21. Ideal standards (Points: 4) are rigorous but attainable. are the standards generally used in a master budget. reflect optimal performance under perfect operating conditions. will always motivate employees to achieve the maximum output.
22. An unfavorable materials quantity variance would occur if (Points: 4) more materials were purchased than were used. actual pounds of materials used were less than the standard pounds allowed. actual labor hours used were greater than the standard labor hours allowed. actual pounds of materials used were greater than the standard pounds allowed.
23. The direct labor quantity standard is sometimes called the direct labor (Points: 4) volume standard. effectiveness standard. efficiency standard. quality standard.
24. The difference between a budget and a standard is that (Points: 4) a budget expresses what costs were, while a standard expresses what costs should be. a budget expresses management's plans, while a standard reflects what actually happened. a budget expresses a total amount, while a standard expresses a unit amount. standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system.
25. Sargent.Com plans to sell 2,000 purple lawn chairs during May, 1,900 in June, and 2,000 during July. The company keeps 15% of the next month's sales as ending inventory. How many units should Sargent.Com produce during June? (Points: 4) 1,915 2,200 1,885 Not enough information to determine.
(1,900 + (2,000 x .15) – (1,900 x .15) = 1,915)
26. Which of the following would not appear as a fixed expense on a selling and admini-strative expense budget? (Points: 4) Freight-out Office salaries Property taxes Depreciation
27. The direct materials budget shows: Desired ending direct materials 36,000 pounds Total materials required 54,000 pounds Direct materials purchases 47,400 pounds The total direct materials needed for production is (Points: 4) 18,000 pounds. 6,600 pounds. 11,400 pounds. 101,400 pounds.
(54,000 – 36,000 = 18,000)
28. If there were 70,000 pounds of raw materials on hand on January 1, 140,000 pounds are desired for inventory at January 31, and 420,000 pounds are required for January production, how many pounds of raw materials should be purchased in January? (Points: 4) 350,000 pounds 560,000 pounds 280,000 pounds 490,000 pounds
(70,000 + X – 420,000 = 140,000; x = 490,000)
29. When will the elimination of a product line have no effect on the company's overall profit? (Points: 4) When the avoidable fixed costs equal the product line's contribution margin When the unavoidable fixed costs equal the product line's contribution margin When there are no fixed costs incurred by the product line When the product line contribution margin is negative
30. A product line should be eliminated whenever (Points: 4) the product line generates a net loss. the unavoidable fixed costs exceed the product line's contribution margin. the product line generates a negative contribution margin. the avoidable costs are less than the product line's contribution margin.
31. The costs incurred prior to the split-off point are referred to as (Points: 4) separable costs. split-off costs. joint product costs. joint costs.
32. Truckel, Inc. currently manufactures a wicket as its main product. The costs per unit are as follows: Direct materials and direct labor $22 Variable overhead 10 Fixed overhead 16 Total $48 Saran Company has contacted Truckel with an offer to sell it 5,000 of the wickets for $36 each. If Truckel makes the wickets, variable costs are $22 per unit. Fixed costs are $16 per unit; however, $10 per unit is unavoidable. Should Truckel make or buy the wickets? (Points: 4) Buy; savings = $50,000 Buy; savings = $20,000 Make; savings = $40,000 Make; savings = $20,000
= (5,000 × ($22 + $10) –(5,000 × $36)
33. Sorrento Company's plant is operating at less than full capacity. The company just received a one-time opportunity to accept an order at a special price below its usual price. The special price exceeds its variable costs. Therefore, which statement is true? (Points: 4) Fixed costs are relevant. The order will likely be accepted. The order will likely be rejected. Sorrento should expand its plant capacity before accepting the order.
34. Alvarez Company is considering the following alternatives: Alternative A Alternative B Revenues $50,000 $60,000 Variable costs 30,000 30,000 Fixed costs 10,000 16,000 What is the incremental profit? (Points: 4) $10,000 $0 $6,000 $4,000
Alternative A:
Revenues$50,000
Less:VC$30,000
CM$20,000
Less: FC$10,000
Operating Income$10,000
Alternative B:
Revenues$60,000
Less:VC$30,000
CM$30,000
Less: FC$16,000
Operating Income$14,000
Incremental Profit = $14,000 - $10,000
35. What is the key factor in determining sales mix if a company has limited resources? (Points: 4) Contribution margin per unit of limited resource The amount of fixed costs per unit Total contribution margin The cost of limited resources
36. In a sales mix situation, at any level of units sold, net income will be higher if (Points: 4) more higher contribution margin units are sold than lower contribution margin units. more lower contribution margin units are sold than higher contribution margin units. more fixed expenses are incurred. weighted-average unit contribution margin decreases.
37. Iguchi Company sells 2,000 units of Product A annually, and 3,000 units of Product B annually. The sales mix for Product A is (Points: 4) 40%. 60%. 67%. cannot determine from information given.
= 2,000 / (2,000 + 3,000)
38. The margin of safety ratio is (Points: 4) expected sales divided by break-even sales. expected sales less break-even sales. margin of safety in dollars divided by expected sales. margin of safety in dollars divided by break-even sales.
39. In 2008, Masset sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $200,000. The same selling price, variable expenses, and fixed expenses are expected for 2009. What is Masset's break-even point in units for 2009? (Points: 4) 1,333 3,000 4,285 6,667
UCM = $500 - $350 = $150
BEP in units = $200,000 / $150
= 1,333
40. The contribution margin ratio is (Points: 4) sales divided by contribution margin. sales divided by fixed expenses. sales divided by variable expenses. contribution margin divided by sales.
41. Tiny Tots Toys has actual sales of $400,000 and a break-even point of $260,000. How much is its margin of safety ratio? (Points: 4) 35% 65% 154% 53.8%
Margin of Safety = $400,000 - $260,000 = $140,000
Margin of Safety Ratio = $140,000/$400,000 = 35%
42. A company requires $1,020,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $180,000. What is the target net income? (Points: 4) $306,000 $234,000 $420,000 $126,000
Sales$1,020,000
Less: VC (70%) $714,000
CM $306,000
Less: FC$180,000
Net Income$126,000
43. Hess, Inc. sells a product with a contribution margin of $12 per unit, fixed costs of $74,400, and sales for the current year of $100,000. How much is Hess's break-even point? (Points: 4) 4,600 units $25,600 6,200 units 2,133 units
BEP = $74,400/$12
= 6,200 units
44. The break-even point is where (Points: 4) total sales equal total variable costs. contribution margin equals total fixed costs. total variable costs equal total fixed costs. total sales equal total fixed costs.
45. Tiny Tots Toys has actual sales of $400,000 and a break-even point of $260,000. How much is its margin of safety ratio? (Points: 4) 35% 65% 154% 53.8%
Margin of Safety = $400,000 - $260,000 = $140,000
Margin of Safety Ratio = $140,000/$400,000 = 35%
46. The following monthly data are available for Wackadoos, Inc. which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 4,000 units. How much is the margin of safety for the company for June? (Points: 4) $70,000 $105,000 $63,000 $2,500
UCM = $42 - $14 = $28
BEP = $42,000 / $28 = 1,500 units
BEP $ = 1,500 × $42 = $63,000
Expected Sales $ = $42 × 4,000 = $168,000
MOS = $105,000