Question 1

All of the following are steps used to find the target profit for companies that incur income taxes except:

Accepted Answer

A) convert the desired target profit after taxes to target profit before taxes. 
B) determine the desired target profit after taxes. 
C) convert the desired target profit before taxes to target profit after taxes. 
D) use the target profit before taxes to calculate target profit in units or in sales dollars. 
E) None of the answer choices is correct. 
A) convert the desired target profit after taxes to target profit before taxes. 
B) determine the desired target profit after taxes. 
C) convert the desired target profit before taxes to target profit after taxes. 
D) use the target profit before taxes to calculate target profit in units or in sales dollars. 
E) None of the answer choices is correct.

Question 2

If the number of units produced is less than the number of units sold,which of the following statements is true when comparing operating profit under absorption versus variable costing?

Accepted Answer

A) Sales revenue will be less when absorption costing is used. 
B) Absorption costing will produce a higher operating profit. 
C) Operating profit is the same under both methods. 
D) Variable costing will produce a higher operating profit. 
E) None of the answer choices is correct. 
A) Sales revenue will be less when absorption costing is used. 
B) Absorption costing will produce a higher operating profit. 
C) Operating profit is the same under both methods. 
D) Variable costing will produce a higher operating profit. 
E) None of the answer choices is correct.

Question 3

Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
  
-Refer to Exhibit 6-4.If the sales mix shifts to 50 percent planes and 50 percent boats,what happens to the weighted average contribution margin per unit?

Accepted Answer

A) It decreases. 
B) It increases. 
C) It is not affected. 
D) There is not enough information to answer this question. 
A) It decreases. 
B) It increases. 
C) It is not affected. 
D) There is not enough information to answer this question.

Question 4

When a company that produces multiple products faces a constraint in areas such as labor hours or machine hours,managers often prefer to maximize the contribution margin per unit of constraint.

Accepted Answer

A) True 
 B)False

Question 5

An advantage of using absorption costing is that it prevents managers from increasing production solely for the purpose of inflating profit.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 6-6
Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce.
-Refer to Exhibit 6-6.Which of the following is the correct contribution margin per unit?

Accepted Answer

A) $15.00 
B) $5.00 
C) $40.00 
D) $25.00 
E) None of the answer choices is correct. 
A) $15.00 
B) $5.00 
C) $40.00 
D) $25.00 
E) None of the answer choices is correct.

Question 7

Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
  
-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
How many units in total must be sold to break even?

Accepted Answer

A) 25,000 
B) 28,000 
C) 14,000 
D) 70,000 
E) None of the answer choices is correct. 
A) 25,000 
B) 28,000 
C) 14,000 
D) 70,000 
E) None of the answer choices is correct.

Question 8

Exhibit 6-3
Howard Company sells mountain bikes for $1,400 per unit representing 40 percent of total sales,and cruising bikes for $1,000 per unit representing 60 percent of total sales.Variable cost per unit is $600 for mountain bikes and $500 for cruising bikes.
-Refer to Exhibit 6-3.What is the weighted average contribution margin per unit?

Accepted Answer

A) $620 
B) $650 
C) $1,160 
D) $1,300 
E) None of the answer choices is correct. 
A) $620 
B) $650 
C) $1,160 
D) $1,300 
E) None of the answer choices is correct.

Question 9

Exhibit 6-5
Estrada Incorporated produces two different products with the following monthly data.
  
-Refer to Exhibit 6-5.What is the operating profit?

Accepted Answer

A) $90,000 
B) $570,000 
C) $270,000 
D) $255,000 
E) None of the answer choices is correct. 
A) $90,000 
B) $570,000 
C) $270,000 
D) $255,000 
E) None of the answer choices is correct.

Question 10

Paddleboard Incorporated builds three products: River,Lake,and Ocean.Information for these three products is shown below:
   
Total annual fixed costs are $765,000.Assume the sales mix remains the same at all levels of sales.
(1) 
a.How many products in total must be sold to break even?
a.How many products in total must be sold to earn an annual profit of $1,275,000?
b.How many units of each product must be sold to break even?
(2)
b.How many units of each product must be sold to earn an annual profit of $1,275,000?

Accepted Answer

The answer of Paddleboard Incorporated builds three products: River,Lake,and Ocean.Information...

Question 11

Sensitivity analysis can be used to determine how changes in variables will impact target profit.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 6-1
Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit.Each unit of product is sold for $20.
-Refer to Exhibit 6-1.Assume that Larimer Company expects to sell 5,000 units of product this coming month.What is the margin of safety in sales dollars?

Accepted Answer

A) $1,000 
B) $20,000 
C) $260,000 
D) $15,000 
E) None of the answer choices is correct. 
A) $1,000 
B) $20,000 
C) $260,000 
D) $15,000 
E) None of the answer choices is correct.

Question 13

Exhibit 6-6
Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce.
-Refer to Exhibit 6-6.Which of the following is the correct contribution margin per direct labor hour?

Accepted Answer

A) $12.50 
B) $6.25 
C) $0.08 
D) $0.10 
E) None of the answer choices is correct. 
A) $12.50 
B) $6.25 
C) $0.08 
D) $0.10 
E) None of the answer choices is correct.

Question 14

Target profit before taxes is calculated as target profit after tax divided by one minus the tax rate.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 6-8
Perry,Inc.produced 15,000 units during the year.Of these,12,000 were sold for $50 each.Other Perry,Inc.data are as follows:
  
-Refer to Exhibit 6-8.Calculate Perry's operating profit assuming the company uses absorption costing.

Accepted Answer

A) $271,000 
B) $286,000 
C) $396,000 
D) $370,000 
E) None of the answer choices is correct. 
A) $271,000 
B) $286,000 
C) $396,000 
D) $370,000 
E) None of the answer choices is correct.

Question 16

Sensitivity analysis is also called "what-if analysis."

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 6-1
Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit.Each unit of product is sold for $20.
-Refer to Exhibit 6-1.What is the break-even point in sales dollars?

Accepted Answer

A) $72,000 
B) $90,000 
C) $360,000 
D) $120,000 
E) None of the answer choices is correct. 
A) $72,000 
B) $90,000 
C) $360,000 
D) $120,000 
E) None of the answer choices is correct.

Question 18

Exhibit 6-5
Estrada Incorporated produces two different products with the following monthly data.
  
-Refer to Exhibit 6-5.Management believes that pushing sales of the Gas Barbecues product would maximize company profits because of the high contribution margin per unit.However,only 20,000 labor hours are available each year and the Gas Barbecue requires 5 labor hours per unit while the Charcoal Barbecue model requires 2 labor hours per unit.
If the company sells everything it produces,what is the contribution margin per unit of the constrained resource for the Charcoal Barbecue?

Accepted Answer

A) $98 
B) $120 
C) $48 
D) $45 
E) None of the answer choices is correct. 
A) $98 
B) $120 
C) $48 
D) $45 
E) None of the answer choices is correct.

Question 19

Which of the following companies would be most likely to use the break-even point expressed in units?

Accepted Answer

A) An accounting firm 
B) A law firm 
C) An electrician 
D) An automobile dealer 
E) None of the answer choices is correct. 
A) An accounting firm 
B) A law firm 
C) An electrician 
D) An automobile dealer 
E) None of the answer choices is correct.

Question 20

Which of the following is not found on an income statement prepared using absorption costing?

Accepted Answer

A) Operating profit. 
B) Sales. 
C) Contribution margin. 
D) Cost of goods sold. 
E) None of the answer choices is correct. 
A) Operating profit. 
B) Sales. 
C) Contribution margin. 
D) Cost of goods sold. 
E) None of the answer choices is correct.

All of the following are steps used to find the target profit for companies that incur income taxes except:

If the number of units produced is less than the number of units sold,which of the following statements is true when comparing operating profit under absorption versus variable costing?

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.If the sales mix shifts to 50 percent planes and 50 percent boats,what happens to the weighted average contribution margin per unit?

When a company that produces multiple products faces a constraint in areas such as labor hours or machine hours,managers often prefer to maximize the contribution margin per unit of constraint.

An advantage of using absorption costing is that it prevents managers from increasing production solely for the purpose of inflating profit.

Exhibit 6-6 Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce. -Refer to Exhibit 6-6.Which of the following is the correct contribution margin per unit?

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. How many units in total must be sold to break even?

Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. -Refer to Exhibit 6-5.What is the operating profit?

Sensitivity analysis can be used to determine how changes in variables will impact target profit.

Exhibit 6-1 Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit.Each unit of product is sold for $20. -Refer to Exhibit 6-1.Assume that Larimer Company expects to sell 5,000 units of product this coming month.What is the margin of safety in sales dollars?

Exhibit 6-6 Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce. -Refer to Exhibit 6-6.Which of the following is the correct contribution margin per direct labor hour?

Target profit before taxes is calculated as target profit after tax divided by one minus the tax rate.

Exhibit 6-8 Perry,Inc.produced 15,000 units during the year.Of these,12,000 were sold for $50 each.Other Perry,Inc.data are as follows: -Refer to Exhibit 6-8.Calculate Perry's operating profit assuming the company uses absorption costing.

Sensitivity analysis is also called "what-if analysis."

Exhibit 6-1 Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit.Each unit of product is sold for $20. -Refer to Exhibit 6-1.What is the break-even point in sales dollars?

Which of the following companies would be most likely to use the break-even point expressed in units?

Which of the following is not found on an income statement prepared using absorption costing?

What Is Managerial Accounting

How Is Job Costing Used to Track Production Costs

How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

How Is Process Costing Used to Track Production Costs

How Do Organizations Identify Cost Behavior Patterns

How Are Relevant Revenues and Costs Used to Make Decisions

How Is Capital Budgeting Used to Make Decisions

How Are Operating Budgets Created

How Do Managers Evaluate Performance Using Cost Variance Analysis

How Do Managers Evaluate Performance in Decentralized Organizations

How Is the Statement of Cash Flows Prepared and Used

How Do Managers Use Financial and Nonfinancial Performance Measures

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Exam 6: How Is Cost-Volume-Profit Analysis Used for Decision Making

All of the following are steps used to find the target profit for companies that incur income taxes except:

If the number of units produced is less than the number of units sold,which of the following statements is true when comparing operating profit under absorption versus variable costing?

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.If the sales mix shifts to 50 percent planes and 50 percent boats,what happens to the weighted average contribution margin per unit?

When a company that produces multiple products faces a constraint in areas such as labor hours or machine hours,managers often prefer to maximize the contribution margin per unit of constraint.

An advantage of using absorption costing is that it prevents managers from increasing production solely for the purpose of inflating profit.

Exhibit 6-6 Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce. -Refer to Exhibit 6-6.Which of the following is the correct contribution margin per unit?

Exhibit 6-4 Sanchez Company produces two different remote control products with the following monthly data for the most recent month: -Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales. How many units in total must be sold to break even?

Exhibit 6-5 Estrada Incorporated produces two different products with the following monthly data. -Refer to Exhibit 6-5.What is the operating profit?

Sensitivity analysis can be used to determine how changes in variables will impact target profit.

Exhibit 6-1 Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit.Each unit of product is sold for $20. -Refer to Exhibit 6-1.Assume that Larimer Company expects to sell 5,000 units of product this coming month.What is the margin of safety in sales dollars?

Exhibit 6-6 Sauer Company sells folding chairs for $40.00 per unit.Variable cost is $15.00 per unit.Each chair requires 4 direct labor hours and 2 machine hours to produce. -Refer to Exhibit 6-6.Which of the following is the correct contribution margin per direct labor hour?

Target profit before taxes is calculated as target profit after tax divided by one minus the tax rate.

Exhibit 6-8 Perry,Inc.produced 15,000 units during the year.Of these,12,000 were sold for $50 each.Other Perry,Inc.data are as follows: -Refer to Exhibit 6-8.Calculate Perry's operating profit assuming the company uses absorption costing.

Sensitivity analysis is also called "what-if analysis."

Exhibit 6-1 Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit.Each unit of product is sold for $20. -Refer to Exhibit 6-1.What is the break-even point in sales dollars?

Which of the following companies would be most likely to use the break-even point expressed in units?

Which of the following is not found on an income statement prepared using absorption costing?

What Is Managerial Accounting

How Is Job Costing Used to Track Production Costs

How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

How Is Process Costing Used to Track Production Costs

How Do Organizations Identify Cost Behavior Patterns

How Are Relevant Revenues and Costs Used to Make Decisions

How Is Capital Budgeting Used to Make Decisions

How Are Operating Budgets Created

How Do Managers Evaluate Performance Using Cost Variance Analysis

How Do Managers Evaluate Performance in Decentralized Organizations

How Is the Statement of Cash Flows Prepared and Used

How Do Managers Use Financial and Nonfinancial Performance Measures

Filters