- Use the following information to answer this question.Gargymal Company would like to estimate the variable and fixed components of its electrical costs and hascompiled the following data for the past five months of operations.Using the high-low method of analysis, the estimated variable cost per machine hour for electricity isclosest to which of the following?MachineHoursElectricalCostAugust 1,000 $1,620September 900 $1,510October 1,500 $1,870November 2,000 $1,950December 1,300 $1,730
C. $0.40
2. Indiana Corporation produces a single product that it sells for $9 per unit. During the first year ofoperations, 100,000 units were produced, and 90,000 units were sold. Manufacturing costs and selling andadministrative expenses for the year were as follows:Fixed Costs Variable CostsRaw materials$1.75 per unitproducedDirect labor$1.25 per unitproducedFactoryoverhead$100,000$0.50 per unitproducedSelling andadministrative$70,000$0.60 per unitsoldWhat was Indiana Corporation's net operating income for the year using variable costing?
C. $271,000
3. 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?B. $200,000
4. Viren Corporation has provided the following data from its activity-based costing system:The company makes 240 units of product T91H a year, requiring a total of 550 machine hours, 90 orders,and 40 inspection hours per year. The product's direct materials cost is $16.98 per unit, and its direct laborcost is $12.09 per unit. According to the activity-based costing system, the average cost of product T91H isclosest to ______per unit.Activity Cost Pool Total Cost Total ActivityAssembly $387,000 25,000 machine-hoursProcessing orders $68,510 1,700 ordersInspection $129,117 1,930 inspection-hours
B. $90.81
5. Use the following information to answer this question.Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of thecompany has provided the following data concerning the activity rates in its activity-based costing system:l The measure of activity for the size-related activity cost pool is the number of planned guests at thewedding reception. The greater the number of guests, the larger the cake.l The measure of complexity is the number of tiers in the cake.Activity Cost Pools Activity RateSize-related $0.94 per guestComplexity-related $31.62 per tierOrder-related $55.70 per orderl The activity measure for the order-related cost pool is the number of orders. (Each wedding involvesone order.)l The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. Theactivity rates don't include the costs of purchased decorations, such as miniature statues and weddingbells, which are accounted for separately.Data concerning two recent orders are listed here:Assuming that the company charges $556.96 for the Smith wedding cake, what would be the overallmargin on the order?PyburnWeddingSmithWeddingNumber of reception guests 72 189Number of tiers on the cake 4 5Cost of purchased decorations for cake $29.92 $68.75
B. $96.66
6. A company increased the selling price for its product from $5 to $6 per unit when total fixed expensesincreased from $100,000 to $200,000 and variable expense per unit remained unchanged. How wouldthese changes affect the break-even point?
C. The effect can't be determined from the information given.
7. Use the following information to answer this question.Callaham Corporation is a wholesaler that sells a single product. Management has provided the followingcost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.The best estimate of the total monthly fixed cost isSales volume (units)4,000 5,000Cost of sales $338,000 $422,500Selling and administrative costs $89,600 $106,000
B. $24,000.
8. Use the following information to answer this question.Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of thecompany has provided the following data concerning the activity rates in its activity-based costing system:l The measure of activity for the size-related activity cost pool is the number of planned guests at thewedding reception. The greater the number of guests, the larger the cake.l The measure of complexity is the number of tiers in the cake.l The activity measure for the order-related cost pool is the number of orders. (Each wedding involvesone order.)l The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. Theactivity rates don't include the costs of purchased decorations, such as miniature statues and weddingbells, which are accounted for separately.Data concerning two recent orders are listed here:Suppose the company decides that the present activity-based costing system is too complex and that allcosts (except for the costs of purchased decorations) should be allocated on the basis of the number ofguests. In that event, what would you expect to happen to the costs of cakes?Activity Cost Pools Activity RateSize-related $0.94 per guestComplexity-related $31.62 per tierOrder-related $55.70 per orderPyburnWeddingSmithWeddingNumber of reception guests 72 189Number of tiers on the cake 4 5Cost of purchased decorations for cake $29.92 $68.
D. The cost of cakes for receptions with fewer than the average number of guests would go down.
9. Green Company's variable expenses are 75% of sales. At a sales level of $400,000, the company'sdegree of operating leverage is 8. At this sales level, fixed expenses are
A. $87,500.
10. Which of the following is true regarding the contribution margin ratio of a single-product company?
D. If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio bythe dollar increase in sales.
11. Rank the following methods of assigning overhead costs from least accurate to most accurate.
D. Plantwide rate, departmental rates, activity-based costing
12. Slosh Cleaning Corporation services both residential and commercial customers. Slosh expects thefollowing operating results next year for each type of customer:Slosh expects to have $18,000 in fixed expenses next year. What would Slosh's total dollar sales have to benext year to generate a profit of $90,000?Operating ResultsResidential CommercialSales $60,000 $140,000Contribution margin ratio 50% 30%
D. $300,000
13. Use the following information to answer this question.Callaham Corporation is a wholesaler that sells a single product. Management has provided the followingcost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.The best estimate of the total variable cost per unit isSales volume (units)4,000 5,000Cost of sales $338,000 $422,500Selling and administrative costs $89,600 $106,000
B. $100.90.
14. 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?
C. $5.
15. Which statement is true for a company that uses variable costing?
D. Profit fluctuates with sales.
16. Use the following information to answer this question.Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000units. Production costs for the year were as follows:Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixedselling and administrative expenses were $170,000. There was no beginning inventory. Assume that directlabor is a variable cost.Under absorption costing, the carrying value on the balance sheet of the ending inventory for the yearwould beProduction Cost DataDirect materials $153,000Direct labor $110,500Variable manufacturing overhead $204,000Fixed manufacturing overhead $255,000
D. $170,000.
17. Murdoch Corporation has provided the following data concerning its only product:What is the margin of safety in dollars?Murdoch Product DataSelling price $230 per unitCurrent sales 39,100 unitsBreak-even sales 29,716 units
A. $2,158,320
18. Use the following information to answer this question.Callaham Corporation is a wholesaler that sells a single product. Management has provided the followingcost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.The best estimate of the total contribution margin when 4,300 units are sold isSales volume (units)4,000 5,000Cost of sales $338,000 $422,500Selling and administrative costs $89,600 $106,000
D. $64,070.
19. A disadvantage of the high-low method of cost analysis is that
B. it uses two extreme data points, which may not be representative of normal conditions.
20. Daniele Corporation uses an activity-based costing system with the following three activity cost pools:The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.The company has provided the following data concerning its costs:
Activity Cost Pool Total Activity
Fabrication 50,000 machine-hours
Order processing 500 orders
Other not applicableCost Data
Wages and salaries $280,000
Depreciation $200,000
Occupancy $140,000
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Fabrication activity cost pool is closest to ______per machine hour.Total $620,000Activity Cost PoolsFabricationOrderProcessing Other TotalWages andsalaries60% 30% 10% 100%Depreciation 20% 35% 45% 100%Occupancy 10% 50% 40% 100%
D. $4.4