Would you please help me with the MC?
ACCOUNTING 203 ON-LINE EXAM #2 (Chs. 17,18,19) Individual Portion 90 pts. 30 Multiple-Choice 3 pts. each (Please highlight your answers in yellow) 1. The costs that are easiest to trace directly to products are A) direct materials and direct labor. B) direct labor and overhead. C) direct materials and overhead. D) none of the above; all three costs are equally easy to trace to the product. 2. Globe Company produces two products, A1 and B2. A1 is a high-volume item totaling 20,000 units annually. B2 is a low-volume item totaling only 6,000 units per year. A1 requires one hour of direct labor for completion, while each unit of B2 requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual manufacturing overhead costs are $640,000. Globe uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of B2 would be assigned overhead of A) $20.00. B) $24.61. C) $40.00. D) need more information to compute. Page 1 3. R-Ball Corporation manufactures deluxe and standard racquetball racquets. R-Ball's total overhead costs consist of assembly costs and inspection costs. The following information is available: Cost Deluxe Standard Total Cost Assembly 500 mach. hours 500 mach. hours $30,000 Inspections 350 150 $50,000 2,100 labor hours 1,900 labor hours R-Ball is considering switching from one overhead rate based on labor hours to activitybased costing. Using activity-based costing, how much assembly cost is assigned to deluxe racquets? A) $10,500. B) $15,000. C) $15,750. D) $21,000. Page 3 4. Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 120,000 500 orders Machine Setup Setups 297,000 450 setups Machining Machine hours 1,500,000 125,000 MH Assembly Parts 1,200,000 1,000,000 parts Inspection Inspections 300,000 500 inspections If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is A) $9.60. B) $12.00. C) $15.00. D) $34.17. Page 5 5. Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 120,000 500 orders Machine Setup Setups 297,000 450 setups Machining Machine hours 1,500,000 125,000 MH Assembly Parts 1,200,000 1,000,000 parts Inspection Inspections 300,000 500 inspections If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is A) $1.20 per direct labor hour. B) $240 per order. C) $0.12 per part. D) $6,834 per order. 6. An activity-based overhead rate is computed as follows: A) actual overhead divided by actual use of cost drivers. B) estimated overhead divided by actual use of cost drivers. C) actual overhead divided by estimated use of cost drivers. D) estimated overhead divided by estimated use of cost drivers. 7. Companies that switch to ABC often find they have A) been overpricing some products. B) possibly losing market share to competitors. C) been sacrificing profitability by underpricing some products. D) all of the above. Page 7 8. Donkey Company manufactures two products, Standard and DeLuxe. Donkey's overhead costs consist of machining, $2,000,000; and assembling, $1,000,000. Information on the two products is: Standard DeLuxe Direct labor hours 10,000 15,000 Machine hours 10,000 30,000 Number of parts 90,000 160,000 Overhead applied to DeLuxe using traditional costing using direct labor hours is A) $860,000. B) $1,200,000. C) $1,800,000. D) $2,140,000. 9. Comp ute the amou nt of overh ead assign ed to Goo. A company incurs $1,350,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available: Department Expected use of Driver Cost Ordering and Receiving 2,000 $400,000 Mixing 50,000 500,000 Testing 1,500 450,000 Production information for Goo is as follows: Department Expected use of Driver Ordering and Receiving 400 Mixing 20,000 Testing 500 Page 9 A) $337,500 B) $430,000 C) $527,382 D) $675,000 10. A cost which remains constant per unit at various levels of activity is a A) variable cost. B) fixed cost. C) mixed cost. D) manufacturing cost. 11. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: 12. If the activity level increases 10%, total variable costs will A) remain the same. B) increase by more than 10%. C) decrease by less than 10%. D) increase 10%. 13. Fontain, Inc. collected the following production data for the past month: Units Produced Total Cost 1,600 $22,000 1,300 19,000 1,500 22,500 1,100 16,500 If the high-low method is used, what is the monthly total cost equation? A) Total cost = $4,400 + $11/unit B) Total cost = $5,500 + $10/unit C) Total cost = $0 + $15/unit D) Total cost = $3,300 + $12/unit 14. Wynne Company's high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were $78,000 in May and $30,000 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units. A) $67,500 B) $72,000 C) $58,500 D) $60,000 Page 11 15. If American Airlines cuts its domestic fares by 30%, A) its fixed costs will decrease. B) profit will increase by 30%. C) a profit can only be earned by decreasing the number of flights. D) a profit can be earned either by increasing the number of passengers or by decreasing variable costs. 16. A company has contribution margin per unit of $45 and a contribution margin ratio of 40%. What is the unit selling price? A) $75.00. B) $112.50. C) $18.00. D) Cannot be determined. 17. Disney's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $22,000. If sales are expected to increase $40,000, by how much will the company's net income increase? A) $18,000. B) $28,000. C) $12,000. D) $6,000. 18. At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $32,000. How much is the selling price per unit? A) $43.50. B) $11.50. C) $16.00. D) Not enough information 19. Fallow-Hawke is a nonprofit organization that captures stray deer from residential communities. Fixed costs are $10,000. The variable cost of capturing each deer is $10.00 each. Fallow-Hawke is funded by a local philanthropy in the amount of $32,000 for 2008. How many deer can Fallow-Hawke capture during 2008? A) 2,200. B) 3,200. C) 4,200. D) 2,000. 20. A company requires $1,020,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $180,000. What is the target net income? A) $306,000. B) $234,000. C) $420,000. D) $126,000. 21. Reese Company requires sales of $2,000,000 to cover its fixed costs of $700,000 and to earn net income of $500,000. What percent are variable costs of sales? A) 25%. B) 40%. C) 35%. D) 60%. 22. Dodge Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $4.20 per unit for a total of $4,200 for the month. If variable costs decrease by 10%, what happens to the break-even level of units per month for Dodge Company? A) It is 10% higher than the original break-even point. B) It decreases about 12 units. C) It decreases about 30 units. D) It depends on the number of units the company expects to produce and sell. Page 13 23. The following monthly data are available for Wackadoos, Inc. which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 4,000 units. How much is the margin of safety for the company for June? A) $70,000. B) $105,000. C) $63,000. D) $2,500. 24. Konerko Company sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $30 and a selling price of $50. Q-Chip Plus has variable costs per unit of $35 and a selling price of $65. The weighted-average unit contribution margin for Konerko is: A) $23. B) $25. C) $27. D) $50. 25. Konerko Company sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $30 and a selling price of $50. Q-Chip Plus has variable costs per unit of $35 and a selling price of $65. Konerko's fixed costs are $540,000. How many units of Q-Chip would be sold at the break-even point? A) 6,000 B) 7,043 C) 10,000 D) 14,000 26. Fields Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Fields incurs $2,220,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The break-even point in dollars is A) $821,400. B) $5,162,791. C) $5,550,000. D) $6,000,000. 27. Fields Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Fields incurs $2,220,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division at the break-even point? A) $1,800,000 B) $2,100,000 C) $3,355,814 D) $3,900,000 Page 15 28. Innova Discs has two divisionsStandard and Premium. Each division has hundreds of different types of golf discs and disc golf products. The following information is available: Standard Division Premium Division Total Sales $400,000 $600,000 $1,000,000 Variable costs 280,000 360,000 Contribution margin $120,000 $240,000 Total fixed costs $300,000 What is the weighted-average contribution margin ratio? A) 34% B) 35% C) 36% D) 50% 29. Innova Discs has two divisionsStandard and Premium. Each division has hundreds of different types of golf discs and disc golf products. The following information is available: Standard Division Premium Division Total Sales $400,000 $600,000 $1,000,000 Variable costs 280,000 360,000 Contribution margin $120,000 $240,000 Total fixed costs $300,000 What is the break-even point in dollars? A) $108,000 B) $833,333 C) $857,143 D) $882,353 Page 17 30. Jermaine's Vittles can produce and sell only one of the following two products: Oven Contribution Hours Required Margin Per Unit Crackers 0.2 $3 Bread sticks 0.3 $4 The company has oven capacity of 600 hours. How much will contribution margin be if it produces only the most profitable product? A) $6,000 B) $8,000 C) $9,000 D) $12,000 Page 19 ACCOUNTING 203 ON-LINE EXAM #2 (Chs. 17,18,19) Individual Portion 90 pts. 30 Multiple-Choice 3 pts. each (Please highlight your answers in yellow) 1. The costs that are easiest to trace directly to products are A) direct materials and direct labor. B) direct labor and overhead. C) direct materials and overhead. D) none of the above; all three costs are equally easy to trace to the product. 2. Globe Company produces two products, A1 and B2. A1 is a high-volume item totaling 20,000 units annually. B2 is a low-volume item totaling only 6,000 units per year. A1 requires one hour of direct labor for completion, while each unit of B2 requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual manufacturing overhead costs are $640,000. Globe uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of B2 would be assigned overhead of A) $20.00. B) $24.61. C) $40.00. D) need more information to compute. Page 1 3. R-Ball Corporation manufactures deluxe and standard racquetball racquets. R-Ball's total overhead costs consist of assembly costs and inspection costs. The following information is available: Cost Deluxe Standard Total Cost Assembly 500 mach. hours 500 mach. hours $30,000 Inspections 350 150 $50,000 2,100 labor hours 1,900 labor hours R-Ball is considering switching from one overhead rate based on labor hours to activitybased costing. Using activity-based costing, how much assembly cost is assigned to deluxe racquets? A) $10,500. B) $15,000. C) $15,750. D) $21,000. Page 3 4. Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 120,000 500 orders Machine Setup Setups 297,000 450 setups Machining Machine hours 1,500,000 125,000 MH Assembly Parts 1,200,000 1,000,000 parts Inspection Inspections 300,000 500 inspections If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is A) $9.60. B) $12.00. C) $15.00. D) $34.17. Page 5 5. Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 120,000 500 orders Machine Setup Setups 297,000 450 setups Machining Machine hours 1,500,000 125,000 MH Assembly Parts 1,200,000 1,000,000 parts Inspection Inspections 300,000 500 inspections If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is A) $1.20 per direct labor hour. B) $240 per order. C) $0.12 per part. D) $6,834 per order. 6. An activity-based overhead rate is computed as follows: A) actual overhead divided by actual use of cost drivers. B) estimated overhead divided by actual use of cost drivers. C) actual overhead divided by estimated use of cost drivers. D) estimated overhead divided by estimated use of cost drivers. 7. Companies that switch to ABC often find they have A) been overpricing some products. B) possibly losing market share to competitors. C) been sacrificing profitability by underpricing some products. D) all of the above. Page 7 8. Donkey Company manufactures two products, Standard and DeLuxe. Donkey's overhead costs consist of machining, $2,000,000; and assembling, $1,000,000. Information on the two products is: Standard DeLuxe Direct labor hours 10,000 15,000 Machine hours 10,000 30,000 Number of parts 90,000 160,000 Overhead applied to DeLuxe using traditional costing using direct labor hours is A) $860,000. B) $1,200,000. C) $1,800,000. D) $2,140,000. 9. Comp ute the amou nt of overh ead assign ed to Goo. A company incurs $1,350,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available: Department Expected use of Driver Cost Ordering and Receiving 2,000 $400,000 Mixing 50,000 500,000 Testing 1,500 450,000 Production information for Goo is as follows: Department Expected use of Driver Ordering and Receiving 400 Mixing 20,000 Testing 500 Page 9 A) $337,500 B) $430,000 C) $527,382 D) $675,000 10. A cost which remains constant per unit at various levels of activity is a A) variable cost. B) fixed cost. C) mixed cost. D) manufacturing cost. 11. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: 12. If the activity level increases 10%, total variable costs will A) remain the same. B) increase by more than 10%. C) decrease by less than 10%. D) increase 10%. 13. Fontain, Inc. collected the following production data for the past month: Units Produced Total Cost 1,600 $22,000 1,300 19,000 1,500 22,500 1,100 16,500 If the high-low method is used, what is the monthly total cost equation? A) Total cost = $4,400 + $11/unit B) Total cost = $5,500 + $10/unit C) Total cost = $0 + $15/unit D) Total cost = $3,300 + $12/unit 14. Wynne Company's high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were $78,000 in May and $30,000 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units. A) $67,500 B) $72,000 C) $58,500 D) $60,000 Page 11 15. If American Airlines cuts its domestic fares by 30%, A) its fixed costs will decrease. B) profit will increase by 30%. C) a profit can only be earned by decreasing the number of flights. D) a profit can be earned either by increasing the number of passengers or by decreasing variable costs. 16. A company has contribution margin per unit of $45 and a contribution margin ratio of 40%. What is the unit selling price? A) $75.00. B) $112.50. C) $18.00. D) Cannot be determined. 17. Disney's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $22,000. If sales are expected to increase $40,000, by how much will the company's net income increase? A) $18,000. B) $28,000. C) $12,000. D) $6,000. 18. At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $32,000. How much is the selling price per unit? A) $43.50. B) $11.50. C) $16.00. D) Not enough information 19. Fallow-Hawke is a nonprofit organization that captures stray deer from residential communities. Fixed costs are $10,000. The variable cost of capturing each deer is $10.00 each. Fallow-Hawke is funded by a local philanthropy in the amount of $32,000 for 2008. How many deer can Fallow-Hawke capture during 2008? A) 2,200. B) 3,200. C) 4,200. D) 2,000. 20. A company requires $1,020,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $180,000. What is the target net income? A) $306,000. B) $234,000. C) $420,000. D) $126,000. 21. Reese Company requires sales of $2,000,000 to cover its fixed costs of $700,000 and to earn net income of $500,000. What percent are variable costs of sales? A) 25%. B) 40%. C) 35%. D) 60%. 22. Dodge Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $4.20 per unit for a total of $4,200 for the month. If variable costs decrease by 10%, what happens to the break-even level of units per month for Dodge Company? A) It is 10% higher than the original break-even point. B) It decreases about 12 units. C) It decreases about 30 units. D) It depends on the number of units the company expects to produce and sell. Page 13 23. The following monthly data are available for Wackadoos, Inc. which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 4,000 units. How much is the margin of safety for the company for June? A) $70,000. B) $105,000. C) $63,000. D) $2,500. 24. Konerko Company sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $30 and a selling price of $50. Q-Chip Plus has variable costs per unit of $35 and a selling price of $65. The weighted-average unit contribution margin for Konerko is: A) $23. B) $25. C) $27. D) $50. 25. Konerko Company sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $30 and a selling price of $50. Q-Chip Plus has variable costs per unit of $35 and a selling price of $65. Konerko's fixed costs are $540,000. How many units of Q-Chip would be sold at the break-even point? A) 6,000 B) 7,043 C) 10,000 D) 14,000 26. Fields Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Fields incurs $2,220,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The break-even point in dollars is A) $821,400. B) $5,162,791. C) $5,550,000. D) $6,000,000. 27. Fields Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Fields incurs $2,220,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division at the break-even point? A) $1,800,000 B) $2,100,000 C) $3,355,814 D) $3,900,000 Page 15 28. Innova Discs has two divisionsStandard and Premium. Each division has hundreds of different types of golf discs and disc golf products. The following information is available: Standard Division Premium Division Total Sales $400,000 $600,000 $1,000,000 Variable costs 280,000 360,000 Contribution margin $120,000 $240,000 Total fixed costs $300,000 What is the weighted-average contribution margin ratio? A) 34% B) 35% C) 36% D) 50% 29. Innova Discs has two divisionsStandard and Premium. Each division has hundreds of different types of golf discs and disc golf products. The following information is available: Standard Division Premium Division Total Sales $400,000 $600,000 $1,000,000 Variable costs 280,000 360,000 Contribution margin $120,000 $240,000 Total fixed costs $300,000 What is the break-even point in dollars? A) $108,000 B) $833,333 C) $857,143 D) $882,353 Page 17 30. Jermaine's Vittles can produce and sell only one of the following two products: Oven Contribution Hours Required Margin Per Unit Crackers 0.2 $3 Bread sticks 0.3 $4 The company has oven capacity of 600 hours. How much will contribution margin be if it produces only the most profitable product? A) $6,000 B) $8,000 C) $9,000 D) $12,000 Page 19 ACCOUNTING 203 ONLINE EXAM #2 (CHS. 17,18,19) TEAM CASE/PROBLEM (60 pts.) DATA: Rick's English Hut (Rick's) is a restaurant located in North Myrtle Beach, South Carolina on a saltwater marsh, surrounded by stately oak trees. Rick's appetizers and entrees run the gamut, from tasty burgers and sandwiches to authentic Mexican plates and succulent ribs. Rick's also has two bars that feature a dozen beers on tap and a widevariety of wines and mixed drinks. With 15 televisions and seating for 250 patrons, Rick's is the place to enjoy good food and warm hospitality with friends while watching your favorite sports team. For the most recent month, Rick's generated $60,000 in revenue, 55% of which came from the sale of alcoholic beverages and 45% of which came from the sale of food items. On average, alcoholic beverages sell for $6 and have a variable cost of $3; the average food item sells for $12 and has a variable cost of $8. Rick's fixed costs for the month totaled $10,950. Rick's recent operating results present the proprietors with a dilemma. Specifically, for state licensing purposes Rick's currently is classified as a \"restaurant\" and, as such, has the appropriate liquor license associated with this statusClass B. With a Class B liquor license, Rick's is allowed to sell alcohol on the premises. However, alcohol sales must not exceed 50% of total revenueotherwise Rick's would be classified as a \"bar\ACCOUNTING 203 ON-LINE EXAM #2 (Chs. 17,18,19) Individual Portion 90 pts. 30 Multiple-Choice 3 pts. each (Please highlight your answers in yellow) 1. The costs that are easiest to trace directly to products are A) direct materials and direct labor. B) direct labor and overhead. C) direct materials and overhead. D) none of the above; all three costs are equally easy to trace to the product. 2. Globe Company produces two products, A1 and B2. A1 is a high-volume item totaling 20,000 units annually. B2 is a low-volume item totaling only 6,000 units per year. A1 requires one hour of direct labor for completion, while each unit of B2 requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual manufacturing overhead costs are $640,000. Globe uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of B2 would be assigned overhead of A) $20.00. B) $24.61. C) $40.00. D) need more information to compute. Page 1 3. R-Ball Corporation manufactures deluxe and standard racquetball racquets. R-Ball's total overhead costs consist of assembly costs and inspection costs. The following information is available: Cost Deluxe Standard Total Cost Assembly 500 mach. hours 500 mach. hours $30,000 Inspections 350 150 $50,000 2,100 labor hours 1,900 labor hours R-Ball is considering switching from one overhead rate based on labor hours to activitybased costing. Using activity-based costing, how much assembly cost is assigned to deluxe racquets? A) $10,500. B) $15,000. C) $15,750. D) $21,000. Page 3 4. Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 120,000 500 orders Machine Setup Setups 297,000 450 setups Machining Machine hours 1,500,000 125,000 MH Assembly Parts 1,200,000 1,000,000 parts Inspection Inspections 300,000 500 inspections If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is A) $9.60. B) $12.00. C) $15.00. D) $34.17. Page 5 5. Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity Ordering and Receiving Orders $ 120,000 500 orders Machine Setup Setups 297,000 450 setups Machining Machine hours 1,500,000 125,000 MH Assembly Parts 1,200,000 1,000,000 parts Inspection Inspections 300,000 500 inspections If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is A) $1.20 per direct labor hour. B) $240 per order. C) $0.12 per part. D) $6,834 per order. 6. An activity-based overhead rate is computed as follows: A) actual overhead divided by actual use of cost drivers. B) estimated overhead divided by actual use of cost drivers. C) actual overhead divided by estimated use of cost drivers. D) estimated overhead divided by estimated use of cost drivers. 7. Companies that switch to ABC often find they have A) been overpricing some products. B) possibly losing market share to competitors. C) been sacrificing profitability by underpricing some products. D) all of the above. Page 7 8. Donkey Company manufactures two products, Standard and DeLuxe. Donkey's overhead costs consist of machining, $2,000,000; and assembling, $1,000,000. Information on the two products is: Standard DeLuxe Direct labor hours 10,000 15,000 Machine hours 10,000 30,000 Number of parts 90,000 160,000 Overhead applied to DeLuxe using traditional costing using direct labor hours is A) $860,000. B) $1,200,000. C) $1,800,000. D) $2,140,000. 9. Comp ute the amou nt of overh ead assign ed to Goo. A company incurs $1,350,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available: Department Expected use of Driver Cost Ordering and Receiving 2,000 $400,000 Mixing 50,000 500,000 Testing 1,500 450,000 Production information for Goo is as follows: Department Expected use of Driver Ordering and Receiving 400 Mixing 20,000 Testing 500 Page 9 A) $337,500 B) $430,000 C) $527,382 D) $675,000 10. A cost which remains constant per unit at various levels of activity is a A) variable cost. B) fixed cost. C) mixed cost. D) manufacturing cost. 11. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: 12. If the activity level increases 10%, total variable costs will A) remain the same. B) increase by more than 10%. C) decrease by less than 10%. D) increase 10%. 13. Fontain, Inc. collected the following production data for the past month: Units Produced Total Cost 1,600 $22,000 1,300 19,000 1,500 22,500 1,100 16,500 If the high-low method is used, what is the monthly total cost equation? A) Total cost = $4,400 + $11/unit B) Total cost = $5,500 + $10/unit C) Total cost = $0 + $15/unit D) Total cost = $3,300 + $12/unit 14. Wynne Company's high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were $78,000 in May and $30,000 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units. A) $67,500 B) $72,000 C) $58,500 D) $60,000 Page 11 15. If American Airlines cuts its domestic fares by 30%, A) its fixed costs will decrease. B) profit will increase by 30%. C) a profit can only be earned by decreasing the number of flights. D) a profit can be earned either by increasing the number of passengers or by decreasing variable costs. 16. A company has contribution margin per unit of $45 and a contribution margin ratio of 40%. What is the unit selling price? A) $75.00. B) $112.50. C) $18.00. D) Cannot be determined. 17. Disney's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $22,000. If sales are expected to increase $40,000, by how much will the company's net income increase? A) $18,000. B) $28,000. C) $12,000. D) $6,000. 18. At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $32,000. How much is the selling price per unit? A) $43.50. B) $11.50. C) $16.00. D) Not enough information 19. Fallow-Hawke is a nonprofit organization that captures stray deer from residential communities. Fixed costs are $10,000. The variable cost of capturing each deer is $10.00 each. Fallow-Hawke is funded by a local philanthropy in the amount of $32,000 for 2008. How many deer can Fallow-Hawke capture during 2008? A) 2,200. B) 3,200. C) 4,200. D) 2,000. 20. A company requires $1,020,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $180,000. What is the target net income? A) $306,000. B) $234,000. C) $420,000. D) $126,000. 21. Reese Company requires sales of $2,000,000 to cover its fixed costs of $700,000 and to earn net income of $500,000. What percent are variable costs of sales? A) 25%. B) 40%. C) 35%. D) 60%. 22. Dodge Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $4.20 per unit for a total of $4,200 for the month. If variable costs decrease by 10%, what happens to the break-even level of units per month for Dodge Company? A) It is 10% higher than the original break-even point. B) It decreases about 12 units. C) It decreases about 30 units. D) It depends on the number of units the company expects to produce and sell. Page 13 23. The following monthly data are available for Wackadoos, Inc. which produces only one product: Selling price per unit, $42; Unit variable expenses, $14; Total fixed expenses, $42,000; Actual sales for the month of June, 4,000 units. How much is the margin of safety for the company for June? A) $70,000. B) $105,000. C) $63,000. D) $2,500. 24. Konerko Company sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $30 and a selling price of $50. Q-Chip Plus has variable costs per unit of $35 and a selling price of $65. The weighted-average unit contribution margin for Konerko is: A) $23. B) $25. C) $27. D) $50. 25. Konerko Company sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $30 and a selling price of $50. Q-Chip Plus has variable costs per unit of $35 and a selling price of $65. Konerko's fixed costs are $540,000. How many units of Q-Chip would be sold at the break-even point? A) 6,000 B) 7,043 C) 10,000 D) 14,000 26. Fields Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Fields incurs $2,220,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. The break-even point in dollars is A) $821,400. B) $5,162,791. C) $5,550,000. D) $6,000,000. 27. Fields Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Fields incurs $2,220,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division at the break-even point? A) $1,800,000 B) $2,100,000 C) $3,355,814 D) $3,900,000 Page 15 28. Innova Discs has two divisionsStandard and Premium. Each division has hundreds of different types of golf discs and disc golf products. The following information is available: Standard Division Premium Division Total Sales $400,000 $600,000 $1,000,000 Variable costs 280,000 360,000 Contribution margin $120,000 $240,000 Total fixed costs $300,000 What is the weighted-average contribution margin ratio? A) 34% B) 35% C) 36% D) 50% 29. Innova Discs has two divisionsStandard and Premium. Each division has hundreds of different types of golf discs and disc golf products. The following information is available: Standard Division Premium Division Total Sales $400,000 $600,000 $1,000,000 Variable costs 280,000 360,000 Contribution margin $120,000 $240,000 Total fixed costs $300,000 What is the break-even point in dollars? A) $108,000 B) $833,333 C) $857,143 D) $882,353 Page 17 30. Jermaine's Vittles can produce and sell only one of the following two products: Oven Contribution Hours Required Margin Per Unit Crackers 0.2 $3 Bread sticks 0.3 $4 The company has oven capacity of 600 hours. How much will contribution margin be if it produces only the most profitable product? A) $6,000 B) $8,000 C) $9,000 D) $12,000 Page 19 ACCOUNTING 203 ONLINE EXAM #2 (CHS. 17,18,19) TEAM CASE/PROBLEM (60 pts.) DATA: Rick's English Hut (Rick's) is a restaurant located in North Myrtle Beach, South Carolina on a saltwater marsh, surrounded by stately oak trees. Rick's appetizers and entrees run the gamut, from tasty burgers and sandwiches to authentic Mexican plates and succulent ribs. Rick's also has two bars that feature a dozen beers on tap and a widevariety of wines and mixed drinks. With 15 televisions and seating for 250 patrons, Rick's is the place to enjoy good food and warm hospitality with friends while watching your favorite sports team. For the most recent month, Rick's generated $60,000 in revenue, 55% of which came from the sale of alcoholic beverages and 45% of which came from the sale of food items. On average, alcoholic beverages sell for $6 and have a variable cost of $3; the average food item sells for $12 and has a variable cost of $8. Rick's fixed costs for the month totaled $10,950. Rick's recent operating results present the proprietors with a dilemma. Specifically, for state licensing purposes Rick's currently is classified as a \"restaurant\" and, as such, has the appropriate liquor license associated with this statusClass B. With a Class B liquor license, Rick's is allowed to sell alcohol on the premises. However, alcohol sales must not exceed 50% of total revenueotherwise Rick's would be classified as a \"bar\
