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ACCT 224 – Exam 1 – Chapter 12
Answer each question with the correct answer (1.5 pts ea).
1. Which of the following are reported on a contribution margin income statement:
A. Variable expenses, fixed expenses, and gross margin.
B. Variable expenses, fixed expenses, and contribution margin.
C. Cost of goods sold, operating expenses, and contribution margin.
D. Cost of goods sold, operating expenses, and gross margin.
2. Which of the following statements does not describe a characteristic of
management accounting?
A. Management accounting is required to conform to GAAP.
B. Approximate amounts rather than accurate amounts or refined estimates are
often used in management accounting.
C. Management accounting places a great deal of emphasis on the future and
budgets.
D. Management accounting is more concerned with units of the organization
rather than with the whole organization.
3. Managerial accounting, as opposed to financial accounting, is primarily
concerned with:
A.
B.
C.
D.
present and future planning and control.
historical financial results.
providing budgets to investors and creditors.
present and past trend analysis .
4. Managerial accounting can best be described as:
A. the preparation and use of accounting information within the
organization.
B. the preparation and distribution of the corporate tax
return.
C. the preparation of audited financial statements.
D. meeting the requirements of generally accepted accounting principles.
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5. Which of the following is another term for semi-variable costs?
A. overhead costs.
B. mixed costs.
C. relevant range costs.
D. fixed costs.
6. As the total volume of activity changes:
A. the total of fixed costs changes.
B. variable costs per unit stay the same.
C. variable costs per unit change.
D. fixed costs per unit stay the same.
7. The formula for expressing the total of a fixed, variable, or mixed cost at any level
of activity is:
A. total cost = fixed cost + (variable rate * volume of activity).
B. total cost = fixed cost * (variable rate + volume of activity).
C. total cost = fixed cost * variable rate per unit.
D. total cost = fixed cost – variable cost.
8. When a cost formula is used to describe a semi-variable cost behavior pattern,
fixed costs are expected to remain constant and total variable costs are
expected to:
A. decrease as the level of activity increases.
B. decrease as the level of activity decreases.
C. increase as the level of activity decreases.
D. remain constant as the level of activity increases.
9. When the cost behavior pattern has been identified as fixed at a certain volume
of activity:
A. any change in volume will cause the cost to change.
B. it is appropriate to express the cost on a per unit of activity basis.
C. total fixed costs will remain the same within the relevant range.
D. total fixed costs will never change regardless of any substantial changes.
10. As the level of activity decreases:
A. variable cost per unit decreases.
B. variable cost per unit increases.
C. variable costs in total remain the same .
D. variable cost per unit remain the same.
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11. An example of a cost that is likely to have a semi-variable behavior pattern is:
A. production labor wages.
B. depreciation of production equipment.
C. salaries of production supervisors.
D. utilities in the factory building.
12. An example of a cost likely to have a fixed behavior pattern is:
A. sales force commission.
B. utilities in the office building.
C. production labor wages.
D. depreciation expense.
13. An example of a cost likely to have a variable behavior pattern is:
A.
B.
C.
D.
sales force salaries.
insurance premiums.
depreciation of production equipment.
materials used in production.
14. Which of the following is the correct calculation for the contribution margin
ratio?
A. Contribution margin divided by sales.
B. Sales divided by contribution margin.
C. Sales less variable expenses.
D. Contribution margin divided by variable costs.
15.The cost formula for monthly customer order processing cost has been
established as $200/month (fixed) + $0.10 per order (variable). It is expected that
5,600 orders will be processed in May and 6,400 in June. Total order processing
costs for May and June combined will be estimated to be:
A.
B.
C.
D.
$1,400.
$1,200.
$1,600.
$1,300.
16. Operating income using the contribution margin format income statement is
calculated as:
A. revenue – variable expenses = gross margin – fixed expenses.
B. revenue – variable expenses = contribution margin – fixed expenses.
C. revenue – cost of goods sold = contribution margin – fixed expenses.
D. revenue – cost of goods sold = contribution margin – operating
expenses.
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17.A firm has revenues of $120,000, a contribution margin ratio of 30%, and fixed
expenses that total $10,000. Operating income equals:
A.
B.
C.
D.
$26,000.
$20,000.
$58,000.
$36,000.
18. Selling price per unit
$100
Variable expenses per unit
$40
Fixed expenses per month
$60,000
Operating income at a volume of 3,000 units per month is:
A.
B.
C.
D.
$240,000.
$200,000.
$180,000.
$120,000.
19. Selling price per unit
$100
Variable expenses per unit
$50
Fixed expenses per month
$60,000
The break-even point volume of units is:
A.
B.
C.
D.
1,100.
1,200.
1,500.
1,000.
20. Selling price per unit
$100
Variable expenses per unit
$50
Fixed expenses per month
$60,000
The break-even point in terms of total revenues per month is:
A.
B.
C.
D.
$130,000.
$160,000.
$120,000.
$100,000.
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21. Selling price per unit
$100
Variable expenses per unit
$60
Fixed expenses per month
$50,000
The contribution margin ratio is:
A.
B.
C.
D.
50%.
60%.
30%.
40%.
22. ABC Company’s sales are $100,000, fixed costs are $40,000, and variable costs are
$50,000. ABC Company’s contribution margin and operating income are __________
and __________ respectively.
A.
B.
C.
D.
$60,000; $10,000
$10,000; $60,000
$10,000; $50,000
$50,000; $10,000
23. Current operating income for Jax Inc. is $225,000. Selling price per unit is
$250, the CM ratio is 30%, and fixed expenses are $300,000. (10 pts.)
a) Calculate the variable costs per unit and total variable costs.
b) Calculate the contribution margin per unit and total contribution margin.
c) How many units are currently being sold?
d) Calculate the total sales revenues.
e) Calculate the break-even point in units.
f) Calculate the break-even point in sales dollars.
g) Calculate the units needed for a target operating profit of $300,000
h) Calculate the sales dollars needed for a target operating profit of $300,000.
i) Calculate the margin of safety.
j) Calculate the margin of safety ratio.
24. Teller Inc. incurs monthly fixed expenses of $1,000 insurance and $500 in rent.
They also incur $2 per unit in materials and $8 per unit in direct labor. Utilities of $500
per month and $1 per unit are also incurred. (3 pts)
a)
b)
c)
What is their cost formula using Y=a+bX?
Calculate the total costs incurred for production of 900 units in July.
Calculate the total costs incurred for production of 1,000 units in Aug.
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25. Convert the following traditional income statement into a contribution margin
income statement. Contribution margin ratio = 35%. (4 pts)
Sales
$100,000
COGS
60,000
Gross Margin
40,000
Oper. Exps.
20,000
Oper. Income
20,000
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McGraw-Hill Education.