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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

Indicate what contribution margin is and how it can be expressed.AppendixLO1
Identify the three ways to determine the break-even point.AppendixLO1
Give the formulas for determining sales required to earn target net income.AppendixLO1
Defi ne margin of safety, and give the formulas for computing it.AppendixLO1
Variable costs are costs that:(a) vary in total directly and proportionately with changes in the activity level.(b) remain the same per unit at every activity level.(c) Neither of the above.(d) Both
The relevant range is:(a) the range of activity in which variable costs will be curvilinear.(b) the range of activity in which fixed costs will be curvilinear.(c) the range over which the company
Mixed costs consist of a:(a) variable-cost element and a fixed-cost element.(b) fixed-cost element and a controllable-cost element.(c) relevant-cost element and a controllable-cost element.(d)
Your phone service provider offers a plan that is classified as a mixed cost. The cost per month for 1,000 minutes is $50. If you use 2,000 minutes this month, your cost will be:(a) $50. (c) more
Kendra Corporation’s total utility costs during the past year were $1,200 during its highest month and$600 during its lowest month. These costs corresponded with 10,000 units of production during
Which of the following is not involved in CVP analysis?(a) Sales mix.(b) Unit selling prices.(c) Fixed costs per unit.(d) Volume or level of activity.AppendixLO1
When comparing a traditional income statement to a CVP income statement:(a) net income will always be greater on the traditional statement.(b) net income will always be less on the traditional
Contribution margin:(a) is revenue remaining after deducting variable costs.(b) may be expressed as contribution margin per unit.(c) is selling price less cost of goods sold.(d) Both (a) and (b)
Cournot Company sells 100,000 wrenches for $12 a unit. Fixed costs are $300,000, and net income is$200,000. What should be reported as variable expenses in the CVP income statement?(a) $700,000. (c)
Gossen Company is planning to sell 200,000 pliers for$4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?(a) $100,000. (c)
Brownstone Company’s contribution margin ratio is 30%. If Brownstone’s sales revenue is $100 greater than its break-even sales in dollars, its net income:(a) will be $100.(b) will be $70.(c) will
The mathematical equation for computing required sales to obtain target net income is: Required sales 5(a) Variable costs 1 Target net income.(b) Variable costs 1 Fixed costs 1 Target net income.(c)
Margin of safety is computed as:(a) Actual sales 2 Break-even sales.(b) Contribution margin 2 Fixed costs.(c) Break-even sales 2 Variable costs.(d) Actual sales 2 Contribution margin.AppendixLO1
Marshall Company had actual sales of $600,000 when break-even sales were $420,000. What is the margin of safety ratio?(a) 25%. (c) 331/3%.(b) 30%. (d) 45%.AppendixLO1
(a) What is cost behavior analysis?(b) Why is cost behavior analysis important to management?AppendixLO1
(a) Scott Winter asks your help in understanding the term “activity index.” Explain the meaning and importance of this term for Scott.(b) State the two ways that variable costs may be
Contrast the effects of changes in the activity level on total fixed costs and on unit fixed costs.AppendixLO1
J. P. Alexander claims that the relevant range concept is important only for variable costs.(a) Explain the relevant range concept.(b) Do you agree with J. P.’s claim? Explain.AppendixLO1
“The relevant range is indispensable in cost behavior analysis.” Is this true? Why or why not?AppendixLO1
Adam Antal is confused. He does not understand why rent on his apartment is a fixed cost and rent on a Hertz rental truck is a mixed cost. Explain the difference to Adam.AppendixLO1
How should mixed costs be classified in CVP analysis?What approach is used to effect the appropriate classification?AppendixLO1
At the high and low levels of activity during the month, direct labor hours are 90,000 and 40,000, respectively.The related costs are $165,000 and $100,000. What are the fixed and variable costs at
“Cost-volume-profit (CVP) analysis is based entirely on unit costs.” Do you agree? Explain.AppendixLO1
Faye Dunn defines contribution margin as the amount of profit available to cover operating expenses.Is there any truth in this definition? Discuss.AppendixLO1
Marshall Company’s GWhiz calculator sells for $40.Variable costs per unit are estimated to be $26. What are the contribution margin per unit and the contribution margin ratio?AppendixLO1
“Break-even analysis is of limited use to management because a company cannot survive by just breaking even.” Do you agree? Explain.AppendixLO1
Total fixed costs are $26,000 for Daz Inc. It has a contribution margin per unit of $15, and a contribution margin ratio of 25%. Compute the break-even sales in dollars.AppendixLO1
Peggy Turnbull asks your help in constructing a CVP graph. Explain to Peggy (a) how the break-even point is plotted, and (b) how the level of activity and dollar sales at the break-even point are
Define the term “margin of safety.” If Revere Company expects to sell 1,250 units of its product at $12 per unit, and break-even sales for the product are$13,200, what is the margin of safety
Huang Company’s break-even sales are $500,000. Assuming fixed costs are $180,000, what sales volume is needed to achieve a target net income of $90,000?AppendixLO1
The traditional income statement for Pace Company shows sales $900,000, cost of goods sold $600,000, and operating expenses $200,000. Assuming all costs and expenses are 70% variable and 30% fixed,
Monthly production costs in Pesavento Company for two levels of production are as follows.Cost 2,000 Units 4,000 Units Indirect labor $10,000 $20,000 Supervisory salaries 5,000 5,000 Maintenance
For Lodes Company, the relevant range of production is 40–80% of capacity. At 40% of capacity, a variable cost is $4,000 and a fixed cost is $6,000. Diagram the behavior of each cost within the
For Hunt Company, a mixed cost is $15,000 plus $18 per direct labor hour. Diagram the behavior of the cost using increments of 500 hours up to 2,500 hours on the horizontal axis and increments of
Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level.Miles Total Miles Total Driven Cost Driven Cost January 8,000 $14,150 March 8,500 $15,000
Stiever Corp. has collected the following data concerning its maintenance costs for the past 6 months.Units Produced Total Cost July 18,000 $32,000 August 32,000 48,000 September 36,000 55,000
Determine the missing amounts.Unit Selling Unit Variable Contribution Contribution Price Costs Margin per Unit Margin Ratio 1 $640 $352 (a) (b)2 $300 (c) $93 (d)3 (e) (f) $325 25%AppendixLO1
Radial Inc. had sales of $2,400,000 for the first quarter of 2014. In making the sales, the company incurred the costs and expenses shown below.Variable Fixed Cost of goods sold $920,000 $440,000
Rice Company has a unit selling price of $520, variable costs per unit of $286, and fixed costs of $163,800. Compute the break-even point in units using (a) the mathematical equation and (b)
Acorn Corp. had total variable costs of $180,000, total fixed costs of $170,000, and total revenues of $300,000. Compute the required sales in dollars to break even.AppendixLO1
For Flynn Company, variable costs are 70% of sales, and fixed costs are$195,000. Management’s net income goal is $75,000. Compute the required sales in dollars needed to achieve management’s
For Stevens Company, actual sales are $1,000,000 and break-even sales are$840,000. Compute (a) the margin of safety in dollars and (b) the margin of safety ratio.AppendixLO1
Deines Corporation has fixed costs of $480,000. It has a unit selling price of $6, unit variable costs of $4.40, and a target net income of $1,500,000. Compute the required sales in units to achieve
Helena Company reports the following total costs at two levels of production.5,000 Units 10,000 Units Indirect labor $ 3,000 $ 6,000 Property taxes 7,000 7,000 Direct labor 28,000 56,000 Direct
Westerville Company accumulates the following data concerning a mixed cost, using units produced as the activity level.Units Produced Total Cost March 10,000 $18,000 April 9,000 16,650 May 10,500
Larissa Company has a unit selling price of $250, variable costs per unit of $170, and fixed costs of $140,000. Compute the break-even point in units using (a) the mathematical equation and (b)
Presto Company makes radios that sell for $30 each. For the coming year, management expects fixed costs to total $220,000 and variable costs to be $18 per unit.(a) Compute the break-even point in
Turgro Company manufactures a single product. Annual production costs incurred in the manufacturing process are shown below for two levels of production.Costs Incurred Production in Units 5,000
Shingle Enterprises is considering manufacturing a new product. It projects the cost of direct materials and rent for a range of output as shown below.Output Rent Direct in Units Expense Materials
The controller of Furgee Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.Total Total Month Maintenance Costs Machine Hours
Family Furniture Corporation incurred the following costs.1 Wood used in the production of furniture.2 Fuel used in delivery trucks.3 Straight-line depreciation on factory building.4 Screws used in
The controller of Dousmann Industries has collected the following monthly expense data for use in analyzing the cost behavior of maintenance costs.Total Total Month Maintenance Costs Machine Hours
PCB Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,000 units.The utilities and maintenance costs are
Jim Taylor wants Taylor Company to use CVP analysis to study the effects of changes in costs and volume on the company. Taylor has heard that certain assumptions must be valid in order for CVP
All That Blooms provides environmentally friendly lawn services for homeowners.Its operating costs are as follows.Depreciation $1,400 per month Advertising $200 per month Insurance $2,000 per month
The Green Acres Inn is trying to determine its break-even point. The inn has 50 rooms that it rents at $60 a night. Operating costs are as follows.Salaries $6,200 per month Utilities $1,100 per month
In the month of March, Style Salon services 560 clients at an average price of $120. During the month, fixed costs were $21,024 and variable costs were 60% of sales.Instructions(a) Determine the
Kare Kars provides shuttle service between four hotels near a medical center and an international airport. Kare Kars uses two 10-passenger vans to offer 12 round trips per day. A recent month’s
In 2013, Manhoff Company had a break-even point of $350,000 based on a selling price of $5 per unit and fixed costs of $112,000. In 2014, the selling price and the variable costs per unit did not
Cannes Company has the following information available for September 2014.Unit selling price of video game consoles $ 400 Unit variable costs $ 275 Total fixed costs $52,000 Units sold 600
Cottonwood Company reports the following operating results for the month of August: sales $400,000 (units 5,000); variable costs $210,000; and fixed costs $90,000.Management is considering the
Glacial Company estimates that variable costs will be 62.5% of sales, and fixed costs will total $600,000. The selling price of the product is $4.Instructions (a) Prepare a CVP graph, assuming
Oak Bucket Co., a manufacturer of wood buckets, had the following data for 2013:Sales 2,600 units Sales price $40 per unit Variable costs $16 per unit Fixed costs $19,500 Instructions(a) What is the
Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle.For the year 2014,
Dousmann Corp.’s sales slumped badly in 2014. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 500,000 units of
All Frute Company bottles and distributes Frute Ade, a fruit drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 70 cents per bottle. For the year 2014,
Olgivie Company had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 60,000 units of product:
Holiday Company manufactures basketballs and soccer balls. For both products, materials are added at the beginning of the production process and conversion costs are incurred uniformly. Holiday uses
Venuchi Cleaner Company uses a weighted-average process cost system and manufactures a single product—an all-purpose liquid cleaner. The manufacturing activity for the month of March has just been
Swinn Company manufactures bicycles. Materials are added at the beginning of the production process, and conversion costs are incurred uniformly. Production and cost data for the month of May are as
Borman Corporation manufactures in separate processes refrigerators and freezers for homes. In each process, materials are entered at the beginning and conversion costs are incurred uniformly.
Rondeli Company manufactures bicycles and tricycles. For both products, materials are added at the beginning of the production process, and conversion costs are incurred uniformly. Rondeli Company
Hamilton Processing Company uses a weighted-average process cost system and manufactures a single product—a premium rug shampoo and cleaner. The manufacturing activity for the month of October has
Morse Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2014
Seagren Industries Inc. manufactures in separate processes furniture for homes.In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and
The Welding Department of Majestic Company has the following production and manufacturing cost data for February 2014. All materials are added at the beginning of the process. Majestic uses the FIFO
The ledger of Hannon Company has the following work in process account.Work in Process—Painting 3/1 Balance 3,680 3/31 Transferred out ?3/31 Materials 6,600 3/31 Labor 2,500 3/31 Overhead 1,150
The Cutting Department of Keigi Company has the following production and cost data for August.Production Costs 1 Started and completed 8,000 units. Beginning work in process $ –0–2 Started 2,000
Using the data in E16-15, assume Royale Mortgage Company uses the FIFO method. Also assume that the applications in process on September 1 were 100% complete as to materials (forms) and 40% complete
Royale Mortgage Company uses a process cost system to accumulate costs in its loan application department. When an application is completed, it is forwarded to the loan department for final
The Welding Department of Thorpe Company has the following production and manufacturing cost data for February 2014. All materials are added at the beginning of the process.Manufacturing Costs
Overton Company has gathered the following information.Units in beginning work in process 20,000 Units started into production 164,000 Units in ending work in process 24,000 Percent complete in
Kostrivas Company has gathered the following information.Units in beginning work in process –0–Units started into production 40,000 Units in ending work in process 6,000 Percent complete in
The Sanding Department of Richards Furniture Company has the following production and manufacturing cost data for March 2014, the first month of operation.Production: 9,000 units finished and
The Cutting Department of Cassel Company has the following production and cost data for July.Production Costs 1 Transferred out 12,000 units. Beginning work in process $ –0–2 Started 3,000 units
In Wayne Company, materials are entered at the beginning of each process. Work in process inventories, with the percentage of work done on conversion costs, and production data for its Sterilizing
Harrelson Company manufactures pizza sauce through two production departments:Cooking and Canning. In each process, materials and conversion costs are incurred evenly throughout the process. For the
Robert Mallory has prepared the following list of statements about process cost accounting.1 Process cost systems are used to apply costs to similar products that are massproduced in a continuous
The assembly department has the following production data for the current month.Beginning Units Ending Work in Process Transferred Out Work in Process–0– 20,000 12,000 Materials are entered at
Kopa Company manufactures CH-21 through two processes: Mixing and Packaging. In July, the following costs were incurred.Mixing Packaging Raw materials used $10,000 $28,000 Factory labor costs 8,000
Indicate whether each of the following statements is true or false.1 Many hospitals use job order costing for small, routine medical procedures.2 A manufacturer of computer flash drives would use a
Production costs chargeable to the Finishing Department in May at Kim Company are materials $8,000, labor $20,000, overhead $18,000, and transferred-in costs$67,000. Equivalent units of production
Using the data in BE16-10, prepare the cost section of the production cost report for Sanderson Company.AppendixLO1
Sanderson Company has the following production data for March: no beginning work in process, units started and completed 30,000, and ending work in process 5,000 units that are 100% complete for
The Smelting Department of Mathews Company has the following production and cost data for November.Production: Beginning work in process 2,000 units that are 100% complete as to materials and 20%
Data for Cascio Company are given in BE16-7. Production records indicate that 18,000 units were transferred out, and 2,000 units in ending work in process were 50%complete as to conversion cost and

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