As sales exceed the breakeven point, a high contributionmargin percentage
A. / increases profits faster than does a low contribution-margin percentage
A compensation plan where the sales force is paid salary plus commission is a ______.
D. / mixed cost
An increase in total variable cost usually indicates ______.
B. / the cost-driver activity level is increasing
The following information is for Kinsner Corporation:
Total fixed costs $313,500
Variable costs per unit $99
Selling price per unit $154
If management has a targeted net income of $59,400 (ignore income taxes), then sales revenue should be _____.
B. / $1,044,120
Assume the following cost information for Marie Company:
Selling price per unit $144
Variable costs per unit $80
Total fixed costs $80,000
Tax rate 40%
_____ of sales dollars is required to earn an aftertax net income of $24,000.
C. / $270,000
Assume the following cost information for Andrew Company:
Selling price per unit $144
Variable costs per unit $80
Total fixed costs $80,000
Tax rate 40%
_____ must be sold to earn an after-tax net income of $40,800.
B. / 2,313 units
Assume the following cost information for Janice Company:
Selling price per unit $144
Variable costs per unit $80
Total fixed costs $80,000
Tax rate 40%
If fixed costs increased by 10% and management wanted to maintain the original break-even point, then the selling price per unit would have to be increased to _____.
C. / $150.40
Palmer Inc. currently produces 110,000 units at a cost of $440,000. Next year Palmer Inc. expects to produce 115,000 units. Palmer’s relevant range is 100,000 to 120,000 units. If the cost is variable and 115,000 units are produced, the total cost _____.
B. / will increase to $460,000
Suppose a Holiday Inn Hotel has annual fixed costs applicable to its rooms of $1.2 million for its 300-room hotel, average daily room rents of $50, and average variable costs of $10 for each room rented. It operates 365 days per year.
The amount of net income on rooms that will be generated if the hotel is completely full throughout the entire year is _____.
C. / $3,180,000
Information is relevant if it is a(n) _____.
D. / expected future cost that differs from a past cost
Joshua Company produces and sells a product that has variable costs of $7 per unit and fixed costs of $200,000 per year. If production increases from 20,000 units to 25,000 units, the unit cost will _____.
C. / decrease by $2 per unit
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Pennsylvania Company provided the following information regarding its only product--skateboards.
Direct materials used $200,000
Direct labor 80,000
Fixed overhead 100,000
Fixed selling and administrative costs 190,000
Variable overhead 20,000
Variable selling and administrative 90,000
Selling unit price 70
Units produced and sold 10,000
_____ is the gross margin (gross profit) if the absorption approach is used.
A. / $300,000
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Missouri Company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are $0.50 per unit and fixed costs are $0.50 per unit. Current monthly sales are 173,000 units. Gates Company has contacted Missouri Company about purchasing 20,000 units at $1.00 each. Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order. Missouri Company's change in profits if the order is accepted will be a _____:
C. / $10,000 increase
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Dakota Corporation has been producing and selling 42,000 hats a year. The Dakota Corporation has the capacity to produce 52,000 hats with its present facilities. The following information is also available:
Selling price per unit $30
Variable costs per unit:
Manufacturing 13
Selling and Administrative 7
Fixed costs in total:
Manufacturing $128,000
Selling and Administrative 56,000
If a special order is accepted for 10,000 hats at a price of $25 per unit, net income would _____.
B. / increase by $50,000
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Arkansas Corporation provided the following information regarding its only product--tables:
Selling price per unit $65
Direct materials used 150,000
Direct labor 225,000
Variable factory overhead 140,000
Variable selling and administrative expenses 60,000
Fixed factory overhead 370,000
Fixed selling and administrative expenses 30,000
Units produced and sold 20,000
Assuming there is excess capacity, the effect of accepting a special order for 1,000 units at a price of $40.00 per table is that net income would _____.
B. / increase by $11,250
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Birch Company manufactures a part for its production cycle. The costs per unit for 5,000 units of this part are as follows:
Direct materials $3
Direct labor 5
Variable factory overhead 4
Fixed factory overhead 4
Total costs $16
The fixed factory overhead costs are unavoidable. Spalding Corporation has offered to sell 5,000 units of the same part to Birch Company for $15 a unit. Assuming no other use for the facilities, Birch Company should _____.
D. / make the part to save $3 per unit
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Fird Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:
Direct materials $20
Direct labor 15
Variable factory overhead 16
Fixed factory overhead 15
Total costs $66
The fixed factory overhead costs are unavoidable. Assuming no other use of their facilities, the highest price that Fird Company should be willing to pay for the part is _____.
D. / $51
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_____ are a qualitative factor of a make-or-buy decision.
C. / Long-term relationships with suppliers
_____ costs will not continue if an ongoing operation is changed or deleted.
A. / Avoidable
Riverside Industries has three product lines, A, B, and C. The following information is available:
A B C
Sales $100,000 $90,000 $44,000
Variable costs 76,000 48,000 35,000
Contribution margin $24,000 $42,000 $9,000
Fixed costs:
Avoidable 9,000 18,000 3,000
Unavoidable 6,000 9,000 7,700
Operating income $9,000 $15,000 $(1,700)
Riverside Industries is thinking of dropping product line C because it is reporting a loss. Assuming Riverside drops line C and does not replace it, the operating income will _____.
C. / decrease by $6,000
Phoenix Corporation has a joint process that produces three products: X, Y, and Z. Each product may be sold at split-off or processed further and then sold. Joint- processing costs for a year amount to $100,000. Other relevant data are as follows:
Separable
Processing
Sales Value Costs after Sales Value
Product at Splitoff Splitoff at Completion
X $128,000 $16,000 $160,000
Y 50,000 26,000 76,000
Z 25,600 20,000 40,000
Product Y _____.
D. / can be processed further or sold at split-off; there is no difference in profit
Bert Company is considering replacing a machine that is presently used in the production of its product. The following data are available:
Replacement
Old Machine Machine
Original cost $57,000 $35,000
Useful life in years 17 5
Current age in years 12 0
Book value $39,000
Disposal value now $8,000
Disposal value in 5 years 0 0
Annual cash operating costs $7,000 $4,000
The difference in cost between keeping the old machine and replacing the old machine, ignoring income taxes, is _____the old machine.
B. / $12,000 in favor of keeping