Managerial accounting
Which income statement format better facilitates the determination of a
company’s break-even point?- Variable costing income statement
Broadway Company sells three products: A, B and C. Product A's unit
contribution margin is higher than Product B's which is higher than Products C's.
Which one of the following events is most likely to increase the company's
overall break-even point?- An increase in the overall market demand for Product
B
Select the incorrect equation for computing the breakeven point.A Company sells a product for P7.50 whose variable cost is P2.25 per unit. The
company needed to sell 20,000 shirts to break even. What was the company’s
total fixed costs?- P105,000
B Company sells a product for P7.50 whose variable cost is P2.25 per unit. The
company needed to sell 20,000 shirts to break even and its net income was
P5,040 before tax. How many units did the company sell?- 20,960
W Company manufactures a product that sells for P800 per unit. The unit
variable costs are P600 and total fixed costs are P6,600,000. The annual sales
required for W Company to break even is- P26,400,000
F Company manufactures and sells T-shirts. Last year, the shirts sold for P7.50
each, and the variable cost to manufacture them was P2.25 per unit. The
company needed to sell 20,000 shirts to break even. The net income last year
was P5,040. F Company’s expectation for the coming year include the following:
- The selling price of the T-shirts will be P9.00
- Variable cost to manufacture will increase by one-third
- Fixed costs will increase by 10%
- The income tax rate of 40% will be unchanged
The number of T-shirts that must be sold to break even in the coming year is:19,250
A calculation used in CVP analysis determines the break-even point. Once the
break-even point has been reached, operating income will increase by the:contribution margin per unit for each additional unit sold.
A company sells a product for P9.00 which has a variable manufacturing cost of
P3.00 per unit. Last year, the company needed to sell 20,000 shirts to break
even. Assuming the company is subject to a 40% tax rate and wishes to earn
P22,500 profit after tax for the coming year, what sales will be required?P236,250
X Company sold a product last year that had a P5.00 unit contribution margin. A
significant change in the company’s production technology has caused a 10%
increase in annual fixed costs but a 20% decrease in unit variable costs.
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Assuming there was no change in the product’s P10.00 selling price, what is the
company’s new contribution margin ratio?- 60%
A significant change in Y Company’s production technology caused its total fixed
costs of P6,708,716 to increase by 9%. However, the change caused a 20% unit
cost decrease in direct labor and a 25% decrease in the unit material cost
leading to P25 increase in its P300 unit contribution margin. After incorporating
these changes, what is Y Company’s new break-even point?- 22,500 units
One Company sells two products, A and B. A has a unit contribution margin of
P40 while B has a unit contribution margin of P25. Last year the company sold
40,000 units of Product A and 60,000 units of Product B. What is the company’s
weighted average contribution margin?- (P40 x 0.4) + (P25 x 0.6)
For a profitable company, the amount by which sales can decline before losses
occur is known as the:- margin of safety
V Company sold 10,000 units of its product for P100 per unit. Its unit variable
costs are P20 and its total fixed costs are P600,000. Assuming the company has
a 40% tax rate, what is its degree of operating leverage?- 4.00
Which of the following is not an assumption of CVP analysis?- Sales exceed
production.
Select the incorrect statement from the following.- In the future, the only
nonmonetary variable included in the break-even model will be sales volume.
In absorption costing, as contrasted with direct costing, the following are
absorbed into inventory.- All the elements of fixed and variable manufacturing
overhead.
Which of the following is a term more descriptive of the type of cost accounting
often called direct costing.- Variable Costing
A criticism of variable costing for managerial accounting purpose is that it- Might
encourage managers to emphasize the short term at the expense of the long
term
Inventory under the variable costing includes- Direct materials cost, direct labor
cost, and variable factory overhead.
If production is greater than sales (units), then absorption costing net income
will generally be- Greater than direct costing net income
Which of the following statements is correct?- If all the products manufactured
during the period are sold in that period, variable costing net income is equal to
absorption costing net income.
An unfavorable volume variance means that- Actual output was less than the
level used to set the standard fixed cost.
Normal costing differs from actual costing in treating- Overhead
Under absorption costing, if sales remain constant from period 1 to period 2, the
company will report a larger income in period 2 when- Period 2 production
exceeds period 1 production
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Absorption costing differs from variable costing in all of the following exceptTreatment of variable production costs.
The variable costing method ordinarily includes in product costs the following:Direct materials cost, direct labor cost, and variable manufacturing overhead
cost
Samar Co. manufactures a single product. Variable production costs are P20 and
fixed production costs are P300,000. Samar uses a normal activity of 20,000
units to set its standard costs. Samar began the year with no inventory,
produced 22,000 units, and sold 21,000 units. The volume variance under
absorption costing would be- P30,000
Tacloban Company manufactures a single product. Variable production costs are
P20 and fixed production costs are P300,000. Tacloban uses a normal activity of
20,000 units to set its standard costs. Tacloban began the year with no
inventory, produced 22,000 units, and sold 21,000 units. The standard cost of
goods sold under variable costing would be- P420,000
The excerpt presented below was taken from Smurf Company’s records for the
fiscal year ended November 30:
Direct materials used
P300,000
Direct labor
100,000
Variable factory overhead
50,000
Fixed factory overhead
80,000
Selling and administrative cost - variable
40,000
Selling and administrative cost – fixed
20,000
If Smurf Company uses variable costing, the inventoriable costs for the current
fiscal year are- 450,000
Compute for the inventory under the direct costing method using the data
given: units unsold at the end of the period 45,000; raw materials used, P6.00
per unit; raw materials inventory, beginning, P5.90 per unit; direct labor, P3.00
per unit; variable overhead per unit, P2.00 per unit; indirect labor for the month,
P33,750, total fixed costs, P67,500.- P11.00
With a production of 200,000 units of product A during the month of June,
Bucayao Corporation had incurred costs as follows:
Direct Materials
Direct labor used
P 200,000
135,000
Manufacturing overhead:
Variable
75,000
Fixed
90,000
Selling and administrative expenses:
Variable
30,000
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Fixed
85,000
Total
P 615,000
Under absorption costing, the unit cost of product A was:- P 2.50
LY & Company completed its first year of operations during which time the
following information were generated:
Total units produced
Total units sold
100,000
80,000 at 100 per unit
Work in process ending inventory cost
Fixed cost Factory Overhead
Selling and administrative
P 1.2 million
P 0.7 million
Per unit variable cost
Raw materials
P 20.00
Direct labor
12.50
Factory Overhead
7.50
Selling and administrative
10.00
If the company used the variable (direct) costing method, the operating income
would be- P 2,100,000
Life, Inc., manufactures a single product for which the costs and selling prices
are:
Variable production costs
Selling price
P 50 per unit
P 125 per unit
Fixed production overhead
Fixed selling and administrative overhead
P 200,000 per quarter
P 80,000 per quarter
Normal capacity is 20,000 units per quarter. Production in the first quarter was
19,000 units and sales volume was 16,000 units. No opening inventory for the
quarter. The absorption costing profit for the quarter was:- P 950,000
The following operating data are available from the records of Sheena Company
for the month of January 2018:
Sales (P70 per unit)
P 210,000
Direct materials
59,200
Direct labor
48,000
Manufacturing overhead:
Fixed
36,080
Variable
24,000
Marketing and general expenses:
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Fixed
11,000
Variable
5% of sales
Production in units
3,200 units
Beginning inventory
none
The ending finished goods inventory under absorption costing would be:- P
14,280
The books of Mariposa Company pertaining to the year ended December 31,
2018 operations, showed the following figures relating to product A:
Beginning inventory-FG and WIP
none
No. of units produced
40,000
No. of units sold at 15
32,500
Direct materials used
P
Direct labor used
P
177,500
85,000
Fixed
Variable
P 110,000
61,500_
P 171,500
Fixed admin expenses
P
30,000
Under variable costing, what would be the finished goods inventory as of
December 31, 2018?- P 60,750.00
During the year 2018, Good Health Corporation manufactured 70,000 units of
product A, a new product. Only 65,000 units were sold during the year. There
was no beginning inventory. Manufacturing cost per unit was P20.00 variable
and P50.00 fixed. What would be the effect on net income if absorption costing
is used instead of variable costing?- Profit is P250,000 higher
The following information has been extracted from P Co.’s financial records for
its first year of operations:
Units produced, 10,000
Units sold, 7,000
Variable costs per unit:
Direct material, P 8
Direct labor, 9
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Manufacturing overhead, 3
SG&A, 4
Fixed costs:
Manufacturing overhead, P 70,000
SG&A, 30,000
Based on absorption costing, the Cost of Goods Manufactured for P Co.’s first
year would be- P 270,000
The excerpt presented below was taken from Smurf Company’s records for the
fiscal year ended November 30:
Direct materials used
P300,000
Direct labor
100,000
Variable factory overhead
50,000
Fixed factory overhead
80,000
Selling and administrative cost - variable
40,000
Selling and administrative cost – fixed
20,000
Using absorption (full) costing, inventoriable costs are- P530,000
The following operating data are available from the records of Sheena Company
for the month of January 2018:
Sales (P70 per unit)
P 210,000
Direct materials
59,200
Direct labor
48,000
Manufacturing overhead:
Fixed
36,080
Variable
24,000
Marketing and general expenses:
Fixed
Variable
11,000
5% of sales
Production in units
3,200 units
Beginning inventory
none
The net income for the month under the variable costing method would be:- P
32,420
The books of Mariposa Company pertaining to the year ended December 31,
2018 operations, showed the following figures relating to product A:
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Beginning inventory-FG and WIP
none
No. of units produced
40,000
No. of units sold at 15
32,500
Direct materials used
P
Direct labor used
P
177,500
85,000
Fixed
Variable
P 110,000
61,500_
P 171,500
Fixed admin expenses
P
30,000
Which costing method, variable or absorption costing, would show a higher
operating income for 2018 and by how much?- Absorption by P 20,625
Broadway Company sells three products: A, B and C. Product A's unit
contribution margin is higher than Product B's which is higher than Products C's.
Which one of the following events is most likely to increase the company's
overall break-even point?- An increase in the overall market demand for Product
B
Which of the following would not affect the breakeven point?- Number of units
sold
Green Corporation expects to sell 3,000 plants a month. Its operations manager
estimated the following monthly costs:
Variable costs
Fixed costs
P 7,500
15,000
What sales price per plant does she need to achieve to begin making a profit if
she sells the estimated number of plants per month?- P7.50
An organization's break-even point is 4,000 units at a sales price of P50 per unit,
variable cost of P30 per unit, and total fixed costs of P80,000. If the company
sells 500 additional units, by how much will its profit increase?- P10,000
Consider the following:
Fixed expenses
P78,000
Unit contribution margin
Target net profit
12
42,000
How many unit sales are required to earn the target net profit?- 10,000 units
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Carribean Company produces a product that sells for P60. The variable
manufacturing costs are P30 per unit. The fixed manufacturing cost is P10 per
unit based on the current level of activity, and fixed selling and administrative
costs are P8 per unit. A selling commission of 10% of the selling price is paid on
each unit sold.
The contribution margin per unit is:- P24
Seal Yard Ornaments sells lawn ornaments for P15 each. Seal's contribution
margin ratio is 40%. Fixed costs are P32,000. Should fixed costs increase 30%,
how many additional units will Seal have to produce and sell in order to
generate the same net profit as under the current conditions?- 1600
Albatross Company has fixed costs of P90,300. At a sales volume of P360,000,
return on sales is 10%; at a P600,000 volume, return on sales is 20%. What is
the break-even volume?- 258000
The following is the Lux Corporation's contribution format income statement for
last month:
Sales
Less variable expenses
P2,000,000
1,400,000
Contribution margin
600,000
Less fixed expenses
Net income
360,000
P 240,000
The company has no beginning or ending inventories. A total of 40,000 units
were produced and sold last month. What is the company's degree of operating
leverage?- 2.50
The following economic data were provided by the corporate planning staff of
Heaven, Inc.:
Sales volume
30,000 units
Sales price per unit
P30
Unit variable costs:
Variable manufacturing
P13
Other variable costs
Unit variable costs
8
P21
Unit contribution margin
P 8
Fixed costs:
Manufacturing
P150,000
Other fixed costs
P 50,000
Total fixed costs
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P200,000
The management is considering installing a new, automated manufacturing
process that will increase fixed costs by P50,000 and reduce variable
manufacturing cost by P3 per unit. The management set a target a profit of
P70,000 before and after the acquisition of the automated machine. After
installation of the automated machine, what will be the change in the units
required to achieve the target profit?- 3,333 unit decrease
https://www.academia.edu/39915477/X04_Cost_Volume_Profit_Relationships
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