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ACCT310

Exam 2

Spring 2007

Name: __________________________ Date: _____________ 1. Mason Enterprises has prepared the following budget for the month of July:

Product A .............. Product B............... Product C...............

Selling Variable Unit price per unit cost per unit sales $10.00 $4.00 15,000 $15.00 $8.00 20,000 $18.00 $9.00 5,000

Assuming that total fixed expenses will be $150,000 and the sales mix remains constant, the break-even point would be closest to: a) $276,008 b) $235,292 c) $294,545 d) $141,278 Use the following to answer questions 2-3: The following data were provided by Rider, Inc, which produces a single product:

Units in beginning inventory..................... Units produced .......................................... Units sold .................................................. Variable costs per unit: Production .............................................. Selling and administrative...................... Fixed costs, in total: Production .............................................. Selling and administrative......................

0 5,000 4,500

$10 $4 $15,000 $10,000

2. Under absorption costing, the unit product cost is: a) $19 b) $13 c) $10 d) $14 3. For the year in question, one would expect the net operating income under absorption costing to be: a) higher than the net operating income under variable costing. b) lower than the net operating income under variable costing. c) the same as the net operating income under variable costing. d) none of these.

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ACCT310

Exam 2

Spring 2007

4. Which of the following is true of a company that uses absorption costing? a) Net operating income fluctuates directly with changes in sales volume. b) Fixed production and fixed selling costs are considered to be product costs. c) Unit product costs can change as a result of changes in the number of units manufactured. d) Variable selling expenses are included in product costs. Use the following to answer question 5: Eskenazy Company is a wholesale distributor that uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system:

Overhead costs: Wages and salaries ............ Other expenses .................. Total ..................................

$580,000 120,000 $700,000

Distribution of resource consumption: Filling Orders 15% 55% Activity Cost Pools Customer Support Other Total 75% 10% 100% 25% 20% 100%

Wages and salaries .............. Other expenses ....................

The Other activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows: Activity Cost Pool Filling orders ..................... Customer support .............. Activity 2,000 orders 20 customers

5. To the nearest whole dollar, how much wages and salaries cost would be allocated to a customer who made 7 orders in a year? a) $22,055 b) $17,682 c) $13,309 d) $26,618

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ACCT310

Exam 2

Spring 2007

Use the following to answer question 6: The controller of Kleyman Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below:

Total expected units produced .............. Total expected material moves.............. Expected direct labor-hours per unit .....

Wall Mirrors 4,000 500 7

Specialty Windows 3,000 400 6

The total materials handling cost for the year is expected to be $28,400.40. 6. If the materials handling cost is allocated on the basis of material moves, how much of the total materials handling cost should be allocated to the specialty windows? (Round off your answer to the nearest whole dollar.) a) $12,622 b) $13,108 c) $12,224 d) $14,200 Use the following to answer question 7: Grip Catering uses activity-based costing for its overhead costs. The company has provided the following data concerning the activity rates in its activity-based costing system:

Activity Cost Pools Wages .................... Supplies ................. Other expenses ......

Preparing Arranging Meals Functions $0.65 $145.00 $0.40 $170.00 $0.20 $80.00

The number of meals served is the measure of activity for the Preparing Meals activity cost pool. The number of functions catered is used as the activity measure for the Arranging Functions activity cost pool. Management would like to know whether the company made any money on a recent function at which 50 meals were served. The company catered the function for a fixed price of $22.00 per meal. The cost of the raw ingredients for the meals was $12.60 per meal. This cost is in addition to the costs of wages, supplies, and other expenses detailed above. For the purposes of preparing action analyses, management has assigned ease of adjustment codes to the costs as follows: wages are classified as a Yellow cost; supplies and raw ingredients as a Green cost; and other expenses as a Red cost.

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ACCT310

Exam 2

Spring 2007

7. Suppose an action analysis report is prepared for the function mentioned above. What would be the "red margin" in the action analysis report? (Round to the nearest whole dollar.) a) $13 b) $(138) c) $(88) d) $163 Use the following to answer question 8: Pricher Corporation's income statement for last year appears below:

Sales .......................................................... Cost of goods sold: Direct materials ...................................... Direct labor (variable)............................ Variable manufacturing overhead .......... Fixed manufacturing overhead............... Gross margin ............................................. Selling and administrative expenses: Variable .................................................. Fixed ...................................................... Net operating income ................................

$2,000,000 $500,000 150,000 50,000 600,000

1,300,000 700,000

100,000 300,000

400,000 $ 300,000

8. The degree of operating leverage last year was: a) 0.33 b) 2.33 c) 4.00 d) 3.33 9. Belsky Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool Assembly..................... Processing orders ........ Inspection ....................

Total Cost Total Activity $313,490 29,000 machine-hours $49,476 1,400 orders $73,882 1,060 inspection-hours

The company makes 490 units of product Q19S a year, requiring a total of 1,080 machinehours, 60 orders, and 20 inspection-hours per year. The product's direct materials cost is $46.42 per unit and its direct labor cost is $20.22 per unit. According to the activity-based costing system, the average cost of product Q19S is closest to: a) $97.64 per unit b) $66.64 per unit c) $93.31 per unit d) $94.79 per unit

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ACCT310

Exam 2

Spring 2007

10. The following data pertain to last year's operations at Tredder Corporation, a company that produces a single product: Units in beginning inventory Units produced 20,000 Units sold 19,000 Selling price per unit $100.00

Variable costs per unit: Direct materials $12.00 Direct labor $25.00 Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative

$3.00 $2.00

$500,000 $600,000

What was the variable costing net operating income last year? a) $12,000 b) $57,000 c) $2,000 d) $27,000 Use the following to answer question 11: Abbe Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 600 units. There are three activity cost pools, with estimated costs and expected activity as follows:

Activity Cost Pool Activity 1............... Activity 2............... Activity 3...............

Expected Activity Estimated Cost Product A Product B Total $17,460 600 600 1,200 $19,987 1,700 600 2,300 $29,884 400 120 520

11. The activity rate for Activity 2 is closest to: a) $11.76 b) $8.69 c) $29.27 d) $33.31 12. Designing a new product is an example of a: a) Unit-level activity. b) Batch-level activity. c) Product-level activity. d) Organization-sustaining activity.

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ACCT310

Exam 2

Spring 2007

13. Cindy, Inc. sells a product for $10 per unit. The variable expenses are $6 per unit, and the fixed expenses total $35,000 per period. By how much will net operating income change if sales are expected to increase by $40,000? a) $16,000 increase b) $5,000 increase c) $24,000 increase d) $11,000 decrease 14. The type of costing that provides the best information for breakeven analysis is: a) job-order costing. b) variable costing. c) process costing. d) absorption costing. 15. The break-even point in unit sales is found by dividing total fixed expenses by: a) the contribution margin ratio. b) the variable expenses per unit. c) the sales price per unit. d) the contribution margin per unit. 16. The following information relates to the break-even point at Pezzo Corporation:

Sales dollars ..................... $120,000 Total fixed expenses......... $30,000


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

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ACCT310

Exam 2

Spring 2007

Use the following to answer question 17: Abbey Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price ....................................................... Units in beginning inventory.............................. Units produced ................................................... Units sold ........................................................... Units in ending inventory................................... Variable costs per unit: Direct materials ............................................... Direct labor ..................................................... Variable manufacturing overhead ................... Variable selling and administrative ................ Fixed costs: Fixed manufacturing overhead........................ Fixed selling and administrative .....................

$129 0 6,300 6,100 200

$32 $50 $5 $11

$88,200 $97,600

17. What is the total period cost for the month under the variable costing approach? a) $252,900 b) $164,700 c) $88,200 d) $185,800 18. Darth Company sells three products. Sales and contribution margin ratios for the three products follow:

Sales in dollars .............................. contribution margin ratio ..............

Product X Y Z $20,000 $40,000 $100,000 45% 40% 15%

Given these data, the contribution margin ratio for the company as a whole would be: a) 25% b) 75% c) 33.3% d) it is impossible to determine from the given data

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ACCT310

Exam 2

Spring 2007

Use the following to answer question 19: Holger Incorporated, which produces and sells a single product, has provided the following data:

Sales .................................. Selling price ...................... Variable expense ............... Fixed expense....................

2,000 units $60 per unit $40 per unit $20,000

Consider each of the following questions independently. 19. If the sales volume decreases by 25% and the variable expense per unit increases by 15%, net operating income is expected to: a) decrease by $19,000 b) decrease by $1,000 c) increase by $1,750 d) decrease by $15,000 20. Sun Company's tentative budget for next year is as follows:

Sales .......................................................... Variable expenses ..................................... Fixed expenses: Manufacturing........................................ Selling and administrative...................... Net operating income.............................

$600,000 360,000 90,000 110,000 $40,000

Mr. Johnston, the marketing manager, has proposed an aggressive advertising campaign costing an additional $50,000 that he predicts will result in a 30% unit sales increase. Assuming that Johnston's proposal is incorporated into the budget, what should be the increase in the budgeted net operating income for next year? a) $12,000 b) $22,000 c) $72,000 d) $130,000

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ACCT310

Exam 2

Spring 2007

Use the following to answer question 21: Dimaio Company uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system:

Costs: Manufacturing overhead ....................................... Selling and administrative expenses ..................... Total ...................................................................... Distribution of resource consumption:

$580,000 240,000 $820,000

Manufacturing overhead ..................... Selling and administrative expenses ...

Activity Cost Pools Order Customer Size Support Other Total 50% 40% 10% 100% 5% 75% 20% 100%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. 21. How much cost, in total, would be allocated in the first-stage allocation to the Customer Support activity cost pool? a) $328,000 b) $412,000 c) $471,500 d) $615,000 22. Gyro Gear Company produces a single product, a special gear used in automatic transmissions. Each gear sells for $28, and the company sells 500,000 gears each year. Unit cost data are presented below: Variable Fixed $6.00 $2.00 $4.00 $7.00 $3.00

Direct material Direct labor $5.00 Manufacturing overhead Selling & administrative

The unit product cost of gears under variable costing is: a) $13 b) $20 c) $17 d) $27

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ACCT310

Exam 2

Spring 2007

Use the following to answer question 23: Feasal Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price ....................................................... Units in beginning inventory.............................. Units produced ................................................... Units sold ........................................................... Units in ending inventory................................... Variable costs per unit: Direct materials ............................................... Direct labor ..................................................... Variable manufacturing overhead ................... Variable selling and administrative ................ Fixed costs: Fixed manufacturing overhead........................ Fixed selling and administrative .....................

$108 0 7,700 7,500 200

$26 $38 $3 $4

$184,800 $90,000

23. What is the net operating income for the month under absorption costing? a) $2,700 b) $7,500 c) $4,800 d) ($10,700)

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ACCT310

Exam 2

Spring 2007

24. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price Units in beginning inventory Units produced 1,700 Units sold 1,400 Units in ending inventory 0

300

Variable costs per unit: Direct materials $39 Direct labor $32 Variable manufacturing overhead Variable selling and administrative Fixed costs: Fixed manufacturing overhead Fixed selling and administrative

$6 $5

$6,800 $8,400

What is the net operating income for the month under absorption costing? a) $14,200 b) ($8,900) c) $1,200 d) $15,400 Use the following to answer questions 25-26: Feheln Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price ....................................................... Units in beginning inventory.............................. Units produced ................................................... Units sold ........................................................... Units in ending inventory................................... Variable costs per unit: Direct materials ............................................... Direct labor ..................................................... Variable manufacturing overhead ................... Variable selling and administrative ................ Fixed costs: Fixed manufacturing overhead........................ Fixed selling and administrative .....................

$114 0 7,300 7,200 100

$30 $53 $3 $8

$73,000 $57,600

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ACCT310

Exam 2

Spring 2007

25. What is the unit product cost for the month under variable costing? a) $94 b) $86 c) $96 d) $104 26. What is the net operating income for the month under variable costing? a) $1,000 b) $14,400 c) $13,400 d) $4,800 Use the following to answer question 27: Jameson Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price ....................................................... Units in beginning inventory.............................. Units produced ................................................... Units sold ........................................................... Units in ending inventory................................... Variable costs per unit: Direct materials ............................................... Direct labor ..................................................... Variable manufacturing overhead ................... Variable selling and administrative ................ Fixed costs: Fixed manufacturing overhead........................ Fixed selling and administrative .....................

$80 600 8,400 8,600 400

$24 $33 $3 $5

$117,600 $8,600

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. 27. What is the net operating income for the month under variable costing? a) $14,800 b) $2,800 c) $0 d) $5,600

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ACCT310

Exam 2

Spring 2007

Use the following to answer question 28: A manufacturer of premium wire strippers has supplied the following data:

Units produced and sold.................................................. Sales revenue................................................................... Variable manufacturing expense ..................................... Fixed manufacturing expense ......................................... Variable selling and administrative expense ................... Fixed selling and administrative expense ....................... Net operating income ......................................................
28. The company's unit contribution margin is closest to: a) $2.95 b) $5.45 c) $7.30 d) $4.05

560,000 $4,704,000 2,436,000 1,200,000 616,000 272,000 $180,000

29. Grandolfo Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system:

Costs: Wages and salaries ............ Depreciation ...................... Utilities.............................. Total ..................................

$300,000 200,000 140,000 $640,000

Distribution of resource consumption: Activity Cost Pools Assembly Setting Up Other Wages and salaries .............. 45% 35% 20% Depreciation ........................ 20% 40% 40% Utilities................................ 15% 55% 30% Total 100% 100% 100%

How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool? a) $192,000 b) $182,000 c) $128,000 d) $192,000

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ACCT310

Exam 2

Spring 2007

Use the following to answer question 30: Roberts Company bases its budget on the following data:

Sales .................................. Selling price ...................... Variable expense ............... Fixed expenses ..................

3,600 units $50 per unit $15 per unit $40,530

30. 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 31. Hochberg Corporation uses an activity-based costing system with the following three activity cost pools:

Activity Cost Pool Fabrication ........................... Order processing .................. Other.....................................

Total Activity 30,000 machine-hours 300 orders Not applicable

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: Wages and salaries .................. Depreciation ............................ Occupancy............................... Total ........................................ $340,000 160,000 220,000 $720,000

The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Order Fabrication Processing Other Total Wages and salaries .................. 30% 60% 10% 100% Depreciation ............................ 15% 50% 35% 100% Occupancy............................... 15% 55% 30% 100%
The activity rate for the Fabrication activity cost pool is closest to: a) $5.30 per machine-hour b) $3.60 per machine-hour c) $7.20 per machine-hour d) $4.80 per machine-hour

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ACCT310

Exam 2

Spring 2007

32. If a cost object such as a product or customer has a negative red margin, then: a) its green margin will be positive. b) its green margin may be positive, negative, or zero. c) its green margin will be negative. d) its green margin will be zero. 33. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price Units in beginning inventory Units produced 8,700 Units sold 8,300 Units in ending inventory 0

400

Variable costs per unit: Direct materials $29 Direct labor $31 Variable manufacturing overhead Variable selling and administrative Fixed costs: Fixed manufacturing overhead Fixed selling and administrative

$2 $6

$269,700 $8,300

The total contribution margin for the month under the variable costing approach is: a) $282,200 b) $74,700 c) $332,000 d) $12,500 Use the following to answer question 34: Clarkson Industries produces an electronic calculator that sells for $75 per unit. Variable expenses are $45 per unit and fixed expenses are $150,000. 34. The contribution margin ratio is: a) 20% b) 66.6% c) 60% d) 40%

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ACCT310

Exam 2

Spring 2007

Use the following to answer questions 35-37: Grisim Catering uses activity-based costing for its overhead costs. The company has provided the following data concerning the activity rates in its activity-based costing system:

Activity Cost Pools Wages .................... Supplies ................. Other expenses ......

Preparing Arranging Meals Functions $0.75 $175.00 $0.50 $280.00 $0.35 $130.00

The number of meals served is the measure of activity for the Preparing Meals activity cost pool. The number of functions catered is used as the activity measure for the Arranging Functions activity cost pool. Management would like to know whether the company made any money on a recent function at which 130 meals were served. The company catered the function for a fixed price of $11.00 per meal. The cost of the raw ingredients for the meals was $6.90 per meal. This cost is in addition to the costs of wages, supplies, and other expenses detailed above. For the purposes of preparing action analyses, management has assigned ease of adjustment codes to the costs as follows: wages are classified as a Yellow cost; supplies and raw ingredients as a Green cost; and other expenses as a Red cost. 35. Suppose an action analysis report is prepared for the function mentioned above. What would be the "red margin" in the action analysis report? (Round to the nearest whole dollar.) a) $(110) b) $(360) c) $(410) d) $(260) 36. Suppose an action analysis report is prepared for the function mentioned above. What would be the "yellow margin" in the action analysis report? (Round to the nearest whole dollar.) a) $(10) b) $40 c) $95 d) $(85) 37. According to the activity-based costing system, what was the total cost (including the costs of raw ingredients) of the function mentioned above? (Round to the nearest whole dollar.) a) $1,040 b) $1,890 c) $1,690 d) $1,190

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ACCT310

Exam 2

Spring 2007

38. Mason Company's selling price was $20.00 per unit. Fixed expenses totaled $54,000, variable expenses were $14.00 per unit, and the company reported a profit of $9,000 for the year. The break-even point for Mason Company is: a) 10,500 units b) 4,500 units c) 8,500 units d) 9,000 units Use the following to answer question 39: Abrams Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 300 units and of Product B is 1,000 units. There are three activity cost pools, with estimated costs and expected activity as follows:

Expected Activity Activity Cost Pool Activity 1............... Activity 2............... Activity 3............... Estimated Cost $7,356 $30,555 $16,169 Product A 200 1,400 90 Product B Total 200 400 700 2,100 300 390

39. The activity rate for Activity 3 is closest to: a) $53.906 b) $138.67 c) $41.46 d) $18.71

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ACCT310

Exam 2

Spring 2007

Use the following to answer question 40: Fornia Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity based costing system:

Overhead costs: Wages and salaries ............ Other expenses .................. Total ..................................

$ 70,000 60,000 $130,000

Distribution of resource consumption: Activity Cost Pools Making Bouquets 70% 45% Delivery 20% 25% Other Total 10% 100% 30% 100%

Wages and salaries .............. Other expenses ....................

The Other activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows: Activity Cost Pool Activity Making bouquets................. 40,000 bouquets Delivery............................... 4,000 deliveries
40. What would be the total overhead cost per delivery according to the activity based costing system? In other words, what would be the overall activity rate for the deliveries activity cost pool? (Round to the nearest whole cent.) a) $7.25 b) $7.31 c) $8.13 d) $6.50 Use the following to answer question 41: Johnston Company manufactures a single product. The company has supplied the following data:

Selling price .............................................. Variable costs per unit: Production .............................................. Selling and administrative...................... Fixed costs in total: Production .............................................. Selling and administrative......................

$30 $8 $5 $80,000 $60,000

Last year there was no beginning inventory. During the year, 20,000 units were produced and 17,000 units were sold.

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ACCT310

Exam 2

Spring 2007

41. Under absorption costing, the unit product cost would be: a) $20 b) $12 c) $13 d) $8 42. Barnes Corporation expected to sell 150,000 games during the month of November. The following budgeted data are based on that level of sales:

Revenue (150,000 games)..................................... Variable expenses ................................................. Fixed manufacturing overhead expenses .............. Fixed selling & administrative expenses .............. Net operating income ............................................

$2,400,000 1,425,000 250,000 500,000 225,000

Barnes' actual sales during November were 180,000 games. What should the actual net operating income during November have been? a) $450,000 b) $270,000 c) $420,000 d) $510,000 43. Moruzzi Corporation is a single-product company that expects the following operating results for next year:

Sales .......................................................... Contribution margin per unit..................... Contribution margin ratio.......................... Degree of operating leverage ....................

$320,000 $0.20 25% 8

How many units would Moruzzi have to sell next year to break-even? a) 50,000 b) 200,000 c) 280,000 d) 350,000

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ACCT310

Exam 2

Spring 2007

44. Hettich Corporation uses an activity-based costing system with the following three activity cost pools:

Activity Cost Pool Fabrication ........................... Order processing .................. Other.....................................

Total Activity 20,000 machine-hours 200 orders Not applicable

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: Wages and salaries .................. Depreciation ............................ Occupancy............................... Total ........................................ $480,000 120,000 200,000 $800,000

The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools Order Fabrication Processing Other Total Wages and salaries .................. 55% 20% 25% 100% Depreciation ............................ 10% 45% 45% 100% Occupancy............................... 25% 40% 35% 100%
The activity rate for the Order Processing activity cost pool is closest to: a) $1,400 per order b) $1,600 per order c) $1,150 per order d) $800 per order

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ACCT310

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Spring 2007

Use the following to answer question 45: Clifton Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price .............................................. Units in beginning inventory..................... Units produced .......................................... Units sold .................................................. Units in ending inventory.......................... Variable costs per unit: Direct materials ...................................... Direct labor ............................................ Variable manufacturing overhead .......... Variable selling and administrative ....... Fixed costs: Fixed manufacturing overhead............... Fixed selling and administrative ............

$63 0 1,500 1,100 400

$14 $15 $1 $7

$16,500 $5,500

45. The total gross margin for the month under the absorption costing approach is: a) $28,600 b) $24,200 c) $40,600 d) $11,000 46. Olympia Company produces a single product. Last year, the company had a net operating income of $92,000 using absorption costing and a net operating income of $98,600 using variable costing. If the fixed manufacturing overhead cost was $3.00 per unit for the last two years, and if production was 18,000 units, then sales in units last year were: a) 24,600 b) 20,200 c) 15,800 d) 15,000 Use the following to answer question 47: The following data were supplied by Reader Corporation:

Sales .................................. Variable expenses ............. Fixed expenses ..................

$600,000 $420,000 $141,000

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47. The contribution margin is: a) $420,000 b) $54,000 c) $474,000 d) $180,000 48. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price Units in beginning inventory Units produced 5,300 Units sold 5,200 Units in ending inventory 0

100

Variable costs per unit: Direct materials $27 Direct labor $46 Variable manufacturing overhead Variable selling and administrative Fixed costs: Fixed manufacturing overhead Fixed selling and administrative

$1 $5

$169,600 $31,200

The total contribution margin for the month under the variable costing approach is: a) $48,800 b) $244,400 c) $218,400 d) $78,000 49. Birney Company has prepared the following budget data:

Sales ............................................................. Selling price ................................................. Variable expenses ........................................ Fixed manufacturing expenses ..................... Fixed selling and admin. expenses...............

150,000 units $25 per unit $15 per unit $800,000 $700,000

An advertising agency claims that an aggressive advertising campaign would enable the company to increase its unit sales by 20%. What is the maximum amount that the company can pay for advertising and obtain a net operating income of $200,000? a) $100,000 b) $200,000 c) $300,000 d) $550,000

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ACCT310

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Spring 2007

Use the following to answer question 50: A company that makes organic fertilizer has supplied the following data:

Bags produced and sold .............................................. Sales revenue............................................................... Variable manufacturing expense ................................. Fixed manufacturing expense ..................................... Variable selling and administrative expense ............... Fixed selling and administrative expense ................... Net operating income ..................................................

240,000 $1,896,000 $804,000 $520,000 $180,000 $270,000 $122,000

50. The company's unit contribution margin is closest to: a) $4.10 b) $3.80 c) $4.55 d) $7.15

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ACCT310

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Spring 2007

Answer Key
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. c b a c a a a c a c b c a b d c a a a b b a b d b c b a b b a b a d d d c d c a b c d c b b d c a

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50. b

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