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Test II – Chapters 5 thru 7

1.

Data concerning Odum Corporation’s single product appear below:

The break-even in monthly unit sales is closest to:

[removed]A) 1,413 units
[removed]B) 1,110 units
[removed]C) 622 units
[removed]D) 1,048 units

2.

A cement manufacturer has supplied the following data:

  
 
What is the company’s unit contribution margin?

[removed]A) $2.00
[removed]B) $0.32
[removed]C) $4.30
[removed]D) $2.30

3.

Tanigawa Inc. has an operating leverage of 8.7. If the company’s sales increase by 8%, its net operating income should increase by about:

[removed]A) 69.6%
[removed]B) 8.7%
[removed]C) 108.8%
[removed]D) 8.0%

4.

A company that makes organic fertilizer has supplied the following data:

  
 
The company’s unit contribution margin is closest to:

[removed]A) $5.25
[removed]B) $4.05
[removed]C) $3.50
[removed]D) $2.35

5.

Weinreich Corporation produces and sells a single product. Data concerning that product appear below:

The company is currently selling 2,000 units per month. Fixed expenses are $131,000 per month. The marketing manager believes that an $18,000 increase in the monthly advertising budget would result in a 170 unit increase in monthly sales. What should be the overall effect on the company’s monthly net operating income of this change?

[removed]A) Increase of $2,700
[removed]B) Increase of $15,300
[removed]C) Decrease of $18,000
[removed]D) Decrease of $2,700

6.

Guillet Inc. produces and sells a single product. The selling price of the product is $180.00 per unit and its variable cost is $46.80 per unit. The fixed expense is $618,048 per month.
 
The break-even in monthly unit sales is closest to:

[removed]A) 3,434 units
[removed]B) 4,640 units
[removed]C) 7,093 units
[removed]D) 13,206 units

7.

Danneman Corporation’s fixed monthly expenses are $13,000 and its contribution margin ratio is 56%. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company’s net operating income in a month when sales are $41,000?

[removed]A) $9,960
[removed]B) $5,040
[removed]C) $22,960
[removed]D) $28,000

8.

Green Enterprises produces a single product. The following data were provided by the company for the most recent period:

  
 
For the period above, one would expect the net operating income under absorption costing to be:

[removed]A) higher than the net operating income under variable costing.
[removed]B) lower than the net operating income under variable costing.
[removed]C) the same as the net operating income under variable costing.
[removed]D) The relation between absorption costing net operating income and variable costing net operating income cannot be determined.

9.

Vanstee Corporation manufactures a variety of products. Variable costing net operating income last year was $60,000 and this year was $67,000. Last year, $37,000 in fixed manufacturing overhead costs were deferred in inventory under absorption costing. This year, $8,000 in fixed manufacturing overhead costs were released from inventory under absorption costing.
 
What was the absorption costing net operating income this year?

[removed]A) $38,000
[removed]B) $96,000
[removed]C) $75,000
[removed]D) $59,000

10.

Green Enterprises produces a single product. The following data were provided by the company for the most recent period:

  
 
Under absorption costing, the unit product cost is:

[removed]A) $20
[removed]B) $18
[removed]C) $15
[removed]D) $25

11.

Olds Inc., which produces a single product, has provided the following data for its most recent month of operations:

There were no beginning or ending inventories. The absorption costing unit product cost was:

[removed]A) $97
[removed]B) $130
[removed]C) $99
[removed]D) $207

12.

Tsuchiya Corporation manufactures a variety of products. Last year, the company’s variable costing net operating income was $57,500. Fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $35,400. What was the absorption costing net operating income last year?

[removed]A) $22,100
[removed]B) $35,400
[removed]C) $57,500
[removed]D) $92,900

13.

Segment margin is sales minus:

[removed]A) variable expenses.
[removed]B) traceable fixed expenses.
[removed]C) variable expenses and common fixed expenses.
[removed]D) variable expenses and traceable fixed expenses.

14.

Favini Company, which has only one product, has provided the following data concerning its most recent month of operations:

  
 
What is the unit product cost for the month under absorption costing?

[removed]A) $91
[removed]B) $125
[removed]C) $118
[removed]D) $98

15.

Dykema Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Processing, Supervising, and Other. The costs in those activity cost pools appear below:

Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

  
 
The activity rate for the Processing activity cost pool under activity-based costing is closest to:

[removed]A) $15.00 per MH 
[removed]B) $3.60 per MH 
[removed]C) $0.46 per MH 

16.

Drewniak Corporation has provided the following data from its activity-based costing system:

The company makes 430 units of product O37W a year, requiring a total of 690 machine-hours, 40 orders, and 10 inspection-hours per year. The product’s direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit.
According to the activity-based costing system, the average cost of product O37W is closest to:

[removed]A) $94.11 per unit 
[removed]B) $89.72 per unit 
[removed]C) $65.18 per unit 
[removed]D) $92.49 per unit 

17.

Roshannon Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment expense and indirect labor-to three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below:

In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

  
 
The activity rate for the Processing activity cost pool under activity-based costing is closest to:

[removed]A) $5.33 per MH 
[removed]B) $0.68 per MH 
[removed]C) $0.52 per MH 
[removed]D) $3.00 per MH 

18.

Ballweg Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:

Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:

Finally, the costs of Machining and Order Filling are combined with the following sales and direct cost data to determine product margins.

  
 
What is the product margin for Product T2 under activity-based costing?

[removed]A) $1,821 
[removed]B) $871 
[removed]C) $8,700 
[removed]D) $16,200 

19.

Roshannon Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment expense and indirect labor-to three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below:

In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:

Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.

  
 
What is the overhead cost assigned to Product P3 under activity-based costing?

[removed]A) $30,000 
[removed]B) $5,916 
[removed]C) $5,640 
[removed]D) $11,556 

20.

Matt Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with total cost and total activity as follows:

The activity-based costing cost per unit of Product A is closest to:

[removed]A) $2.40 
[removed]B) $3.90 
[removed]C) $10.59 
[removed]D) $6.60