Costs and Decision Making 1. At a break-even point of 400 units sold, variable expenses were $4,000, and fixed expenses were $2,000. What will the 401st unit sold contribute to profit? A. $15 B. $10 C. $0 D. $5 2. A disadvantage of the high-low method of cost analysis is that A. it can't be used when there are a very large number of observations. B. it uses two extreme data points, which may not be representative of normal conditions. C. it's too time-consuming to apply. D. it relies totally on the judgment of the person performing the cost analysis 3. Murdoch Corporation has provided the following data concerning its only product: Murdoch Product Data Selling price $230 per unit Current sales 39,100 units Break-even sales 29,716 units What is the margin of safety in dollars? A. $6,834,680 B. $8,993,000 C. $5,995,333 D. $2,158,320 4. An increase in the activity level within the relevant range results in a/an A. increase in fixed cost per unit. B. unchanged fixed cost per unit. C. proportionate increase in total fixed costs. D. decrease in fixed cost per unit. 5. Green Company's variable expenses are 75% of sales. At a sales level of $400,000, the company's degree of operating leverage is 8. At this sales level, fixed expenses are A. $100,000. B. $50,000. C. $87,500. D. $75,000. 6. A cost driver is A. the largest single category of cost in a company. B. an indirect cost that's essential to the business. C. a fixed cost that can't be avoided. D. a factor that causes variations in a cost 7. Rank the following methods of assigning overhead costs from least accurate to most accurate. A. Plantwide rate, departmental rates, activity-based costing B. Activity-based costing, departmental rates, plantwide rate C. Departmental rates, plantwide rate, activity-based costing D. Plantwide rate, activity-based costing, departmental rates 8. Use the following information to answer this question. Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs year were as follows: Production Cost Data. Direct materials $153,000 Direct labor $110,500 Variable manufacturing overhead $204,000. Fixed manufacturing overhead $255,000 Sales were $780,000 year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost. Under variable costing, the company's net operating income year would be _______ than under absorption costing. A. $60,000 higher B. $108,000 lower C. $60,000 lower D. $108,000 higher 9. Use the following information to answer this question. Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data levels of monthly sales volume. The company sells the product for $115.80 per unit. Sales volume (units) 4,000 5,000 Cost of sales $338,000 $422,500 Selling and administrative costs $89,600 $106,000 The best estimate of the total contribution margin when 4,300 units are sold is A. $38,270. B. $64,070. C. $43,430. D. $134,590. 10. Use the following information to answer this question. Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: Activity Cost Pools Activity Rate Size-related $0.94 per guest Complexity-related $31.62 per tier Order-related $55.79 per order •The measure of activity size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake. •The measure of complexity is the number of tiers in the cake. •The activity measure order-related cost pool is the number of orders. (Each wedding involves one order.) •The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The activity rates don't include the costs of purchased decorations, such as miniature statues and wedding bells, which are accounted . Data concerning two recent orders are listed here: Pyburn Wedding Smith Wedding Number of reception guests 72 189 Number of tiers on the cake 4 5 Cost of purchased decorations $29.92 $68.75 Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, which amount would the company have to ch
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