1 Which of the following correctly describes fixed and variable cost behavior as total volume increases A Unit fixed costs stay the same and unit variable costs increase B Total fixed costs stay the same and total variable costs increase C Unit fixed costs decrease and total variable costs decrease D Unit fixed costs decrease and unit variable costs decrease 2 The incremental profit generated by the sale of one additional unit is equal to the A contribution margin per unit B selling price C margin of safety D incremental cost 3 Clipper Office Furniture uses cost plus pricing with a 40 mark up on total cost at capacity The company is currently selling 40,000 units at $19 60 per unit Each unit has a variable cost of $9 In addition, the company incurs $200,000 in fixed costs annually If demand falls to 32,000 units and the company wants to continue to earn a 40 return, what price should the company charge A $15 25 B $21 35 C $19 60 D $27 44 4 ABC company has $6 50 per unit in variable costs and $2 20 per unit in fixed costs at a volume of 40,000 units If the company uses cost plus 20 for pricing, which of the following should the company use to determine the price A The company should use a unit cost of $8 70 per unit only at a volume of 40,000 units B The company should use a unit cost of $8 70 at any volume level C The company should use a unit price of $10 44 at any volume level D The company should ignore fixed costs for cost plus pricing 5 Which of the following is a grouping of overhead costs whose total is allocated using one allocation base A Cost objective B Cost pool C Direct cost D Cost driver 6 Which one of the following is the preferred alternative when deciding between two options A Incremental profit is greater than under the other alternatives B Revenues are greater than under the other alternatives C Expenses are less than under the other alternatives D No opportunity or sunk costs exist 7 The required rate of return used to calculate an investments net present value is related to the firms A contribution margin B cost of capital C total assets D Price Earnings ratio 8 A company is trying to decide whether to keep or drop the organic foods department in its grocery store If organic foods are dropped, the manager will be laid off What is the manager's salary in relation to the decision to keep or drop the department A A variable cost and therefore relevant B Avoidable and therefore incremental C Sunk and therefore not relevant D A fixed cost and therefore not relevant 9 The following information relates to Ajax Widgets during the year There was no beginning inventory Units produced 11,000 Units sold 10,000 Units in ending inventory 1,000 Fixed manufacturing overhead $220,000 How much fixed manufacturing overhead will be expensed during the year (included in Cost of Goods Sold) using full costing A $220,000 B $200,000 C $20,000 D $10,000 10 If the required rate of return is greater than the internal rate of return of a potential investment, the company should judge the investment as acceptable A This is a True statement B This is a False statement C Not enough information provided 11 The basic concept involved in time value of money calculations is that A it is better to receive a dollar in the future than to receive a dollar today B incremental revenues must exceed incremental costs C it is better to receive a dollar today than to receive a dollar in the future D it can only be applied to positive cash flows 12 Hanson Sports has three product lines footballs, basketballs, and bats Common costs are allocated based on relative sales A product line income statement for the year ended December 31, 2016 follows Footballs Basketballs Bats Total Sales $600,000 $800,000 $400,000 $1,800,000 Cost of goods sold 260,000 400,000 230,000 890,000 Gross margin 340,000 400,000 170,000 910,000 Less other variable costs 85,000 120,000 80,000 285,000 Contribution margin 255,000 280,000 90,000 625,000 Less direct salaries 50,000 60,000 45,000 155,000 Less common fixed costs 85,000 100,000 55,000 240,000 Net income $120,000 $120,000 $10,000 $230,000 Since the profit for bats is a net loss, the company is considering dropping this product line What is the incremental $ effect on total net income of dropping the Bats line 13 Right Air Supply sells a specialized air filter that has a variable cost of $10 each Fixed costs are estimated to be $700,000 across all levels of sales shown below Units Sold Unit Price CM per unit x Qty Fixed Costs Profit 90,000 $33 700,000 100,000 $31 700,000 110,000 $30 700,000 120,000 $28 700,000 Which price should Right Air Supply charge to maximize profits 14 Randolph Corporation sells a single product at a price of $275 per unit Variable cost per unit is $135 and fixed costs total $356,860 If sales are expected to be $825,000, what is the companys margin of safety 15 Roger Excavating Company experienced the following costs in 2016 Direct materials $1 75 per unit Direct labor $2 00 per unit Variable manufacturing overhead $2 50 per unit Variable selling $0 75 per unit Fixed manufacturing overhead $50,000 Fixed selling $15,000 Fixed administrative $5,000 During 2016, the company manufactured 100,000 units and sold 80,000 units If the average selling price per unit was $22 65, what is the amount of the companys contribution margin per unit

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#1 Which of the following correctly describes fixed and variable cost behavior as total volume increases? A. Unit fixed costs stay the same and unit

	#1	Which of the following correctly describes fixed and variable cost behavior as total volume increases?
	A.	Unit fixed costs stay the same and unit variable costs increase.
	B.	Total fixed costs stay the same and total variable costs increase.
	C.	Unit fixed costs decrease and total variable costs decrease.
	D.	Unit fixed costs decrease and unit variable costs decrease.

	#2	The incremental profit generated by the sale of one additional unit is equal to the
	A.	contribution margin per unit.
	B.	selling price.
	C.	margin of safety.
	D.	incremental cost.

	#3	Clipper Office Furniture uses cost-plus pricing with a 40% mark-up on total cost at capacity. The company is currently selling 40,000 units at $19.60 per unit. Each unit has a variable cost of $9. In addition, the company incurs $200,000 in fixed costs annually. If demand falls to 32,000 units and the company wants to continue to earn a 40% return, what price should the company charge?
	A.	$15.25
	B.	$21.35
	C.	$19.60
	D.	$27.44

	#4	ABC company has $6.50 per unit in variable costs and $2.20 per unit in fixed costs at a volume of 40,000 units. If the company uses cost-plus 20% for pricing, which of the following should the company use to determine the price?
	A.	The company should use a unit cost of $8.70 per unit only at a volume of 40,000 units.
	B.	The company should use a unit cost of $8.70 at any volume level.
	C.	The company should use a unit price of $10.44 at any volume level.
	D.	The company should ignore fixed costs for cost-plus pricing.

	#5	Which of the following is a grouping of overhead costs whose total is allocated using one allocation base?
	A.	Cost objective
	B.	Cost pool
	C.	Direct cost
	D.	Cost driver

	#6	Which one of the following is the preferred alternative when deciding between two options?
	A.	Incremental profit is greater than under the other alternatives.
	B.	Revenues are greater than under the other alternatives.
	C.	Expenses are less than under the other alternatives.
	D.	No opportunity or sunk costs exist.

#7	The required rate of return used to calculate an investments net present value is related to the firms
A.	contribution margin.
B.	cost of capital.
C.	total assets.
D.	Price/Earnings ratio.

#8	A company is trying to decide whether to keep or drop the organic foods department in its grocery store. If organic foods are dropped, the manager will be laid off. What is the manager's salary in relation to the decision to keep or drop the department?
A.	A variable cost and therefore relevant
B.	Avoidable and therefore incremental
C.	Sunk and therefore not relevant
D.	A fixed cost and therefore not relevant

#9	The following information relates to Ajax Widgets during the year. There was no beginning inventory.
	Units produced	11,000
	Units sold	10,000
	Units in ending inventory	1,000
	Fixed manufacturing overhead	$220,000
	How much fixed manufacturing overhead will be expensed during the year (included in Cost of Goods Sold) using full costing?
A.	$220,000
B.	$200,000
C.	$20,000
D.	$10,000

#10	If the required rate of return is greater than the internal rate of return of a potential investment, the company should judge the investment as acceptable.
A.	This is a True statement
B.	This is a False statement
C.	Not enough information provided.

#11	The basic concept involved in time value of money calculations is that
A.	it is better to receive a dollar in the future than to receive a dollar today
B.	incremental revenues must exceed incremental costs.
C.	it is better to receive a dollar today than to receive a dollar in the future.
D.	it can only be applied to positive cash flows

#12	Hanson Sports has three product lines: footballs, basketballs, and bats. Common costs are allocated based on relative sales. A product line income statement for the year ended December 31, 2016 follows:
		Footballs	Basketballs	Bats	Total
	Sales	$600,000	$800,000	$400,000	$1,800,000
	Cost of goods sold	260,000	400,000	230,000	890,000
	Gross margin	340,000	400,000	170,000	910,000
	Less other variable costs	85,000	120,000	80,000	285,000
	Contribution margin	255,000	280,000	90,000	625,000
	Less direct salaries	50,000	60,000	45,000	155,000
	Less common fixed costs	85,000	100,000	55,000	240,000
	Net income	$120,000	$120,000	-$10,000	$230,000

	Since the profit for bats is a net loss, the company is considering dropping this product line. What is the incremental $ effect on total net income of dropping the Bats line?


#13	Right Air Supply sells a specialized air filter that has a variable cost of $10 each.
	Fixed costs are estimated to be $700,000 across all levels of sales shown below.
	Units Sold	Unit Price	CM per unit x Qty	Fixed Costs	Profit
	90,000	$33		700,000
	100,000	$31		700,000
	110,000	$30		700,000
	120,000	$28		700,000
	Which price should Right Air Supply charge to maximize profits?


#14	Randolph Corporation sells a single product at a price of $275 per unit. Variable cost per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, what is the companys margin of safety?


#15	Roger Excavating Company experienced the following costs in 2016:
	Direct materials	$1.75 per unit
	Direct labor	$2.00 per unit
	Variable manufacturing overhead	$2.50 per unit
	Variable selling	$0.75 per unit
	Fixed manufacturing overhead	$50,000
	Fixed selling	$15,000
	Fixed administrative	$5,000
	During 2016, the company manufactured 100,000 units and sold 80,000 units. If the average selling price per unit was $22.65, what is the amount of the companys contribution margin per unit?