)

20,000

Supervision (fixed)

28,500

Depreciation (fixed)

23,100

Other (fixed)

4,300

In September, Bellfont expects to produce 100,000 door stoppers. Assuming no structural changes, what is Bellfont’s production cost per door stopper for September?

Your Answer:

Ans: 1.61 Question 4 options: Answer

Question 5 (1 point)

Aaron's chairs is in the process of preparing a production cost budget for August. Actual costs in July for 120 chairs were: Materials cost Labor cost Rent Depreciation Other fixed costs

$4,750 2,960 1,500 2,500 3,200

Materials and labor are the only variable costs. If production and sales are budgeted to increase to 100 chairs in August, how much is the expected total variable cost on the August budget? Your Answer: Ans: $6425 Question 5 options: Answer

Question 6 (1 point)

Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $23,400 to buy 670 units from Carry-ALL. Total fixed costs are $7,000 per year. This offer does not affect Carry-ALL's other planned operations. The incremental revenues for this situation are Your Answer: Ans: 23400 Question 6 options: Answer

Question 7 (1 point)

Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by $10,000 then their profit increases/decreases by how much?

Sales

$50,000

Variable Costs

$8,300

Fixed Costs

$28,000

Your Answer:

Ans: Increase by $8340 Question 7 options: Answer

Question 8 (1 point)

Susan is trying to decide whether or not to attend college during the next 12-week session. She has the following options: 1. Attend college full-time at a cost of $1,200. 2. Attend college part-time at a cost of $700 and work part-time earning $2,000. 3. Work full-time earning $5,000. What is Susan's incremental profit if she chooses option 3 over option 2? Your Answer:

Ans: $3700 Question 8 options: Answer

Question 9 (1 point)

Total costs were $76,700 when 29,000 units were produced and $93,600 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. Your Answer: Ans: $81309.09 Question 9 options: Answer

Question 10 (1 point)

Professional 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 Spring 2007 Fall 2004

Student Credit Hours 250,000 300,000

Facilities Cost $500,000 $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? Question 10 options: FC = $350,000 + $0.60 / student credit hour FC = -$585,100 + $1.67 / student credit hour FC = $1.77 / student credit hour FC = $2 / student credit hour

Question 11 (1 point)

Randy's tireland makes a product that sells for $65 per unit and has $49 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? Your Answer:

Ans : $160 Question 11 options: Answer

Question 12 (1 point)

Ritz Furniture has a contribution margin ratio of 0.15. If fixed costs are $177,900, how many dollars of revenue must the company generate in order to reach the break-even point? Your Answer: Ans: 1186000 Question 12 options: Answer

Question 13 (1 point)

U.S. Telephone Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10% (based on the unit sales price per phone). Fixed manufacturing costs total $1,270 per month, while fixed selling and administrative costs total $2,260. How many phones must be sold to achieve the breakeven point? Your Answer:

Ans: 88.25 Question 13 options: Answer

Question 14 (1 point)

Swimkids is a swimsuit manufacturer. They sell swim suits at a selling price is $30 per unit. Swimkids variable costs are $18 per unit. Fixed costs are $70,300. Swimkids expects sales of $274,800 next year. What is Swimkids's margin of safety? Your Answer: Ans: 99050

Question 14 options: Answer

Question 15 (1 point)

Lambardi Company sells 3 types of bags. Bag A sells for $20 and has variable cost of $9.00 per unit. Bag B sells for $14 and has variable cost of $12.00 per unit. Bag C sells for $7 and has variable costs of $6.00 per unit. Lambardi 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 Lambardi? Your Answer:

Ans: 3.3 Question 15 options: Answer

Question 16 (1 point)

Product A has a contribution margin per unit of $500 and required 2 hours of machine time. Product B has a contribution margin per unit of $1,000 and requires 5 hours of machine time. How much of each product should be produced given there are 100 hours of available machine time?

Question 16 options: 50 units of A and 25 units of B. 25 units of B. 50 units of A. None of the above

Question 17 (1 point)

Delfi Company produces two models of seats, Toro and Prep. Information regarding these products for May follows:

Number of units Sales revenue Variable costs Fixed costs Net Income Pounds of plastic to produce one bucket Contribution margin per unit

Toro 3,000

Prep 7,000

$120,000 60,000 24,000

$140,000 42,000 50,000

$36,000

$48,000

4.0 $20

1.6 $14

Due to increased demand of plastic in the market, Delfi Company can obtain only 9,000 pounds of plastic per month. Delfi can sell as many seats as it can produce of either model. How many of each model should Delfi produce to maximize profit in May considering the constraint? Question 17 options: Toro: 0; Prep: 4,375 Toro: 2,250; Prep: 0 Toro: 1,125; Prep: 2,812 Toro: 0; Prep: 5,625

Question 18 (1 point)

Abagail Corp. uses activity-based costing system with three activity cost pools. The following information is provided:

Costs: Wages and salaries $

202,000

Depreciation

105,000

Utilities

119,000

Total

$440,000

Activity Cost Pools Assembly

Setting Up

Other

Wages and salaries

0.56

30%

10%

Depreciation

0.32

45%

20%

Utilities

0.23

40%

30%

How much total cost would be allocated to the Assembly activity cost pool? Your Answer: Ans: 174090

Question 18 options: Answer

Question 19 (1 point)

Maxx Inc. has provided the following data from its activity-based costing system: Activity Cost Pools

Total Cost

Total Activity

Designing products

$377,800

6,310 product design hours

Setting up batches

$52,678

7366 batch set-ups

Assembling products

$25,122

4,018 assembly hours

The activity rate for the “designing products” activity cost pool is: Your Answer:

Ans: $59.87 per product design hours Question 19 options: Answer

Question 20 (1 point)

Sasha Company allocates the estimated $196,100 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The costs will be allocated based on the number of employees using the direct method. Information regarding costs and employees follows: Department Accounting Production Sales

Employees 4 32 15

How much of the accounting department costs will be allocated to the production? Your Answer: Ans: 133514.89

Question 20 options: Answer

Question 21 (1 point)

Medusa Company allocates costs from the payroll department (S1) and the maintenance department (S2) to the molding (P1), finishing (P2), and packaging (P3) departments. Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet which the production department occupies within the factory. Information about the departments is presented below:

Department Payroll (S1) Maintenance (S2) Molding (P1) Finishing (P2) Packaging (P3)

Costs $143,000 $220,000

Number of Employees 2 8 60 49 20

Number of Square Feet Occupied 2,000 64,000 100,000 60,000 40,000

Medusa uses the direct method to allocate costs. Round all answers to the nearest dollar. What amount of the payroll department costs will be allocated to the molding department? Your Answer: Ans: 66511.63

Question 21 options: Answer

Question 22 (1 point)

The Manassas Company has 55 obsolete keyboards that are carried in inventory at a cost of $9,600. If these keyboards are upgraded at a cost of $7,500, they could be sold for $19,100. Alternatively, the keyboards could be sold “as is” for $7,800. What is the net advantage or disadvantage of re-working the keyboards? Your Answer: Ans: $3800 Question 22 options: Answer

Question 23 (1 point)

Ritz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below: Cost Pool Packaging and shipping Final inspection General operations and supervision

Total Costs

Cost Driver

$162,400 Number of boxes shipped Number of individual items $197,600 shipped $80,600 Number of orders

Annual Activity 25,000 boxes 96,500 items 8,100 orders

During the period, the Far East sales office generated 656 orders for a total of 6,130 items. These orders were shipped in 1,408 boxes. What amount of shipping department costs should be allocated to these sales? Your Answer: Ans: 28226.18

Question 23 options: Answer

Question 24 (1 point)

Baller Financial is a banking services company that offers many different types of checking accounts. The bank has recently adopted an activity-based costing system to assign costs to their various types of checking accounts. The following data relate to the money market checking accounts, one of the popular checking accounts, and the ABC cost pools: Annual number of accounts = 54,000 accounts Checking account cost pools:

Cost Pool Returned check costs Checking account reconciliation costs New account setup

Cost $2,910,000 59,000 635,000

Copies of cancelled checks

397,000

Online banking web site maintenance

193,000

Cost Drivers Number of returned checks Number of account reconciliation requests Number of new accounts Number of cancelled check copy requests Per product group (type of account)

Annual activity information related to cost drivers: Cost Pool Returned check Check reconciliation costs New accounts Cancelled check copy requests Web site costs

All Products Money Market Checking 200,000 returned checks 18,000 397,000 checking 420 account 50,000 new accounts 15,000 98,000 cancelled check 60,000 6 types of accounts 1

Calculate the overhead cost per account for the Money Market Checking. Your Answer: Ans: 10.55 Question 24 options: Answer

Question 25 (1 point)

Sosa Company has $39 per unit in variable costs and $1,900,000 per year in fixed costs. Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price? Your Answer:

Ans: 71.24 Question 25 options:

Answer

Question 26 (1 point)

Bob's Company sells one product with a variable cost of $5 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices, what price should be charged in order to maximize profits? Units Sold

Price

30,000

$10

40,000

$9

50,000

$8

60,000

$7

Question 26 options: $10 $9 $8 $7

Question 27 (1 point)

A retailer purchased some trendy clothes that have gone out of style and must be marked down to 30% of the original selling price in order to be sold. Which of the following is a sunk cost in this situation? Question 27 options: the original selling price the anticipated profit the original purchase price the current selling price

Question 28 (1 point)

Carlton Products Company has analyzed the indirect costs associated with servicing its various customers in order to assess customer profitability. Results appear below: Cost Pool Processing electronic orders Processing non-electronic orders Picking orders Packaging orders Returns

Annual Cost Cost Driver Annual Driver Quantity $1,000,000 Number of orders 500,000 $2,000,000 Number of orders 400,000 $3,000,000 Number of different products ordered 800,000 $1,500,000 Number of items ordered 50,000,000 $2,000,000 Number of returns 50,000

If all costs were assigned to customers based on the number of items ordered, what would be the cost per item ordered? Your Answer: Ans: .19 Question 28 options: Answer

Question 29 (1 point)

Costa Company has a capacity of 40,000 units per year and is currently selling 35,000 for $400 each. Barton Company has approached Costa about buying 2,000 units for only $300 each. The units would be packaged in bulk, saving Costa $20 per unit when compared to the normal packaging cost. Normally, Costa has a variable cost of $280 per unit. The annual fixed cost of $2,000,000 would be unaffected by the special order. What would be the impact on profits if Costa were to accept this special order? Question 29 options: Profits would increase $40,000. Profits would increase $60,000. Profits would decrease $200,000. Profits would increase $80,000

Question 30 (1 point)

A company has $6.60 per unit in variable costs and $3.30 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.51, what price should be charged if 55,000 units are expected to be sold? Your Answer:

Ans: 14.5 Question 30 options: Answer

Question 31 (1 point)

Customer profitability analysis might result in:

Question 31 options: dropping some customers that are unprofitable. lowering price or offering incentives to profitable customers. giving incentives to all customers to place orders online. All of the above.

Question 32 (1 point)

The Estrada Company uses cost-plus pricing with a 0.43 mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $4.70. In addition, the company incurs $190,400 in fixed costs annually. If demand falls to 79,900 units and the company wants to continue to earn a 0.43 return, what price should the company charge? Your Answer: Ans: 10.13 Question 32 options: Answer

Question 33 (1 point)

A new product is being designed by an engineering team at Golem Security. Several managers and employees from the cost accounting department and the marketing department are also on the team to evaluate the product and determine the cost using a target costing methodology. An analysis of similar products on the market suggests a price of $122.00 per unit. The company requires a profit of 0.22 of selling price. How much is the target cost per unit? Your Answer: Ans: 95.16 Question 33 options: Answer

Question 34 (1 point)

A company using activity based pricing marks up the direct cost of goods by 0.27 plus charges customers for indirect costs based on the activities utilized by the customer. Indirect costs are charged as follows: $6.50 per order placed; $2.80 per separate item ordered; $27.10 per return. A customer places 7 orders with a total direct cost of $2,700, orders 300 separate items, and makes 3 returns. What will the customer be charged? Your Answer: Ans: 4395.80

Question 34 options: Answer

Question 35 (1 point)

A law firm uses activity-based pricing. The company’s activity pools are as follows: Cost Pool Consultation

Annual Estimated Cost Cost Driver Annual Driver Quantity 196,000 Number of consultations 80 consultations

Administrative Costs Client Service

134,000 Admin labor hours 79,000 Number of clients

9,800 labor hours 120 clients

The firm had two consultations with this client and required 130 administrative labor hours. What additional costs will be charged to this customer? Your Answer: Ans: 6677.55

Question 35 options: Answer