1.

Indirect labor is a part of:

A

Prime cost.

B

Conversion cost.

C

Period cost.

D

Nonmanufacturing cost.

2.

 Prime cost and conversion cost share what common element of total cost?

A

Direct materials.

B

Direct labor.

C

Variable overhead.

D

Variable overhead.

3.

On the Schedule of Cost of Goods Manufactured, the final Cost of Goods Manufactured figure represents:

A

the amount of cost charged to Work in Process during the period.

B

the amount of cost transferred from Finished Goods to Cost of Goods Sold during the period.

C

the amount of cost placed into production during the period.

D

the amount of cost of goods completed during the current year whether they were started before or during the current year.

4.

Which of the following would most likely be included as part of manufacturing overhead in the production of a wooden table?

A

The amount paid to the individual who stains the table

B

The commission paid to the salesperson who sold the table

C

The cost of the glue used in the table

D

The cost of the wood used in the table

1.

Overapplied overhead means that:

A)

the applied overhead cost was less than the actual overhead cost.

B)

the applied overhead cost was greater than the actual overhead cost.

C)

the estimated overhead cost was less than the actual overhead cost.

D)

the estimated overhead cost was less than the applied overhead cost.

2.

Departmental overhead rates are generally preferred to plant-wide overhead rates when:

A)

the activities of the various departments in the plant are not homogeneous.

B)

the activities of the various departments in the plant are homogeneous.

C)

most of the overhead costs are fixed.

D)

all departments in the plant are heavily automated.

3.

Discretionary fixed costs:

A)

cannot be changed since they are fixed.

B)

have a long-term planning horizon, generally encompassing many years.

C)

are made up of facilities, equipment, and basic organization.

D)

responses b and c are both correct.

E)

none of these.

4.

An example of a committed fixed cost is:

A)

management training seminars.

B)

a long-term equipment lease.

C)

research and development.

D)

advertising.

 Depreciation, factory equipment

 $30,000

 Depreciation, office equipment

 7,000

 Supplies, factory

 1,500

 Maintenance, factory equipment

 20,000

 Utilities, factory

 8,000

 Sales commissions

 30,000

 Indirect labor

 54,500

 Rent, factory building

 70,000

 Purchases of raw materials

 124,000

 Direct labor cost

 80,000

 Advertising expense

 90,000

Inventories:

 Beginning

Ending

Raw materials

 $ 9,000

$11,000

 Work in process

 6,000

21,000

 Finished goods

 69,000

24,000

1.

The contribution margin ratio is equal to:

A)

Total manufacturing expenses/Sales.

B)

(Sales - Variable expenses)/Sales.

C)

1 - (Gross Margin/Sales).

D)

1 - (Contribution Margin/Sales).

2.

To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used?

A)

(Fixed expenses + Target net profit)/Total contribution margin

B)

(Fixed expenses + Target net profit)/Contribution margin ratio

C)

Fixed expenses/Contribution margin per unit

D)

Target net profit/Contribution margin ratio

3.

The following information relates to the break-even point at Pezzo Corporation:

If Pezzo wants to generate net operating income of $12,000, what will its sales dollars have to be?

A)

$132,000

B)

$136,000

C)

$168,000

D)

$176,000

4.

The “Dog Hut” hot dog stand expects the following operating results for next year:

What is Dog Hut's break-even point next year in sales dollars?

A)

$120,000

B)

$181,300

C)

$196,000

D)

$250,000

1.

If the company wants to increase its total contribution margin by 40%, assuming variable and fixed expenses remain the same, it will need to increase its sales by about:

A)

$48,840

B)

$72,000

C)

$50,400

D)

$34,188

2.

If the company wants its margin of safety to equal $40,000, it will need to sell about:

A)

1,158 units

B)

1,958 units

C)

2,300 units

D)

800 units

3.

If the company's fixed expenses decrease by 20%, the break-even point will change from its previous level by about a:

A)

232 unit increase

B)

510 unit decrease

C)

232 unit decrease

D)

510 unit increase

1.

Baker Company has a product that sells for $20 per unit. The variable expenses are $12 per unit, and fixed expenses total $30,000 per year.

Required:

a. What is the total contribution margin at the break-even point?

b. What is the contribution margin ratio for the product?

c. If total sales increase by $20,000 and fixed expenses remain unchanged, by how much would net operating income be expected to increase?

d. The marketing manager wants to increase advertising by $6,000 per year. How many additional units would have to be sold to increase overall net operating income by $2,000?

2.

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

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

Required:

a. What is the unit product cost for the month under variable costing?

b. Prepare an income statement for the month using the contribution format and the variable costing method.

c. Without preparing an income statement, determine the absorption costing net operating income for the month. (Hint: Use the reconciliation method.)