22 Multiple choice questions: costing, ABC, CVP analysis, breakeven, fixed, variable

To be useful to management, accounting information must
a. be prepared in accordance with GAAP.
b. have the potential to affect decisions and influence behavior.
c. be completely accurate.
d. be in the form of financial statements.

2. The primary difference between target costing and traditional cost-based pricing is
a. traditional cost-based pricing is designed to appeal to any customers, but target costing targets specific customers.
b. traditional cost-based pricing considers the market that is available for the product at the end of the process, whereas target costing considers the market at the beginning of the process.
c. product costs are irrelevant under traditional cost-based pricing, but are very important under target costing.
d. product costs are irrelevant under target costing, but are very important under traditional cost-based pricing.

3. In an activity-based cost system, an overhead cost system would first be allocated to __________, and then allocated to __________.
a. a product; an activity pool
b. a product only
c. an activity pool; a product
d. an activity pool only

5. All of the following are assumptions made in cost-volume-profit analysis except
a. the cost of materials can change at different levels of volume.
b. fixed costs are constant over the volume of production being considered.
c. mixed costs can be separated into their variable and fixed components.
d. the various components of unit variable cost remain constant during the period of analysis.

6. A company's current sales are $400,000 at a volume of 10,000 units. Fixed costs are $120,000 and variable costs are $30 per unit. What is the company's breakeven sales volume in units?
a. 3,000
b. 10,000
c. 2,250
d. 12,000

7. If fixed costs for a company are $65,000 and variable costs are 20% of sales, what do total sales need to be to achieve a target net income of $35,000?
a. $500,000
b. $116,250
c. $125,000
d. $108,750

10. If sales are $425,000, variable costs are 63% of sales, and operating income is $50,000, what is the contribution margin ratio?
a. 37%
b. 26.8%
c. 11.8%
d. 63%

11. If sales are $820,000, variable costs are $524,800, and operating income is $260,000, what is the contribution margin ratio?
a. 53.1%
b. 33%
c. 64%
d. 36%

12. If fixed costs are $250,000, the unit selling price is $105, and the unit variable costs are $65, what is the break-even sales (units)?
a. 3,846 units
b. 2,381 units
c. 10,000 units
d. 6,250 units

13. If fixed costs are $750,000 and variable costs are 70% of sales, what is the break-even point (dollars)?
a. $1,071,429
b. $525,000
c. $2,500,000
d. $1,275,000

14. If fixed costs are $1,400,000, the unit selling price is $220, and the unit variable costs are $120, what is the amount of sales required to realize an operating income of $200,000?
a. 14,000 units
b. 12,000 units
c. 16,000 units
d. 13,333 units

15. Ingram Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are:
a. $56,000
b. $28,400
c. $17,600
d. cannot be determined from the data given

16. Given the following cost and activity observations for Wondrous Company's utilities, use the high-low method to calculate Wondrous' variable utilities costs per machine hour.
Cost Machine Hours
March $3,100 15,000
April 2,700 10,000
May 2,900 12,000
June 3,500 18,000

a. $10.00
b. $.67
c. $.63
d. $.10

17. Given the following cost and activity observations for Johnson Company's utilities, use the high-low method to calculate Johnson's fixed costs per month.
Cost Machine Hours
January $52,600 20,000
February 75,100 29,000
March 57,000 22,000
April 64,000 24,500

a. $2,600
b. $50,000
c. $12,500
d. $5,000

Please use the following for Problems 18-21:

Mavis Company uses the total cost concept of applying the cost-plus approach to product pricing. The costs and expenses of producing and selling 38,400 units of Product E are as follows:

Variable costs:
Direct materials $ 4.70
Direct labor 2.50
Factory overhead 1.90
Selling and administrative expenses 2.60
Total $ 11.70
Fixed costs:
Factory overhead $80,000
Selling and administrative expenses 14,000

Mavis desires a profit equal to a 14% rate of return on invested assets of $640,000.

18. Determine the amount of desired profit from the production and sale of Product E.
a. 76,600
b. 74,600
c. 89,600
d. 92,600

19. Determine the total costs and the cost amount per unit for the production and sale of 38,400 units of Product E.
a. 17.80
b. 15.00
c. 10.15
d. 14.15

20. Determine the markup percentage for Product E.
a. 12.8%
b. 16.5%
c. 18.0%
d. 17.4%

21. Determine the selling price of Product E.
a. 9.69
b. 16.48
c. 12.45
d. 8.78

22. Which of the following statements is false?
a. There is no overlap between financial and managerial accounting.
b. Managerial accounting sometimes relies on past information.
c. Managerial accounting does not need to conform to GAAP
d. Financial accounting must conform to GAAP.

23. Managerial accounting
a. is prepared according to GAAP.
b. is prepared according to management needs.
c. is prepared periodically only.
d. is related to the entire business entity only.

24. Who are the individuals charged with the responsibility for directing the day-to-day operations of a business?
a. Investors
b. Managers
c. Employees
d. Customers

25. The manufacturing cost of Lancer Industries for three months of the year are provided below:

Total Cost Production
April $ 61,900 1,200 Units
May 80,920 1,800
June 100,300 2,400

Using the high-low method, the variable cost per unit, and the total fixed costs are:
a. $32.30 per unit and $77,520 respectively.
b. $32 per unit and $23,500 respectively.
c. $32 per unit and $76,800 respectively.
d. $32.30 per unit and $22,780 respectively.