____ 1. Managerial accounting information is "restricted" by which of the following authorities/limitations?
A) Financial Accounting Standards Board (FASB) regulation
B) Generally Accepted Accounting Principles (GAAP) regulation
C) Value Added Principle
D) International Accounting Standards Board (IASB) regulation
____ 2. Which of the following is a feature of financial (NOT managerial) accounting:
A) Information includes economic and non-financial data as well as financial data.
B) Information is historically based and reported annually.
C) Information is provided primarily to insiders such as managers.
D) Information is reported continuously with a present or future orientation.
____ 3. How can accountants justify calculating cost per unit as an average?
A) Determining the exact cost of a product is virtually impossible.
B) Some manufacturing-related costs cannot be cost-effectively traced to specific units of product.
C) Even when producing multiple units of the same product, normal variations occur in the amount of materials and labor used.
D) All of the above are justifications for computing average unit costs.
____ 4. Select the incorrect statement regarding costs and expenses.
A) Some costs are initially recorded as expenses while others are initially recorded as assets.
B) Expenses are incurred when manufactured goods aresold.
C) Manufacturing-related production costs are initially recorded as expenses.
D) Non-manufacturing costs should be expensed in the period in which they are incurred.
____5. Falcon Company's accountant mistakenly classified some of the company's periodcosts as product costs. After review of page 18/19 of the text and the page 54 homework assign, which of the following indicateshow thiserror affects the company'sfinancial statements, assuming the number of units produced exceededthenumber of units soldduring the period?
A) Reported Cost of Goods sold is too high.
B) Reported Gross Margin (i.e. Gross Profit) is too low.
C) Reported overall expense (total of product and period costs)on the income statement is too low.
D) All of the above would occur based upon this error.
___6. Bennett &Hyre, Inc.makes donuts for discriminating students. Variable cost of production is $3.50 per dozen and fixed production costs are $46,000 per year. The company plans to doubledonut production, but this volume increase will still be within the company's current "relevantrange" of production. How will this change impact the cost of producing a single donut?
A) The unit cost of producing a donut will stay the same within the relevant range.
B) The unit cost of producing a donut will go up within the relevant range.
C) The unit cost of producing a donut will go down within the relevant range.
D) The unit cost of producing a donut will go down and then up quickly in the relevant range.
Use the fact pattern below for Chp 1 related questions 7through 9:
____ 7. During its first year of operations, Critchfield & Furukawa, Inc. paid $40,000 for direct material and $10,000 in wages for production workers. Lease payments and utilities on the production facilities amounted to $9,000. General, selling, and administrative expenses (i.e. S,G&A costs) were $21,000. The company produced 5,000 units and sold 4,000 units at a price of $30/unit. Based upon the facts presented, and after reviewing Chapter 1 regarding product vs. period costs, what is the average production cost that would be used to value company inventory on a per unit basis?
A) $9.80 B) $10.00 C) $11.80 D) $13.30 E) $16.00
____ 8. The Ending Inventory amount, as reported on the Balance Sheet, would be:
A) Higher than the reported Cost of Goods Sold.
B) $4,800
C) $7,840
D) $9,120
E) None of the above.
____ 9. Total "Cost of Goods Sold" expense, to be shown on the income statement, would be:
A) $ 39,200 B) $ 40,000 C) $ 45,600 D) $ 53,200 E) $ 64,000
10. Create a "CM template" (as used in class) to confirm the missing elements & relationships below.
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Selling Price/Unit
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VC per Unit
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CM%
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Total FC
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Net Profit
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Units Sold
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$40/Unit
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??
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25%
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$75,000
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$400,000
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??
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Unit Basis
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Percentages
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Total Dollars
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SP
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VC
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CM
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FC
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NI
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10a. The firm's "cost structure"for the above question is primarily (circle one):
VARIABLE FIXED
11. Create a "CM template" (as used in class) to confirm the missing elements & relationships below.
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Selling Price/Unit
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VC %
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Total CM in $$
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Total FC
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Net Loss
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Units Sold
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??
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30%
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$210,000
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??
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$(30,000)
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3,000
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Unit Basis
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Percentages
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Total Dollars
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SP
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VC
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CM
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FC
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Net LOSS
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11a. The firm's "cost structure" for the above question is primarily (circle one): VARIABLE FIXED
Use the following information from Thien & Baxter, Inc. to answer questions 12 - 14:
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Selling Price
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$25/Case
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Expected Sales Level
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40,000 Cases
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Total Fixed Costs
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$60,000
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Variable Costs
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$23/Case
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12. What is the expected profit for the period? Create an Income Stmt using the full CM format (ignore taxes).
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Unit Basis
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Percentages
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Total Dollars
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SP
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VC
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CM
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FC
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NI
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13. Based on the above Income Statement prepared, what is the current "Operating Leverage" andwhat dollar amount and percentageincrease in profits would be expected with say... a 10% increase in unit sales? Show your work and prepare a new CM template below to confirm (prove) your answer.
____ 14. Considering the formula for Operating Leverage, if no fixed costs had existed in the above fact pattern, operating leverage would have been (i.e. would always be):
a. Negative b. Zero c. 1.0 d. > 1.0
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____ 15. If the level of activity (X) increases, within the relevant range of activity (i.e. class pizza example):
a. Variable cost per unit will increase
b. Total fixed costs will increase
c. Total costs will actually decrease
d. Fixed cost per unit will increase
e. Total variable costs will increase
16. Select the term from the numerical list provided that best matches each of the following descriptions.
Note: If six or more (of the ten) matches is correct, 1pt (full credit) is earned
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List #
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Description
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List of terms
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7
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A. Costs composed of both fixed and variable components.
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1. Activity level
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B. A cost that remains constant in total when total volume changes.
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2. Contribution Margin
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C. The factor that causes (or drives) changes in costs.
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3. Cost behavior
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D. A cost that changes in total in direct proportion to changes in volume.
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4. Cost structure
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E. The way a cost reacts (changes) relative to changes in a measure of activity.
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5. Fixed cost
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F. A condition in which a percentage change in revenue will produce a larger percentage change in net income or loss.
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6. High-low method
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G. A method of estimating the fixed and variable components of a mixed cost where data are plotted on a graph and a line is visually fit to the data.
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7. Mixed costs
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H. The difference between a company's sales revenue and its variable costs.
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8. Operating leverage
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I. A company's cost mix or relative proportion of variable and fixed costs to total costs.
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9. Scattergraph method
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J. A method of estimating the fixed and variable components of a mixed cost using two data observations.
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10. Variable cost
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Use the following information to answer question 17 through 19:
____17. Kyle & Potter Outdoor, Inc. produces bookbags for fashion-conscious students. In 2015, its highest and lowest production levels occurred in June and October, respectively. In June, it produced 5,000 bookbags at a total cost of $105,000. In October, it produced 3,500 bookbags at a total cost of $87,000. Using the high/lowmethod of estimating costs, the average variable cost of producing a bookbag would be:
a. $12.00
b. $27.50
c. $30.38
d. $31.25
e. None of the above. The correct answer is: ____________
18. Based upon the high-low analysis above, and after determining the expected fixed cost associated with this fact pattern, the cost formula (expressed as Y = A + bX ) to be used would be (show all work below):
Total Cost (Y) =
19. If the company planned production of 4,200 units for next month, total expected cost would be:
Total Cost (Y) =
Question #20 Facts: Falcon Productions manufacturers a unique study guide for discriminating students. The company normally produces and sells between 4,000 and 8,000 guides per year. The following cost data is provided:
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Number of Units
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4,000
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5,000
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6,000
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7,000
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Total costs incurred:
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Fixed
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$48,000
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Variable
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48,000
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Total costs
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$96,000
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Cost per unit:
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Fixed
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$ 12.00
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Variable
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12.00
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Total cost per unit
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$24.00
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_____ 20. Assuming consistent cost behavior, what would be the expected "Total Cost Per Unit" if 7,000 units are produced and sold? Be sure to complete all elements of the preceding table as you determine your answer.
a. $48.00 b. $24.00 c. $21.93 d. $20.72 e. $18.86
Use the following information for questions 21 - 23:
Brousseau & Graham, Inc. producesacademicChess sets for office-hours competition. The company expects the following sales and expenses for the year for its top of the line "ExcellentStudent" (ES) brand of gold-plated sets.
Sales (400 sets) $ 200,000 Expected Income Tax Rate: 20%
Variable expenses $ 80,000
Fixed expenses $ 60,000
21.Set up a CM template, use the equation method, and determine how many units (sets) must be sold to break-even.
22.What sales dollar amount of Excellent Student series sets must be sold to earn a pre-tax profit of $30,000?
23.What sales dollar amount of ExcellentStudent series sets must be sold to earn an after-tax profit of $30,000?