1.

A
manufacturing company produces 100,000 units of product A at a total cost of
$2.8 million. Total fixed costs are
$1.2 million. If the company increases
production by 18% and uses a 23% markup the price per unit will be:

A)

$31.54

B)

$32.19

C)

$35.47

D)

$37.10

2.

A new employee
looks at the analysis and exclaims, “We’ll lose money with either of these
alternatives! Let’s just throw these units in the trash!” Suppose the
alternative to trashing is choosing the more profitable of the two
alternatives (that the new employee looked at and did not like). What effect
will the trashing option (that the new employee

wants)
have on net income?

A)

Net
income will increase by $35 per unit for each unit discarded.

B)

Net
income will decrease by $265 per unit for each unit discarded.

C)

Net
income will decrease by $150 per unit for each unit discarded.

D)

It
will have no effect on net income.

3.

When
the incremental revenues and expenses are analyzed, the company is better off
by

A)

$10
per unit if they sell the units in their current state.

B)

$25
per unit if they sell the units in their current state.

C)

$115
per unit if they complete the units.

D)

$15
per unit if they complete the units.

4.

A
company using activity based pricing marks up the direct cost of goods by 43%
plus charges customers for indirect costs based on the activities utilized by
the customer. Indirect costs are
charged as follows: $8.00 per order
placed; $4.00 per separate item ordered; $30.00 per return. A customer places 10 orders with a total
direct cost of $3,000, orders 300 separate items, and makes 6 returns. What will the customer be charged?

A)

$5,750

B)

$3,000

C)

$5,330

D)

$4,290

5.

Manufacturing
overhead is allocated to products based on the number of machine hours
required. In a year when 20,000
machine hours were anticipated, costs were budgeted at $125,000. If a product requires 7,000 machine hours,
how much manufacturing overhead will be allocated to this product?

A)

$41,667

B)

$42,850

C)

$51,120

D)

$43,750

6.

If the
hotel spends an additional $10,000 in the month of February on advertising
they feel that they can expect occupancy rate to increase by 5%. What would
be the financial impact of spending this additional money on advertising for
the month of February (28 days)?

A)

Total
fixed costs will increase by $10,500.

B)

Net
income will increase by $26,320.

C)

Net
income will increase by $16,320.

D)

Total
fixed costs will remain the same.

7.

If 80%
of the rooms are occupied each night in the month of February (28 days) what
will total costs be for the month?

A)

$155,680.

B)

$173,600.

C)

$171,530.

D)

$150,778.

8.

Jones
Company manufactures widgets. Old Ham
Company has approached Jones with a proposal to sell the company one of the
components used to make widgets at a price of $100,000 for 50,000 units. Jones is currently making these components
in its own factory. The following
costs are associated with this part of the process when 50,000 units are
produced:

The
manufacturing overhead consists of $32,000 of costs that will be eliminated
if the components are no longer produced by Jones. The remaining manufacturing overhead will
continue whether or not Jones makes the components.

What
is the amount of avoidable costs if Jones buys rather than makes the
components?

A)

$60,000

B)

$78,000

C)

$96,000

D)

$100,000

Budget

Actual

Difference

Sales

$200,000

$202,000

$2,000

Less:

Cost of ingredients

$162,000

$166,000

$4,000

Salaries

$31,000

$31,200

$200

Controllable Profit

$47,000

$44,800

-$2,200

10.

A
company has a total cost of $50.00 per unit at a volume of 100,000
units. The variable cost per unit is $20.00. What would the price be if the company
expected a volume of 120,000 units and used a markup of 50%?

A)

$67.50

B)

$62.50

C)

$75.00

D)

There
is not enough information in the problem to answer.

A)

If fixed costs increase, net income will
decrease by the contribution margin ratio times the amount of the increase in
fixed costs.

B)

If sales increase by 20%, net income will also
increase by 20%, assuming fixed costs are not equal to zero.

C)

If variable costs double, net income will
decrease by 50%.

D)

Net income will decrease by the decrease in
number of units sold times the contribution margin per unit.

A)

200

B)

230

C)

460

D)

540

13.

Western
Apparel Company owns two stores and management is considering eliminating the
East store due to declining sales.
Segmented contribution income statements are as follows and common
fixed costs are allocated on the basis of sales.

Western
feels that if they eliminate the East store that sales in the West store will
decline by 25%. If they close the East
store, overall company net income will:

A)

decline
by $90,000.

B)

decline
by $85,625.

C)

decline
by $74,375.

D)

decline
by $63,500.

14.

Maestro,
a best-selling toy has a selling price of $15. If the contribution margin ratio is 40% and
if the fixed costs are $60,000, how many Maestros must the company sell to
realize a profit of $450,000?

A)

30,000

B)

34,000

C)

85,000

D)

100,000

15.

Given
a resource constraint, management should shift the focus of
cost-volume-profit analysis to:

A)

Increasing
labor productivity and reducing output.

B)

The
product with the lowest variable cost per sales dollar.

C)

The
contribution margin per unit of the constraint.

D)

Decreasing
the firm’s breakeven point by increasing the selling price.

16.

Which
of the following changes will result in a change in the break-even point?

A)

The
number of units sold goes up.

B)

The
company buys a new depreciable machine.

C)

The
sales price per unit goes up.

D)

The
tax rate on profits changes.

17.

Assume
that Reggie’s Bikes has fixed costs of $101,250. Each unit generates variable costs of $80
and sells for $125. What is the
break-even point for Reggie’s Bikes?

A)

1,536 units

B)

6,221
units

C)

2,250 units

D)

8,025
units

18.

For
which of the following decisions are sunk costs relevant?

A)

The
decision to sell or not sell a new product after paying for its market
surveys.

B)

The
decision to sell a product after the split-off point or after further
processing.

C)

The
decision to accept or reject a special order.

D)

None
of the above.

19.

Della’s
Furniture has a contribution margin ratio of 15%. If fixed costs are $175,500, how many
dollars of revenue must the company generate in order to reach the break-even
point?

A)

$1,111,333

B)

$1,211,333

C)

$1,170,000

D)

$2,111,450

20.

The
Copy Department of the Formaz Company is budgeted to incur $40,000 per month
in fixed costs and $0.02 per copy in variable costs. It allocates copy costs to user departments
as follows: Fixed costs are allocated (as a lump sum) based on budgeted fixed
costs and estimated peak demand for each department. Variable costs are
allocated based on the budgeted rate per copy times the department’s actual
usage. Which of the following is not
an advantage of this allocation scheme over allocating actual costs based
on actual usage?

A)

The
amount charged to one using department is not affected by the number of
copies used by another department.

B)

Managers
in the using departments pay for the fixed costs that are created by their
demands for capacity.

C)

Using
departments are not charged for cost overruns in the copy department.

D)

All of
the above are advantages of this allocation system.

21.

Ken’s Pizza
produced and sold 2,000 pizzas last month and had fixed costs of $6,000. If production and sales are expected to
increase by 10% next month, which of the following statements is true?

A)

Total
fixed costs will decrease.

B)

Fixed
cost per unit will decrease.

C)

Total
fixed costs will increase.

D)

Fixed
cost per unit will increase.

22.

The
Dynamaco Company uses cost-plus pricing with a 50% mark-up. The company is currently selling 100,000
units at $12 per unit. Each unit has a
variable cost of $6. In addition, the
company incurs $200,000 in fixed costs annually. If demand falls to 80,000 units and the
company wants to continue to earn a 50% return, what price should the company
charge?

A)

$12.75

B)

$14.55

C)

$13.50

D)

$10.95

Month

Units produced

Total costs

March

10,000

$25,600

April

12,000

26,200

May

18,000

27,600

June

13,000

26,450

July

12,000

26,000

August

15,000

26,500

23.

Using
the high-low method, what is the variable cost per unit?

A)

$2.25

B)

$2.56

C)

$0.22

D)

$0.25

24.

A
manufacturing company produces and sells 40,000 units of a single
product. Variable costs total $80,000
and fixed costs total $120,000. If
unit is sold for $8, what markup percentage is the company using?

A)

60%

B)

160%

C)

75%

D)

133%

25.

During
2014, Teko, Inc. reported revenues of $789,532 and profits of $96,450. Fixed costs were $405,094, and 45,000 units
were sold. If costs and prices were
expected to stay the same, in 2015, and Teko, Inc. expects to sell 50,000 units,
what will be the company’s budgeted profit?

A)

$95,457

B)

$124,388

C)

$168,414

D)

$152,177