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Exam 11 Practice Test 1. The following data pertains to activity and costs for two months: July 20.000 Activity level in units Variable costs Fixed costs Mixed costs Total costs June 10,000 $20,000 15,000 10.000 $45.000 $70.000 Assuming that these activity levels are within the relevant range, the mixed costs for July were: A) $10,000 B) $35,000 C) $15,000 D) $40,000 2. 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. 3. In describing the cost formula equation Y a+bX, which of the following statements is correct? A) "X" is the dependent variable. B) "a" is the fixed component. C) in the high-low method, "b" equals change in activity divided by change in costs. D) As "X" increases "Y" decreases. 4. Average maintenance costs are $1.50 per machine-hour at an activity level of 8,000 e-hours and $1.20 per machine-hour at an activity level of 13,000 machine-hours. Assuming that this activity is within the relevant range, total expected maintenance cost for a budgeted activity level of 10,000 machine-hours would be closest to: A) $16,128 B) $15,000 C) $13,440. D) $11,433 5. The following data pertains to activity and utility costs for two recent years: Activity level in units Utilities cost Year 2 12,000 $15,000 Year 1 8,000 $12,000 Using the high-low method, the cost formula for utilities is: A) $1.50 per unit B) $8,000 plus $0.50 per unit. C) $1.25 per unit. D) $6,000 plus $0.75 per unit. 6. A cost driver is: A) the largest single category of cost in a company. B) a fixed cost that cannot be avoided. C) a factor that causes variations in a cost. D) an indirect cost that is essential to the business. Use the following to answer questions 7-8: Johnson Company has provided the following data for the first five months of the year: Machine Hours 120 January February March April May 200 Lubrication Cost $750 $800 $870 $790 $840 150 170 7. Using the high-low method of analysis, the estimated variable lubrication cost per machine hour is closest to: A) $1.40. B) $1.25 C) $0.67 D) $1.50. 8. Using the high-low method of analysis, the estimated monthly fixed component of lubrication cost is closest to: A) $570 B) $560 C) $585. D) $565. Use the following to answer questions 9-13: The following data relate to a company that produces and sells a travel guide that is updated monthly Fixed costs: Copy editing Art work Typesetting $ 6,000 2,000 72,000 Variable costs: Printing and binding Bookstore discounts Salespersons' commissions Author's royalties $ 3.20 per copy 4.00 per copy 50 per copy 2.00 per copy Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July 9. The unit contribution margin per book is: A) $10.30 B) $14.30 C) $10.80. D) $8.30. 10. The contribution margin ratio for the book is: A) 71.5% B) 54.0% C) 51.5% D) 51.9% 11. The break-even point in units is: A) 8,247 books. B) 7,767 books. C) 7,407 books. D) 6,504 books. 12. The degree of operating leverage for July is: A) the same as that for June. B) higher than that for June. C) lower than that for June. D) not determinable. 13. The degree of operating leverage for July is closest to: A) 4.48 B) 3.48 C) 4.22 D) 8.70 14. Break-even analysis assumes that: A) total costs are unchanged. B) unit variable expenses are unchanged. C) variable expenses are nonlinear. D) unit fixed expenses are unchanged. 15. Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution format income statement for July. Sales (7,000 units).......... Variable expenses......... Contribution margin.. . Fixed expenses... ........ Net operating income........ $315,000 175.000 140,000 103,500 $ 36,500 if the company sells 6,900 units, its net operating income should be closest to: A) $35,979 B) $34,500 C) $36,500 D) $32,000 16. 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: A) $260,000 B) $440,000 C) $280,000 D) $240,000 Exam 11 Practice Test 1. The following data pertains to activity and costs for two months: July 20.000 Activity level in units Variable costs Fixed costs Mixed costs Total costs June 10,000 $20,000 15,000 10.000 $45.000 $70.000 Assuming that these activity levels are within the relevant range, the mixed costs for July were: A) $10,000 B) $35,000 C) $15,000 D) $40,000 2. 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. 3. In describing the cost formula equation Y a+bX, which of the following statements is correct? A) "X" is the dependent variable. B) "a" is the fixed component. C) in the high-low method, "b" equals change in activity divided by change in costs. D) As "X" increases "Y" decreases. 4. Average maintenance costs are $1.50 per machine-hour at an activity level of 8,000 e-hours and $1.20 per machine-hour at an activity level of 13,000 machine-hours. Assuming that this activity is within the relevant range, total expected maintenance cost for a budgeted activity level of 10,000 machine-hours would be closest to: A) $16,128 B) $15,000 C) $13,440. D) $11,433 5. The following data pertains to activity and utility costs for two recent years: Activity level in units Utilities cost Year 2 12,000 $15,000 Year 1 8,000 $12,000 Using the high-low method, the cost formula for utilities is: A) $1.50 per unit B) $8,000 plus $0.50 per unit. C) $1.25 per unit. D) $6,000 plus $0.75 per unit. 6. A cost driver is: A) the largest single category of cost in a company. B) a fixed cost that cannot be avoided. C) a factor that causes variations in a cost. D) an indirect cost that is essential to the business. Use the following to answer questions 7-8: Johnson Company has provided the following data for the first five months of the year: Machine Hours 120 January February March April May 200 Lubrication Cost $750 $800 $870 $790 $840 150 170 7. Using the high-low method of analysis, the estimated variable lubrication cost per machine hour is closest to: A) $1.40. B) $1.25 C) $0.67 D) $1.50. 8. Using the high-low method of analysis, the estimated monthly fixed component of lubrication cost is closest to: A) $570 B) $560 C) $585. D) $565. Use the following to answer questions 9-13: The following data relate to a company that produces and sells a travel guide that is updated monthly Fixed costs: Copy editing Art work Typesetting $ 6,000 2,000 72,000 Variable costs: Printing and binding Bookstore discounts Salespersons' commissions Author's royalties $ 3.20 per copy 4.00 per copy 50 per copy 2.00 per copy Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July 9. The unit contribution margin per book is: A) $10.30 B) $14.30 C) $10.80. D) $8.30. 10. The contribution margin ratio for the book is: A) 71.5% B) 54.0% C) 51.5% D) 51.9% 11. The break-even point in units is: A) 8,247 books. B) 7,767 books. C) 7,407 books. D) 6,504 books. 12. The degree of operating leverage for July is: A) the same as that for June. B) higher than that for June. C) lower than that for June. D) not determinable. 13. The degree of operating leverage for July is closest to: A) 4.48 B) 3.48 C) 4.22 D) 8.70 14. Break-even analysis assumes that: A) total costs are unchanged. B) unit variable expenses are unchanged. C) variable expenses are nonlinear. D) unit fixed expenses are unchanged. 15. Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution format income statement for July. Sales (7,000 units).......... Variable expenses......... Contribution margin.. . Fixed expenses... ........ Net operating income........ $315,000 175.000 140,000 103,500 $ 36,500 if the company sells 6,900 units, its net operating income should be closest to: A) $35,979 B) $34,500 C) $36,500 D) $32,000 16. 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: A) $260,000 B) $440,000 C) $280,000 D) $240,000