Annette Smith Essay

AC505 week 8 final exam tutorial numbers 2-17 2. Which costs will change with a decrease in activity within the relevant range? A) Total fixed costs and total variable cost. B) Unit fixed costs and total variable cost. Answer C) Unit variable cost and unit fixed cost. D) Unit fixed cost and total fixed cost. 3. An increase in the activity level within the relevant range results in: A) an increase in fixed cost per unit. B) a proportionate increase in total fixed costs.

C) an unchanged fixed cost per unit. D) a decrease in fixed cost per unit. Answer Use the following to answer questions 4-5:

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The following information has been provided by the Evans Retail Stores, Inc. , for the first quarter of the year: Sales $350,000 Variable selling expense 35,000 Fixed selling expenses 25,000 Cost of goods sold (variable) 160,000 Fixed administrative expenses 55,000 Variable administrative expenses 15,000 4. The gross margin of Evans Retail Stores, Inc. for the first quarter is: A) $210,000. B) $140,000. C) $220,000. D) $190,000. Answer Sales 350,000 – CGS 160,000 = 190,000 5.

The contribution margin of Evans Retail Stores, Inc. for the first quarter is: A) $300,000. B) $140,000. C) $210,000.

D) $190,000. 5. The contribution margin of Evans Retail Stores, Inc. for the first quarter is: A) $300,000. B) $140,000. Answer B Sales 350,000 – CGS (variable) 160,000 – Var Sell and Adm 35,000 – Var Adm 15,000 = 140,000 C) $210,000. D) $190,000. 6. The total contribution margin decreases if sales volume remains the same and: A) fixed expenses increase. B) fixed expenses decrease. C) variable expense per unit increases. Answer D) variable expense per unit decreases. 7. A company has provided the following data: Sales 3,000 units Sales price $70 per unit Variable cost $50 per unit Fixed cost $25,000

If the sales volume decreases by 25%, the variable cost per unit increases by 15%, and all other factors remain the same, net income will: A) decrease by $31,875. B) decrease by $15,000. C) increase by $20,625. D) decrease by $3,125. Answer: A Orig data CM 20. 00 X 3000 = 60,000 – FC 25,000 = NI 35,000 New scenario CM 12. 50 X 2250 = 28,125 – FC 25,000 = NI 3,125 Decrease of 31,875 8. Wallace, Inc. , prepared the following budgeted data based on a sales forecast of $6,000,000: Variable Fixed Direct materials $1,600,000 Direct labor 1,400,000 Factory overhead 600,000 $ 900,000 Selling expenses 240,000 360,000

Administrative expenses 60,000 140,000 Total $3,900,000 $1,400,000 What would be the amount of sales dollars at the break-even point? A) $2,250,000 B) $3,500,000 C) $4,000,000 D) $5,300,000 Answer: C BEP Sales = Fixed Exp/CM ratio = 1,400,000/. 35 (2,100. 000/6,000,000) = 4,000,000 9. The following information pertains to Rica Company: Sales (50,000 units) $1,000,000 Manufacturing costs: Variable 340,000 Fixed 70,000 Selling and admin. expenses: Variable 10,000 Fixed 60,000 How much is Rica’s break-even point in number of units? A) 9,848 B) 10,000 C) 18,571 D) 26,000 Answer: B BEP Units = Fixed Exp/Unit CM ratio = 130,000 / 13. 0 = 10,000 130,000 = Fixed Manu of 60,000 + Fixed selling and adm of 70,000 The 13. 00 unit cm margin is calculated by dividing sales and var costs by 50,000. Use the following to answer questions 10-11: Dorian Company produces and sells a single product. The product sells for $60 per unit and has a contribution margin ratio of 40%. The company’s monthly fixed expenses are $28,800. 10. The variable expense per unit is: A) $31. 20. B) $24. 00. C) $36. 00. D) $28. 80. Answer: C Var Exp/Unit = Unit Price – contribution margin ratio 36. 00 = 60. 00 – 24. 00 (40% of $60. 00 per unit) 11. The break-even point in sales dollars is: A) $48,000.

B) $72,000. C) $28,800. D) $0. Answer: B BEP Sales = 28,800 / . 4 = 72,000 12. An allocated portion of fixed manufacturing overhead is included in product costs under: Absorption Variable Costing costing A) No No B) No Yes C) Yes No D) Yes Yes Answer: C Use the following to answer questions 13-16: Farron Company, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $92 Units in beginning inventory 0 Units produced 8,700 Units sold 8,300 Units in ending inventory 400 Variable costs per unit: Direct materials $13 Direct labor 55 Variable manufacturing overhead 1

Variable selling and administrative 5 Fixed costs: Fixed manufacturing overhead $130,500 Fixed selling and administrative 8,300 13. What is the unit product cost for the month under variable costing? A) $69 B) $84 C) $89 D) $74 Answer: A DM 13. 00 + DL 55. 00 + V OH 1. 00 = 69. 00 14. What is the unit product cost for the month under absorption costing? A) $74 B) $89 C) $69 D) $84 Answer: D DM 13. 00 + DL 55. 00 + V OH 1. 00 + F OH 15. 00 = 84. 00 F OH = 130,500/8700 15. What is the net income for the month under variable costing? A) $10,600 B) ($17,000) C) $16,600 D) $6,000 Answer: A Sales (8,300 X $92) $763,600

Variable Expenses Beg Inv 0 Var Manu (8,700 X $69) 600,300 Less End Invty (400 X 69) (27,600) Variable CGS (572,700) Variable Selling and Admin (8300 X 5) ( 41,500) Contribution Margin 149,400 Less Fixed Expenses 138,800 Net Income 10,600 16. What is the net income for the month under absorption costing? A) ($17,000) B) $16,600 C) $6,000 D) $10,600 Answer: B Sales (8,300 X $92) $763,600 Beg Inv 0 CGM (8,700 X $84) 730,800 Less EI (400 X 84) (33,600) CGS (697,200) Gross Margin 66,400 Less Selling and Admin 49,800 Net Income 16,600 17. Orion Corporation is preparing a cash budget for the six months beginning January 1.

Shown below are the company’s expected collection pattern and the budgeted sales for the period. Expected collection pattern: 65% collected in the month of sale 20% collected in the month after sale 10% collected in the second month after sale 4% collected in the third month after sale 1% uncollectible Budgeted sales: January $160,000 February 185,000 March 190,000 April 170,000 May 200,000 June 180,000 The estimated total cash collections during April from sales and accounts receivables would be: A) $155,900. B) $167,000. C) $171,666. D) $173,400. Answer: D 65% of 170,000 + 20% of 190,000 + 10% of 185,000 + 4% of 160,000 = 173,400

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