1. Mardist Corporation has sales of $100,000, variable expenses of $75,000, fixed expenses of $30,000,
and a net loss of $5,000. How much would Mardist have to sell to achieve a profit of 10% of sales?
A. $187,500
B. $225,500
C. $180,000
D. $200,000
2. Use the following information to answer this question.
Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has
compiled the following data for the past five months of operations.
Using the high-low method of analysis, the estimated variable cost per machine hour for electricity is
closest to which of the following?
Machine
Hours
Electrical
Cost
August 1,000 $1,620
September 900 $1,510
October 1,500 $1,870
November 2,000 $1,950
December 1,300 $1,730
A. $0.40
B. $1.68
C. $2.50
D. $0.98
3. Use the following information to answer this question.
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following
cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
Sales volume (units)The best estimate of the total variable cost per unit is
4,000 5,000
Cost of sales $338,000 $422,500
Selling and administrative costs $89,600 $106,000
A. $84.50.
B. $105.70.
C. $106.90.
D. $100.90.
4. Viren Corporation has provided the following data from its activity-based costing system:
The company makes 240 units of product T91H a year, requiring a total of 550 machine hours, 90 orders,
and 40 inspection hours per year. The product’s direct materials cost is $16.98 per unit, and its direct labor
cost is $12.09 per unit. According to the activity-based costing system, the average cost of product T91H is
closest to _______ per unit.
Activity Cost Pool Total Cost Total Activity
Assembly $387,000 25,000 machine-hours
Processing orders $68,510 1,700 orders
Inspection $129,117 1,930 inspection-hours
A. $90.81
B. $75.70
C. $79.66
D. $29.07
5. Indiana Corporation produces a single product that it sells for $9 per unit. During the first year of
operations, 100,000 units were produced, and 90,000 units were sold. Manufacturing costs and selling and
administrative expenses for the year were as follows:
What was Indiana Corporation’s net operating income for the year using variable costing?
Fixed Costs Variable Costs
Raw materials $1.75 per unit
produced
Direct labor $1.25 per unit
produced
Factory
overhead $100,000 $0.50 per unit
produced
Selling and
administrative $70,000 $0.60 per unit
sold
A. $371,000
B. $281,000
C. $271,000
D. $181,000
6. Use the following information to answer this question.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000
units. Production costs for the year were as follows:
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed
selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct
labor is a variable cost.
The contribution margin per unit was
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead $255,000
A. $27.30.
B. $32.50.
C. $17.50.
D. $25.70.
7. Last year, Gransky Corporation’s variable costing net operating income was $52,100, and its ending
inventory increased by 400 units. Fixed manufacturing overhead cost was $7 per unit. What was the
absorption costing net operating income last year?
A. $49,300
B. $52,100
C. $54,900
D. $2,800
8. Rank the following methods of assigning overhead costs from least accurate to most accurate.
A. Plantwide rate, departmental rates, activity-based costing
B. Plantwide rate, activity-based costing, departmental rates
C. Activity-based costing, departmental rates, plantwide rate
D. Departmental rates, plantwide rate, activity-based costing
9. Use the following information to answer this question.
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following
cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.The best estimate of the total contribution margin when 4,300 units are sold is
Sales volume (units)
4,000 5,000
Cost of sales $338,000 $422,500
Selling and administrative costs $89,600 $106,000
A. $64,070.
B. $38,270.
C. $134,590.
D. $43,430.
10. A company increased the selling price for its product from $5 to $6 per unit when total fixed expenses
increased from $100,000 to $200,000 and variable expense per unit remained unchanged. How would
these changes affect the break-even point?
A. The break-even point in units would decrease.
B. The effect can’t be determined from the information given.
C. The break-even point in units would increase.
D. The break-even point in units would remain unchanged.
11. Use the following information to answer this question.
Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000
units. Production costs for the year were as follows:
Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed
selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct
labor is a variable cost.
Under variable costing, the company’s net operating income for the year would be _______ than under
absorption costing.
Production Cost Data
Direct materials $153,000
Direct labor $110,500
Variable manufacturing overhead $204,000
Fixed manufacturing overhead $255,000
A. $108,000 higher
B. $60,000 higher
C. $60,000 lower
D. $108,000 lower
12. An increase in the activity level within the relevant range results in a/an
A. increase in fixed cost per unit.
B. unchanged fixed cost per unit.
C. proportionate increase in total fixed costs.
D. decrease in fixed cost per unit.
13. Use the following information to answer this question.
Gargymal Company would like to estimate the variable and fixed components of its electrical costs and has
compiled the following data for the past five months of operations.
Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to which
of the following?
Machine
Hours
Electrical
Cost
August 1,000 $1,620
September 900 $1,510
October 1,500 $1,870
November 2,000 $1,950
December 1,300 $1,730
A. $870.00
B. $1,150.00
C. $1,306.50
D. $1,290.00
14. Use the following information to answer this question.
Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the
company has provided the following data concerning the activity rates in its activity-based costing system:
l The measure of activity for the size-related activity cost pool is the number of planned guests at the
wedding reception. The greater the number of guests, the larger the cake.
l The measure of complexity is the number of tiers in the cake.
l The activity measure for the order-related cost pool is the number of orders. (Each wedding involves
one order.)
l The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The
activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding
bells, which are accounted for separately.
Data concerning two recent orders are listed here:
Activity Cost Pools Activity Rate
Size-related $0.94 per guest
Complexity-related $31.62 per tier
Order-related $55.79 per orderAssuming that the company charges $556.96 for the Smith wedding cake, what would be the overall
margin on the order?
Pyburn
Wedding
Smith
Wedding
Number of reception guests 72 189
Number of tiers on the cake 4 5
Cost of purchased decorations for cake $29.92 $68.75
A. $460.30
B. $165.41
C. $96.66
D. $152.45
15. Which statement is true for a company that uses variable costing?
A. The unit product cost changes because of changes in the number of units manufactured.
B. Profit fluctuates with sales.
C. Product costs include variable administration costs.
D. Any underapplied overhead is included in the product cost.
16. Use the following information to answer this question.
Callaham Corporation is a wholesaler that sells a single product. Management has provided the following
cost data for two levels of monthly sales volume. The company sells the product for $115.80 per unit.
The best estimate of the total monthly fixed cost is
Sales volume (units)
4,000 5,000
Cost of sales $338,000 $422,500
Selling and administrative costs $89,600 $106,000
A. $478,050.
B. $427,600.
C. $24,000.
D. $528,500.
17. Murdoch Corporation has provided the following data concerning its only product:
Murdoch Product Data
Selling price $230 per unit
Current sales 39,100 units
Break-even sales 29,716 unitsWhat is the margin of safety in dollars?
A. $8,993,000
B. $5,995,333
C. $2,158,320
D. $6,834,680
18. Use the following information to answer this question.
Lifsey Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the
company has provided the following data concerning the activity rates in its activity-based costing system:
l The measure of activity for the size-related activity cost pool is the number of planned guests at the
wedding reception. The greater the number of guests, the larger the cake.
l The measure of complexity is the number of tiers in the cake.
l The activity measure for the order-related cost pool is the number of orders. (Each wedding involves
one order.)
l The activity rates include the costs of raw ingredients, such as flour, sugar, eggs, and shortening. The
activity rates don’t include the costs of purchased decorations, such as miniature statues and wedding
bells, which are accounted for separately.
Data concerning two recent orders are listed here:
Assuming that the company charges $556.96 for the Smith wedding cake, what would be the overall
margin on the order?
Activity Cost Pools Activity Rate
Size-related $0.94 per guest
Complexity-related $31.62 per tier
Order-related $55.70 per order
Pyburn
Wedding
Smith
Wedding
Number of reception guests 72 189
Number of tiers on the cake 4 5
Cost of purchased decorations for cake $29.92 $68.75
A. $96.66
B. $152.45
C. $165.41
D. $460.30
19. Daniele Corporation uses an activity-based costing system with the following three activity cost pools:
Activity Cost Pool Total ActivityEnd of exam
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Fabrication activity cost pool is closest to _______ per machine hour.
Fabrication 50,000 machine-hours
Order processing 500 orders
Other not applicable
Cost Data
Wages and salaries $280,000
Depreciation $200,000
Occupancy $140,000
Total $620,000
Activity Cost Pools
Fabrication Order
Processing Other Total
Wages and
salaries 60% 30% 10% 100%
Depreciation 20% 35% 45% 100%
Occupancy 10% 50% 40% 100%
A. $7.44
B. $1.24
C. $3.72
D. $4.44
20. Green Company’s variable expenses are 75% of sales. At a sales level of $400,000, the company’s
degree of operating leverage is 8. At this sales level, fixed expenses are
A. $50,000.
B. $75,000.
C. $87,500.
D. $100,000.
