Question :
PART I — MULTIPLE CHOICE (28 points)
Instructions: Designate the best : 1311530
PART I — MULTIPLE CHOICE (28 points)
Instructions: Designate the best answer for each of the following questions.
1. Given the following costs for Abay Liquidators, select the answer choice that correctly classifies each cost’s behavior.
Total Cost at
1,500 Units1,800 Units
Cost A $4,650$5,580
Cost B 8,6009,400
a. Cost A and Cost B are both variable
b. Cost A is variable; Cost B is mixed
c. Cost A is variable; Cost B is fixed
d. Cost A and Cost B are both mixed
e. There is not enough information provided to determine the answer.
2. Which one of the following is not one of the assumptions that underlie basic CVP analysis?
a. When more than one product is sold, total sales will be in a constant sales mix.
b. All costs can be classified as variable or fixed with reasonable accuracy.
c. The behavior of both costs and revenues is linear throughout the relevant range.
d. The breakeven point changes when the number of units sold changes.
3. Candial Enterprises can produce and sell only one of the following two products:
Machine HoursContribution
RequiredMargin Per Unit
Product A0.6$4.50
Product B0.4$3.20
The company has machine capacity of 1,496 hours. How much will contribution margin be if Candial produces only the most profitable product?
a.$3,740
b.$11,968
c.$2,493
d.$11,220
4. Nova Supreme has a weighted-average unit contribution margin of $12 for its two products, Standard and Premium. Expected sales for Nova are 30,000 for Standard and 10,000 for Premium. Fixed expenses are $840,000. How many Standards will Nova Supreme sell at the break-even point?
a. 70,000
b. 50,000
c. 30,000
d. 52,500
5. Winners Games reported sales of $72,000 and net income totaling $12,000 during the year. It’s selling price is $6 per unit, its variable cost is $2 per unit, and its total fixed costs are $36,000. How much is the projected margin of safety?
a. $54,000
b. $66,000
c. $12,000
d. $18,000
6. Hanley’s Carwash has $80,000 of fixed costs and variable costs of 60% of sales. How much is total sales to achieve a net income of $140,000?
a. $550,000
b. $220,000
c. $150,000.
d. $366,667
7. In order to decrease a company’s break-even point, which of the following should be decreased?
a. The contribution margin ratio
b. The contribution margin
c. The selling price
d. Variable costs per unit
8. Little Tykes Day Care desires net income of $84,000. It has $28,000 of fixed costs and variable costs of 60% of sales. How much is contribution margin?
a. $280,000
b. $112,000
c. $186,667
d. $75,000
9. Assume October is the high-volume month for a toy manufacturer and July is the low-volume month. The following total production costs and volume levels have been recorded:
Total CostsVolume
October$72,0004,000
July$60,0001,500
How much are total fixed costs?
a. $12,000
b. $52,800
c. $132,000
d. $60,010
10. Fixed costs
a. increase in total as total production increases.
b. decrease in total as total production decreases.
c. decrease per unit as total production decreases.
d. increase per unit as total production decreases.
11. Variable costs, as activity increases, will
a. will stay the same in total.
b. increase per unit.
c. remain constant per unit.
d. decrease in total.
12. A cost that increases in total, but not proportionately with increases in the activity level, is a(n)
a. mixed cost.
b. variable cost.
c. fixed cost.
d. unusual fixed cost.
*13. Which of the following is included in the cost of goods manufactured under absorption costing but not under variable costing?
a. Direct materials
b. Variable factory overhead
c. Fixed factory overhead
d. Direct labor
*14. Which of the following would not be deducted in determining the contribution margin under variable costing?
a. Direct labor
b. Sales commissions
c. Sales office depreciation using the straight line method
d. Variable factory overhead
