Question 1

Orchid Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $25,000. If Orchid sells 13,000 units, contribution margin will equal:

Accepted Answer

A)  $195,000 
B)  $145,000 
C)  $40,000 
D)  $65,000 
A)  $195,000 
B)  $145,000 
C)  $40,000 
D)  $65,000

Question 2

The linearity assumption is:

Accepted Answer

A)  the assumption that the relationship between fixed costs and variable costs can be approximated by a straight line. 
B)  the assumption that the relationship between fixed costs and variable costs can be approximated by a curved line. 
C)  realistic in all costing situations. 
D)  the assumption that total cost depends on activity level. 
A)  the assumption that the relationship between fixed costs and variable costs can be approximated by a straight line. 
B)  the assumption that the relationship between fixed costs and variable costs can be approximated by a curved line. 
C)  realistic in all costing situations. 
D)  the assumption that total cost depends on activity level.

Question 3

Which of the following statements is true?

Accepted Answer

A)  Fixed costs are constant on a per unit basis. 
B)  Variable costs per unit decrease as activity volume increases. 
C)  Variable costs are constant in total dollars. 
D)  Fixed costs are constant in total dollars. 
A)  Fixed costs are constant on a per unit basis. 
B)  Variable costs per unit decrease as activity volume increases. 
C)  Variable costs are constant in total dollars. 
D)  Fixed costs are constant in total dollars.

Question 4

Lavender Inc has the following information for its first year of operations:   a. Prepare Lavender's full absorption costing income statement.
b. Prepare Lavender's variable costing income statement.

Accepted Answer

a. @#IMG-DLM& (Cost of goods sold per un

Question 5

When Greenway, Inc. sells 48,000 units, its total fixed cost is $115,200. What is its total fixed cost when it sells 54,000 units?

Accepted Answer

A)  $100,800 
B)  $115,200 
C)  $129,600 
D)  $134,800 
A)  $100,800 
B)  $115,200 
C)  $129,600 
D)  $134,800

Question 6

A cost that remains the same, in total, regardless of changes in activity level is a:

Accepted Answer

A)  variable cost. 
B)  fixed cost. 
C)  mixed cost. 
D)  step cost. 
A)  variable cost. 
B)  fixed cost. 
C)  mixed cost. 
D)  step cost.

Question 7

Contribution margin plus variable cost per unit equals total sales revenue

Accepted Answer

A) True 
 B)False

Question 8

Heather Inc has the following information for its first year of operations:   a. Prepare Heather's full absorption costing income statement.
b. Prepare Heather's variable costing income statement.

Accepted Answer

a. @#IMG-DLM& (Cost of goods sold per un

Question 9

Laredo, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. If sales revenue increases by $20,000, by how much will profit increase?

Accepted Answer

A)  $1,800 
B)  $4,500 
C)  $5,000 
D)  $9,000 
A)  $1,800 
B)  $4,500 
C)  $5,000 
D)  $9,000

Question 10

A grocery store wants to encourage its customers to bring their own shopping bags, thus saving the store money on purchasing plastic or paper bags and saving the environment in the process. For an Earth Day promotion, the store gives away free canvas bags and engages in a substantial advertising campaign to highlight the initiative. Then, the store rewards customers who bring their own bags with a 5% discount on all future shopping trips. Which of the following is not a way this initiative might be reflected in the grocery store's contribution margin income statement?

Accepted Answer

A)  It wouldn't be. Contribution margin income statements do not currently support sustainability accounting. 
B)  The store's fixed costs would increase to account for the promotional materials and the fixed costs of providing free bags to customers. 
C)  The store's sales revenue would decrease to reflect the discounts given to customers who bring their own bags. 
D)  The store's variable costs would decrease to reflect the reduced cost of providing paper or plastic bags to all customers. 
A)  It wouldn't be. Contribution margin income statements do not currently support sustainability accounting. 
B)  The store's fixed costs would increase to account for the promotional materials and the fixed costs of providing free bags to customers. 
C)  The store's sales revenue would decrease to reflect the discounts given to customers who bring their own bags. 
D)  The store's variable costs would decrease to reflect the reduced cost of providing paper or plastic bags to all customers.

Question 11

Maple Corp. has a selling price of $20, variable costs of $15 per unit, and fixed costs of $25,000. Maple expects profit of $300,000 at its anticipated level of production. What is Maple's unit contribution margin?

Accepted Answer

A)  $5.00 
B)  $10.00 
C)  $27.50 
D)  $20.00 
A)  $5.00 
B)  $10.00 
C)  $27.50 
D)  $20.00

Question 12

Chilton, Inc. sold 11,000 units last year for $20 each. Variable costs per unit were $4 for direct materials, $1.50 for direct labor, and $2.50 for variable overhead. Fixed costs were $60,000 in manufacturing overhead and $40,000 in nonmanufacturing costs.
a. What is the total contribution margin?
b. What is the unit contribution margin?
c. What is the contribution margin ratio?
d. If sales increase by 2,000 units, by how much will profits increase?

Accepted Answer

a. $132,000 = (11,000 × $20) -

Question 13

Elm uses the high-low method of estimating costs. Elm had total costs of $250,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 10,000 units, total costs were $390,000. Elm would estimate variable cost per unit as:

Accepted Answer

A)  $70.00 
B)  $45.50 
C)  $28.00 
D)  $52.71 
A)  $70.00 
B)  $45.50 
C)  $28.00 
D)  $52.71

Question 14

Total contribution margin is equal to:

Accepted Answer

A)  total sales less fixed costs. 
B)  fixed costs plus net operating income. 
C)  variable costs plus net operating income. 
D)  total sales less net operating income. 
A)  total sales less fixed costs. 
B)  fixed costs plus net operating income. 
C)  variable costs plus net operating income. 
D)  total sales less net operating income.

Question 15

Carson, which uses the high-low method of estimating costs, reported total costs of $24 per unit when production was at its lowest level, at 10,000 units. When production doubled to its highest level, the total cost per unit dropped to $15. Carson would estimate its total fixed cost as:

Accepted Answer

A)  $9 
B)  $33 
C)  $180,000 
D)  $585,000 
A)  $9 
B)  $33 
C)  $180,000 
D)  $585,000

Question 16

The cost estimating approach that uses the two most extreme activity observations is the:

Accepted Answer

A)  scattergraph method. 
B)  high-low method. 
C)  visual fit method. 
D)  regression analysis. 
A)  scattergraph method. 
B)  high-low method. 
C)  visual fit method. 
D)  regression analysis.

Question 17

Campbell, Inc. sold 100,000 units last year for $2.00 each. Variable costs per unit were $0.30 for direct materials, $0.50 for direct labor, and $0.30 for variable overhead. Fixed costs were $60,000 in manufacturing overhead and $40,000 in nonmanufacturing costs.
a. What is the total contribution margin?
b. What is the unit contribution margin?
c. What is the contribution margin ratio?
d. If sales increase by 20,000 units, by how much will profits increase?

Accepted Answer

a. $90,000 = (100,000 × $2) -

Question 18

Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output:     What is Star's formula for estimating costs?

Accepted Answer

A)  Total cost = $175,003 + ($11.57 × Production) 
B)  Total cost = $61,603 + ($0.92 × Production) 
C)  Total cost = $175,003 + ($61,603 × Production) 
D)  Total cost = $11.57 + ($0.9213 × Production) 
A)  Total cost = $175,003 + ($11.57 × Production) 
B)  Total cost = $61,603 + ($0.92 × Production) 
C)  Total cost = $175,003 + ($61,603 × Production) 
D)  Total cost = $11.57 + ($0.9213 × Production)

Question 19

Using the results of the least-squares regression analysis, which value estimates variable cost per unit?

Accepted Answer

A)  R Square 
B)  Intercept 
C)  X Value 
D)  Multiple R 
A)  R Square 
B)  Intercept 
C)  X Value 
D)  Multiple R

Question 20

Royal Enterprises has presented the following information for the past three months operations:   a. Using the high-low method, calculate the fixed cost per month and variable cost per unit.
b. What would total costs be for a month with 5,000 units produced?

Accepted Answer

a. High month: August; low month: June.

Orchid Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $25,000. If Orchid sells 13,000 units, contribution margin will equal:

The linearity assumption is:

Which of the following statements is true?

Lavender Inc has the following information for its first year of operations: a. Prepare Lavender's full absorption costing income statement. b. Prepare Lavender's variable costing income statement.

When Greenway, Inc. sells 48,000 units, its total fixed cost is $115,200. What is its total fixed cost when it sells 54,000 units?

A cost that remains the same, in total, regardless of changes in activity level is a:

Contribution margin plus variable cost per unit equals total sales revenue

Heather Inc has the following information for its first year of operations: a. Prepare Heather's full absorption costing income statement. b. Prepare Heather's variable costing income statement.

Laredo, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. If sales revenue increases by $20,000, by how much will profit increase?

Maple Corp. has a selling price of $20, variable costs of $15 per unit, and fixed costs of $25,000. Maple expects profit of $300,000 at its anticipated level of production. What is Maple's unit contribution margin?

Elm uses the high-low method of estimating costs. Elm had total costs of $250,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 10,000 units, total costs were $390,000. Elm would estimate variable cost per unit as:

Total contribution margin is equal to:

Carson, which uses the high-low method of estimating costs, reported total costs of $24 per unit when production was at its lowest level, at 10,000 units. When production doubled to its highest level, the total cost per unit dropped to $15. Carson would estimate its total fixed cost as:

The cost estimating approach that uses the two most extreme activity observations is the:

Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output: What is Star's formula for estimating costs?

Using the results of the least-squares regression analysis, which value estimates variable cost per unit?

Royal Enterprises has presented the following information for the past three months operations: a. Using the high-low method, calculate the fixed cost per month and variable cost per unit. b. What would total costs be for a month with 5,000 units produced?

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 5: Cost Behavior and Estimation

Orchid Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $25,000. If Orchid sells 13,000 units, contribution margin will equal:

The linearity assumption is:

Which of the following statements is true?

Lavender Inc has the following information for its first year of operations: a. Prepare Lavender's full absorption costing income statement. b. Prepare Lavender's variable costing income statement.

When Greenway, Inc. sells 48,000 units, its total fixed cost is $115,200. What is its total fixed cost when it sells 54,000 units?

A cost that remains the same, in total, regardless of changes in activity level is a:

Contribution margin plus variable cost per unit equals total sales revenue

Heather Inc has the following information for its first year of operations: a. Prepare Heather's full absorption costing income statement. b. Prepare Heather's variable costing income statement.

Laredo, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. If sales revenue increases by $20,000, by how much will profit increase?

Maple Corp. has a selling price of $20, variable costs of $15 per unit, and fixed costs of $25,000. Maple expects profit of $300,000 at its anticipated level of production. What is Maple's unit contribution margin?

Elm uses the high-low method of estimating costs. Elm had total costs of $250,000 at its lowest level of activity, when 5,000 units were sold. When, at its highest level of activity, sales equaled 10,000 units, total costs were $390,000. Elm would estimate variable cost per unit as:

Total contribution margin is equal to:

Carson, which uses the high-low method of estimating costs, reported total costs of $24 per unit when production was at its lowest level, at 10,000 units. When production doubled to its highest level, the total cost per unit dropped to $15. Carson would estimate its total fixed cost as:

The cost estimating approach that uses the two most extreme activity observations is the:

Star, Inc. used Excel to run a least-squares regression analysis, which resulted in the following output: What is Star's formula for estimating costs?

Using the results of the least-squares regression analysis, which value estimates variable cost per unit?

Royal Enterprises has presented the following information for the past three months operations: a. Using the high-low method, calculate the fixed cost per month and variable cost per unit. b. What would total costs be for a month with 5,000 units produced?

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Financial Statement Analysis

Filters