Question 1

Manufacturing cost per unit will be higher under variable costing than under absorption costing.

Accepted Answer

A) True 
 B)False

Question 2

Variable costing

Accepted Answer

A) is used for external reporting purposes. 
B) is required under GAAP. 
C) treats fixed manufacturing overhead as a period cost. 
D) is also known as full costing. 
A) is used for external reporting purposes. 
B) is required under GAAP. 
C) treats fixed manufacturing overhead as a period cost. 
D) is also known as full costing.

Question 3

A company with low operating leverage will experience a sharp increase in net income with a given increase in sales.

Accepted Answer

A) True 
 B)False

Question 4

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

Accepted Answer

A) True 
 B)False

Question 5

When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income.

Accepted Answer

A) True 
 B)False

Question 6

Use the following information for questions 
Swanson Company has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Swanson incurs $6,660,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%.
-The weighted-average contribution margin ratio is

Accepted Answer

A) 37%. 
B) 40%. 
C) 43%. 
D) 50%. 
A) 37%. 
B) 40%. 
C) 43%. 
D) 50%.

Question 7

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

Accepted Answer

A) True 
 B)False

Question 8

Management may be tempted to overproduce when using

Accepted Answer

A) variable costing, in order to increase net income. 
B) variable costing, in order to decrease net income. 
C) absorption costing, in order to increase net income. 
D) absorption costing, in order to decrease net income. 
A) variable costing, in order to increase net income. 
B) variable costing, in order to decrease net income. 
C) absorption costing, in order to increase net income. 
D) absorption costing, in order to decrease net income.

Question 9

Miller Manufacturing's degree of operating leverage is 1.5.Warren Corporation's degree of operating leverage is 3.Warren's earnings would go up (or down) by ________ as much as Miller's with an equal increase (or decrease) in sales.

Accepted Answer

A) 1/2 
B) 1.5 times 
C) 2 times 
D) 4.5 times 
A) 1/2 
B) 1.5 times 
C) 2 times 
D) 4.5 times

Question 10

If contribution margin is $140,000, sales is $300,000, and net income is $40,000, then variable and fixed expenses are $$\begin{array} { l l l } 
& \text { Variable } & \text { Fixed } \
\text { a. } & \$ 160,000 & \$ 260,000 \
\text { b. } & \$ 160,000 & \$ 100,000 \
\text { c. } & \$ 100,000 & \$ 160,000 \
\text { d. } & \$ 440,000 & \$ 260,000
\end{array}$$

Accepted Answer

The answer of If contribution margin is $140,000, sales is...

Question 11

The margin of safety ratio

Accepted Answer

A) is computed as actual sales divided by break-even sales. 
B) indicates what percent decline in sales could be sustained before the company would operate at a loss. 
C) measures the ratio of fixed costs to variable costs. 
D) is used to determine the break-even point. 
A) is computed as actual sales divided by break-even sales. 
B) indicates what percent decline in sales could be sustained before the company would operate at a loss. 
C) measures the ratio of fixed costs to variable costs. 
D) is used to determine the break-even point.

Question 12

The use of absorption costing facilitates cost-volume-profit analysis.

Accepted Answer

A) True 
 B)False

Question 13

Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.

Accepted Answer

A) True 
 B)False

Question 14

Sales mix is

Accepted Answer

A) the relative percentage in which a company sells its multiple products. 
B) the trend of sales over recent periods. 
C) the mix of variable and fixed expenses in relation to sales. 
D) a measure of leverage used by the company. 
A) the relative percentage in which a company sells its multiple products. 
B) the trend of sales over recent periods. 
C) the mix of variable and fixed expenses in relation to sales. 
D) a measure of leverage used by the company.

Question 15

In 2016, Teller Company sold 3,000 units at $600 each.Variable expenses were $420 per unit, and fixed expenses were $270,000.The same selling price, variable expenses, and fixed expenses are expected for 2017.What is Teller's break-even point in units for 2017?

Accepted Answer

A) 1,500 
B) 643 
C) 450 
D) 750 
A) 1,500 
B) 643 
C) 450 
D) 750

Question 16

Margin of safety in dollars is

Accepted Answer

A) expected sales divided by break-even sales. 
B) expected sales less break-even sales. 
C) actual sales less expected sales. 
D) expected sales less actual sales. 
A) expected sales divided by break-even sales. 
B) expected sales less break-even sales. 
C) actual sales less expected sales. 
D) expected sales less actual sales.

Question 17

If fixed costs are $100,000 and weighted-average unit contribution margin is $50, then the break-even point in units is 2,000 units.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a potential advantage of variable costing relative to absorption costing?

Accepted Answer

A) Net income is affected by changes in production levels. 
B) The use of variable costing is consistent with cost-volume-profit analysis. 
C) Net income computed under variable costing is not closely tied to changes in sales levels. 
D) More than one of the above. 
A) Net income is affected by changes in production levels. 
B) The use of variable costing is consistent with cost-volume-profit analysis. 
C) Net income computed under variable costing is not closely tied to changes in sales levels. 
D) More than one of the above.

Question 19

Sales mix is not important to managers when different products have substantially different contribution margins.

Accepted Answer

A) True 
 B)False

Question 20

In 2016, Raleigh sold 1,000 units at $500 each, and earned net income of $40,000.Variable expenses were $300 per unit, and fixed expenses were $160,000.The same selling price is expected for 2017.Raleigh's variable cost per unit will rise by 10% in 2017 due to increasing material costs, so they are tentatively planning to cut fixed costs by $10,000.How many units must Raleigh sell in 2017 to maintain the same income level as 2016?

Accepted Answer

A) 882 
B) 1,000 
C) 1,056 
D) 1,118 
A) 882 
B) 1,000 
C) 1,056 
D) 1,118

Manufacturing cost per unit will be higher under variable costing than under absorption costing.

Variable costing

A company with low operating leverage will experience a sharp increase in net income with a given increase in sales.

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income.

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

Management may be tempted to overproduce when using

Miller Manufacturing's degree of operating leverage is 1.5.Warren Corporation's degree of operating leverage is 3.Warren's earnings would go up (or down) by ________ as much as Miller's with an equal increase (or decrease) in sales.

If contribution margin is $140,000, sales is $300,000, and net income is $40,000, then variable and fixed expenses are Variable Fixed a. \ 160,000 \ 260,000 b. \ 160,000 \ 100,000 c. \ 100,000 \ 160,000 d. \ 440,000 \ 260,000

The margin of safety ratio

The use of absorption costing facilitates cost-volume-profit analysis.

Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.

Sales mix is

In 2016, Teller Company sold 3,000 units at $600 each.Variable expenses were $420 per unit, and fixed expenses were $270,000.The same selling price, variable expenses, and fixed expenses are expected for 2017.What is Teller's break-even point in units for 2017?

Margin of safety in dollars is

If fixed costs are $100,000 and weighted-average unit contribution margin is $50, then the break-even point in units is 2,000 units.

Which of the following is a potential advantage of variable costing relative to absorption costing?

Sales mix is not important to managers when different products have substantially different contribution margins.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

Filters

Exam 6: Reporting and Analyzing Inventory

Manufacturing cost per unit will be higher under variable costing than under absorption costing.

Variable costing

A company with low operating leverage will experience a sharp increase in net income with a given increase in sales.

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income.

If a company has limited machine hours available for production, it is generally more profitable to produce and sell the product with the highest contribution margin per machine hour.

Management may be tempted to overproduce when using

Miller Manufacturing's degree of operating leverage is 1.5.Warren Corporation's degree of operating leverage is 3.Warren's earnings would go up (or down) by ________ as much as Miller's with an equal increase (or decrease) in sales.

If contribution margin is $140,000, sales is $300,000, and net income is $40,000, then variable and fixed expenses are Variable Fixed a. \ 160,000 \ 260,000 b. \ 160,000 \ 100,000 c. \ 100,000 \ 160,000 d. \ 440,000 \ 260,000

The margin of safety ratio

The use of absorption costing facilitates cost-volume-profit analysis.

Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.

Sales mix is

In 2016, Teller Company sold 3,000 units at $600 each.Variable expenses were $420 per unit, and fixed expenses were $270,000.The same selling price, variable expenses, and fixed expenses are expected for 2017.What is Teller's break-even point in units for 2017?

Margin of safety in dollars is

If fixed costs are $100,000 and weighted-average unit contribution margin is $50, then the break-even point in units is 2,000 units.

Which of the following is a potential advantage of variable costing relative to absorption costing?

Sales mix is not important to managers when different products have substantially different contribution margins.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

Filters