BUSA 102

MR. FARINA

Pre-Quiz #3

Chapters 19 and 20


Name

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FILL-IN-THE-BLANK—PRINCIPLESANDTERMINOLOGY—Chapter 19

INSTRUCTIONS: Complete each of the following statements by writing the appropriate words in the Answers column.

For
Answers / Scoring
0.The manner in which a cost changes as a related activity changes is known as /
cost behavior /
0. ____
1.Direct materials and direct labor are generally classified as a ( fixed or variable) cost /
1. ____
2.The activity causing a cost to be incurred is referred to as a(n) ...... /
2. ____
3.The salary of a production supervisor is an example of a (fixed or variable) cost /
3. ____
4.The rental cost of a piece of office equipment is $6,000 per month plus $2.27 for each machine hour used over 1,720 hours. This is an example of a (type of cost) /
4. ____
5.In the high-low method, the difference in total cost divided by the difference in production results in /
5. ____
6.Decreases in variable cost per unit will cause the break-even point to. / 6. ____
7.Increases in property tax rates will cause the break-even point to .... / 7. ____
8.Sales less variable costs divided by sales is used to compute...... / 8. ____
9.Decreases in the sales price per unit will cause the break-even point to / 9. ____
10.The vertical axis of a break-even chart depicts ...... / 10. ____
11.With the aid of computer software, managers can vary assumed selling prices, costs, and volume and can immediately see the effects on the break-even point. Such an analysis is called /
11. ____
12.The sales volume necessary to break-even or to earn a target profit for a business selling two or more products depends upon the /
12. ____
13.Contribution margin divided by operating income is used in the calculation of /
13. ____
14.The difference between the current sales revenue and the sales at the break-even point is referred to as /
14. ____
15.An important assumption of cost-volume-profit analysis is that total sales and total costs can be represented by /
15. ____

PROBLEMS—CHAPTER 19

INSTRUCTIONS: Solve the following problems and record the answers in the Answers column.

For
Answers / Scoring
0.If total fixed costs are $700,000 and production is 35,000 units, the unit fixed cost is /
$20.00 /
0. ____
1–3.A firm had $600,000 of fixed costs, a unit selling price of $14, and variable costs of $10 per unit.
1.The break-even point, in units, is ...... / 1. ____
2.If fixed costs increase by 12%, the new break-even point, in units, is . / 2. ____
3.The contribution margin ratio is ...... / 3. ____
4.A firm had $745,000 in fixed costs, a unit selling price of $10, and variable costs of $7. The number of sales, in units, necessary to earn a target profit of $155,000 is /
4. ____
5.If Baxter Co. has an operating leverage of 5 and sales increase from $400,000 to $440,000, the percentage increase expected in operating profit is /
5. ____
6.If sales are $700,000, the unit selling price is $25, and sales at the break-even point are $400,000, the margin of safety is /
6. ____
7-8.The data for the highest and lowest levels of a firm’s production are
as follows:
Units ProducedTotal Costs
Highest level14,000$66,000
Lowest level2,00018,000
7.The variable cost per unit is ...... / $ / 7. ____
8.The estimated total cost to produce 6,000 units is ...... / $ / 8. ____
9-10.A firm manufactures two products, X and Y. The fixed costs are
$13,000, and the sales mix is 75% X and 25% Y. The unit selling price
and the unit variable cost for each product are as follows:
Unit Selling PriceUnit Variable Cost
X$20$8
Y6044
9.The break-even sales (units) of X and Y is ...... / 9. ____
10.The number of units of Y that would be sold at the break-even point is . / 10. ____

FILL-IN-THE-BLANK—PRINCIPLESANDTERMINOLOGY—CHAPTER 20

INSTRUCTIONS: Complete each of the following statements by writing the appropriate word or amount in the Answers column.

For
Answers / Scoring
0.The accounting method necessary in determining historical costs for financial reporting is called /

Absorption costing

/
0. ____
1. Another name for variable costing is...... / 1. ____
2.The term applied to the conventional concept that includes both fixed and variable manufacturing costs as part of the cost of products manufactured is /
2. ____
3.In the variable costing income statement, deduction of variable operating expenses from manufacturing margin yields /
3. ____
4.In the variable costing income statement, deduction of variable cost of goods sold from sales yields /
4. ____
5.In the absorption costing income statement, deduction of cost of goods sold from sales yields /
5. ____
6.The concept (variable or absorption costing) that would yield the higher income from operations for a period during which the number of units manufactured is more than the number of units sold is /
6. ____
7. The concept (variable or absorption costing) that supplies cost data useful to management in analyses of long-run production plans is /
7. ____
8.The concept (variable or absorption costing) that supplies cost data useful to management in analyses of short-run pricing plans is /
8. ____
9.Are financial statements prepared on the basis of variable costing in accordance with GAAP? (yes or no) /
9. ____
10–13.Indicate whether each of the following would be included in or excluded from the cost of the product under the variable costing concept:
10.direct labor ...... / 10. ____
11.straight-line depreciation on factory building...... / 11. ____
12.officers’ salaries ...... / 12. ____
13.lumber for a furniture manufacturer ...... / 13. ____
14–15. In contribution margin analysis, the two factors that are identified as responsible for an increase in the amount of sales are:
14...... / 14. ____
15...... / 15. ____

PROBLEMS—CHAPTER 20

INSTRUCTIONS: Solve the following problems and record the answers in the Answers column.

For
Answers / Scoring
0.If total direct labor costs are $100,000 for 25,000 units of production, the per-unit direct labor cost is /
$4.00 per unit /
0. ____
1–2.25,000 units of product T were manufactured and 20,000 units were sold in the current period, the first year of operations. The unit costs and expenses were as follows:
Unit ManufacturingUnit Operating Expenses
Costs of the Period of the Period
Variable$12$4
Fixed 3 1
1.The effect on income from operations if absorption costing rather than variable costing is used would be (answer increase or decrease) /
1. ____
2.The amount of the increase or decrease in income from operations would be / $ / 2. ____
3–6.A business operated at 100% of capacity during its first month, with the following results:
Sales (4,500 units)$180,000
Production costs (5,000 units):
Direct materials$65,000
Direct labor30,000
Variable factory overhead15,000
Fixed factory overhead10,000$120,000
Operating expenses:
Variable operating expenses$ 4,000
Fixed operating expenses 2,500 $6,500
3.The amount of the manufacturing margin that would be reported on the variable costing income statement is /
$ /
3. ____
4.The amount of the contribution margin that would be reported on the variable costing income statement is /
$ /
4. ____
5.The amount of income from operations that would be reported on the variable costing income statement is /
$ /
5. ____
6.The amount of income from operations that would be reported on the absorption costing income statement is /
$ /
6. ____
7–8.At the end of the first year of operations, 3,000 units remained in finished goods inventory. The unit manufacturing costs during the year were as follows:
Direct materials$25
Direct labor10
Variable factory overhead6
Fixed factory overhead2
What is the cost of the finished goods inventory reported on the balance sheet:
7.Under the variable costing concept? ...... / $ / 7. ____
8.Under the absorption costing concept? ...... / $ / 8. ____
9–10.During the current year, the 7,500 units sold were produced at a variable cost of goods sold of $300,000. The planned variable cost of goods sold included 6,000 units for a total cost of $246,000. What was the amount and direction of change (increase or decrease) in the variable cost of goods sold attributed to:
9.The quantity factor? ...... / $ / 9. ____
10.The price factor? ...... / $ / 10. ____

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