Question 1

Companies recognize fixed manufacturing overhead costs as period costs (expenses) when incurred when using

Accepted Answer

A)  full costing. 
B)  absorption costing. 
C)  product costing. 
D)  variable costing. 
A)  full costing. 
B)  absorption costing. 
C)  product costing. 
D)  variable costing.

Question 2

Greg's Breads can produce and sell only one of the following two products: $\begin{array}{lll}&\text { Oven } & \text { Contribution } \
&\text { Hours Required } & \text { Margin Per Unit }\
\text { Muffins } & 0.2 & \$ 3 \
\text { Coffee Cakes } & 0.3 & \$ 4
\end{array}$ The company has oven capacity of 1,500 hours. How much will contribution margin be if it produces only the most profitable product?

Accepted Answer

A)  $15,000 
B)  $20,000 
C)  $22,500 
D)  $30,000 
A)  $15,000 
B)  $20,000 
C)  $22,500 
D)  $30,000

Question 3

A shift from low-margin sales to high-margin sales

Accepted Answer

A)  may increase net income, even though there is a decline in total units sold. 
B)  will always increase net income. 
C)  will always decrease net income. 
D)  will always decrease units sold. 
A)  may increase net income, even though there is a decline in total units sold. 
B)  will always increase net income. 
C)  will always decrease net income. 
D)  will always decrease units sold.

Question 4

Use the following information for questions 
Mercantile Corporation has sales of $2,000,000, variable costs of $800,000, and fixed costs of $900,000.
-Mercantile's margin of safety ratio is

Accepted Answer

A)  .15. 
B)  .25. 
C)  .33. 
D)  .75. 
A)  .15. 
B)  .25. 
C)  .33. 
D)  .75.

Question 5

When units produced exceed units sold, income under absorption costing is higher than income under variable costing.

Accepted Answer

A) True 
 B)False

Question 6

For Pierce Company, sales is $500,000, variable expenses are $340,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is

Accepted Answer

A)  4%. 
B)  28%. 
C)  32%. 
D)  68%. 
A)  4%. 
B)  28%. 
C)  32%. 
D)  68%.

Question 7

Use the following information for questions 
Sprinkle Co. sells its product for $60 per unit. During 2019, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses.
-The per unit manufacturing cost under absorption costing is

Accepted Answer

A)  $24. 
B)  $27. 
C)  $39. 
D)  $40. 
A)  $24. 
B)  $27. 
C)  $39. 
D)  $40.

Question 8

Some fixed manufacturing costs of the current period are deferred to future periods through ending inventory under variable costing.

Accepted Answer

A) True 
 B)False

Question 9

A company with a higher contribution margin ratio is

Accepted Answer

A)  more sensitive to changes in sales revenue. 
B)  less sensitive to changes in sales revenue. 
C)  either more or less sensitive to changes in sales revenue, depending on other factors. 
D)  likely to have a lower breakeven point. 
A)  more sensitive to changes in sales revenue. 
B)  less sensitive to changes in sales revenue. 
C)  either more or less sensitive to changes in sales revenue, depending on other factors. 
D)  likely to have a lower breakeven point.

Question 10

The degree of operating leverage provides a measure of a company's earnings volatility.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

Moonwalker's CVP income statement included sales of 5,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $110,000. Net income is

Accepted Answer

A)  $500,000. 
B)  $200,000. 
C)  $190,000. 
D)  $90,000. 
A)  $500,000. 
B)  $200,000. 
C)  $190,000. 
D)  $90,000.

Question 14

For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What is net income?

Accepted Answer

A)  $120,000 
B)  $216,000 
C)  $504,000 
D)  $720,000 
A)  $120,000 
B)  $216,000 
C)  $504,000 
D)  $720,000

Question 15

Use the following information for questions 
Sprinkle Co. sells its product for $60 per unit. During 2019, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: direct materials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses.
-Cost of goods sold under absorption costing is

Accepted Answer

A)  $1,350,000. 
B)  $1,620,000. 
C)  $1,950,000. 
D)  $1,560,000. 
A)  $1,350,000. 
B)  $1,620,000. 
C)  $1,950,000. 
D)  $1,560,000.

Question 16

Which of the following statements is not true?

Accepted Answer

A)  Operating leverage refers to the extent to which a company's net income reacts to a given change in sales. 
B)  Companies that have higher fixed costs relative to variable costs have higher operating leverage. 
C)  When a company's sales revenue is increasing, high operating leverage is good because it means that profits will increase rapidly. 
D)  When a company's sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease. 
A)  Operating leverage refers to the extent to which a company's net income reacts to a given change in sales. 
B)  Companies that have higher fixed costs relative to variable costs have higher operating leverage. 
C)  When a company's sales revenue is increasing, high operating leverage is good because it means that profits will increase rapidly. 
D)  When a company's sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease.

Question 17

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 18

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 19

Variable costing is the approach used for external reporting under generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 20

Use the following information for questions.
Roosevelt Corporation has a weighted-average unit contribution margin of $30 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are $1,800,000.
-At the expected sales level, Roosevelt's net income will be

Accepted Answer

A)  $(300,000). 
B)  $ - 0 -. 
C)  $1,200,000. 
D)  $3,000,000. 
A)  $(300,000). 
B)  $ - 0 -. 
C)  $1,200,000. 
D)  $3,000,000.

Companies recognize fixed manufacturing overhead costs as period costs (expenses) when incurred when using

Greg's Breads can produce and sell only one of the following two products: Oven Contribution Hours Required Margin Per Unit Muffins 0.2 \ 3 Coffee Cakes 0.3 \ 4 The company has oven capacity of 1,500 hours. How much will contribution margin be if it produces only the most profitable product?

A shift from low-margin sales to high-margin sales

Use the following information for questions Mercantile Corporation has sales of $2,000,000, variable costs of $800,000, and fixed costs of $900,000. -Mercantile's margin of safety ratio is

When units produced exceed units sold, income under absorption costing is higher than income under variable costing.

For Pierce Company, sales is $500,000, variable expenses are $340,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is

Some fixed manufacturing costs of the current period are deferred to future periods through ending inventory under variable costing.

A company with a higher contribution margin ratio is

The degree of operating leverage provides a measure of a company's earnings volatility.

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

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

Moonwalker's CVP income statement included sales of 5,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $110,000. Net income is

For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What is net income?

Which of the following statements is not true?

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.

Variable costing

Variable costing is the approach used for external reporting under generally accepted accounting principles.

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 6: Cost-Volume-Profit Analysis: Additional Issues

Companies recognize fixed manufacturing overhead costs as period costs (expenses) when incurred when using

Greg's Breads can produce and sell only one of the following two products: Oven Contribution Hours Required Margin Per Unit Muffins 0.2 \ 3 Coffee Cakes 0.3 \ 4 The company has oven capacity of 1,500 hours. How much will contribution margin be if it produces only the most profitable product?

A shift from low-margin sales to high-margin sales

Use the following information for questions Mercantile Corporation has sales of $2,000,000, variable costs of $800,000, and fixed costs of $900,000. -Mercantile's margin of safety ratio is

When units produced exceed units sold, income under absorption costing is higher than income under variable costing.

For Pierce Company, sales is $500,000, variable expenses are $340,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is

Some fixed manufacturing costs of the current period are deferred to future periods through ending inventory under variable costing.

A company with a higher contribution margin ratio is

The degree of operating leverage provides a measure of a company's earnings volatility.

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

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

Moonwalker's CVP income statement included sales of 5,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $110,000. Net income is

For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What is net income?

Which of the following statements is not true?

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.

Variable costing

Variable costing is the approach used for external reporting under generally accepted accounting principles.

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

Filters