Accounting Questions
1. Contribution margin can be defined as:
the amount of sales revenue necessary to cover variable expenses.
sales revenue minus fixed expenses.
the amount of sales revenue necessary to cover fixed and variable expenses.
sales revenue minus variable expenses.
2. If a company is operating at the break-even point:
its contribution margin will be equal to its variable expenses.
its margin of safety will be equal to zero.
its fixed expenses will be equal to its variable expenses.
its selling price will be equal to its variable expense per unit.
3. Break-even analysis assumes that:
Total revenue is constant.
Unit variable expense is constant.
Unit fixed expense is constant.
Selling prices must fall in order to generate more revenue.
4. A company makes a single product that it sells for $16 per unit. Fixed costs are $76,800 per month and the product has a
contribution margin ratio of 40%. If the company's actual sales are $224,000, its margin of safety is:
$32,000
$96,000
$128,000
$192,000
5. Sorin Inc., a company that produces and sells a single product, has provided its contribution format income statement for
January.
If the company sells 4,600 units, its total contribution margin should be closest to:
$54,600
$59,800
$69,400
$13,362
6. Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income
statement for November.
If the company sells 5,300 units, its net operating income should be closest to:
$24,600
$2,200
$22,874
$15,400
7. Holt Company's variable expenses are 70% of sales. At a $300,000 sales level, the degree of operating leverage is 10. If
sales increase by $60,000, the degree of operating leverage will be:
12
10
6
4
8. Gayne Corporation's contribution margin ratio is 12% and its fixed monthly expenses are $84,000. If the company's sales
for a month are $738,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly
expenses do not change.
$565,440
$654,000
$88,560
$4,560
9. Borich Corporation produces and sells a single product. Data concerning that product appear below:
The break-even in monthly unit sales is closest to:
2,055
4,030
4,194
3,426
10. Data concerning Follick Corporation's single product appear below:
The break-even in monthly dollar sales is closest to:
$1,148,400
$638,851
$321,552
$446,600
11. Hettrick International Corporation's only product sells for $120.00 per unit and its variable expense is $52.80. The
company's monthly fixed expense is $396,480 per month. The unit sales to attain the company's monthly target profit of
$13,000 is closest to:
7,755
6,093
5,753
3,412
12. The costing method that treats all fixed costs as period costs is:
absorption costing.
job-order costing.
variable costing.
process costing.
13. Under the variable costing method, which of the following is always expensed in its entirety in the period in which it is
incurred?
fixed manufacturing overhead cost
fixed selling and administrative expense
variable selling and administrative expense
All of these
14. Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that:
variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials,
direct labor, and the variable portion of manufacturing overhead as product costs.
variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of
fixed manufacturing overhead as product costs while absorption costing treats only direct materials, direct labor, and the
variable portion of manufacturing overhead as product costs.
variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable
portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labor, the
variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.
variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs
while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated
portion of fixed manufacturing overhead as product costs.
15. Net operating income under absorption costing may differ from net operating income determined under variable costing.
How is this difference calculated?
A) change in the quantity of units in inventory times the fixed manufacturing overhead rate per unit.
B) number of units produced during the period times the fixed manufacturing overhead rate per unit.
C) change in the quantity of units in inventory times the variable manufacturing cost per unit.
D) number of units produced during the period times the variable manufacturing cost per unit.
16. Shun Corporation manufactures and sells a handheld calculator. The following information relates to Shun's operations for
last year:
What is Shun's unit product cost under absorption costing for last year?
$4.10
$4.55
$5.85
$6.30
17. A manufacturing company that produces a single product has provided the following data concerning its most recent month
of operations:
What is the total period cost for the month under the variable costing approach?
$138,600
$134,400
$46,200
$184,800
18. Pungent Corporation manufactures and sells a spice rack. Shown below are the actual operating results for the first two
years of operations:
Pungent's cost structure and selling price were the same for both years. What is Pungent's variable costing net operating
income for Year 2?
$48,000
$50,000
$54,000
$56,000
19. The following data pertain to last year's operations at Clarkson, Incorporated, a company that produces a single product:
What was the absorption costing net operating income last year?
$44,000
$48,000
$50,000
$49,000
20. Beamish Inc., which produces a single product, has provided the following data for its most recent month of operations:
There were no beginning or ending inventories. The unit product cost under absorption costing was:
$93
$97
$136
$194