AMIS 212
EXAM 2 REVIEW
1. Montgomery Company has a variable selling cost. If sales volume increases, how
will the total variable cost and the variable cost per unit behave?
A.
B.
C.
D.
E.
Total Variable Cost
Increase
Increase
Increase
Remain constant
Decrease
Variable Cost Per Unit
Increase
Remain constant
Decrease
Decrease
Increase
2. Farac Corporation has provided the following production and total cost data for two
levels of monthly production volume. The company produces a single product.
Production volume ..................................... 4,000 units 5,000 units
Direct materials ..........................................
$208,800
$261,000
Direct labor ................................................
$119,200
$149,000
Manufacturing overhead ............................
$319,200
$329,500
The best estimate of the total cost to manufacture 4,300 units is closest to:
A.
B.
C.
D.
$695,740
$635,970
$655,855
$674,890
3. What type of cost exhibits the behavior that follows?
Manufacturing
Volume (Units)
50,000
80,000
A.
B.
C.
D.
E.
Cost
Per Unit
$3.000
1.875
Variable cost.
Fixed cost.
Semivariable cost.
Step-variable cost.
Mixed cost.
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4. A review of Glandon Corporation's accounting records found that at a volume of
80,000 units, the variable and fixed cost per unit amounted to $7 and $5,
respectively. On the basis of this information, what amount of total cost would
Glandon anticipate at a volume of 90,000 units?
A. $960,000.
B. $1,010,000.
C. $1,030,000.
D. $1,080,000.
Use the following to answer questions 5-7:
Colgate Company, which uses the high-low method to analyze cost behavior, has
determined that machine hours best explain the company's utilities cost. The company's
relevant range of activity varies from a low of 600 machine hours to a high of 1,100
machine hours, with the following data being available for the first six months of the
year:
Month
January
February
March
April
May
June
Utilities
$8,700
8,360
8,950
9,360
9,625
9,150
Machine Hours
800
720
810
920
950
900
5. The variable utilities cost per machine hour is:
A. $0.18.
B. $4.50.
C. $5.00.
D. $5.50.
E. an amount other than those listed above.
6. The fixed utilities cost per month is:
A. $3,764.
B. $4,400.
C. $4,760.
D. $5,100.
E. an amount other than those listed above.
7. Using the high-low method, the utilities cost associated with 980 machine hours
would be:
A. $9,510.
B. $9,660.
C. $9,700.
D. $9,790.
E. an amount other than those listed above.
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8. Which of the following would take place if a company were able to reduce its variable
cost per unit?
A.
B.
C.
D.
E.
Contribution
Margin
Increase
Increase
Decrease
Decrease
Increase
Break-even
Point
Increase
Decrease
Increase
Decrease
No effect
9. Which of the following would take place if a company experienced an increase in
fixed costs?
A. Net income would increase.
B. The break-even point would increase.
C. The contribution margin would increase.
D. The contribution margin would decrease.
E. More than one of the above events would occur.
10. A recent income statement of Fox Corporation reported the following data:
Sales revenue
Variable costs
Fixed costs
$3,600,000
1,600,000
1,000,000
If these data are based on the sale of 10,000 units, the break-even point would be:
A. 2,000 units.
B. 2,778 units.
C. 3,600 units.
D. 5,000 units.
E. an amount other than those given above.
11. Ribco Co., makes and sells only one product. The unit contribution margin is $6 and
the break-even point in unit sales is 24,000. The company's fixed costs are:
A. $4,000.
B. $14,400.
C. $40,000.
D. $144,000.
E. an amount other than those given above.
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12. Yellow, Inc., sells a single product for $10. Variable costs are $4 per unit and fixed
costs total $120,000 at a volume level of 10,000 units. What dollar sales level
would Yellow have to achieve to earn a target net profit of $240,000?
A. $400,000.
B. $500,000.
C. $600,000.
D. $750,000.
E. $900,000.
13. Lamar & Co. makes and sells two types of shoes, Plain and Fancy. Annual volume
(in units) is 10,000 shoes. Other data concerning these products are as follows:
Unit selling price
Variable cost per unit
Plain
$20.00
12.00
Fancy
$35.00
24.50
Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000.
Assuming that the sales mix remains constant, the number of units of Plain that the
company must sell to break even is:
A. 2,000.
B. 3,000.
C. 3,375.
D. 5,000.
E. 5,625.
14. 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
equal:
a. $87,500.
b. $100,000.
c. $50,000.
d. $75,000.
15. All of the following are expensed under variable costing except:
A. variable manufacturing overhead.
B. fixed manufacturing overhead.
C. variable selling and administrative costs.
D. fixed selling and administrative costs.
E. items "C" and "D" above.
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Use the following to answer questions 16-17:
Indiana Company incurred the following costs during the past year when planned
production and actual production each totaled 20,000 units:
Direct materials used
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Variable selling and administrative costs
Fixed selling and administrative costs
$280,000
120,000
160,000
100,000
60,000
90,000
16. If Indiana uses variable costing, the total inventoriable costs for the year would
be:
A. $400,000.
B. $460,000.
C. $560,000.
D. $620,000.
E. $660,000.
17. The per-unit inventoriable cost under absorption costing is:
A. $9.50.
B. $25.00.
C. $28.00.
D. $33.00.
E. $40.50.
18. Gomez's inventory increased during the year. On the basis of this information,
income reported under absorption costing:
A. will be the same as that reported under variable costing.
B. will be higher than that reported under variable costing.
C. will be lower than that reported under variable costing.
D. will differ from that reported under variable costing, the direction of which
cannot be determined from the information given.
E. will be less than that reported in the previous period.
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19. Joy Company reported $65,000 of net income for the year by using absorption
costing. The company had no beginning inventory, planned and actual production of
20,000 units, and sales of 18,000 units. Variable manufacturing costs were $20 per
unit, and total budgeted fixed manufacturing overhead was $100,000. If there were
no variances, net income under variable costing would be:
A.
B.
C.
D.
E.
$15,000.
$55,000.
$65,000.
$75,000.
$115,000.
20. Roberts, which began business at the start of the current year, had the following data:
Planned and actual production: 40,000 units
Sales: 37,000 units at $15 per unit
Manufacturing costs:
Variable: $4 per unit
Fixed: $260,000
Selling and administrative costs:
Variable: $1 per unit
Fixed: $32,000
The amount of gross margin the company would disclose on an absorptioncosting income statement is:
A. $97,500.
B. $147,000.
C. $166,500.
D. $370,000.
E. none of the above.
21. Flint began business at the start of the current year. The company planned to
produce 25,000 units, and actual production conformed to expectations. Sales
totaled 20,000 units at $27 each. Costs incurred were:
Fixed manufacturing overhead
Fixed selling and administrative cost
Variable manufacturing cost per unit
Variable selling and administrative cost per unit
$150,000
100,000
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What would the company's variable-costing income be?
A. $125,000.
B. $130,000.
C. $155,000.
D. $160,000.
E. some other amount.
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22. Which of the following budgets is based on many other master-budget components?
A. Direct labor budget.
B. Overhead budget.
C. Sales budget.
D. Cash budget.
E. Selling and administrative expense budget.
23. Coleman, Inc., anticipates sales of 50,000 units, 48,000 units, and 51,000 units in
July, August, and September, respectively. Company policy is to maintain an
ending finished-goods inventory equal to 40% of the following month's sales. On
the basis of this information, how many units would the company plan to produce
in August?
A. 46,800.
B. 49,200.
C. 49,800.
D. 52,200.
E. None of the above.
Use the following to answer questions 24:
Northwest manufactures a product requiring 0.5 ounces of platinum per unit. The cost of
platinum is approximately $360 per ounce; the company maintains an ending platinum
inventory equal to 10% of the following month's production usage. The following data
were taken from the most recent quarterly production budget:
Planned production in units
July
1,000
August
1,100
September
980
24. The cost of platinum to be purchased to support August production is:
A. $195,840.
B. $198,000.
C. $200,160.
D. $391,680.
E. None of the above.
25. Trimble Company budgeted sales on account of $120,000 for July, $211,000 for
August, and $198,000 for September. Collection experience indicates that none of the
budgeted sales will be collected in the month of the sale, 60% will be collected the
month after the sale, 36% in the second month, and 4% will be uncollectible. The
cash receipts from accounts receivable that should be budgeted for September would
be:
A) $169,800.
B) $147,960.
C) $197,880.
D) $194,760.
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26. Diego makes all purchases on account, subject to the following payment pattern:
Paid in the month of purchase: 30%
Paid in the first month following purchase: 60%
Paid in the second month following purchase: 10%
If purchases for January, February, and March were $200,000, $180,000, and
$230,000, respectively, what were the firm's budgeted payments in March?
A. $69,000.
B. $138,000.
C. $177,000.
D. $197,000.
E. None of the above.
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