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# 1. As the cost-driver activity level increases within the relevant

### Resolved Question:

1. As the cost-driver activity level increases within the relevant range_____.
a. total fixed costs increase
b. fixed costs per unit decrease
c. total variable costs decrease
d. variable costs per unit decrease

2. As sales exceed the break-even point, a high contribution-margin percentage
a. increases profits faster than does a low contribution-margin percentage
b. increases profits at the same rate as a low contribution-margin percentage
c. decreases profits at the same rate as a low contribution-margin percentage
d. increases profits slower than does a low contribution-margin percentage

3. As the level of activity decreases within the relevant range _______.
a. total fixed costs increase
b. fixed costs per unit decrease
c. total variable costs increase
d. variable costs per unit remain unchanged

4. A compensation plan where the sales force is paid salary pulus commission is a ________.
a. purely variable costs
b. discretionary fixed cost
c. committed fixed cost
d. mixed cost

5. An increase in total varible cost usually indicates _________.
a. the cost-driver activity level is decreasing
b. the cost-driver activity level is increasing
c. variable cost per unit is decreasing
d. variable cost per unit is increasing

6. Walnut corporation sells desks at \$480 per desk. The variable costs associated with each desk are as follows:
Direct materials \$195
Direct labor \$126

Total fixed costs for the period are \$456,840. The contribution margin per desk is ________.
a. \$195
b. \$108
c. \$51
d. \$126

7. If the sales price per unit is \$100, the unit variable cost is \$75, and total fixed csots are \$150,000, then the break-even volume in dollar sales rounded to the nearest whole dollar is _______.
a. \$600,000
b. \$150,000
c. \$200,000
d. \$1,500.00

8. The following information is for Kisner Corporation:
Total fixed costs \$313,500
Variable costs per unit \$99
Selling price per unit \$154

If management has targeted net income of \$46,200 (ignore income taxes), then the number of units that must be sold is ______.
a. 2,036 units
b. 2,336 units
c. 5,700 units
d. 6,540 units

9. The following information is for Kinsner Corporation:
Total fixed costs \$313,500
Varible costs per unit \$99
Selling price per unit \$154

If management has target net income of \$59,400 (ignore income taxes), then sales revenue should be _______.
a. \$580,067
b. \$1,044,120
c. \$239,721
d. \$671,220

10. Strongsville Company wishes to earn after-tax net income of \$18,000. Total fixed costs are \$84,000 and the contribution margin per unit is \$6.00 Strongsville’s tax rate is 40%. The number of units that must be sold to earn the target net income is __________.
a. 14,000 units
b. 17,000 units
c. 19,000 units
d. 21,500 units

11. Assume the following cost information for Marie Company:
Selling price per unit \$144
Variable costs per unit \$80
Total fixed costs \$80,000
Tax rate 40%

________ of sales dollars is required to earn an after-tax net income of \$24,000.
a. \$216,000
b. \$252,000
c. \$270,000
d. \$315,000

12. Assume the following cost information for Andrew Company:
Selling price per unit \$144
Variable costs per unit \$80
Total fixed costs \$80,000
Tax rate 40%

________ must be sold to earn an after-tax net income of \$40,800.
a. 3,700 units
b. 2,313 units
c. 1,594 units
d. 1,063 units
13. Assume the following cost information for Janice Company
Selling price per unit \$144
Variable costs per unit \$80
Total fixed costs \$80,000
Tax rate 40%

If fixed costs increased by 10% and management wanted to maintain the original break-even point, then the selling price per unit would have to be increased to ______.
a. \$158.40
b. \$208.00
c. \$150.40
d. \$155.20

14. Palmer Inc. currently produces 110,000 units at a cost of \$440,000. Next year Palmer Inc. expects to produce 115,000 units. Palmer’s relevant range is 100,000 to 120,000 units. If the cost is variable and 115,000 units are produced, the total cost ________.
a. will stay the same
b. will increase to \$460,000
c. will decrease
d. will be intermediate

15. Suppose a Holiday Inn Hotel has annual fixed costs applicable to its rooms of \$1.2 million for its 300-room hotel, average daily room rents of \$50, and average varible costs of \$10 for each room rented. It operates 365 days per year.

The amount of net income on rooms that will be generated if the hotel is completely full throughout the entire year is _____.
a. \$(1,888,000)
b. \$4,275,000
c. \$3,180,000
d. \$5,475,000

16. Information is relevant if it is a(n) _______.
a. expected future cost or it differs among alternatives
b. expected future cost and it differs among alternatives
c. historical cost and it differs among alternatives
d. expected future cost that differs from a past cost

17. Joshua Company produces and sell a product that has variable costs of \$7 per unit and fixed costs of \$200,000 per year. If production increases from 20,000 units to 25,000 units, the unit cost will _______.
a. increase by \$35,000
b. decrease by \$8 per unit
c. decrease by \$2 per unit
d. not change

18. Pennsylvania Company provided the following information regarding its only product-skateboards
Direct materials used \$200,000
Direct labor 80,000
Fixed selling and administrative costs 190,000
Selling unit price 70
Units produced and sold 10,000

______ is the gross margin (gross profit) if the absorption approach is used.

a. \$300,000
b. \$390,000
c. \$470,000
d. \$450,000

19. Missouri company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are \$0.50 per unit and fixed costs are \$0.50 per unit. Current monthly sales are 173,000 units. Gates company has contacted Missouri Company about purchasing 20,000 units at \$1.00 each. Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order. Missouri Company’s change in profits if the order is accepted will be _______.
a. \$20,000 increase
b. \$20,000 decrease
c. \$10,000 increase
d. \$10,000 decrease

20. Birch Company manufactures a part for its production cycle. The costs per unit for 5,000 units of this part are as follows:
Direct materials \$3
Direct labor 5
Total costs \$16

The fixed factory overhead costs are unavoidable. Spalding Corporation has offered to sell 5,000 units of the same part to Birch Company for \$15 a unit. Assuming no other use for the facilities, Birch Company should ________.
a. buy from Scalding Corp to save \$1 per unit
b. make the part to save \$1 per unit
c. buy from Scalding Corp to save \$3 per unit
d. make the part to save \$3 per unit

21. Fird Company manufactures a part for its production cycle. The costs per unit for 10,000 units of this part are as follows:
Direct materials \$20
Direct labor 15
Total costs \$66
The fixed factory overhead costs are unavoidable. Assuming no other use of their facilities, the highest price that Fird Company should be willing to pay for the part is ________.
a. \$41
b. \$35
c. \$45
d. \$51

22. Riverside Industries has three product lines, A, B, and C. The following information is available:
A B C

Sales \$100,000 \$90,000 \$44,000
Varible costs 76,000 48,000 35,000
Contribution margin \$24,000 \$42,000 \$9,000
Fixed Costs:
Avoidable 9,000 18,000 3,000
Unavoidable 6,000 9,000 7,700
Operating income \$9,000 \$15,000 \$(1,700)
Riverside industries is thinking of dropping product line C because it is reporting a loss. Assuming Riverside drops line C and does not replace it, the operating income will _______.
a. increase by \$2,400
b. increase by \$600
c. decrease by \$6,000
d. decrease by \$9,000

23. Cena corporation has a joint process that produces three products: P, G and A. Each product may be sold at split-off or processed further and then sold. Join-processing costs for a year amount to \$25,000. Other relevant data are as follows:

Separable
Processing
Value Sales Value Costs after Sales

Completion Product at split-off Split off at

\$40,000 P \$32,000 \$5,000
29,000 G 16,500 7,500
10,000 A 6,400 8,000

Once product P is produced, processing it further will cause profits to _______.
a. increase by \$8,000
b. decrease by \$5,000
c. decrease by \$8,000
d. increase by \$3,000

24. Bert company is considering replacing a machine that is presently used in the production of its product. The following data are available:
Replacement
Old Machine Machine
Original cost \$57,000 \$35,000
Useful life in years 17 5
Current age in years 12 0
Book value \$39,000 -
Disposal value now \$8,000 -
Disposal value in 5 years 0 0
Annual cash operating costs \$7,000 \$4,000

The difference in cost between keeping the old machine and replacing the old machine, ignoring income taxes, is ____ the old machine.
a. \$22,000 in favor of keeping
b. \$12,000 in favor of keeping
c. \$37,000 in favor or replacing
d. \$22,000 in favor of replacing

25. Green Company planned to produce 12,000 units. Processing required 16,000 machine hours at a cost of \$15,000 + \$10.50 per machine hour. Actual sales were 14,000 units requiring 20,000 machine hours. Actual processing cost was \$222,000. ________ is the static-budget variance for processing.
a. \$39,000 favorable
b. \$39,000 unfavorable
c. \$42,000 favorable
d. \$42,000 unfavorable

26. Roger Company planned to product 12,000 units. Processing required 16,000 machine hours at a cost of \$15,000 + \$10.50 per machine hour. Actual sales were 14,000 units requiring 20,000 machine hours. Actual processing cost was \$222,000. _____is the activity-level variance for processing.
a. \$39,000 favorable
b. \$39,000 unfavorable
c. \$42,000 favorable
d. \$42,000 unfavorable

27. Identify which statement bellowing would NOT be a possible reason for variance between flexible budget and actual results.
a. material prices were different than expected
b. labor prices were different then expected
c. the actual volume of activity was different then expected
d. the amount of labor used per unit of output was different then expected
2
28. The following information is for Brooklyn Corporation:
Direct
Material
Standard price per unit of input \$29
Actual price per unit of input \$27
Standard inputs allowed per unit of output 3 pounds
Actual units of input used 9,000 pounds
Actual units of output 3,000 units
* Direct material is measured in pounds
_____ is the direct-material price variance.

a. \$6,000 favorable
b. \$6,000 unfavorable
c. \$18,000 favorable
d. \$18,000 unfavorable

29. The following information is for Euclid Corporation:
Direct
Material
Standard price per unit of input \$25
Actual price per unit of input \$24
Standard inputs allowed per unit of output 3 pounds
Actual units of input used 8,300 pounds
Actual units of output 2,770 units
* Direct material is measured in pounds
_____ is the direct-material quantity (usage) variance.

a. \$250 unfavorable
b. \$250 favorable
c. \$8,300 unfavorable
d. \$8,300 favorable

30. The following information is for Pepper Pike Corporation:
Direct
Material
Standard price per unit of input \$20
Actual price per unit of input \$18
Standard inputs allowed per unit of output 3 pounds
Actual units of input used 8,300 pounds
Actual units of output 2,770 units
* Direct material is measured in pounds
_____ is the total direct-material flexible-budget variance.

a. \$16,400 unfavorable
b. \$16,400 favorable
c. \$16,800 favorable
d. \$16,800 unfavorable

31. Berea Company produces 2,500 units. Each unit was expected to require 2 labor hours at a cost of \$10 per hour. Total labor cost was \$55,250 for 4,750 hours worked. Direct labor is measured in hours. _____ is the direct-labor price variance.
a. \$5,250 favorable
b. \$5,250 unfavorable
c. \$7,750 favorable
d. \$7,750 unfavorable

32. Berea Company produces 2,500 units. Each unit was expected to require 2 labor hours at a cost of \$10 per hour. Total labor cost was \$55,250 for 4,750 hours worked. Direct labor is measured in hours. _____ is the direct-labor quantity variance.
a. \$2,750 favorable
b. \$2,750 unfavorable
c. \$2,500 favorable
d. \$2,500 unfavorable

33. Berea Company produces 2,500 units. Each unit was expected to require 2 labor hours at a cost of \$10 per hour. Total labor cost was \$55,250 for 4,750 hours worked. Direct labor is measured in hours. _____ is the total flexible-budget variance for direct labor.
a. \$5,250 favorable
b. \$5,250 unfavorable
c. \$7,500 favorable
d. none of these answers are correct

34. To achieve maximum benefits at minimum cost, a management control system must foster _____.
a. goal congruence and employee motivation
b. motivation and responsibility accounting
c. responsibility accounting and managerial effort
d. managerial effort and goal congruence

35. The following information is available for Writers Inc. and its two divisions, Pen and Ink:
Company Pen Ink
as a whole Division Division
Net sales \$100,000 \$50,000 \$50,000
Fixed costs:
Controllable by
division manager 16,500 12,500 4,000
Controllable by others 8,000 5,000 3,000
Variable costs:
Cost of merchandise sold 24,500 17,500 7,000
Operating expenses 16,400 10,000 6,400
Unallocated costs 1,000
_____ is the contribution controllable by the manager of the Ink Division.

a. \$29,600
b. \$36,600
c. \$36,000
d. \$32,600

36. Jewel Company’s revenues are \$300 and invested capital is \$240. Expenses are currently 60% of sales. Jewel Company’s current return on investment is
a. 50%
b. 100%
c. 80%
d. none of these answers are correct

37. Kitchen Company’s revenues are \$300 on invested capital of \$240. Expenses are currently 70% of sales. If Kitchen Company can reduce its invested capital by 20%, return on investment will be _____.
a. 75%
b. 93.75%
c.18.75%
d. 46.88 %

38. The following information is available for the Super Company:
Sales \$1,000,000
Invested capital 312,500
ROI 20%
The net income is _____.

a. \$687,000
b. \$312,500
c. \$62,500
d. \$100,000

39. The following information pertains to Mary Company:
Total assets \$50,000
Total current liabilities 30,000
Total expenses 60,000
Total liabilities 35,000
Total revenues 80,000
If invested capital is defined as total assets, and their cost of capital is 10%, the economic profit (residual income) is _____.
a. \$4,000
b. \$15,000
c. \$20,000
d. \$1,600

40. Identify which of the following statements about cost centers and decentralization is true.
a. accountability for revenues and expenses exist independently of the ability to make decisions
b. accountability for revenues and expenses requires the ability to make decisions
c. decentralized organizations are organized into profit centers
d. cost centers are centralized, but profit centers are decentralized

41. The following information pertains to Robert Company:
Total assets \$50,000
Total current liabilities 10,000
Total expenses 60,000
Total liabilities 15,000
Total revenues 80,000
If invested capital is defined as total assets minus current liabilities, the economic profit (residual income) at an imputed interest rate of 20% is _____.

a. \$12,000
b. \$20,000
c. \$4,000
d. \$2,600

42. Transfer prices are _____.
a. costs of the segment producing the product or service
b. revenues of the segment acquiring the product or service
c. revenues of the segment producing the product or service
d. none of these answers are correct

43. The Table and Chair Divisions are part of the same company. Currently the Chair Division buys a part from Table for \$384. The Table Division wants to increase the price of the part it sells to Chair by \$96 to \$480. The manager of Chair has stated that it cannot afford to go that high, as it will decrease the division's profit to near zero. Chair can buy the part from an outside supplier for \$448. The cost data for the Table Division is as follows:
Direct materials \$136
Direct labor 200
If Table ceases to produce the parts for Chair, it will be able to avoid one-third of the fixed manufacturing overhead. The Table Division has excess capacity but no alternative uses for its facilities. From the standpoint of the company as a whole, should Chair continue to buy from Table or start to buy from the outside supplier?

a. Chair should buy from Table Division because the company’s profit would be \$58.00 per unit larger
b. Chair should buy from Table Division because the company’s profit would be \$32.00 per unit larger
c. Chair should buy from an outside supplier
d. None of these answers are correct
Submitted: 5 years ago.
Category: Homework
Expert:  Manal Elkhoshkhany replied 5 years ago.

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Customer: replied 5 years ago.
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Expert:  Manal Elkhoshkhany replied 5 years ago.

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Thanks again for your continued trust

Customer: replied 5 years ago.
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Expert:  Manal Elkhoshkhany replied 5 years ago.
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Manal Elkhoshkhany, Tutor
Category: Homework
Satisfied Customers: 9724
Experience: More than 5000 online tutoring sessions.

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