Applying the hi low method determine fixed costs and variable costs per unit Month
January
February
March
April Miles Total Cost
80,000
$144,000
50,000
120,000
70,000
141,000
90,000
195,000 Fixed costs
variable costs per unit
linear equation in the form of y=mx + b Gurevitz Inc sold 100,000 calculators during 2016: Sales
Variable costs:
Materials
Order processing
Billing labor
Selling expenses
Fixed costs $ 2,000,000
$ 380,000
150,000
110,000
60,000 $ 1,000,000 Instructions:
1 Determine the breakeven point in units and dollars
2 Determine the Cotribution margin ratio and the variable cost ratio
3 Determine the sales $ amoount for a target net income of $125,500 Rountree Industries manufactures dining chairs and tables. The following information is available: Chairs
# of Machine setups
# of Inspections
Labor hours 200
250
2,600 Tables
Total Cost
600 $
48,000
470 $
72,000
2,400 Instructions
a) Compute total machine setups and inspection costs assigned to each product, using a single over b) Compute total machine setups and inspection costs assigned to each product, using activity-base
c) Comment on your findings. nformation is available: ch product, using a single overhead rate. ch product, using activity-based costing. Please use the color fill option to color the line item that denotes the correct answer.
1) Manufacturing costs are also known as product costs. Which of the following best describ a.
b.
c.
d.
2) Machine lubricant used on processing equipment in a manufacturing plant would be clas a.
b.
c.
d.
3) direct labor
direct materials
overhead
SG&A A company's telephone bill consisting of a $200 monthly base amount, plus long distanc a.
b.
c.
d.
5) period cost/overhead
product cost/overhead
product cost/SG&A
period cost/SG&A Which of the following product costs is both a prime cost and conversion cost? a.
b.
c.
d.
4) direct labor, direct material and selling costs
direct labor, direct material and overhead costs
indirect labor, indirect material and overhead costs
indirect labor, indirect material and selling costs Fixed cost
Variable cost
Mixed cost
Direct cost Talbot ot Company is planning to sell air filter systems for $2,500 per unit.
Variable costs are $1,500 per unit and total fixed costs are $1,000,000. What is the dollar value of sales necessary to break even? a.
b.
c.
d. $
$
$
$ 1,000,000
2,000,000
2,500,000
5,000,000 6) A mixed cost contains
a.
both selling and administrative costs.
b.
both operating and nonoperating costs.
c.
a variable element and a fixed element.
d.
direct materials and overhead 7) The break-even point is where
a.
total sales equal total variable costs.
b.
total variable costs equal total fixed costs.
c.
contribution margin equals total fixed costs.
d.
total sales equal total fixed costs. 8) Capital budgeting is the process
a.
of determining how much capital stock to issue.
b.
used in sell or process further decisions.
c.
of determining special orders
d.
of making capital expenditure decisions. 9) Which of the following is a disadvantage of the cash payback technique?
a.
It is difficult to calculate
Itb.
relies on the time value of money
c.
It can only be calculated when there are equal annual net cash flows
d.
It ignores the expected profitability of a project 10) Which of the following does not consider a company’s required rate of return?
a.
Net present value
b.
Internal rate of return
c.
Annual rate of return
d.
Cash payback 11) Intangible benefits in capital budgeting
a.
should be ignored because they are difficult to determine.
b.
include increased quality or employee loyalty.
c.
are not considered because they are usually not relevant to the decision
d.
have a rate of return in excess of the company’s cost of capital. 12) In traditional costing systems, overhead is generally applied based on
a.
direct labor.
b.
machine hours.
c.
direct material dollars.
d.
units of production. 13) The costs that are easiest to trace directly to products are
a.
direct materials and direct labor.
b.
direct labor and overhead.
c.
direct materials and overhead.
d.
none of the above; all three costs are equally easy to trace to the produc 14) Ordering materials, setting up machines, assembling products, and inspecting prod
a.
overhead cost pools.
b.
cost drivers.
c.
direct labor costs.
d.
nonmanufacturing activities. 15) The last step in activity-based costing is to
a.
assign overhead costs to products, using overhead rates determined for
b.
compute the activity-based overhead rate per cost driver. c.
d. identify and classify the activities involved in the manufacture of specific
identify the cost driver that has a strong correlation to the activity cost po 16) Which of the following is not an example of an activity cost pool?
a.
Setting up machines
b.
Machining
c.
Inspecting
d.
Machine hours 17) Which of the following would not be considered an aspect of budgetary control?
a.
It assists in the determination of differences between actual and planned
b.
It provides feedback value needed by management to see whether actua
c.
It assists management in controlling operations.
d.
It provides a guarantee for favorable results. 18) Which statement is true?
a.
An investment center is responsible for revenues and expenses, as well
b.
An investment center is only responsible for its investments.
c.
An investment center is only responsible for revenues and expenses.
d.
A profit center is evaluated using contribution margin, while an investmen 19) A profit center is
a.
a responsibility center that always reports a profit.
b.
a responsibility center that incurs costs and generates revenues.
c.
evaluated by the rate of return earned on the investment allocated to the
d.
referred to as a loss center when operations do not meet the company's 20) A manager of a cost center is evaluated mainly on
a.
the profit that the center generates.
b.
his or her ability to control costs.
c.
the amount of investment it takes to support the cost center.
d.
the amount of revenue that can be generated. ch of the following best describes those costs which are considered to be manufacturing costs? nufacturing plant would be classified as a: and conversion cost? base amount, plus long distance charges, would be classified as a: $2,500 per unit. e $1,000,000. payback technique? ual annual net cash flows required rate of return? to determine. y not relevant to the decision.
any’s cost of capital. pplied based on ly easy to trace to the product. products, and inspecting products are examples of verhead rates determined for each cost pool.
er cost driver. n the manufacture of specific products, and allocate overhead to cost pools.
relation to the activity cost pool.
cost pool? pect of budgetary control?
between actual and planned results.
gement to see whether actual operations are on course. enues and expenses, as well as earning a return on assets.
its investments.
revenues and expenses.
n margin, while an investment center is evaluated using ROI. generates revenues.
e investment allocated to the center.
s do not meet the company's objectives. t the cost center. Identify where each of the following items would be reported in the financial statements. 1 Cash
2 Loss on sale of investments in stock.
3 Unearned revenue
4 Copyright
5 Interest earned on investments in bonds.
6 Unrealized loss on trading securities
7 Bonds payable
8 Accumulated depreciation
9 Tade Receivables
10 Unrealized gain on Available for sale securities
11 Investments in bonds. Balance sheet
LTI
CA
CL
INV
LTL
PPE
SE
IA
Income statement
ORG
OEL
OCI nancial statements. Long-term investment
Current assets
Current liabilities
Investments
Long-term liabilities
Property, plant, and equipment
Stockholders' equity
Intangible assets
Other revenues and gains
Other expenses and losses Trading
Trading Other comprehensive income AFS

 

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