Managerial Accounting Exam CH 5-8

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Chapter 5 (1-70) Chapter 7(71-96) Chapter 8 (97-133) Chapter 6 (134-203

Reynold Enterprises sells a single product for $25. The variable expense per unit is $15 and the fixed expense per unit is $5 at the current level of sales. The company's net operating income will increase by $5 if one more unit is sold.

False

Incremental analysis is an analytical approach that focuses only on those revenues and costs that will change as a result of a decision.

True

To facilitate decision-making, fixed expenses should be expressed on a per-unit basis

False

On a CVP graph for a profitable company, the total revenue line will be steeper than the total expense line.

True

On a CVP graph for a profitable company, the total expense line will be steeper than the line representing fixed costs.

True

For a given level of sales, a low contribution margin ratio will produce less net operating income than a high contribution margin ratio

True

The impact on net operating income of a given dollar change in sales can be computed by applying the contribution margin ratio to the dollar change in sales.

True

The variable expense per unit is $12 and the selling price per unit is $40. Then the contribution margin ratio is 70%.

True

Mark Company currently sells a video recorder with a selling price of $300 per unit. The variable expense per unit is $175 and fixed expenses are $100,000. If the company reduces variable expenses by $20 per unit and increases the fixed expenses by $10,000, the break-even point will increase.

False

The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the sum of the fixed expenses and the target profit by the contribution margin ratio.

True

The break-even point in units can be obtained by dividing total fixed expenses by the contribution margin ratio.

False

At the break-even point: Sales - Variable expenses = Fixed expenses.

True

If fixed expenses increase by $10,000 per year, then the level of sales needed to break even will also increase by $10,000.

False

If the fixed expenses increase in a company, and all other factors remain unchanged, then one would expect the margin of safety to decrease.

True

The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in dollars.

True

If two companies produce the same product and have the same total sales and same total expenses, operating leverage will be lower in the company with a higher proportion of fixed expenses in its cost structure.

False

A company with a degree of operating leverage of 4 would expect net operating income to increase by 200% if sales increased from $100,000 to $150,000

True

If two companies have the same total sales and total expenses and make the same product, the volatility of net operating income with changes in sales will tend to be greater in the company with a higher proportion of fixed expenses in its cost structure.

True

A shift in the sales mix from products with a low contribution margin ratio toward products with a high contribution margin ratio will lower the break-even point in the company as a whole

True

The difference between total sales in dollars and total variable expenses is called

The contribution margin

With regard to the CVP graph, which of the following statements is not correct?

. The CVP graph assumes that variable costs go down as volume goes up.

East Company manufactures and sells a single product with a positive contribution margin. If the selling price and the variable expense per unit both increase 5% and fixed expenses do not change, what is the effect on the contribution margin per unit and the contribution margin ratio?

C. Option C (Increase-No Change)

Which of the following formulas is used to calculate the contribution margin ratio?

(Sales - Variable expenses)  Sales

Brasher Company manufactures and sells a single product that has a positive contribution margin. If the selling price and variable expenses both decrease by 5% and fixed expenses do not change, then what would be the effect on the contribution margin per unit and the contribution margin ratio?

Option B (decrease-no change)

The break-even point in unit sales is found by dividing total fixed expenses by

the contribution margin per unit.

Break-even analysis assumes that:

the average variable expense per unit is constant

If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the break-even point in units is

F  (P-V). F divided by (p-v)

The break-even point in unit sales increases when variable expenses

increase and the selling price remains unchanged

The margin of safety percentage is computed as

(Total sales - Break-even sales)  Total sales

The amount by which a company's sales can decline before losses are incurred is called the

margin of safety

The degree of operating leverage can be calculated as:

contribution margin divided by net operating income

All other things the same, which of the following would be true of the contribution margin and variable expenses of a company with high fixed costs and low variable costs as compared to a company with low fixed costs and high variable costs?

Option C (Higher-Lower)

James Company has a margin of safety percentage of 20% based on its actual sales. The break-even point is $200,000 and the variable expenses are 45% of sales. Given this information, the actual profit is

$27,500

A company has provided the following data
Sales----3,000 units
Sales Price----- $70 per unit
Variable Price -----$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 operating income will:

decrease by $31,875.

Butteco Corporation has provided the following cost data for last year when 100,000 units were produced and sold:
Raw Material---$200,000
Direct Labor----$100,000
Manufacturing Overhead------$200,000
Selling and administrative expense---$150,000

All costs are variable except for $100,000 of manufacturing overhead and $100,000 of selling and administrative expense. There are no beginning or ending inventories. If the selling price is $10 per unit, the net operating income from producing and selling 110,000 units would be

$405,000

Menlove Company had the following income statement for the most recent year:
Sales (17,000 units)...... $357,000
Variable Expenses...........$255,000
Contribution Margin...........102,000
Fixed Expenes...................68,000
Net operating income.........34,000

Given this data, the unit contribution margin was:

$6 per unit

The following information relates to Clyde Corporation which produced and sold 50,000 units last month.

Sales.......$850,000
Manufacturing Cost:
Fixed..............................$210,000
Variable..........................$140,000
Selling and administrative expenses:
Fixed................................$300,000
Variable............................$45,000

There were no beginning or ending inventories. Production and sales next month are expected to be 40,000 units. The company's unit contribution margin next month should be

$13.30

Mancuso Corporation has provided its contribution format income statement for January. The company produces and sells a single product

Sales (2,900 units).....................$269,700
Variable Expense ......................$107,300
Contribution Margin....................162,400
Fixed Expenses..........................137,100
Net Operating Income.................$25,300

If the company sells 3,100 units, its total contribution margin should be closest to

$173,600

Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution format income statement for July

Sales (7,000 units)..............$315,000
Variable Expenses...............$175,000
Contribution Margin...............140,000
Fixed Expenses.......................103,500
Net operating Income...............36,500

If the company sells 6,900 units, its net operating income should be closest to:

$34,500

Sensabaugh Inc., a company that produces and sells a single product, has provided its contribution format income statement for January

Sales (1,800 units)......$91,800
Variable expense...........59,400
contribution Margin.......32,400
Fixed Expenes................27,000
Net operating income......5,400

$28,800

Gaudy Inc. produces and sells a single product. The company has provided its contribution format income statement for May

Sales (4,5000 units)........ $427,500
Variable Expenses...........265,500
Contribution Margin........162,000
Fixed Expenses..............135,300
Net operating income.......$26,700

$19,500

The contribution margin ratio is 25% for Grain Company and the break-even point in sales is $200,000. To obtain a target net operating income of $60,000, sales would have to be

$440,000

The contribution margin ratio is 30% for the Honeyville Company and the break-even point in sales is $150,000. If the company's target net operating income is $60,000, sales would have to be:

$350,000

Rothe Company manufactures and sells a single product that it sells for $90 per unit and has a contribution margin ratio of 35%. The company's fixed expenses are $46,800. If Rothe desires a monthly target net operating income equal to 15% of sales, the amount of sales in units will have to be (rounded):

2,600 units

The Herald Company manufactures and sells a single product which sells for $50 per unit and has a contribution margin ratio of 30%. The company's monthly fixed expenses are $25,000. If Herald desires a monthly target net operating income equal to 20% of sales dollars, sales in units will have to be (rounded)

5,000 units

Street Company's fixed expenses total $150,000, its variable expense ratio is 60% and its variable expenses are $4.50 per unit. Based on this information, the break-even point in units is

50,000 units

South Company sells a single product for $20 per unit. If variable expenses are 60% of sales and fixed expenses total $9,600, the break-even point will be

$24,000

Turner Company's contribution margin ratio is 15%. If the degree of operating leverage is 12 at the $150,000 sales level, net operating income at the $150,000 sales level must equal

$1,875

Patterson Company's variable expenses are 55% of sales. At a $400,000 sales level, the degree of operating leverage is 5. If sales increase by $30,000, the new degree of operating leverage will be (rounded)

3.91

Darth Company sells three products. Sales and contribution margin ratios for the three products follow
Product X product Y Product Z
Sales in dollars....................20,000 $40,000 $100,000
Contibution Margin ration.....45% 40% 15%

Given these data, the contribution margin ratio for the company as a whole would be

25%

Cindy, Inc. sells a product for $10 per unit. The variable expenses are $6 per unit, and the fixed expenses total $35,000 per period. By how much will net operating income change if sales are expected to increase by $40,000?

$16,000 increase

Knoke Corporation's contribution margin ratio is 29% and its fixed monthly expenses are $17,000. If the company's sales for a month are $98,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change

$11,420

Balonek Inc.'s contribution margin ratio is 57% and its fixed monthly expenses are $41,000. 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 $112,000?

$22,840

Danneman Corporation's fixed monthly expenses are $13,000 and its contribution margin ratio is 56%. 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 $41,000?

$9,960

Sinclair Company's single product has a selling price of $25 per unit. Last year the company reported a profit of $20,000 and variable expenses totaling $180,000. The product has a 40% contribution margin ratio. Because of competition, Sinclair Company will be forced in the current year to reduce its selling price by $2 per unit. How many units must be sold in the current year to earn the same profit as was earned last year?

15,000 units

Pool Company's variable expenses are 36% of sales. Pool is contemplating an advertising campaign that will cost $20,000. If sales increase by $80,000, the company's net operating income should increase by:

$31,200

Loren Company's single product has a selling price of $15 per unit. Last year the company reported total variable expenses of $180,000, fixed expenses of $90,000, and a net operating income of $30,000. A study by the sales manager discloses that a 15% increase in the selling price would reduce unit sales by 10%. If her proposal is adopted, net operating income would

increase by $28,500

Data concerning Runnells Corporation's single product appear below:

Per Unit Percent of Sales
Selling Price $160 100%
Variable Expense 80 50%
Contribution Margin 80 50

The company is currently selling 6,000 units per month. Fixed expenses are $424,000 per month. The marketing manager believes that a $7,000 increase in the monthly advertising budget would result in a 100 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

Increase of $1,000

Weinreich Corporation produces and sells a single product. Data concerning that product appear below

Per Unit Percent of Sales
Selling Price $180 100%
Variable Expense 90 50%
Contribution Margin 90 50%

The company is currently selling 2,000 units per month. Fixed expenses are $131,000 per month. The marketing manager believes that an $18,000 increase in the monthly advertising budget would result in a 170 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

Decrease of $2,700

Data concerning Lancaster Corporation's single product appear below:
Per Unit Percent of Sales
Selling Price $200 100%
Variable Expense 60 30%
Contribution Margin 140 70

Fixed expenses are $105,000 per month. The company is currently selling 1,000 units per month. Management is considering using a new component that would increase the unit variable cost by $44. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change?

Increase of $5,600

Ribb Corporation produces and sells a single product. Data concerning that product appear below:

Per Unit Percent of Sales
Selling Price $190 100%
Variable Expense 57 30%
Contribution Margin 133 70%

Fixed expenses are $913,000 per month. The company is currently selling 9,000 units per month. Management is considering using a new component that would increase the unit variable cost by $6. Since the new component would increase the features of the company's product, the marketing manager predicts that monthly sales would increase by 400 units. What should be the overall effect on the company's monthly net operating income of this change?

Decrease of $3,200

Data concerning Moscowitz Corporation's single product appear below

Per Unit Percent of Sales
Selling Price $160 100%
Variable Expense 96 60%
Contribution Margin 64 40%

Fixed expenses are $375,000 per month. The company is currently selling 8,000 units per month. The marketing manager would like to cut the selling price by $15 and increase the advertising budget by $23,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 3,100 units. What should be the overall effect on the company's monthly net operating income of this change?

Increase of $8,900

Montgomery Corporation produces and sells a single product. Data concerning that product appear below
Per Unit Percent of Sales
Selling Price $240 100%
Variable Expense 144 60%
Contribution Margin 96 40%

Fixed expenses are $239,000 per month. The company is currently selling 3,000 units per month. The marketing manager would like to cut the selling price by $12 and increase the advertising budget by $12,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 500 units. What should be the overall effect on the company's monthly net operating income of this change

Decrease of $6,000

Data concerning Knipp Corporation's single product appear below:
Per Unit Percent of Sales
Selling Price $230 100%
Variable Expense 46 20%
Contribution Margin 184 80%

Increase of $9,800

Mowrer Corporation produces and sells a single product. Data concerning that product appear below
Per Unit Percent of Sales
Selling Price $120 100%
Variable Expense 48 60%
Contribution Margin 72 40%

Fixed expenses are $567,000 per month. The company is currently selling 9,000 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $11 per unit. In exchange, the sales staff would accept a decrease in their salaries of $84,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 600 units. What should be the overall effect on the company's monthly net operating income of this change?

Increase of $21,600

Hirt Corporation sells its product for $12 per unit. Next year, fixed expenses are expected to be $400,000 and variable expenses are expected to be $8 per unit. How many units must the company sell to generate net operating income of $80,000?

120,000 units

A total of 30,000 units were sold last year. The contribution margin per unit was $2, and fixed expenses totaled $20,000 for the year. This year fixed expenses are expected to increase to $26,000, but the contribution margin per unit will remain unchanged at $2. How many units must be sold this year to earn the same profit as was earned last year?

43,000 units

A product sells for $20 per unit and has a contribution margin ratio of 40 percent. Fixed expenses total $240,000 annually. How many units of the product must be sold to yield a profit of $60,000?

37,500 units

Last year, Flynn Company reported a profit of $70,000 when sales totaled $520,000 and the contribution margin ratio was 40%. If fixed expenses increase by $10,000 next year, what amount of sales will be necessary in order for the company to earn a profit of $80,000?

$570,000

Perona Corporation produces and sells a single product. Data concerning that product appear below:
Selling price per unit..............$160.00
Variable Expense per unit $70.40
Fixed expense per month $385,280
The unit sales to attain the company's monthly target profit of $9,000 is closest to

4,400 units

Unit-level activities are performed each time a unit is produced.

True

Organization-sustaining activities are activities of the general organization that support specific products.

False

Costs classified as batch-level costs should depend on the number of batches processed rather than on the number of units produced, the number of units sold, or other measures of volume

True

Customer-level activities relate to specific customers and are not tied to any specific products

True

Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products on the basis of direct labor-hours.

True

Activity-based costing is a costing method that is designed to provide managers with product cost information for external financial reports.

False

Transaction drivers usually take more effort to record than duration drivers.

True

In general, duration drivers are more accurate measures of the consumption of resources than transaction drivers.

True

Even departmental overhead rates will not correctly assign overhead costs in situations where a company has a range of products that differ in volume, lot size, or complexity of production.

True

In activity-based costing, some manufacturing costs may be excluded from product costs

True

In activity-based costing, there are a number of activity cost pools, each of which is allocated to products and other costing objects using its own unique measure of activity

True

The practice of assigning the costs of idle capacity to products can result in unstable unit product costs.

True

An activity-based costing system should include all of the activities carried out in an organization because any simplification will inevitably result in inaccuracy

False

The costs of a particular department should not be split up among activity cost pools in an activity-based costing system.

False

Personnel administration is an example of (an):

Organization-sustaining activity.

Which of the following activities would be classified as a batch-level activity?

Setting up equipment

Would the following activities at a manufacturer of canned soup be best classified as unit-level, batch-level, product-level, or organization-sustaining activities?

Researching recipes Shipping orders to G. Stores
unit unit
batch batch
Product unit
product batch

Option D
Product/batch

A duration driver is:

A measure of the amount of time required to perform an activity.

A transaction driver is

A simple count of the number of times an activity occurs.

Which of the following is not a limitation of activity-based costing

More accurate product costs may result in increasing the selling prices of some products.

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:

. all of the above are reasons why an activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles

Designing a new product is an example of (an):

Product-level activity.

Property taxes are an example of a cost that would be considered to be

Organization-sustaining.

McCaskey Corporation uses an activity-based costing system with the following three activity cost pools:

Activity Cost Pool Total Activity

Fabrication..............................40,000 Machine Hours
Order Processing.....................500 Orders
Other..........................................Not Applicable

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:

Wages and salaries.............$420,000
Deprecition.........................$100,000
Occupancy...........................$120,000
Total......................................$640,000

The distribution of resource consumption across activity cost pools is given below

The activity rate for the Fabrication activity cost pool is closest to

$1.65 per machine-hour

Christiansen Corporation uses an activity-based costing system with the following three activity cost pools:

Activity Cost Pool Total Activity

Fabrication..............................70,000 Machine Hours
Order Processing.....................500 Orders
Other..........................................Not Applicable

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:

Wages and salaries.............$420,000
Deprecition.........................$160,000
Occupancy...........................$200,000
Total......................................$780,000

The distribution of resource consumption across activity cost pools is given below

$560 per order

Zee Corporation has provided the following data concerning its overhead costs for the coming year:
The activity rate for the Assembly activity cost pool is closest to
A. $2.70 per labor-hour
B. $4.25 per labor-hour
C. $4.05 per labor-hour
D. $8.10 per labor-hour

$4.25 per labor-hour

The production budget is typically prepared prior to the sales budget

False

One benefit of budgeting is that it coordinates the activities of the entire organization

True

Both planning and control are needed for an effective budgeting system

True

One difficulty with self-imposed budgets is that they are not subject to any type of review

False

The master budget is a network consisting of many separate budgets that are interdependent

True

Planning and control are essentially the same thing

False

Sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing known

False

A sales budget is a detailed schedule showing the expected sales for the budget period; typically, it is expressed in both dollars and units of product

True

Both variable and fixed manufacturing overhead costs are included in the manufacturing overhead budget.

True

In the selling and administrative budget, the non-cash charges (such as depreciation) are added to the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses

False

Which of the following represents the normal sequence in which the indicated budgets are prepared?

Production, Cash, Income Statement

Which of the following is not a benefit of budgeting?

It reduces the need for tracking actual cost activity.

Self-imposed budgets typically are:

subject to review by higher levels of management in order to prevent the budgets from becoming too loose

Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared?

Selling and administrative expense budget, cash budget, budgeted income statement, budgeted balance sheet

National Telephone company has been forced by competition to put much more emphasis on planning and controlling its costs. Accordingly, the company's controller has suggested initiating a formal budgeting process. Which of the following steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system

Implementing the change quickly.

A continuous (or perpetual) budget

is a plan that is updated monthly or quarterly, dropping one period and adding another.

Which of the following statements is not correct?

The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.

Budgeted production needs are determined by

adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.

The budgeted amount of raw materials to be purchased is determined by.

adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials

Which of the following is not correct regarding the manufacturing overhead budget?

Total budgeted cash disbursements for manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead

Shown below is the sales forecast for Cooper Inc. for the first four months of the coming year.
On average, 50% of credit sales are paid for in the month of the sale, 30% in the month following sale, and the remainder are paid two months after the month of the sale. Assuming there are no bad debts, the expected cash inflow in March is

$119,000

Budgeted sales in Allen Company over the next four months are given below:
Twenty-five percent of the company's sales are for cash and 75% are on account. Collections for sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale. The remainder are uncollectible. Given these data, cash collections for December should be:

$103,500

The following data have been taken from the budget reports of Brandon company, a merchandising company.

Forty percent of purchases are paid for in cash at the time of purchase, and 30% are paid for in each of the next two months. Purchases for the previous November and December were $150,000 per month. Employee wages are 10% of sales for the month in which the sales occur. Selling and administrative expenses are 20% of the following month's sales. (July sales are budgeted to be $220,000.) Interest payments of $20,000 are paid quarterly in January and April. Brandon's cash disbursements for the month of April would be:

$254,000

Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000 units in June. The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this information, Walsh Company's production of Product W for the month of April should be

75,000 units

Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales. There are 150,000 finished units in inventory on June 30.
Berol Company's production requirement in units of finished product for the three-month period ending September 30 is

665,720 units

The Willsey Merchandise Company has budgeted $40,000 in sales for the month of December. The company's cost of goods sold is 30% of sales. If the company has budgeted to purchase $18,000 in merchandise during December, then the budgeted change in inventory levels over the month of December is:

$6,000 increase

Prestwich Company has budgeted production for next year as follows:



Two pounds of material A are required for each unit produced. The company has a policy of maintaining a stock of material A on hand at the end of each quarter equal to 25% of the next quarter's production needs for material A. A total of 30,000 pounds of material A are on hand to start the year. Budgeted purchases of material A for the second quarter would be

165,000 pounds

Veltri Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.77 direct labor-hours. The direct labor rate is $11.20 per direct labor-hour. The production budget calls for producing 7,100 units in October and 6,900 units in November. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 5,480 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months?

A. $122,752.00

Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

$31,584.00

Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,100 direct labor-hours will be required in May. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be

$102,870

The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in August. The variable overhead rate is $8.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $132,770 per month, which includes depreciation of $24,850. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for August should be:

$27.30

. Avitia Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 3,700 direct labor-hours will be required in September. The variable overhead rate is $5.70 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $48,100 per month, which includes depreciation of $5,550. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for September should be:

$18.70

The manufacturing overhead budget at Cutchin Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,800 direct labor-hours will be required in September. The variable overhead rate is $7.00 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,120 per month, which includes depreciation of $3,640. All other fixed manufacturing overhead costs represent current cash flows. The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

$59,080

The selling and administrative expense budget of Breckinridge Corporation is based on budgeted unit sales, which are 5,500 units for June. The variable selling and administrative expense is $1.00 per unit. The budgeted fixed selling and administrative expense is $101,200 per month, which includes depreciation of $6,050 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the June selling and administrative expense budget should be:

$100,650

Lunderville Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 3,200 units are planned to be sold in December. The variable selling and administrative expense is $3.10 per unit. The budgeted fixed selling and administrative expense is $60,800 per month, which includes depreciation of $6,720 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the December selling and administrative expense budget should be:

$64,000

The Carlquist Company makes and sells a product called Product K. Each unit of Product K sells for $24 dollars and has a unit variablecost of $18. The company has budgeted the following data for November:•Sales of $1,152,200, all in cash.•A cash balance on November 1 of $48,000.•Cash disbursements (other than interest) during November of $1,160,000.•A minimum cash balance on November 30 of $60,000.If necessary, the company will borrow cash from a bank. The borrowing will be in multiples of $1,000 and will bear interest at 2% per month. All borrowing will take place at the beginning of the month. The November interest will be paid in cash during November.The amount of cash needed to be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 cash balance is

$21,000

Mosbey Inc. is working on its cash budget for June. The budgeted beginning cash balance is $16,000. Budgeted cash receipts total$188,000 and budgeted cash disbursements total $187,000. The desired ending cash balance is $40,000. The excess (deficiency) of cashavailable over disbursements for June will be

$17,000

Under variable costing, all variable costs are treated as product costs

True

Under variable costing, fixed manufacturing overhead cost is treated as a product cost

True

The unit product cost under absorption costing does not include fixed manufacturing overhead cost.

False

Variable manufacturing overhead costs are treated as period costs under both absorption and variable costing

False

When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be added to variable costing net operating income to arrive at the absorption costing net operating income.

True

When production is less than sales for the period, absorption costing net operating income will generally be less than variable costing net operating income

True

Absorption costing is more compatible with cost-volume-profit analysis than is variable costing.

True

Contribution margin and segment margin mean the same thing.

False

Assuming that a segment has both variable expenses and traceable fixed expenses, an increase in sales should increase profits by an amount equal to the sales times the segment margin ratio.

Falsw

The salary of the treasurer of a corporation is an example of a common cost which normally cannot be traced to product segments.

True

The salary paid to a store manager is a traceable fixed expense of the store.

True

Segmented statements for internal use should be prepared in the contribution format.

True

Fixed costs that are traceable to a segment may become common if the segment is divided into smaller units.

True

The contribution margin is viewed as a better gauge of the long run profitability of a segment than the segment margin.

...

In responsibility accounting, each segment in an organization should be charged with the costs for which it is responsible and over which it has control plus its share of common organizational costs

False

The contribution margin tells us what happens to profits as volume changes if a segment's capacity and fixed costs change as well

...

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