BA213 Managerial Accounting: Week 2 Study Guide (20 MCQs)

BA213 Management Accounting
Week 2 Study Guide (20 Questions)

1. Which of the following is true regarding the contribution margin ratio of a single product company? (Points : 2)
As fixed expenses decrease, the contribution margin ratio increases.
The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.
The contribution margin ratio will decline as unit sales decline.
The contribution margin ratio equals the selling price per unit less the variable expense ratio.

2. If a company is operating at the break-even point: (Points : 2)
its contribution margin will be equal to its variable expenses.
its margin of safety will be equal to zero.
its fixed expenses will be equal to its variable expenses.
its selling price will be equal to its variable expense per unit.

3. Target profit analysis is used to answer which of the following questions? (Points : 2)
What sales volume is needed to cover all expenses?
What sales volume is needed to cover fixed expenses?
What sales volume is needed to earn a specific amount of net operating income?
What sales volume is needed to avoid a loss?

4. The margin of safety can be calculated by: (Points : 2)
Sales - (Fixed expenses/Contribution margin ratio).
Sales - (Fixed expenses/Variable expense per unit).
Sales - (Fixed expenses + Variable expenses).
Sales - Net operating income.

5. Sorin Inc., a company that produces and sells a single product, has provided its contribution format income statement for January.
Sales (4,200 units) $155,400
Variable expenses 100,800
Contribution margin 54,600
Fixed expenses 42,400
Net operating income $ 12,200

If the company sells 4,600 units, its total contribution margin should be closest to: (Points : 2)
$54,600
$59,800
$69,400
$13,362

6. Decaprio Inc. produces and sells a single product. The company has provided its contribution format income statement for June.
Sales (8,800 units) $528,000
Variable expenses 290,400
Contribution margin 237,600
Fixed expenses 211,700
Net operating income $ 25,900

If the company sells 9,200 units, its net operating income should be closest to: (Points : 2)
$27,077
$49,900
$36,700
$25,900

7. The margin of safety in the Flaherty Company is $24,000. If the company's sales are $120,000 and its variable expenses are $80,000, its fixed expenses must be: (Points : 2)
$8,000
$32,000
$24,000
$16,000

8. Jilk Inc.'s contribution margin ratio is 58% and its fixed monthly expenses are $36,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $103,000? (Points : 2)
$23,740
$59,740
$67,000
$7,260

9. Borich Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit $ 150.00
Variable expense per unit $ 73.50
Fixed expense per month $308,295

The break-even in monthly unit sales is closest to: (Points : 2)
2,055
4,030
4,194
3,426

10. Data concerning Follick Corporation's single product appear below:
Selling price per unit $ 110.00
Variable expense per unit $ 30.80
Fixed expense per month $321,552

The break-even in monthly dollar sales is closest to: (Points : 2)
$1,148,400
$638,851
$321,552
$446,600

11. Hettrick International Corporation's only product sells for $120.00 per unit and its variable expense is $52.80. The company's monthly fixed expense is $396,480 per month. The unit sales to attain the company's monthly target profit of $13,000 is closest to: (Points : 2)
7,755
6,093
5,753
3,412

12. The costing method that treats all fixed costs as period costs is: (Points : 2)
absorption costing.
job-order costing.
variable costing.
process costing.

13. Under the variable costing method, which of the following is always expensed in its entirety in the period in which it is incurred? (Points : 2)
fixed manufacturing overhead cost
fixed selling and administrative expense
variable selling and administrative expense
All of these

14. Net operating income under variable and absorption costing will generally: (Points : 2)
always be equal.
never be equal.
be equal only when production and sales are equal.
be equal only when production exceeds sales.

15. Fleet Corporation produces a single product. The company manufactured 700 units last year. The ending inventory consisted of 100 units. There was no beginning inventory. Variable manufacturing costs were $6.00 per unit and fixed manufacturing costs were $2.00 per unit. What would be the change in the dollar amount of ending inventory if variable costing was used instead of absorption costing? (Points : 2)
$800 decrease
$200 decrease
$0
$200 increase

16. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Selling price $97

Units in beginning inventory 0
Units produced 2,200
Units sold 2,100
Units in ending inventory 100

Variable cost per unit:
Direct materials $32
Direct labor $25
Variable manufacturing overhead $ 2
Variable selling and administrative $ 9

Fixed costs:
Fixed manufacturing overhead $ 8,800
Fixed selling and administrative $37,800

What is the total period cost for the month under the absorption costing approach? (Points : 2)
$56,700
$65,500
$8,800
$37,800

17. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Units in beginning inventory 0
Units produced 7,100
Units sold 7,000
Units in ending inventory 100

Variable cost per unit:
Direct materials $33
Direct labor $53
Variable manufacturing overhead $ 1
Variable selling and administrative $ 7

Fixed costs:
Fixed manufacturing overhead $170,400
Fixed selling and administrative $ 7,000

What is the unit product cost for the month under variable costing? (Points : 2)
$118
$94
$111
$87

18. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:
Selling price $123

Units in beginning inventory 0
Units produced 1,000
Units sold 900
Units in ending inventory 100

Variable cost per unit:
Direct materials $41
Direct labor $26
Variable manufacturing overhead $ 4
Variable selling and administrative $ 6

Fixed costs:
Fixed manufacturing overhead $ 17,000
Fixed selling and administrative $ 11,700

What is the net operating income for the month under variable costing? (Points : 2)
$12,700
$5,600
$1,700
$14,400

19. The following data pertain to last year's operations at Clarkson, Incorporated, a company that produces a single product:
Units in beginning inventory 0
Units produced 100,000
Units sold 98,000

Selling price per unit $10.00

Variable cost per unit:
Direct materials $ 1.50
Direct labor $ 2.50
Variable manufacturing overhead $ 1.00
Variable selling and administrative $ 2.00

Fixed costs:
Fixed manufacturing overhead $200,000
Fixed selling and administrative $ 50,000

What was the absorption costing net operating income last year? (Points : 2)
$44,000
$48,000
$50,000
$49,000

20. Beamish Inc., which produces a single product, has provided the following data for its most recent month of operations:
Number of units produced 8,000

Variable cost per unit:
Direct materials $ 37
Direct labor $ 56
Variable manufacturing overhead $ 4
Variable selling and administrative $ 2

Fixed costs:
Fixed manufacturing overhead $312,000
Fixed selling and administrative $448,000

There were no beginning or ending inventories. The unit product cost under absorption costing was: (Points : 2)
$93
$97
$136
$194
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