ACG 2071 Tiny Test #1 - Chapters 1 through 3
Whimsy Company had the following income statement:
Sales revenue (800 units)
Cost of goods sold:
Fixed costs
$14,000
Variable costs
16,000
Gross profit
Operating expenses:
Fixed costs
12,000
Variable costs
11,200
Operating income
$72,000
30,000
42,000
23,200
$18,800
1. Show the calculation for the total contribution margin. Circle the amount.
$72,000 - $16,000 - $11,200 = $44,800
2. Show the calculation of the gross profit ratio. Circle the rate.
$42,000/$72,000 = 58.33%
3. Show the calculation of the unit variable cost. Circle the amount.
($16,000 + $11,200)/800 = $34.00
ACG 2071 Tiny Test #1 Chapters 1 through 3
MW3:00
6 participation points possible
Dart Company had the following income statement:
Sales revenue (400 units)
Cost of goods sold:
Fixed costs
$14,000
Variable costs
18,000
Gross profit
Operating expenses:
Fixed costs
15,000
Variable costs
14,200
Operating income
$72,000
32,000
40,000
29,200
$10,800
1. Show the calculation for the total contribution margin. Circle the amount.
$72,000 - $18,000 - $14,200 = $39,800
2. Show the calculation of the gross profit ratio. Circle the rate.
$40,000/$72,000 = 55.56%
3. Show the calculation of the unit variable cost. Circle the amount.
($18,000 + $14,200)/400 = $80.50
ACG 2071 Review Problems Chapters 1 through 3
1. Three costs incurred by Hanson Company are summarized below at two different activity levels, 1,000
and 1,600 units:
1,000 Units
1,600 Units
Cost 1
$24,000
$42,000
Cost 2
$12,000
$16,000
Cost 3
$17,500
$28,000
How much is the total variable cost of all of the costs for which the behavior is truly variable?
Cost 1 = Mixed cost; Total costs and unit costs differ at the two activity levels.
Cost 2 = Mixed cost; Total costs and unit costs differ at the two activity levels.
Cost 3:
$17,500/1,000 = $17.50 per unit
$28,000/1,600 = $17.50 per unit
Answer = Only cost 3: $17,500 at 1,000 units or $28,000 at 1,600 units
2.
A significant weakness of the high-low method is that
A. a significant amount of management expertise is necessary to break out the variable and fixed costs.
B. the two data points that are used may not be representative of the general relation between cost and
activity.
C. the calculations are so complex that a computer is usually necessary in order to get accurate results.
D. monthly data must be collected for at least three years before the method can be used.
3.
Which of the following statements is correct?
A. Total fixed costs are equal to revenue plus variable cost per unit times the quantity produced.
B. Profit is equal to total fixed costs plus revenue.
C. Total fixed costs are equal to profit minus revenue.
D. Profit is equal to revenue minus total variable costs minus total fixed costs.
4.
A regression analysis yields the following information:
Regression Statistics
Multiple R
0.961386
R Square
0.924262
Adjusted R Squ
0.916688
Standard Error
39.10106
Observations
12
ANOVA
df
Regression
1
Residual
10
Total
11
Intercept
X Variable 1
Coefficients
824.516
2.087
SS
186578
15288.9
201867
Standard
Error
225.526
0.09912
MS
186578
1528.89
F
122.0345
Sign F
6.3E-07
t Stat
4.2349
11.0469
P-value
0.00173
0.00634
Lower
95%
452.579
0.87409
Upper
95%
1457.6
1.3158
Lower
95.0%
452.58
0.8741
Upper
95.0%
1457.6
1.3158
What is the estimated cost for a production level of 900 units?
TC = (2.087)(900) + 824.516 = $2,702.82 = $2,703
5.
Which of the following correctly describes fixed and variable cost behavior as total volume increases?
A.
Unit fixed costs stay the same and unit variable costs increase.
B.
Total fixed costs stay the same and total variable costs increase.
C.
Unit fixed costs decrease and total variable costs decrease.
D.
Unit fixed costs decrease and unit variable costs decrease.
3
6. Florida Golf Supply has collected the following information over the last six months.
Month
Units produced
Total costs
April
10,000
$25,600
May
12,000
26,200
June
18,000
27,600
July
11,000
25,450
August
12,000
26,000
Sept
17,000
27,800
Using the high-low method, what is the estimated total cost in a month when 11,400 units are produced?
VC per unit = [$27,600 - $25,600] / [18,000 – 10,000] = $0.25 per unit
$27,600 = (0.25)*18,000 + FC
FC = $23,100
TC = (0.25)*11,400 + 23,100 = $25,950