INDIANA CORPORATION PRODUCES A SINGLE PRODUCT THAT IT SELLS FOR $9 PER UNIT ANSWER

1. Indiana Corporation produces a single product that it sells for $9 per unit. During the first year of operations, 100,000 units were produced, and 90,000 units were sold. Manufacturing costs and selling and administrative expenses for the year were as follows:
Fixed Costs Variable Costs
Raw materials $1.75 per unit produced
Direct labor $1.25 per unit produced
Factory overhead $100,000 $0.50 per unit produced
Selling and administrative $70,000 $0.60 per unit
sold
What was Indiana Corporation’s net operating income for the year using variable costing
A)271,000 B)281,000 C)181,000 d)371,000

2.
Last year, Gransky Corporation’s variable costing net operating income was $52,100, and its ending inventory increased by 400 units. Fixed manufacturing overhead cost was $7 per unit. What was the absorption costing net operating income last year?

a)54,900 b)2800 c)52,100 d)49,300

3.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead $255,000
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.
Under variable costing, the company’s net operating income for the year would be _______ than under absorption costing.

a)108,000 lower b)60,000higher c)60,000 lower d)108,000 higher

4) . Rank the following methods of assigning overhead costs from least accurate to most accurate
a) Departmental rates, plantwide rate, activity-based costing
b) Plantwide rate, activity-based costing, departmental rates
c) Plantwide rate, departmental rates, activity-based costin
d) Activity-based costing, departmental rates, plantwide rate

5) Green Company’s variable expenses are 75% of sales. At a sales level of $400,000, the company’s degree of operating leverage is 8. At this sales level, fixed expenses are
a)75000 b)50000 c)87500 d)100,000

6) Viren Corporation has provided the following data from its activity-based costing system:
Activity Cost Pool Total Cost Total Activity
Assembly $387,000 25,000 machine-hours $15.48/hour
Processing orders $68,510 1,700 orders $40.30/hour
Inspection $129,117 1,930 inspection-hours  $66.90/hour
550 * 15.48 = $8514
90 *40.30 = $3627
40 * 66.90 = 2676
Total = 14817 / 240 units = $61.74
The company makes 240 units of product T91H a year, requiring a total of 550 machine hours, 90 orders, and 40 inspection hours per year. The product’s direct materials cost is $16.98 per unit, and its direct labor cost is $12.09 per unit. According to the activity-based costing system, the average cost of product T91H is closest to _______ per unit.
a)75.70 b)79.66 c)29.07 d)90.81

7) Slosh Cleaning Corporation services both residential and commercial customers. Slosh expects the following operating results next year for each type of customer:
Operating Results
Residential Commercial
Sales $60,000 $140,000
Contribution margin ratio 50% 30%
Slosh expects to have $18,000 in fixed expenses next year. What would Slosh’s total dollar sales have to be next year to generate a profit of $90,000?
a)270,000 b)216000 c)300,000 d)250000

8. Which of the following is true regarding the contribution margin ratio of a single-product company?
a) The contribution margin ratio multiplied by the variable expense per unit equals the contribution margin per unit
b) As fixed expenses decrease, the contribution margin ratio increases.
c) The contribution margin ratio increases as the number of units sold increases
d)If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales.

9. Callaham Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
Sales volume (units)
4,000 5,000
Cost of sales $338,000 $422,500 All Variable
Selling and administrative costs $89,600 $106,000
The best estimate of the total contribution margin when 4,300 units are sold is
a)43,430
b)64,070
c)38270
d)134,590

10.) Mardist Corporation has sales of $100,000, variable expenses of $75,000, fixed expenses of $30,000, and a net loss of $5,000. How much would Mardist have to sell to achieve a profit of 10% of sales?
a)180,000 b)225,500 c)187500 d)200,000

11.) Purchase-order processing is an example of a/an _______ activity
a) unit-level b) product-level c) batch-level d)
organization-sustaining

12) At a break-even point of 400 units sold, variable expenses were $4,000, and fixed expenses were $2,000. What will the 401st unit sold contribute to profit
a)5 b)10 c)15 d )0

13. Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
Activity Cost Pools Activity Rate
Size-related $0.94 per guest
Complexity-related $31.62 per tier
Order-related $55.70 per order
• The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake.
• The measure of complexity is the number of tiers in the cake.
• The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.)
• The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders are listed here:
Pyburn Wedding Smith Wedding
Number of reception guests 72 189
Number of tiers on the cake 4 5
Cost of purchased decorations for cake $29.92 $68.75
Suppose the company decides that the present activity-based costing system is too complex and that all costs (except for the costs of purchased decorations) should be allocated on the basis of the number of guests. In that event, what would you expect to happen to the costs of cakes?
a) The cost of cakes for receptions with more than the average number of guests would go down
b) The cost of cakes for receptions with fewer than the average number of guests would go down
c) The costs of all cakes would go up
d) The costs of all cakes would go down

14)
Which statement is true for a company that uses variable costing?

a) The unit product cost changes because of changes in the number of units manufactured
b) Product costs include variable administration costs
c) Profit fluctuates with sales.
d) Any underapplied overhead is included in the product cost.

15)
Bear Publishing sells a nature guide. The following information was reported for a typical month (sales volume is constant each month):
Total Per Unit
Sales $17,600 $16.00
Variable expenses $9,680 $8.80
Contribution margin $7,920 $7.20
Fixed expenses $3,600
Net operating income $4,320
Bear is expecting a 20-cent increase in variable expenses. No other changes are expected or planned. How much contribution margin should Bear expect after the increase?

a) Cant be determined
b) 4100
c) 7700
d) 9900

16)
Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
Activity Cost Pools Activity Rate
Size-related $0.94 per guest
Complexity-related $31.62 per tier
Order-related $55.70 per order
• The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake.
• The measure of complexity is the number of tiers in the cake.
• The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.)
• The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders are listed here:
Pyburn Wedding Smith Wedding
Number of reception guests 72 189
Number of tiers on the cake 4 5
Cost of purchased decorations for cake $29.92 $68.75
Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, which amount would the company have to charge for the Pyburn wedding cake to just break even?

a)55.79
b)29.92
c)279.87
d)338.64

17.)

Use the following information to answer this question.
Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has compiled the following data for the past five months of operations.
Machine Hours Electrical Cost
August 1,000 $1,620
September 900 $1,510
October 1,500 $1,870
November 2,000 $1,950
December 1,300 $1,730
Using the high-low method of analysis, the estimated variable cost per machine hour for electricity is closest to which of the following?

a)2.50
b)0.98
c)1.68
d)0.40

18)
Murdoch Corporation has provided the following data concerning its only product:
Murdoch Product Data
Selling price $230 per unit
Current sales 39,100 units
Break-even sales 29,716 units
What is the margin of safety in dollars?

a) $2,158,320
b) $8,993,000
c) $5,995,333
d) $6,834,680

19) Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
Activity Cost Pools Activity Rate
Size-related $0.94 per guest
Complexity-related $31.62 per tier
Order-related $55.70 per order
• The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake.
• The measure of complexity is the number of tiers in the cake.
• The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.)
• The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders are listed here:
Pyburn Wedding Smith Wedding
Number of reception guests 72 189
Number of tiers on the cake 4 5
Cost of purchased decorations for cake $29.92 $68.75
Assuming that the company charges $556.96 for the Smith wedding cake, what would be the overall margin on the order?
a)165.41
b)96.66
c)154.45
d)460.30

 
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