1 An increase in fixed costs will cause the break-even point to decrease True False
2 Rental of equipment at $5,000 per month plus $6 for each machine hour used over 9,000 hours is a type of mixed cost. True False
3 Conversion costs are made up of direct labor and factory overhead True False
4 Which of the following would be classified as a variable cost?
Straight-line depreciation on production equipment
Copy lease payment of $500 per month plus $0.01 per copy
Fabric for use in quilts to be produced.
None of the above
5.Mixed costs:
have both the characteristics of fixed costs and variable costs.
change in relation to the passage of time.
cannot be accurately plotted on a graph.
None of the above
6 What is the correct formula to calculate the contribution margin ratio?
Fixed Costs / Unit Contribution Margin
(Sales - Variable Costs) / Sales
(Fixed Costs + Target Profit) / Unit Contribution Margin
None of the above
7 The budget process begins with which of the following?
Production budget
Sales budget
Cash Budget
Budgeted Income Statement
8 If the cost of materials purchased in the period is $200,000, and $185,000 is used in the manufacturing process, then:
the unused $15,000 is a period cost.
the unused $15,000 is part of work-in-process inventory in the period.
the unused $15,000 is classified as materials inventory
the unused $15,000 is part of finished goods inventory on the balance sheet.
9 Which statement(s) is True about the uses of managerial accounting?
Managerial accounting is used to support long-term planning decisions.
Managerial accounting helps a company evaluate the performance of company decisions.
Managerial accounting helps users run the day-to-day operations of the business.
All of the above
10 A budgeting system that requires managers to estimate sales and other operating expenses as though operations are being started for the first time is:
static budgeting.
flexible budgeting
zero based budgeting
None of the above
11
Fixed costs for Flag Stamp Co. are $250,000. The selling price per unit is $20.00, and variable costs are $15.00.
The contribution margin ratio is ? (state whole number only - no decimals).
12
Fixed costs for Flag Stamp Co. are $300,000. The selling price per unit is $20.00, and variable costs are $15.00. The break-even sales (in units) are ?
13
Assume sales are $750,000, variable costs are 70% of sales, and income from operations is $100,000. What is the contribution margin ratio and fixed cost, respectively?
14
The following costs were incurred in August:
Direct Materials $25,000
Direct Labor $20,000
Manufacturing (Factory) Overhead $25,000
Selling and Administrative Expenses $40,000
(1) What is the amount of the prime costs?
(2) What is the amount of the period costs?
(3) What is the amount of the conversion costs?
(4) What is the amount of the product costs?
15
If Ragged Edge Arts sells quilts and paintings, and it has estimated selling 50 quilts at $250 each and 42 paintings at $500 each, what are the estimated sales for next year?
1 An increase in fixed costs will cause the break-even point to decrease True False
2 Rental of equipment at $5,000 per month plus $6 for each machine hour used over 9,000 hours is a type of mixed cost. True False
3 Conversion costs are made up of direct labor and factory overhead True False
4 Which of the following would be classified as a variable cost?
Straight-line depreciation on production equipment
Copy lease payment of $500 per month plus $0.01 per copy
Fabric for use in quilts to be produced.
None of the above
5.Mixed costs:
have both the characteristics of fixed costs and variable costs.
change in relation to the passage of time.
cannot be accurately plotted on a graph.
None of the above
6 What is the correct formula to calculate the contribution margin ratio?
Fixed Costs / Unit Contribution Margin
(Sales - Variable Costs) / Sales
(Fixed Costs + Target Profit) / Unit Contribution Margin
None of the above
7 The budget process begins with which of the following?
Production budget
Sales budget
Cash Budget
Budgeted Income Statement
8 If the cost of materials purchased in the period is $200,000, and $185,000 is used in the manufacturing process, then:
the unused $15,000 is a period cost.
the unused $15,000 is part of work-in-process inventory in the period.
the unused $15,000 is classified as materials inventory
the unused $15,000 is part of finished goods inventory on the balance sheet.
9 Which statement(s) is True about the uses of managerial accounting?
Managerial accounting is used to support long-term planning decisions.
Managerial accounting helps a company evaluate the performance of company decisions.
Managerial accounting helps users run the day-to-day operations of the business.
All of the above
10 A budgeting system that requires managers to estimate sales and other operating expenses as though operations are being started for the first time is:
static budgeting.
flexible budgeting
zero based budgeting
None of the above
11
Fixed costs for Flag Stamp Co. are $250,000. The selling price per unit is $20.00, and variable costs are $15.00.
The contribution margin ratio is ? (state whole number only - no decimals).
12
Fixed costs for Flag Stamp Co. are $300,000. The selling price per unit is $20.00, and variable costs are $15.00. The break-even sales (in units) are ?
13
Assume sales are $750,000, variable costs are 70% of sales, and income from operations is $100,000. What is the contribution margin ratio and fixed cost, respectively?
14
The following costs were incurred in August:
Direct Materials $25,000
Direct Labor $20,000
Manufacturing (Factory) Overhead $25,000
Selling and Administrative Expenses $40,000
(1) What is the amount of the prime costs?
(2) What is the amount of the period costs?
(3) What is the amount of the conversion costs?
(4) What is the amount of the product costs?
15
If Ragged Edge Arts sells quilts and paintings, and it has estimated selling 50 quilts at $250 each and 42 paintings at $500 each, what are the estimated sales for next year?
Related questions
The Hampshire Company manufactures umbrellas that sell for$12.50 each. In 2014, the company made and sold 60,000 umbrellas.The company had fixed manufacturing costs of $216,000. It also hadfixed costs for administration of $79,525. The per-unit costs ofeach umbrella are as follows:
Direct Materials: $3.00
Direct Labor: $1.50
Variable Manufacturing Overhead: $0.40
Variable Selling Expenses: $1.10
Using the information above, perform a cost-volume-profit (CVP)analysis by completing the steps below.
1. Compute net income before tax.
2. Compute the unit contribution margin in dollars and thecontribution margin ratio for one umbrella.
3. Calculate the break-even point in units and dollars ofrevenue.
4. Calculate the margin of safety:
In units
In sales dollars
As a percentage
5. Calculate the degree of operating leverage.
6. Assume that sales will increase by 20% in 2015. Calculate thepercentage of before-tax income for this increase. Providecalculations to prove that your percentage increase is correctbased on the operating leverage calculated in step 5.
7. Compute the number of umbrellas that Hampshire is required tosell if it plans to earn $150,000 in income before taxes by usingthe target income formula. Proof your calculation.
8. A company that specializes in tours in England has offered topurchase 5,000 umbrellas at $11 each from Hampshire. The variableselling costs of these additional units will be $1.30 as opposed to$1.10 per unit. Also, this production activity will incur another$15,000 of fixed administrative costs. Should Hampshire agree tosell these additional 5,000 umbrellas to the touring business?Provide calculations to support your decision.
| Requirement 1 | ||||
| Units | Price | Totals | ||
| Sales | X | $ | $ | |
| Variable Costs | X | $ | $ | |
| Fixed Costs | $ | |||
| Net Income | $ | |||
| Requirement 2 | ||||
| Contribution Margin per Unitin Dollars = Selling Price รขยย Variable Costs | ||||
| Selling Price | Variable Costs | Contribution Margin per Unit | ||
| Contribution Margin Ratio =Contribution Margin/Selling Price | ||||
| Contribution Margin | Selling Price | Contribution Margin Ratio | ||
| Requirement 3 | ||||
| Break-Even Point = Fixed Costs/ Contribution Margin | ||||
| Fixed Costs | Contribution Margin | Break-Even Point in Units (Rounded) | ||
| Break-Even Point in Units XSelling Price per Unit = Break-Even Point Sales | ||||
| Break-Even Point in Units | Selling Price per Unit | Break-Even Point in Sales (Rounded) | ||
| Requirement 4A | ||||
| Margin of Safety in Units =Current Unit Sales รขยย Break-Even Point in Unit Sales | ||||
| Current Unit Sales | Break-Even Point in Sales | Margin of Safety in Units | ||
| Requirement 4B | ||||
| Margin of Safety in Dollars =Current Sales in Dollars รขยย Break-Even Point Sales in Dollars | ||||
| Current Sales in Dollars | Break-Even Point in Dollars | Margin of Safety in Dollars | ||
| Requirement 4C | ||||
| Margin of Safety as aPercentage = Margin of Sales in Units / Current Unit Sales | ||||
| Margin of Safety in Units | Current Unit Sales | Margin of Safety Percentage | ||
| Requirement 5 | ||||
| Degree of Operating Leverage =Contribution Margin / Operating Income | ||||
| Contribution Margin | Operating Income | Operating Leverage | ||
| Requirement 6 | ||||
| Units | $ Per Unit | Totals | ||
| Sales | X | $ | $ | |
| Variable Costs | X | $ | $ | |
| Fixed Costs | $ | |||
| Net Income | $ | |||
| Operating Leverage | Times % Increase | Increase would be XX% | ||
| Prior Income | $ | From Part 1 | ||
| Increase | $ | Prior Income X XX% Above | ||
| Total | $ | |||
| Requirement 7 | ||||
| Targeted Income = (Fixed Costs+ Target Income) / Contribution Margin | ||||
| Fixed Costs + Target Income | Divided by Contribution Margin | # of Units (Rounded) | ||
| Fixed Costs | $ | |||
| Target Income | $ | |||
| Total | $ | $ | X | |
| # of Units Above X $ Per Unit | ||||
| Proof | Revenue | XX,XXX X $XX.XX | $ | |
| Variable Costs | XX,XXX X $X.XX | $ | ||
| Contribution Margin | $ | |||
| Fixed Costs | $ | |||
| Net Income | $ | |||
| Requirement 8 | ||||
| Sales Mix | ||||
| Current | Specialty | Total | ||
| Expected Sales Units | X | X | ||
| Revenue = Sales X Price | $ | $ | $ | |
| Variable Costs X Units | $ | $ | $ | |
| Contribution Margin | $ | $ | $ | |
| Fixed Costs | $ | $ | $ | |
| Operating Income | $ | |||
| Prior Net Income FromRequirement 1 | $ | |||
| Additional Operating Income | (Operating Income Above Less Prior Income) | $ | ||
| Decision With Explanation | ||||
If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
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