Question 1

Gross profit is calculated by deducting ________ from sales revenue.

Accepted Answer

A) total fixed costs 
B) cost of goods sold 
C) total variable costs 
D) selling and administrative costs 
A) total fixed costs 
B) cost of goods sold 
C) total variable costs 
D) selling and administrative costs

Question 2

Periphery,Inc.has two products-picture frames and candle holders.Financial data for both the products follow: $$\begin{array} { | l | r | r | } 
\hline & \begin{array} { r } 
\text { Picture } \
\text { Frames }
\end{array} & \begin{array} { r } 
\text { Candle } \
\text { Holders }
\end{array} \
\hline \text { Units sold } & 2100 \text { units } & 700 \text { units } \
\hline \text { Sales price per unit } & \$ 700 & \$ 1200 \
\hline \text { Variable manufacturing cost per unit } & 300 & 650 \
\hline \text { Sales commission (\% of sales) } & 5 \% & 3 \% \
\hline
\end{array}$$ Periphery has two sales representatives-Andrew Novak and Liu Wei.Each sales representative sold a total of 1400 units during the month of March.Andrew had a sales mix of 70% picture frames and 30% candle holders.Liu had a sales mix of 80% picture frames and 20% candle holders.What is the contribution margin ratio for picture frames and candle holders,respectively?

Accepted Answer

A) 57%; 46% 
B) 52%; 43% 
C) 5%; 3% 
D) 43%; 54% 
A) 57%; 46% 
B) 52%; 43% 
C) 5%; 3% 
D) 43%; 54%

Question 3

Llywelyn,Inc.reports the following information for July: $$\begin{array} { | l | r | } 
\hline \text { Sales Revenue } & \$ 960,000 \
\hline \text { Variable Costs } & 110,000 \
\hline \text { Operating Income } & 360,000 \
\hline
\end{array}$$ What is the total fixed cost using variable costing?

Accepted Answer

A) $850,000 
B) $490,000 
C) $250,000 
D) $470,000 
A) $850,000 
B) $490,000 
C) $250,000 
D) $470,000

Question 4

Palmer's Plant Food Company sells two products,Quo-Eco and Quo-Pre,with a sales mix of 65% and 35%,respectively.Quo-Eco has a contribution margin per unit of $10,and Quo-Pre has a contribution margin per unit of $15.The company sold 1,000 total units in March.
Requirements:
a)Calculate the total contribution margin for the company.
b)Assume the sales mix shifted to 50% for each product,and calculate the total contribution margin for the company.

Accepted Answer

None

Question 5

When there is no beginning Finished Goods Inventory and all the goods that are produced are sold,the operating income ________.

Accepted Answer

A) will be higher under absorption costing than variable costing 
B) will be lower under absorption costing than variable costing 
C) will be higher than the gross profit under variable costing 
D) will be the same for both absorption costing and variable costing 
A) will be higher under absorption costing than variable costing 
B) will be lower under absorption costing than variable costing 
C) will be higher than the gross profit under variable costing 
D) will be the same for both absorption costing and variable costing

Question 6

Zesty Tomato Company manufactures jam and ketchup.Sales price and cost data for both products follow:
$$\begin{array}{l}
\begin{array} { l r r } 
& \text { Jam } & \text { Ketchup } \
\text { Sales price } & \$ 20.00 & \$ 42.00 \
\text { Variable manufacturing costs } & 12.00 & 20.00 \
\text { Sales commission } ( 10 \% ) & 2.00 & 4.20
\end{array}\
\text { The company has three sales representatives: }\
\begin{array} { l r r } 
&{ \text { Units Sold } } \
& \text { Jam } & \text { Ketchup } \
\text { Paul Kowalski } & 2,000 & 750 \
\text { Miriam Omer } & 2,520 & 650 \
\text { May Sasaki } & 2,300 & 900
\end{array}
\end{array}$$
Calculate the total contribution margin and the contribution margin ratio for each sales representative. Round dollar amounts to nearest dollar and ratio to two decimal places.

Accepted Answer

None

Question 7

Tidy Turf,Inc.provides housekeeping services.The following financial data have been provided. $$\begin{array} { | l | r | } 
\hline \text { Service Revenue } & \$ 60,000 \
\hline \text { Cleaning Supplies Used } & 21,000 \
\hline \text { Wages Expense } & 20,350 \
\hline \text { Office Rent Expense } & 5350 \
\hline \text { Depreciation Expense- } & \
\text { Machinery } & 550 \
\hline
\end{array}$$ Calculate the contribution margin and the contribution margin ratio.(Round your contribution margin to the nearest dollar,and your contribution margin ratio to two decimal places.)

Accepted Answer

A) $54,650; 91.08% 
B) $39,650; 66.08% 
C) $12,750; 21.25% 
D) $18,650; 31.08% 
A) $54,650; 91.08% 
B) $39,650; 66.08% 
C) $12,750; 21.25% 
D) $18,650; 31.08%

Question 8

The following data has been provided by Jestina,Inc.for the year.
 $$\begin{array} { | l | r | l | } 
\hline \text { Units produced and sold } & 5,500 & \text { units } \
\hline \text { Sales price } & \$ 300 & \text { per unit } \
\hline \text { Direct materials } & \$ 90 & \text { per unit } \
\hline \text { Direct labor } & \$ 50 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 40 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 110,000 & \text { per year } \
\hline \text { Fixed selling and administrative costs } & \$ 150,000 & \text { per year } \
\hline
\end{array}$$ There are no beginning inventories.Prepare an income statement using the contribution margin format.

Accepted Answer

Jestina, Inc.
Income

Question 9

To explain why two business segments have different contribution margin ratios,take the total amounts and expand them into their two components-units and amount per unit-by dividing the totals by the number of units.

Accepted Answer

A) True 
 B)False

Question 10

Bethel,Inc.has collected the following data.(There are no beginning inventories.) $\begin{array}{|l|r|l|}
\hline \text { Units produced } & 530 &\text { units } \
\hline \text { Sales price } & \$140 &\text { per unit } \
\hline \text { Direct materials } & \$17&\text {  per unit } \
\hline \text { Direct labor } & \$ 13 &\text { per unit } \
\hline \text { Variable mannufacturing overhead } & \$ 10 &\text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 19,200 &\text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 10 &\text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 10,000 &\text { per year } \
\hline
\end{array}$ What is the operating income using variable costing if 500 units are sold?

Accepted Answer

A) $15,800 
B) $45,000 
C) $60,000 
D) $4200 
A) $15,800 
B) $45,000 
C) $60,000 
D) $4200

Question 11

In its first year of business,Lakota,Inc.produced 600 units and sold 400 units.If Lakota uses variable costing,________.

Accepted Answer

A) its operating income for the period will be higher than under absorption costing 
B) its operating income for the period will be lower than under absorption costing 
C) its value of ending Finished Goods Inventory reported in the balance sheet will be higher than under absorption costing 
D) its operating income will be the same as under absorption costing 
A) its operating income for the period will be higher than under absorption costing 
B) its operating income for the period will be lower than under absorption costing 
C) its value of ending Finished Goods Inventory reported in the balance sheet will be higher than under absorption costing 
D) its operating income will be the same as under absorption costing

Question 12

Orderly Headquarters,Inc.has two business segments: Commercial and Residential.The following data have been provided for the year ending December 31,20XX.
 $\begin{array}{lll} 
& \text { Commercial } & \text { Residential } \
\text { Service Revenue } & \$ 5,900 & \$ 8,500 \
\text { Variable costs } & 3,500 & 5,400
\end{array}$ The company incurred $1,500 as fixed costs.
Requirements:
a)Prepare the income statement of Orderly Headquarters showing the contribution margin of each segment.
b)Calculate the contribution margin ratio of each segment.Which segment is more profitable and why?

Accepted Answer

a)
\[\text{Orderly Headquarters, Inc.}\

Question 13

When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

Accepted Answer

A) True 
 B)False

Question 14

In absorption costing,all product costs are recorded first as assets in the inventory accounts.

Accepted Answer

A) True 
 B)False

Question 15

Some costs are not controllable in the long run.However,in the short run,all costs are controllable.

Accepted Answer

A) True 
 B)False

Question 16

Sunrise Breakfast Foods,Inc.has two products-waffles and toaster pastries.Financial data for both the products follows:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Waffles } & \text { Pastries } \
\hline \text { Sales price per unit } & \$ 500 & \$ 1,000 \
\hline \text { Variable manufacturing cost per unit } & 320 & 750 \
\hline \text { Sales commission } ( \% \text { of sales } ) & 7 \% & 5 \% \
\hline
\end{array}$$ Sunrise has two sales representatives-Iolana and Sachi.Each sales representative sold a total of 1,500 units during the month of March.Iolana had a sales mix of 70% waffles and 30% pastries.Sachi had a sales mix of 60% waffles and 40% pastries.Which sales representative has the highest contribution ratio? Explain the reason for your answer.
(Round your percent answers to two decimal places.)

Accepted Answer

@#LAT-DLM&
1,500 units × 60% = 900 waffles
1,500 u

Question 17

Which of the following is considered a period cost in absorption costing?

Accepted Answer

A) variable manufacturing overhead costs 
B) fixed selling and administrative costs 
C) fixed manufacturing overhead costs 
D) semi-variable manufacturing overhead costs 
A) variable manufacturing overhead costs 
B) fixed selling and administrative costs 
C) fixed manufacturing overhead costs 
D) semi-variable manufacturing overhead costs

Question 18

Under absorption costing,the more units added to ending Finished Goods Inventory,the less fixed manufacturing overhead is '"hidden" in ending Finished Goods Inventory at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 19

McIntosh,Inc.reports the following information: $$\begin{array} { | l | r | l | } 
\hline \text { Beginning Finished Goods Inventory } & 50 & \text { units } \
\hline \text { Units produced } & 570 & \text { units } \
\hline \text { Units sold } & 620 & \text { units } \
\hline \text { Sales price } & \$ 120 & \text { per unit } \
\hline \text { Direct materials } & \$ 24 & \text { per unit } \
\hline \text { Direct labor } & \$ 15 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 19 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 15,500 & \text { per year } \
\hline \text { Variable selling and administrative costs } & \$ 5 & \text { per unit } \
\hline \text { Fixed selling and administrative costs } & \$ 13,500 & \text { per year } \
\hline
\end{array}$$ What is the unit product cost using variable costing? (Round your answer to the nearest cent.)

Accepted Answer

A) $85.19 
B) $58.00 
C) $61.19 
D) $113.88 
A) $85.19 
B) $58.00 
C) $61.19 
D) $113.88

Question 20

Betsy's Pies,Inc.has provided the following financial information for the year: $$\begin{array} { | l | r | } 
\hline \text { Finished Goods Inventory: } & \
\hline \text { Beginning balance, in units } & 620 \
\hline \text { Units produced } & 2100 \
\hline \text { Units sold } & 2200 \
\hline \text { Ending balance, in units } & 520 \
\hline \text { Production Costs: } & \
\hline \text { Variable manufacturing costs per } & \
\text { unit } & \$ 50 \
\hline \text { Total fixed manufacturing costs } & \$ 42,000 \
\hline
\end{array}$$ What is the unit product cost for the year using variable costing?

Accepted Answer

A) $70 
B) $19 
C) $50 
D) $81 
A) $70 
B) $19 
C) $50 
D) $81

Gross profit is calculated by deducting ________ from sales revenue.

Llywelyn,Inc.reports the following information for July: Sales Revenue \ 960,000 Variable Costs 110,000 Operating Income 360,000 What is the total fixed cost using variable costing?

When there is no beginning Finished Goods Inventory and all the goods that are produced are sold,the operating income ________.

To explain why two business segments have different contribution margin ratios,take the total amounts and expand them into their two components-units and amount per unit-by dividing the totals by the number of units.

In its first year of business,Lakota,Inc.produced 600 units and sold 400 units.If Lakota uses variable costing,________.

When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

In absorption costing,all product costs are recorded first as assets in the inventory accounts.

Some costs are not controllable in the long run.However,in the short run,all costs are controllable.

Which of the following is considered a period cost in absorption costing?

Under absorption costing,the more units added to ending Finished Goods Inventory,the less fixed manufacturing overhead is '"hidden" in ending Finished Goods Inventory at the end of the accounting period.

Accounting Information Systems

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 21: Variable Costing

Gross profit is calculated by deducting ________ from sales revenue.

Llywelyn,Inc.reports the following information for July: Sales Revenue \ 960,000 Variable Costs 110,000 Operating Income 360,000 What is the total fixed cost using variable costing?

When there is no beginning Finished Goods Inventory and all the goods that are produced are sold,the operating income ________.

To explain why two business segments have different contribution margin ratios,take the total amounts and expand them into their two components-units and amount per unit-by dividing the totals by the number of units.

In its first year of business,Lakota,Inc.produced 600 units and sold 400 units.If Lakota uses variable costing,________.

When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

In absorption costing,all product costs are recorded first as assets in the inventory accounts.

Some costs are not controllable in the long run.However,in the short run,all costs are controllable.

Which of the following is considered a period cost in absorption costing?

Under absorption costing,the more units added to ending Finished Goods Inventory,the less fixed manufacturing overhead is '"hidden" in ending Finished Goods Inventory at the end of the accounting period.

Accounting Information Systems

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Filters