Ritz furniture has a contribution margin

MGMT 650 Final Exam MCQs

Question 1
A typical use of managerial accounting is to:
( ) help investors and creditors assess the financial position of the company.
( ) help management get a clean audit report
( ) help the marketing manager decide which product promotion to implement
( ) help the SEC decide whether management is in compliance of its policies.
Question 2
Three costs incurred by Pitt Company are summarized below:
1,000 units 2,000 units
Cost A $10,000 $15,000
Cost B $21,000 $21,000
Cost C $16,000 $32,000
Which of these costs are variable?
( ) A, B, and C
( ) A and B
( ) A only
( ) C only

Question 3
Bubba's Steakhouse has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials, $4,080; hourly labor (variable), $5,200; rent (fixed), $1,680; depreciation, $710; and other fixed costs, $590. Each steak dinner sells for $12.80 each. How much would Shula’s profit increase if 10 more dinners were sold?

Question 4
Bellfont Company produces door stoppers. August production costs are below:
Door Stoppers produced 74,000
Direct material (variable) $20,000
Direct labor (variable) 40,000
Supplies (variable) 20,000
Supervision (fixed) 25,900
Depreciation (fixed) 24,500
Other (fixed) 5,400
In September, Bellfont expects to produce 100,000 door stoppers. Assuming no structural changes, what is Bellfont’s production cost per door stopper for September?
Question 5
Aaron's chairs is in the process of preparing a production cost budget for August. Actual costs in July for 120 chairs were:
Materials cost $4,790
Labor cost 2,810
Rent 1,500
Depreciation 2,500
Other fixed costs 3,200

Materials and labor are the only variable costs. If production and sales are budgeted to change to 130 chairs in August, how much is the expected total variable cost on the August budget?
Question 6
Carry-ALL plans to sell 1,300 carriers next year and has budgeted sales of $46,000 and profits of $22,000. Variable costs are projected to be $20 per unit. Michael Co. offers to pay $23,400 to buy 690 units from Carry-ALL. Total fixed costs are $7,000 per year. This offer does not affect Carry-ALL's other planned operations. The incremental revenues for this situation are

Question 7
Stellar Company has the following sales, variable cost, and fixed cost. If sales increase by $10,000 then their profit increases/decreases by how much?

Sales $50,000
Variable Costs $9,400
Fixed Costs $27,000
Answer:
8,120

Question 8
Susan is trying to decide whether or not to attend college during the next 12-week session. She has the following options:
1. Attend college full-time at a cost of $1,200.
2. Attend college part-time at a cost of $700 and work part-time earning $1,900.
3. Work full-time earning $5,000.
What is Susan's incremental profit if she chooses option 3 over option 2?
Question 9
Total costs were $72,600 when 28,000 units were produced and $93,800 when 39,000 units were produced. Use the high-low method to find the estimated total costs for a production level of 32,000 units.

Question 10
Professional University teaches a large range of undergraduate courses. It is interested in determining the cost equation for the facilities cost as a function of student credit hours so that it an more accurately budget its facilities costs as enrollment grows. Information for the high and low cost semesters and volumes for last 5 years appears below
Semester Student Credit Hours Facilities Cost
Spring 2007 250,000 $500,000
Fall 2004 300,000 $530,000
Using the high low method, with student credit hours as the activity driver, what is the equation for facilities cost (FC) as a function of student credit hours?
( ) FC = $350,000 + $0.60 / student credit hour
( ) FC = -$585,100 + $1.67 / student credit hour
( ) FC = $1.77 / student credit hour
( ) FC = $2 / student credit hour

Question 11
Randy's tireland makes a product that sells for $66 per unit and has $52 per unit in variable costs. Annual fixed costs are $24,000. If Rambles sells 10 units less than breakeven, how much loss would the company recognize on its income statement?
Question 12
Ritz Furniture has a contribution margin ratio of 0.17. If fixed costs are $163,300, how many dollars of revenue must the company generate in order to reach the break-even point?
Question 13
U.S. Telephone Cellular sells phones for $100. The unit variable cost per phone is $50 plus a selling commission of 10% (based on the unit sales price per phone). Fixed manufacturing costs total $1,010 per month, while fixed selling and administrative costs total $2,430. How many phones must be sold to achieve the breakeven point?
Question 14
Swimkids is a swimsuit manufacturer. They sell swim suits at a selling price is $30 per unit. Swimkids variable costs are $18 per unit. Fixed costs are $86,300. Swimkids expects sales of $274,700 next year. What is Swimkids's margin of safety (in dollars)?
Question 15
Lambardi Company sells 3 types of bags. Bag A sells for $16 and has variable cost of $9.00 per unit. Bag B sells for $14 and has variable cost of $12.00 per unit. Bag C sells for $7 and has variable costs of $6.00 per unit. Lambardi sells in a mix of 2 units of A, 3 units of B and 5 units of C. What is the weighted average contribution margin per unit for Lambardi?
Question 16
Product A has a contribution margin per unit of $500 and required 2 hours of machine time. Product B has a contribution margin per unit of $1,000 and requires 5 hours of machine time. How much of each product should be produced given there are 100 hours of available machine time?
( ) 50 units of A and 25 units of B.
( ) 25 units of B.
( ) 50 units of A.
( ) None of the above

Question 17
Delfi Company produces two models of seats, Toro and Prep. Information regarding these products for May follows:
Toro Prep
Number of units 3,000 7,000
Sales revenue $120,000 $140,000
Variable costs 60,000 42,000
Fixed costs 24,000 50,000
Net Income $36,000 $48,000
Pounds of plastic to produce one bucket 4.0 1.6
Contribution margin per unit $20 $14
Due to increased demand of plastic in the market, Delfi Company can obtain only 9,000 pounds of plastic per month. Delfi can sell as many seats as it can produce of either model. How many of each model should Delfi produce to maximize profit in May considering the constraint?
( ) Toro: 0; Prep: 4,375
( ) Toro: 2,250; Prep: 0
( ) Toro: 1,125; Prep: 2,812
( ) Toro: 0; Prep: 5,625

Question 18
Abagail Corp. uses activity-based costing system with three activity cost pools. The following information is provided:
Costs: Wages and salaries $ 216,000
Depreciation 116,000
Utilities 119,000
Total $440,000

Activity Cost Pools
Assembly Setting Up Other
Wages and salaries 0.54 30% 10%
Depreciation 0.39 45% 20%
Utilities 0.29 40% 30%

How much total cost would be allocated to the Assembly activity cost pool?
Question 19
Which of the following is not a goal of Managerial Accounting?
( ) Provide information managers need for planning.
( ) Provide information managers need for market wide interest rates.
( ) Provide information managers need for control.
( ) Provide information managers need for decision making.
Question 20
Which one of the following is least likely to be a fixed cost?
( ) Rent for buildings
( ) Rent for land
( ) Cost of commodity inputs
( ) Cost of property, plant and equipment