1. What happens to total manufacturing costs per unit when a company?s activity level decreases? a. Total costs per unit should remain the same if the company is still in the relevant range. b. Total cost per unit will drop. c. Total cost per unit will rise. d. More information is needed to answer the question 2. Lemon Company has a contribution margin of $150,000 and a contribution margin ratio of 30%. How much are total variable costs? a. $45,000 b. $350,000 c. $105,000 d. $500,000 Use the following information for questions 3 & 4. Month Miles Total Cost March 60,000 $47,500 April 70,000 51,500 May 50,000 41,500 June 80,000 50,500 3. In applying the high-low method, how much is the variable cost per unit? a. $0.30 b. $0.335 c. $0.50 d. Cannot be determined from the information given 4. How much is the total fixed cost? a. $16,500 b. $9,000 c. $26,500 d. $15,000 5. Which one of the following is a similarity of job order and process cost systems? a. They both track direct materials and direct labor, but not manufacturing overhead. b. They both use a single work in process account. c. They both track direct materials, direct labor, and manufacturing overhead. d. They both are used for the same type of inventory production items. 6. Polutta?s CVP income statement included sales of 4,000 units, a selling price of $200, variable expenses of $120 per unit, and fixed expenses of $176,000. Net income is: a. $800,000. b. $320,000. c. $144,000. d. $ 72,000. 7. The presence of any of the following factors would suggest a switch to ABC except when a. product lines differ greatly in volume. b. overhead costs constitute a minor portion of total costs. c. the manufacturing process has changed significantly. d. production managers are ignoring data provided by the existing system. Use the following information to answer questions 8 & 9 Robey Inc. manufactures two products, Extra and Basic. Overhead costs consist of setting up machines, $200,000; machining, $450,000; and inspecting, $150,000. Additional information on the two products is: Extra Basic Total Direct labor hours 15,000 25,000 40,000 Machine setups 600 400 1,000 Machine hours 24,000 26,000 50,000 Inspections 800 700 1,500 8. Overhead applied to Basic using traditional costing based on direct labor hours is a. $320,000. b. $384,000. c. $416,000. d. $500,000. 9. Overhead applied to Extra using activity-based costing is a. $300,000. b. $384,000. c. $416,000. d. $480,000. Use the following information for items 10-13: Elmore Corporation sells two types of riding lawn mowers, Basic and Extra Power. Three Basic mowers are sold for every 2 Extra Power sales. Elmore incurs $224,000 in fixed costs. Per unit data on the two products is presented blow: Unit data Basic Extra Power Selling price $2,000 $3,200 Variable costs 1,200 1,600 Contribution margin $ 800 $1,600 10. The weighted-average contribution margin is: a. $1,120 b. $1,200 c. $1,400 d. $2,600 11. The breakeven point in total units is: a. 140 b. 187 c. 200 d. 280 12. Assuming the breakeven point is 300 units, how many Basic mowers will be sold at the breakeven point? a. 80 b. 116 c. 120 d. 180 13. What will be the total contribution margin at the breakeven point? a. $96,000. b. $160,000 c. $224,000. d. $496,000. 14. Crate Inc. has a policy of having sufficient direct materials inventory on hand at the end of each month equal to 20% of next month's budgeted production needs. Crate has budgeted production of 15,000 units of product in October and 20,000 units in November. It takes 2 pounds of direct materials to produce one unit of product and 6,000 pounds of direct materials were on hand on September 30. How many pounds of direct materials should be purchased in the month of October? a. 28,000 pounds b. 30,000 pounds c. 38,000 pounds d. 32,000 pounds 15. Chestnut, Inc. has budgeted direct materials purchases of $150,000 in November and $240,000 in December. The company pays for 70% of its purchases in the month of purchase and the remaining 30% in the next month. Other costs are all paid during the month incurred. During December, the following items were budgeted: Wages expense $75,000 Purchase of office equipment 36,000 Selling and administrative expenses 24,000 Depreciation expense 18,000 How much are budgeted cash disbursements for December? a. $324,000 b. $213,000 c. $348,000 d. $366,000 16. Orr Corporation?s manufacturing costs for August when production was 800 units appears below: Direct material $10 per unit Direct labor $4,800 Variable overhead 4,000 Factory depreciation 3,000 Factory supervisory salaries 2,000 Other fixed factory costs 1,000 How much is the total budgeted manufacturing cost for a month when 900 units are produced? a. $23,800 b. $18,900 c. $24,900 d. $25,650 Use the following information for questions 17 & 18: At January 1, 2012, Roscoe, Inc. has beginning inventory of 3,000 units. The company estimates it will sell 14,000 units during the first quarter of 2012 with a 10% increase in sales each quarter. The firm?s policy is to maintain an ending inventory equal to 20% of the next quarter?s sales. Each unit costs $140 and is sold for $200. 17. How many units should Roscoe produce during the first quarter of 2012? a. 14,080 b. 14,000 c. 16,800 d. 14,200 18. How much is budgeted sales revenue for the third quarter of 2012? a. $16,940 b. $3,388,000 c. $3,360,000 d. $3,080,000 19. Elm Company?s cash budget for the month of July showed the following: Beginning cash balance $240,000 Cash receipts 152,000 Cash disbursements 272,000 If the company has a policy of maintaining a minimum end of the month cash balance of $160,000, the amount the company would have to borrow is: a. $ 40,000. b. $ 0. c. $ 80,000. d. $ 8,000. 20. Which one of the following would most likely cause an unrealistic budget to result? a. All levels of management stress the importance of the budgeting process. b. The budget has been developed in a participative approach. c. The budget was developed after considerable planning. d. The budget has been developed in a top down fashion. 21. Russ Corporation sells its product for $40. The variable costs are $18 per unit. Fixed costs are $16,000. The company is considering the purchase of an automated machine that will result in a $4 reduction in unit variable costs and an increase of $2,000 in fixed costs. Which of the following is true about the break-even point in units? a. It will remain unchanged. b. It will decrease. c. It will increase. d. It cannot be determined from the information provided. 22. Identify each cost as either variable, fixed, or mixed. Total Cost at 2,000 Units 3,000 Units Cost A $12,900 $19,350 Cost B 12,300 16,650 Cost C 13,000 13,000 a. Cost A and Cost B are variable; Cost C is fixed. b. Cost A is variable; Cost B is mixed; Cost C is fixed. c. Cost A and Cost B are mixed; Cost C is fixed. d. Cost A is mixed; Cost B is variable; Cost C is fixed. Use the following information for Questions 23 & 24: During 2013, Oops Inc. produced 60,000 units and sold 55,000 for $10 per unit. Variable manufacturing costs were $4 per unit. Annual fixed manufacturing overhead was $120,000 ($2 per unit). Variable selling and administrative costs were $1 per unit sold, and fixed selling and administrative costs were $30,000. 23. What is net income under variable costing? a. $ 125,000 b. $ 135,000 c. $ 275,000 d. $ 155,000 24. What is net income under absorption costing: a. $ 125,000 b. $ 135,000 c. $ 220,000 d. $165,000 25. McBride Corporation is considering buying new equipment for its factory. The new equipment will reduce variable labor costs but increase depreciation expense. Contribution margin is expected to increase from $250,000 to $300,000. Net income is expected to remain the same at $100,000. Which of the following is (are) correct? a. Operating leverage will be 3.0 after acquisition of the new equipment b. After the new equipment is purchased, earnings would be more sensitive to changes in volume. c. McBride should make the change if it expects sales volume to increase steadily over the next ten years d. All of the above 26. Nunn Company makes two types of shoes, sneakers and sandals. . Additional information follows: Sneakers Sandals Units 2,000 3,000 Sales $60,000 $25,000 Variable costs 24,000 13,750 Fixed costs 10,000 5,250 Net income $26,000 $ 6,000 Yards of leather per unit 1.25 0.25 Profit per unit $13.00 $2.00 Contribution margin per unit $18.00 $3.75 Nunn is having trouble getting adequate supplies of high quality leather for its products. Assume that Nunn is able to order an additional 4,000 yards of leather and wishes to maximize its income. Of the additional units it produces, at least 500 of each product are necessary for sales. Nunn has demand for all the units (pairs of shoes) it can produce. What should Nunn produce? a. 500 Sandals and the rest Sneakers b. 500 Sneakers and the rest Sandals c. An equal number of both products d. More information is needed to answer the question 27. Which of the following is true with regard to budgetary planning? a. Generally accepted accounting principles require the budgets be prepared at least annually. b. The cash budget is often considered to be the most important output in preparing financial budgets. c. The likelihood of a realistic budget is greater when the budget is developed from top management down to lower management. d. The human behavior aspects of budgeting, while they should not be ignored, are generally of little real significance.

1. What happens to total manufacturing costs per unit when a company's activity level decreases? a. Total costs per unit should remain the same if the company is still in the relevant range. b. Total cost per unit will drop. c. Total cost per unit will rise. d. More information is needed to answer the question 2. Lemon Company has a contribution margin of $150,000 and a contribution margin ratio of 30%. How much are total variable costs? a. $45,000 b. $350,000 c. $105,000 d. $500,000 Use the following information for questions 3 & 4. Month Miles Total Cost March 60,000 $47,500 April 70,000 51,500 May 50,000 41,500 June 80,000 50,500 3. In applying the high-low method, how much is the variable cost per unit? a. $0.30 b. $0.335 c. $0.50 d. Cannot be determined from the information given 4. How much is the total fixed cost? a. $16,500 b. $9,000 c. $26,500 d. $15,000 5. 6. 7. Which one of the following is a similarity of job order and process cost systems? a. They both track direct materials and direct labor, but not manufacturing overhead. b. They both use a single work in process account. c. They both track direct materials, direct labor, and manufacturing overhead. d. They both are used for the same type of inventory production items. Polutta's CVP income statement included sales of 4,000 units, a selling price of $200, variable expenses of $120 per unit, and fixed expenses of $176,000. Net income is: a. $800,000. b. $320,000. c. $144,000. d. $ 72,000. The presence of any of the following factors would suggest a switch to ABC except when a. product lines differ greatly in volume. b. overhead costs constitute a minor portion of total costs. c. the manufacturing process has changed significantly. d. production managers are ignoring data provided by the existing system. Use the following information to answer questions 8 & 9 Robey Inc. manufactures two products, Extra and Basic. Overhead costs consist of setting up machines, $200,000; machining, $450,000; and inspecting, $150,000. Additional information on the two products is: Extra Direct labor hours Machine setups Machine hours Inspections Basic 15,000 600 400 24,000 800 700 Total 25,000 1,000 26,000 1,500 40,000 50,000 8. Overhead applied to Basic using traditional costing based on direct labor hours is a. $320,000. b. $384,000. c. $416,000. d. $500,000. 9. Overhead applied to Extra using activity-based costing is a. $300,000. b. $384,000. c. $416,000. d. $480,000. Use the following information for items 10-13: Elmore Corporation sells two types of riding lawn mowers, Basic and Extra Power. Three Basic mowers are sold for every 2 Extra Power sales. Elmore incurs $224,000 in fixed costs. Per unit data on the two products is presented blow: Unit data Basic Extra Power Selling price $2,000 $3,200 Variable costs 1,200 1,600 Contribution margin $ 800 $1,600 10. The weighted-average contribution margin is: a. $1,120 b. $1,200 c. $1,400 d. $2,600 11. The breakeven point in total units is: a. 140 b. 187 c. 200 d. 280 12. Assuming the breakeven point is 300 units, how many Basic mowers will be sold at the breakeven point? a. 80 b. 116 c. 120 d. 180 13. What will be the total contribution margin at the breakeven point? a. $96,000. b. $160,000 c. $224,000. d. $496,000. 14. Crate Inc. has a policy of having sufficient direct materials inventory on hand at the end of each month equal to 20% of next month's budgeted production needs. Crate has budgeted production of 15,000 units of product in October and 20,000 units in November. It takes 2 pounds of direct materials to produce one unit of product and 6,000 pounds of direct materials were on hand on September 30. How many pounds of direct materials should be purchased in the month of October? a. 28,000 pounds b. 30,000 pounds c. 38,000 pounds d. 32,000 pounds 15. Chestnut, Inc. has budgeted direct materials purchases of $150,000 in November and $240,000 in December. The company pays for 70% of its purchases in the month of purchase and the remaining 30% in the next month. Other costs are all paid during the month incurred. During December, the following items were budgeted: Wages expense $75,000 Purchase of office equipment 36,000 Selling and administrative expenses 24,000 Depreciation expense 18,000 How much are budgeted cash disbursements for December? a. b. c. d. $324,000 $213,000 $348,000 $366,000 16. Orr Corporation's manufacturing costs for August when production was 800 units appears below: Direct material $10 per unit Direct labor $4,800 Variable overhead 4,000 Factory depreciation 3,000 Factory supervisory salaries 2,000 Other fixed factory costs 1,000 How much is the total budgeted manufacturing cost for a month when 900 units are produced? a. b. c. d. $23,800 $18,900 $24,900 $25,650 Use the following information for questions 17 & 18: At January 1, 2012, Roscoe, Inc. has beginning inventory of 3,000 units. The company estimates it will sell 14,000 units during the first quarter of 2012 with a 10% increase in sales each quarter. The firm's policy is to maintain an ending inventory equal to 20% of the next quarter's sales. Each unit costs $140 and is sold for $200. 17. How many units should Roscoe produce during the first quarter of 2012? a. 14,080 b. 14,000 c. 16,800 d. 14,200 18. How much is budgeted sales revenue for the third quarter of 2012? a. $16,940 b. $3,388,000 c. $3,360,000 d. $3,080,000 19. Elm Company's cash budget for the month of July showed the following: Beginning cash balance $240,000 Cash receipts 152,000 Cash disbursements 272,000 If the company has a policy of maintaining a minimum end of the month cash balance of $160,000, the amount the company would have to borrow is: a. $ 40,000. b. $ 0. c. $ 80,000. d. $ 8,000. 20. Which one of the following would most likely cause an unrealistic budget to result? a. All levels of management stress the importance of the budgeting process. b. The budget has been developed in a participative approach. c. The budget was developed after considerable planning. d. The budget has been developed in a top down fashion. 21. Russ Corporation sells its product for $40. The variable costs are $18 per unit. Fixed costs are $16,000. The company is considering the purchase of an automated machine that will result in a $4 reduction in unit variable costs and an increase of $2,000 in fixed costs. Which of the following is true about the break-even point in units? a. It will remain unchanged. b. It will decrease. c. It will increase. d. It cannot be determined from the information provided. 22. Identify each cost as either variable, fixed, or mixed. Cost A Cost B Cost C a. b. c. d. Total Cost at 2,000 Units 3,000 Units $12,900 $19,350 12,300 16,650 13,000 13,000 Cost A and Cost B are variable; Cost C is fixed. Cost A is variable; Cost B is mixed; Cost C is fixed. Cost A and Cost B are mixed; Cost C is fixed. Cost A is mixed; Cost B is variable; Cost C is fixed. Use the following information for Questions 23 & 24: During 2013, Oops Inc. produced 60,000 units and sold 55,000 for $10 per unit. Variable manufacturing costs were $4 per unit. Annual fixed manufacturing overhead was $120,000 ($2 per unit). Variable selling and administrative costs were $1 per unit sold, and fixed selling and administrative costs were $30,000. 23. a. b. c. d. What is net income under variable costing? $ 125,000 $ 135,000 $ 275,000 $ 155,000 24. What is net income under absorption costing: a. $ 125,000 b. $ 135,000 c. $ 220,000 d. $165,000 25. McBride Corporation is considering buying new equipment for its factory. The new equipment will reduce variable labor costs but increase depreciation expense. Contribution margin is expected to increase from $250,000 to $300,000. Net income is expected to remain the same at $100,000. Which of the following is (are) correct? a. Operating leverage will be 3.0 after acquisition of the new equipment b. After the new equipment is purchased, earnings would be more sensitive to changes in volume. c. McBride should make the change if it expects sales volume to increase steadily over the next ten years d. All of the above 26. Nunn Company makes two types of shoes, sneakers and sandals. . Additional information follows: Units Sales Variable costs Fixed costs Net income Yards of leather per unit Profit per unit Contribution margin per unit Sneakers 2,000 $60,000 24,000 10,000 $26,000 1.25 $13.00 $18.00 Sandals 3,000 $25,000 13,750 5,250 $ 6,000 0.25 $2.00 $3.75 Nunn is having trouble getting adequate supplies of high quality leather for its products. Assume that Nunn is able to order an additional 4,000 yards of leather and wishes to maximize its income. Of the additional units it produces, at least 500 of each product are necessary for sales. Nunn has demand for all the units (pairs of shoes) it can produce. What should Nunn produce? a. 500 Sandals and the rest Sneakers b. 500 Sneakers and the rest Sandals c. An equal number of both products d. More information is needed to answer the question 27. Which of the following is true with regard to budgetary planning? a. Generally accepted accounting principles require the budgets be prepared at least annually. b. The cash budget is often considered to be the most important output in preparing financial budgets. c. The likelihood of a realistic budget is greater when the budget is developed from top management down to lower management. d. The human behavior aspects of budgeting, while they should not be ignored, are generally of little real significance