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EXAM 061682RR COSTS AND DECISION MAKING
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1.   Use the following information to answer this question.

Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the past five months of operations.

Machine Hours           

Electrical Cost

August

1,000   $1,620

September

900      $1,510

October           1,500   $1,870

November       2,000   $1,950

December        1,300   $1,730

Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to which of the following?

A. $870.00

B. $1,290.00

C. $1,150.00

D. $1,306.50

2.   A disadvantage of the high-low method of cost analysis is that

A. it relies totally on the judgment of the person performing the cost analysis.

B. it uses two extreme data points, which may not be representative of normal conditions.

C. it's too time-consuming to apply.

D. it can't be used when there are a very large number of observations.

3.   Use the following information to answer this question.

Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:

Production Cost Data

Direct materials           $153,000

Direct labor     $110,500

Variable manufacturing overhead       $204,000

Fixed manufacturing overhead

$255,000

Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.

Under absorption costing, the carrying value on the balance sheet of the ending inventory for the year would be

A. $230,800.

B  $0.

C. $190,800.

D. $170,000.

4.   Murdoch Corporation has provided the following data concerning its only product:

Murdoch Product Data

Selling price    $230 per unit

Current sales   39,100 units

Break-even sales         29,716 units

What is the margin of safety in dollars?

A. $6,834,680

B. $8,993,000

C. $2,158,320

D. $5,995,333

5.   Purchase-order processing is an example of a/an _______ activity.   

A. product-level

B. unit-level

C. organization-sustaining

D. batch-level

6.   Use the following information to answer this question.

Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:

Production Cost Data

Direct materials           $153,000

Direct labor     $110,500

Variable manufacturing overhead       $204,000

Fixed manufacturing overhead

$255,000

Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.

Under variable costing, the company's net operating income for the year would be _______ than under absorption costing.

A. $108,000 lower

B. $60,000 lower

C. $60,000 higher

D. $108,000 higher

7.   A company increased the selling price for its product from $5 to $6 per unit when total fixed expenses increased from $100,000 to $200,000 and variable expense per unit remained unchanged. How would these changes affect the break-even point?   

A. The break-even point in units would increase.

B. The break-even point in units would decrease.

C. The break-even point in units would remain unchanged.

D. The effect can't be determined from the information given.

8.   Use the following information to answer this question.

Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the past five months of operations.

Machine Hours

Electrical Cost

August            1,000   $1,620

September900             $1,510

October           1,500   $1,870

November       2,000   $1,950

December        1,300   $1,730

Using the high-low method of analysis, the estimated variable cost per machine hour for electricity is closest to which of the following?   

A. $0.40

B. $0.98

C. $2.50

D. $1.68

9.   Viren Corporation has provided the following data from its activity-based costing system:

Activity Cost Pool      Total Cost       Total Activity

Assembly        $387,000         25,000 machine-hours

Processing orders        $68,510           1,700 orders

Inspection       $129,117         1,930 inspection-hours

The company makes 240 units of product T91H a year, requiring a total of 550 machine hours, 90 orders, and 40 inspection hours per year. The product's direct materials cost is $16.98 per unit, and its direct labor cost is $12.09 per unit. According to the activity-based costing system, the average cost of product T91H is closest to _______ per unit.

A. $90.81

B. $29.07

C. $79.66

D. $75.70

10.   Use the following information to answer this question.

Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:

Activity Cost Pools     Activity Rate

Size-related     $0.94 per guest

Complexity-related     $31.62 per tier

Order-related $55.70 per order

 The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake.

the measure of complexity is the number of tiers in the cake.

The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.)

The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The activity rates don't include the costs of purchased decorations, such as miniature statues and wedding bells, which are accounted for separately.

Data concerning two recent orders are listed here:

Pyburn Wedding         Smith Wedding

Number of reception guests    72        189

Number of tiers on the cake    4          5

Cost of purchased decorations for cake         $29.92             $68.75

Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, which amount would the company have to charge for the Pyburn wedding cake to just break even?

A. $29.92

B. $338.64

C. $55.79

D. $279.87

11.   Which statement is true for a company that uses variable costing?   

A. Any underapplied overhead is included in the product cost.

B. The unit product cost changes because of changes in the number of units manufactured.

C. Profit fluctuates with sales.

D. Product costs include variable administration costs.

12.   A cost driver is   

A. a factor that causes variations in a cost.

B. a fixed cost that can't be avoided.

C. the largest single category of cost in a company.

D. an indirect cost that's essential to the business.

13.   Green Company's variable expenses are 75% of sales. At a sales level of $400,000, the company's degree of operating leverage is 8. At this sales level, fixed expenses are   

A. $50,000.

B. $87,500.

C. $75,000.

D. $100,000.

14.   An increase in the activity level within the relevant range results in a/an   

A. decrease in fixed cost per unit.

B. proportionate increase in total fixed costs.

C. increase in fixed cost per unit.

D. unchanged fixed cost per unit.

15.   Last year, Gransky Corporation's variable costing net operating income was $52,100, and its ending inventory increased by 400 units. Fixed manufacturing overhead cost was $7 per unit. What was the absorption costing net operating income last year?   

A. $2,800

B. $49,300

C. $54,900

D. $52,100

16.   Slosh Cleaning Corporation services both residential and commercial customers. Slosh expects the following operating results next year for each type of customer:          

Operating Results

Residential

Commercial

Sales    $60,000           $140,000

Contribution margin ratio       50%     30%

Slosh expects to have $18,000 in fixed expenses next year. What would Slosh's total dollar sales have to be next year to generate a profit of $90,000?   

A. $270,000

B. $250,000

C. $300,000

D. $216,000

17.   Use the following information to answer this question.

Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.

Sales volume (units)

4,000   5,000

Cost of sales    $338,000         $422,500

Selling and administrative costs         $89,600           $106,000

The best estimate of the total variable cost per unit is   

A. $105.70.

B. $106.90.

C. $84.50.

D. $100.90.

18.   Rank the following methods of assigning overhead costs from least accurate to most accurate.   

A. Activity-based costing, departmental rates, plantwide rate

B. Plantwide rate, departmental rates, activity-based costing

C. Departmental rates, plantwide rate, activity-based costing

D. Plantwide rate, activity-based costing, departmental rates

19.   Use the following information to answer this question.

Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:

Activity Cost Pools     Activity Rate

Size-related     $0.94 per guest

Complexity-related     $31.62 per tier

Order-related $55.70 per order

The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake.

The measure of complexity is the number of tiers in the cake.

The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.)

The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The activity rates don't include the costs of purchased decorations, such as miniature statues and wedding bells, which are accounted for separately.

Data concerning two recent orders are listed here:

Pyburn Wedding         Smith Wedding

Number of reception guests    72        189

Number of tiers on the cake    4          5Cost of purchased decorations for cake       $29.92 $68.75

Assuming that the company charges $556.96 for the Smith wedding cake, what would be the overall margin on the order?   

A. $165.41

B. $460.30

C. $96.66

D. $152.45

20. Use the following information to answer this question.

 

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EXAM 061682RR COSTS AND DECISION MAKING
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  • Submitted On 25 Dec, 2014 12:29:27
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1.   Use the following information to answer this question. Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the past five months of operations. Machine Hours            Electrical Cost August 1,000   $1,620 September 900      $1,510 October           1,500   $1,870 November       2,000   $1,950 December        1,300   $1,730 Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to which of the following? A. $870.00 B. $1,290.00 C. $1,150.00 D. $1,306.50 2.   A disadvantage of the high-low method of cost analysis is that A. it relies totally on the judgment of the person performing the cost analysis. B. it uses two extreme data points, which may not be representative of normal conditions. C. it's too time-consuming to apply. D. it can't be used when there are a very large number of observations. 3.   Use the following information to answer this question. Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows: Production Cost Data Direct materials           $153,000 Direct labor     $110,500 Variable manufacturing overhead       $204,000 Fixed manufacturing overhead $255,000 Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost. Under absorption costing, the carrying value on the balance sheet of the ending inventory for the year would be A. $230,800. B  $0. C. $190,800. D. $170,000. 4.   Murdoch Corporation has provided the following data concerning its only product: Murdoch Product Data Selling price    $230 per unit Current sales   39,100 units Break-even sales         29,716 units What is the margin of safety in dollars? A. $6,834,680 B. $8,993,000 C. $2,158,320 D. $5,995,333 5.   Purchase-order processing is an example of a/an _______ activity.    A. product-level B. unit-level C. organization-sustaining D. batch-level 6.   Use the following information to answer this question. Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows: Production Cost Data Direct materials           $153,000 Direct labor     $110,500 Variable manufacturi...
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