CHAPTER 1

Question 1
Which of the following statements are true?
1. Opportunity costs at a manufacturing company are not part of manufacturing overhead.
2. A cost that differs from one month to another is known as a sunk cost.
A.​ Only statement I is true.
B.​ Only statement II is true.
C.​ Both of the statements are true.
D.​ Neither of the statements are true.

Question 2
Which of the following statements are true?
1. Conversion cost is the sum of direct labor cost and manufacturing overhead cost.
2. Conversion cost is the same thing as manufacturing overhead.
3. Conversion cost equals product cost less direct materials cost.
A.​ Only statement I is true.
B.​ Statements I and III are true.
C.​ All statements are true.
D.​ None of the statements are true.

Question 3
Which of the following statements about product costs is true?
A.​ Product costs are deducted from revenue when the production process is completed.
B.​ Product costs are deducted from revenue as expenditures are made.
C.​ Product costs associated with unsold finished goods and work in process appear on the
balance sheet as assets.
D.​ Product costs appear on financial statements only when products are sold.

Question 4
A cost incurred in the past that is not relevant to any current decision is classified as a(n):
A.​ period cost.
B.​ opportunity cost.
C.​ sunk cost.
D.​ differential cost.

Question 5
Contribution margin is:
A.​ Sales less cost of goods sold.
B.​ Sales less variable production, variable selling, and variable administrative expenses.
C.​ Sales less variable production expense.
D.​ Sales less all variable and fixed expenses.

Question 6

Comparative income statements for Boggs Sports Equipment Company for the last two months are
presented below:
All of the company's costs are either fixed, variable, or a mixture of the two (that is, mixed). Assume
that the relevant range includes all of the activity levels mentioned in this problem. Which of the
selling and administrative expenses of the company is variable?
A.​ Rent
B.​ Sales Commissions
C.​ Maintenance Expense
D.​ Clerical Expense

Question 7
Which of the following statements are true?
1. Advertising is not a considered a product cost even if it promotes a specific product.
2. Product costs are also known as inventoriable costs.
3. Prime cost is the sum of direct materials cost and direct labor cost.
4. Prime cost equals manufacturing overhead cost.
A.​ Only statement I is true.
B.​ Both statements I and IV are true.
C.​ Statements I, II, and III are true.
D.​ None of the statements are true.

Question 8
For the past 8 months, Jinan Corporation has experienced a steady increase in its cost per unit even
though total costs have remained stable. This cost per unit increase may be due to_____________
costs if the level of activity at Jinan is_____________.
A.​ fixed, decreasing
B.​ fixed, increasing
C.​ variable, decreasing
D.​ variable, increasing

Question 9
In the standard cost formula Y = a + bX, what does the "X" represent?
A.​ total cost
B.​ total fixed cost
C.​ the level of activity
D.​ variable cost per unit
Question 10
Which of the following statements are true?
1. If the activity level increases, then one would expect the fixed cost per unit to increase as
well.
2. A fixed cost is a cost whose cost per unit varies as the activity level rises and falls.
3. A decrease in production will ordinarily result in a decrease in fixed production costs per
unit.
A.​ Only statement II is true.
B.​ Only statement III is true.
C.​ Statements I and II are true.
D.​ Statements I and III are true.

Question 11
Which of the following statements concerning direct and indirect costs is NOT true?
A.​ Whether a particular cost is classified as direct or indirect does not depend on the cost object.
B.​ A direct cost is one that can be easily traced to the particular cost object.
C.​ The factory manager’s salary would be classified as an indirect cost of producing one unit of
product.
D.​ A particular cost may be direct or indirect, depending on the cost object.

Question 12
Bellucci Corporation has provided the following information:

The incremental manufacturing cost that the company will incur if it increases production from 9,000
to 9,001 units is closest to (assume that the increase is within the relevant range):
A.​ $26.75
B.​ $12.80
C.​ $30.05
D.​ $24.50

Question 13
Abburi Company's manufacturing overhead is 40% of its total conversion costs. If direct labor is
$86,400 and if direct materials are $23,200, the manufacturing overhead is:
 A.​ $57,600
B.​ $129,600
C.​ $15,467
D.​ $73,067

Question 14
Which of the following is NOT a period cost?
A.​ Depreciation of factory maintenance equipment.
B.​ Salary of a clerk who handles customer billing.
C.​ Insurance on a company showroom where customers can view new products.
D.​ Cost of a seminar concerning tax law updates that was attended by the company’s controller.

Question 15
Differential costs can:
A.​ only be fixed costs.
B.​ only be variable costs.
C.​ be either fixed or variable.
D.​ be sunk costs.

CHAPTER 2,3
Question 1
Bernson Corporation is using a predetermined overhead rate that was based on estimated total fixed
manufacturing overhead of $492,000 and 30,000 machine-hours for the period. The company incurred
actual total fixed manufacturing overhead of $517,000 and 28,300 total machine-hours during the
period. The amount of manufacturing overhead that would have been applied to all jobs during the
period is closest to:
Note: Round your intermediate calculations to 2 decimal places.
A.​ $464,120
B.​ $492,000
C.​ $487,703
D.​ $25,000

Question 2
Branin Corporation uses a job-order costing system with a single plantwide predetermined overhead
rate based on direct labor-hours. The company based its predetermined overhead rate for the current
year on total fixed manufacturing overhead cost of $160,000, variable manufacturing overhead of
$3.40 per direct labor-hour, and 80,000 direct labor-hours. The company has provided the following
data concerning Job A578 which was recently completed:
Total direct labor-hours 250
Direct materials $715
Direct labor cost $ 9,000
The total job cost for Job A578 is closest to:
Note: Round your intermediate calculations to 2 decimal places.
A.​ $11,065
B.​ $10,350
C.​ $2,065
 D.​ $9,715

Question 3
Kapanga Manufacturing Corporation uses a job-order costing system and its total manufacturing
overhead applied always equals its total manufacturing overhead. The company started the month of
October with a zero balance in its work in process and finished goods inventory accounts. During
October, Kapanga worked on three jobs and incurred the following direct costs on those jobs:

Kapanga applies manufacturing overhead at a rate of 150% of direct labor cost. During
October, Kapanga completed Jobs B18 and B19 and sold Job B19. Job C11 was incomplete at the end
of the month.
What is Kapanga's work in process inventory balance at the end of October?
A.​ $23,000
B.​ $30,500
C.​ $32,000
D.​ $43,000

Question 4
Job 910 was recently completed. The following data have been recorded on its job cost sheet:
Direct materials $3,193
Direct labor-hours 21 labor-hours
Direct labor wage rate $12 per labor-hour
Machine-hours 166 machine-hours
The Corporation applies manufacturing overhead on the basis of machine-hours. The predetermined
overhead rate is $15 per machine-hour. The total cost that would be recorded on the job cost sheet for
Job 910 would be:
A.​ $3,220
B.​ $3,760
C.​ $5,935
D.​ $3,445

Question 5
Waldbauer Incorporated uses a job-order costing system. In October the company completed job
N66B that consisted of 10,000 units of one of the company's standard products. No other jobs were in
process or sold during the month. The job cost sheet for job N66B shows the following costs:
Beginning balance $41,000
Direct materials $251,000
Direct labor $98,000
Manufacturing overhead cost applied $192,000

The company’s total manufacturing overhead applied always equals its total manufacturing overhead.
During the month, 3,000 completed units from job N66B were sold.
The cost of goods sold that would appear on the income statement for October is closest to:
A.​ $407,400
B.​ $174,600
C.​ $582,000
D.​ $162,300

Question 6
Kroeker Corporation has two production departments, Milling and Customizing. The company uses a
job-order costing system and computes a predetermined overhead rate in each production department.
The Milling Department’s predetermined overhead rate is based on machine-hours and the
Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the
beginning of the current year, the company had made the following estimates:
mc011-1.jpg
The amount of overhead applied in the Customizing Department to Job T898 is closest to: Note:
Round your intermediate calculations to 2 decimal places.
A.​ $450.00
B.​ $119,700.00
C.​ $665.00
D.​ $215.00

Question 7
Giannitti Corporation bases its predetermined overhead rate on the estimated machine- hours for the
upcoming year. Data for the upcoming year appear below:
Estimated machine-hours 72,400
Estimated variable manufacturing overhead $ 3.30 per machine-hour
Estimated total fixed manufacturing overhead $ 838,800
The predetermined overhead rate for the recently completed year was closest to:
A.​ $6.72 per machine-hour
B.​ $9.90 per machine-hour
C.​ $14.89 per machine-hour
D.​ $8.63 per machine-hour

Question 8
Lister Corporation is a manufacturer that uses job-order costing. The company closes out any
overapplied or underapplied overhead to Cost of Goods Sold at the end of the year. The company has
supplied the following data for the just completed year:
Estimated total manufacturing overhead at the beginning of the year $ 624,000
Estimated direct labor-hours at the beginning of the year 39,000 direct labor- hours
Results of operations:
Actual direct labor-hours 36,000 direct labor- hours
Manufacturing Overhead :
Indirect labor cost $ 131,000
Other manufacturing overhead costs
Incurred $ 543,000
The total amount of manufacturing overhead applied to production is:
A.​ $1,547,000
 B.​ $576,000
C.​ $624,000
D.​ $674,000

Question 9
During July at Loeb Corporation, $83,000 of raw materials were requisitioned from the
storeroom for use in production. These raw materials included both direct and indirect materials. The
indirect materials totaled $4,000. The journal entry to record the requisition from the storeroom would
include a:
A.​ debit to Work in Process of $79,000
B.​ debit to Work in Process of $83,000
C.​ credit to Manufacturing Overhead of $4,000
D.​ debit to Raw Materials of $83,000

Question 10
Farrel Corporation is a manufacturer that uses job-order costing. The company has supplied the
following data for the just completed year:
mc009-1.jpg
What is the journal entry to record the direct and indirect labor costs incurred during the year?
A.​
Debit Credit

Wage Payable 737,000

Direct labor 574,000

Manufacturing Overhead 163,000

B.​
Debit Credit

Word in Process 574,000

Manufacturing Overhead 163,000

Wage Payable 737,000

C.​
Debit Credit

Wage Payable 737,000

Word in Process 574,000

Manufacturing Overhead 163,000

D.​
Debit Credit

Direct labor 574,000

 Manufacturing Overhead 163,000

Wage Payable 737,000

Question 11
Piekos Corporation incurred $90,000 of actual Manufacturing Overhead costs during June. During the
same period, the Manufacturing Overhead applied to Work in Process was $92,000. The journal entry
to record the application of Manufacturing Overhead to Work in Process would include a:
A.​ debit to Manufacturing Overhead of $92,000
B.​ debit to Work in Process of $90,000
C.​ credit to Manufacturing Overhead of $92,000
D.​ credit to Work in Process of $90,000

Question 12
If manufacturing overhead is underapplied, then:
A.​ actual manufacturing overhead cost is less than estimated manufacturing overhead cost.
B.​ the amount of manufacturing overhead cost applied to Work in Process is less than the actual
manufacturing overhead cost incurred.
C.​ the predetermined overhead rate is too high.
D.​ the Manufacturing Overhead account will have a credit balance at the end of the year.

Question 13
During March, Zea Incorporated transferred $58,000 from Work in Process to Finished Goods and
recorded a Cost of Goods Sold of $64,000. The journal entries to record these transactions would
include a:
A.​ credit to Cost of Goods Sold of $64,000.
B.​ debit to Finished Goods of $64,000.
C.​ credit to Work in Process of $58,000.
D.​ credit to Finished Goods of $58,000.

Question 14

In goods manufactured is computed according to which of the following equations?

the Schedule of Cost of Goods Manufactured and Cost of Goods Sold, the cost of
A.​ Cost of goods manufactured = Total manufacturing costs + Ending work in process inventory
?2- Beginning work in process inventory
B.​ Cost of goods manufactured = Total manufacturing costs + Beginning work in process
inventory ?2- Ending work in process inventory
C.​ Cost of goods manufactured = Total manufacturing costs + Beginning finished goods
inventory ?2- Ending finished goods inventory
D.​ Cost of goods manufactured = Total manufacturing costs + Ending finished goods inventory
?2- Beginning finished goods inventory

Question 15
Gullett Corporation had $38,000 of raw materials on hand on November 1. During the month, the
Corporation purchased an additional $87,000 of raw materials. The journal entry to record the
purchase of raw materials would include a:
A.​ debit to Raw Materials of $125,000
B.​ credit to Raw Materials of $87,000
C.​ debit to Raw Materials of $87,000
D.​ credit to Raw Materials of $125,000

Question 1
Which of the following statements is not correct concerning multiple overhead rate systems?
A.​ A multiple overhead rate system is more complex than a system based on a single plantwide
overhead rate.
B.​ A multiple overhead rate system is usually more accurate than a system based on a single
plantwide overhead rate.
C.​ A company may choose to create a separate overhead rate for each of its production
departments.
D.​ In departments that are relatively labor-intensive, their overhead costs should be applied to
jobs based on machine-hours rather than on direct labor-hours.

Question 2
In a job-order costing system that is based on machine-hours, which of the following formulas is
correct?
A.​ Predetermined overhead rate = Actual manufacturing overhead ÷ Actual machine- hours
B.​ Predetermined overhead rate = Actual manufacturing overhead ÷ Estimated machine- hours
C.​ Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated
machine-hours
D.​ Predetermined overhead rate = Estimated manufacturing overhead ÷ Actual machine- hours

Question 3
Which of the following is the correct formula to compute the predetermined overhead rate?
A.​ Predetermined overhead rate = Estimated total units in the allocation base ÷ Estimated total
manufacturing overhead costs
B.​ Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Estimated
total units in the allocation base
C.​ Predetermined overhead rate = Actual total manufacturing overhead costs ÷ Estimated total
units in the allocation base
D.​ Predetermined overhead rate = Estimated total manufacturing overhead costs ÷ Actual total
units in the allocation base.

Question 4
Which of the following statements are true?
I. In a job-order costing system, indirect labor is assigned to a job using information from
the employee time ticket.
II. If the allocation base in the predetermined overhead rate does not drive overhead costs, it
will nevertheless provide reasonably accurate unit product costs because of the averaging
process.
III. In a job-order costing system, costs are traced to individual units of product. The sum
total of such traced costs is called the unit product cost.
A.​ Only statement I is true.
B.​ Statements I and II are true.
C.​ Statements II and III are true.
D.​ None of the statements are true.

Question 5
Which of the following statements are true?
I. A cost driver is a factor, such as machine-hours, beds occupied, computer time, or flight-
hours, that causes direct costs.
II. Job-order costing systems often use allocation bases that do not reflect how jobs actually
use overhead resources.
III. An employee time ticket is an hour-by-hour summary of the employee’s activities
throughout the day.
A.​ Only statement I is true.
B.​ Statements I and II are true.
C.​ Statements II and III are true.
D.​ All of the statements are true.

Question 6
Assigning manufacturing overhead to a specific job is complicated by all of the below except:
A.​ Manufacturing overhead is an indirect cost that is either impossible or difficult to trace to a
particular job.
B.​ Manufacturing overhead is incurred only to support some jobs.
C.​ Manufacturing overhead consists of both variable and fixed costs.
D.​ The average cost of actual fixed manufacturing overhead expenses will vary
E.​ depending on how many units are produced in a period.

Question 7
Which of the following statements are true?
I. The formula for computing the predetermined overhead rate is: Predetermined overhead
rate = Estimated total amount of the allocation base ÷ Estimated total manufacturing
overhead cost
II. Generally speaking, when going through the process of computing a predetermined
overhead rate, the estimated total manufacturing overhead cost is determined before estimating the
amount of the allocation base.
A.​ Only statement I is true.
B.​ Only statement II is true.
C.​ Both of the statements are true.
D.​ Neither of the statements are true.

Question 8
Refer to the T-account below:
The ending balance of $8,000 represents which of the following?
A.​ Underapplied overhead.
B.​ Manufacturing overhead that will be carried over to the next period.
C.​ Overapplied overhead.
D.​ A bookkeeping error.

Question 9
Refer to the T-account below:

Entry (5) could represent which of the following?

A.​ Payments for raw materials.
B.​ Requisitions of raw materials to be used in production.
C.​ Purchases of raw materials.
D.​ Overhead cost applied to Work in Process.

Question 10
Refer to the T-account below:
Entry (4) could represent which of the following except?
A.​ Indirect labor cost incurred.
B.​ Factory insurance cost.
C.​ Overhead cost applied to Work in Process.
D.​ Depreciation on factory equipment.

Question 11
Under a job-order costing system, the dollar amount transferred from Work in Process to
Finished Goods is the sum of the costs charged to all jobs:
A.​ started in process during the period.
B.​ in process during the period.
C.​ completed and sold during the period.
D.​ completed during the period.

Question 12
On a manufacturing company’s income statement, which of the following is true?
I. Direct labor is separately listed as an expense.
II. Direct materials is separately listed as an expense.
A.​ Only statement I is true.
B.​ Only statement II is true.
C.​ Both statements I and II are true.
D.​ Neither statement is true.

Question 13
Assume that a company closes out any manufacturing overhead overapplied or underapplied to cost of
goods sold. Related to the Cost of Goods Sold, which of the following statements is true?
I. In the Schedule of Cost of Goods Sold, the Adjusted cost of goods sold = Unadjusted cost of
goods sold + Overapplied overhead ?2- Underapplied overhead.
II. Cost of Goods Sold will be debited if manufacturing overhead is overapplied for the period.
A.​ Only statement I is true.
B.​ Only statement II is true.
C.​ Both statements I and II are true.
D.​ Neither statement is true.

Question 14
In a job-order costing system, indirect labor cost is usually recorded as a debit to:
A.​ Manufacturing Overhead.
B.​ Finished Goods.
C.​ Work in Process.
D.​ Cost of Goods Sold.

Question 15
The journal entry to record applying overhead during the production process is:
A.​
Debit Credit

Manufacturing overhead xxx

Work in Process xxx

B.​
Debit Credit

Finished Goods xxx

Manufacturing overhead xxx

C.​
Debit Credit

Manufacturing overhead xxx

Finished Goods xxx

D.​
Debit Credit

Work in Process xxx

Manufacturing overhead xxx

CHAPTER 4
Question 1
The costing system used by a company producing custom fireplace mantels would be
A.​ process costing.
B.​ job costing.
C.​ equivalent units costing.
D.​ conversion cost costing.

Question 2
Start the Day Right has 2800 gallons of orange juice in WIP Inventory, with 72% of materials already
added. The orange juice is 55% through the process. Assuming all conversion costs are added evenly
throughout the process, what are the equivalent units for conversion costs?
A.​ 0
B.​ 476
C.​ 1540
D.​ 2016

Question 3
For which of the following do we prepare calculations for equivalent units?
A.​ Both direct labor and Manufacturing Overhead
B.​ Both direct materials and conversion costs
C.​ Both direct labor and direct materials
D.​ Neither direct materials nor conversion costs

Question 4
How are manufacturing costs treated in process costing?
A.​ The manufacturing costs are added only when the goods are in finished inventory.
B.​ The manufacturing costs are added only when the goods are sold.
C.​ The manufacturing costs always follow the physical movement of the product.
D.​ None of the above.

Question 5
How is the cost per equivalent unit computed?
A.​ Total equivalent units divided by total costs to account for
B.​ Total costs to account for divided by total equivalent units
C.​ Costs in beginning WIP Inventory divided by equivalent units in beginning WIP
D.​ Costs added to production during the month divided by equivalent units in ending WIP

Question 6
Process costing would not be used by which of the following companies?
A.​ Sherwin-Williams, manufacturer of paint and stains
B.​ Coca-Cola, soft drink manufacturer
C.​ American Custom Yachts, Inc., manufacturer of custom yachts
D.​ Jelly Belly, manufacturer of jelly beans and other candy

Question 7
Perfect Pigments has 2900 gallons of paint in WIP Inventory, with 72% of materials already added.
The paint is 40% through the process. Assuming all conversion costs are added evenly throughout the
process, what are the equivalent units for conversion costs?
A.​ 0
B.​ 928
C.​ 2088
D.​ 1160

Question 8
In process costing, ________ is/are found by taking the number of partially completed physical units
and multiplying it by the percentage of the process completed.
A.​ Cost of Goods Sold
B.​ equivalent units
C.​ fixed Manufacturing Overhead costs
D.​ conversion costs

Question 9
The costing system used by a company making computer chips would be
A.​ process costing.
B.​ job costing.
C.​ equivalent units costing.
D.​ conversion cost costing.

Question 10
Process costing is most likely used in which of the following industries?
A.​ Pharmaceuticals
B.​ Health Care
C.​ Shipbuilding
D.​ Construction

Question 11
When units are moved from one processing department to the next, the cost associated with those
units must also be moved from one WIP account to the next. What are these costs called?
A.​ Transported costs
B.​ Transmitted costs
C.​ Transferred costs
D.​ Conveyed costs

Question 12
Process costing is most likely used in which of the following industries?
A.​ Chemicals
B.​ Aircraft
C.​ Construction
D.​ Printing

Question 13
At Trapeze Corporation, direct materials are added at the beginning of the process and conversions
costs are uniformly applied. Other details include:
What are the total equivalent units for direct materials?
A.​ 149,700
B.​ 136,500
C.​ 143,900
D.​ 155,500

Question 14
Start the Day Right has 2500 gallons of orange juice in WIP Inventory, with 75% of materials already
added. What are equivalent units in ending WIP Inventory for materials if the orange juice is 58%
through the process?
A.​ 1450
B.​ 1875
C.​ 0
D.​ 425

Question 15
Which of the following is a measure of the amount of work done, expressed in complete units of
output?
A.​ Job costing
B.​ Process costing
C.​ Conversion costs
D.​ Equivalent units

Question 1
Process costing is typically used for businesses that make large quantities of identical items.
True
False

Question 2
Equivalent units express the amount of work done during a period in terms of partially completed
units.
True
False

Question 3
In a mass-production environment, direct labor is usually a relatively small component of the total
manufacturing costs.
True
False

Question 4
Companies that use automated production processes often condense the three manufacturing costs into
two categories: Direct labor and Conversion costs.
True
False

Question 5
In process costing, manufacturing costs are usually combined into two categories: direct materials and
conversion costs.
True
False

Question 6
Process costing differs from job costing in that process costing doesn't directly trace any materials or
labor to any part of the production process.
True
False

Question 7
Conversion costs are usually incurred evenly throughout productions.
True
False

Question 8
Cost for direct materials, direct labor and Manufacturing Overhead are assigned to each job.
True
False

Question 9
Equivalent units should be computed separately for direct materials and conversion costs.
 True
False

Question 10
Prime costs include direct labor and direct materials.
True
False

Question 11
In process costing, the manufacturing costs assigned to the product must always follow the physical
movement of the product.
True
False

Question 12
In process costing, the costs flow from Raw Materials Inventory, to Work In Process Inventory, to
Finished Goods Inventory.
True
False

Question 13
A separate Work in Process Inventory account is maintained for each process.
True
False

Question 14
In a job cost system, all costs flow to a particular job.
True
False

Question 15
Process costing is typically used for businesses that make unique goods in relatively small amounts.
True
False

CHAPTER 5

Question 1
Moyas Corporation sells a single product for $10 per unit. Last year, the company's sales revenue was
$250,000 and its net operating income was $42,000. If fixed expenses totaled $83,000 for the year, the
break-even point in unit sales was:
A.​ 25,000 units
B.​ 12,500 units
C.​ 29,200 units
D.​ 16,600 units
Question 2
Houpe Corporation produces and sells a single product. Data concerning that product appear below:

Fixed expenses are $490,000 per month. The company is currently selling 6,000 units per month.
The marketing manager would like to introduce sales commissions as an incentive for the sales staff.
The marketing manager has proposed a commission of $11 per unit. In exchange, the sales staff would
accept a decrease in their salaries of $58,000 per month. (This is the company's savings for the entire
sales staff.) The marketing manager predicts that introducing this sales incentive would increase
monthly sales by 100 units. What should be the overall effect on the company's monthly net operating
income of this change?
A.​ increase of $700
B.​ increase of $56,900
C.​ decrease of $115,300
D.​ increase of $588,700

Question 3
Mio Canoe Livery rents canoes and transports canoes and customers to and from their canoe trip on a
local river. The trip is priced at $20 per person and has a CM ratio of 30%. Mio's fixed expenses are
$84,000. Last year, sales were $400,000 and profit was $36,000. How many units need to be sold to
break-even, and how many need to be sold to earn a profit of $42,000?
A.​ 1,800 and 2,100
B.​ 6,000 and 8,143
C.​ 14,000 and 21,000
D.​ 4,200 and 6,300

Question 4
Majid Corporation sells a product for $160 per unit. The product's current sales are 41,600 units and
its break-even sales are 33,390 units. What is the margin of safety in dollars?
A.​ $4,288,047
B.​ $6,656,000
C.​ $5,342,400
D.​ $1,313,600

Question 5
Cassius Corporation has provided the following contribution format income statement. Assume that
the following information is within the relevant range.
Sales (7,000 units) $ 210,000
Variable expenses 136,500
Contribution margin 73,500
Fixed expenses 67,200
Net operating income $ 6,300
The number of units that must be sold to achieve a target profit of $31,500 is closest to:
A.​ 42,000 units
B.​ 16,400 units
C.​ 35,000 units
D.​ 9,400 units

Question 6
Data concerning Lemelin Corporation's single product appear below:

The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month.
Management is considering using a new component that would increase the unit variable cost by $3.
Since the new component would increase the features of the company's product, the marketing
manager predicts that monthly sales would increase by 200 units. What should be the overall effect on
the company's monthly net operating income of this change?
A.​ decrease of $22,400
B.​ decrease of $1,400
C.​ increase of $22,400
D.​ increase of $1,400

Question 7
Rushenberg Corporation's operating leverage is 10.8. If the company's sales volume increases by 14%,
its net operating income should increase by about:
A.​ 151.2%
B.​ 14.0%
C.​ 77.1%
D.​ 10.8%

Question 8
The July contribution format income statement of Doxtater Corporation appears below:

If the company's sales volume increases by 19%, its net operating income should increase by about:
A.​ 10%
B.​ 19%
 C.​ 83%
D.​ 186%

Question 9
Kelsay Corporation has provided the following contribution format income statement. Assume that the
following information is within the relevant range.

The variable expense ratio is closest to:

A.​ 33%
B.​ 67%
C.​ 25%
D.​ 75%

Question 10
Data concerning Dorazio Corporation's single product appear below:

Fixed expenses are $87,000 per month. The company is currently selling 1,000 units per month.
Management is considering using a new component that would increase the unit variable cost by $28.
Since the new component would increase the features of the company's product, the marketing
manager predicts that monthly sales would increase by 400 units. What should be the overall effect on
the company's monthly net operating income of this change?
A.​ increase of $5,600
B.​ increase of $33,600
C.​ decrease of $5,600
D.​ decrease of $33,600

Question 11
Highjinks, Incorporated, has provided the following budgeted data:
Sales 20,000 units
Selling price $ 100 per unit
Variable expense $ 70 per unit
Fixed expense $ 450,000
How many units would the company have to sell in order to have a net operating income equal to 5%
of total sales dollars?
A.​ 18,000 units
B.​ 20,000 units
C.​ 15,333 units
D.​ 14,286 units

Question 12
Data concerning Bedwell Enterprises Corporation's single product appear below:
Selling price per unit $ 160.00
Variable expense per unit $ 65.60
Fixed expense per month $ 387,040
The unit sales to attain the company's monthly target profit of $17,000 is closest to:
Note: Round your intermediate calculations to 2 decimal places.
A.​ 6,159
B.​ 4,280
C.​ 2,525
D.​ 4,321

Question 13
Stockmaster Corporation has provided the following contribution format income statement. Assume
that the following information is within the relevant range.

The margin of safety in dollars is closest to:

A.​ $6,400
B.​ $16,000
C.​ $121,600
D.​ $128,000

Question 14
Hopi Corporation expects the following operating results for next year:
Sales $ 400,000
Margin of safety $ 100,000
Contribution margin ratio 75%
Degree of operating leverage 4
What is Hopi expecting total fixed expenses to be next year?
A.​ $75,000
B.​ $100,000
C.​ $200,000
D.​ $225,000
Question 15
Bendel Incorporated has an operating leverage of 5.8. If the company's sales volume increases by
12%, its net operating income should increase by about:
A.​ 69.6%
B.​ 2.1%
C.​ 12.0%
D.​ 56.0%
Question 1
Schister Systems uses the following data in its Cost-Volume-Profit analyses:

What is total contribution margin if sales volume increases by 30%?

A.​ $154,000
B.​ $48,100
C.​ $200,200
D.​ $25,900

Question 2
Kelchner Corporation has provided the following contribution format income statement. Assume that
the following information is within the relevant range.
Sales (3,000 units) $180,000
Variable expenses 108,000
Contribution margin 72,000
Fixed expenses 62,400
Net operating income 9,600
The contribution margin ratio is closest to:
A.​ 67%
B.​ 40%
C.​ 33%
D.​ 60%

Question 3
Which of the following statements is true?
I. In two companies making the same product and with the same total sales and total
expenses, the contribution margin ratio will be lower in the company with a higher
proportion of fixed expenses in its cost structure.
II. For a given level of sales, a low contribution margin ratio will produce more net
operating income than a high contribution margin ratio.
 A.​ Only statement I one is true.
B.​ Only statement II is true.
C.​ Both statements are true.
D.​ Neither statement is true.

Question 4
If the contribution margin is not sufficient to cover fixed expenses:
A.​ total profit equals total expenses.
B.​ contribution margin is negative.
C.​ a loss occurs.
D.​ variable expenses equal contribution margin.

Question 5
Which of the following statements is true?
I. For a capital intensive, automated company the break-even point will tend to be higher
and the margin of safety will be lower than for a less capital intensive company with the
same sales.
II. The total volume in sales dollars that would be required to attain a given target profit is
determined by dividing the target profit by the contribution margin ratio.
A.​ Only statement I one is true.
B.​ Only statement II is true.
C.​ Both statements are true.
D.​ Neither statement is true.

Question 6
If the degree of operating leverage is 4, then a one percent change in quantity sold should
result in a four percent change in:
A.​ unit contribution margin.
B.​ revenue.
C.​ variable expense.
D.​ net operating income.

Question 7
Which of the following is true regarding the contribution margin ratio of a company that
produces only a single product?
A.​ As fixed expenses decrease, the contribution margin ratio increases.
B.​ The contribution margin ratio multiplied by the selling price per unit equals the
C.​ contribution margin per unit.
D.​ The contribution margin ratio will decline as unit sales decline.
E.​ The contribution margin ratio equals the selling price per unit less the variable
F.​ expense ratio.

Question 8
Break-even analysis assumes that:
A.​ Total revenue is constant.
B.​ Unit variable expense is constant.
 C.​ Unit fixed expense is constant.
D.​ Selling prices must fall in order to generate more revenue.

Question 9
Which of the following is correct? The break-even point occurs on the CVP graph where:
A.​ total profit equals total expenses.
B.​ total profit equals total fixed expenses.
C.​ total contribution margin equals total fixed expenses.
D.​ total variable expenses equal total contribution margin.

Question 10
Which of the following statements is true?
I. If the variable expense per unit decreases, and all other factors remain the same, the
contribution margin ratio will increase.
II. The smaller the contribution margin ratio, the smaller the amount of sales required to
cover a given amount of fixed expenses.
A.​ Only statement I one is true.
B.​ Only statement II is true.
C.​ Both statements are true.
D.​ Neither statement is true.

Question 11
Mossfeet Shoe Corporation is a single product firm. The company is predicting that a price increase
next year will not cause unit sales to decrease. What effect would this price increase have on the
following items for next year?

A.​ Choice A
B.​ Choice B
C.​ Choice C
D.​ Choice D

Question 12
Which of the following would not affect the break-even point?
A.​ number of units sold
B.​ variable expense per unit
C.​ total fixed expense
D.​ selling price per unit

Question 13
Carver Corporation produces a product which sells for $40. Variable manufacturing costs are $18 per
unit. Fixed manufacturing costs are $5 per unit based on the current level of sales volume, and fixed
selling and administrative costs are $4 per unit. A selling commission of 15% of the selling price is
paid on each unit sold. The contribution margin per unit is:
A.​ $7
B.​ $17
C.​ $22
D.​ $16

Question 14
Stauffer Corporation has provided the following contribution format income statement. Assume that
the following information is within the relevant range.

The variable expense ratio is closest to:

A.​ 60%
B.​ 40%
C.​ 67%
D.​ 33%

Question 15
Which of the following statements is true?
I. A shift in the sales mix from low-margin items to high-margin items will decrease total
profits even though total sales increase.
II. A shift in the sales mix from high-margin items to low-margin items can cause total
profits to decrease even though total sales may increase.
III. A shift in the sales mix from products with high contribution margin ratios toward
products with low contribution margin ratios will raise the break-even point for the company as a
whole.
A.​ Statements I one and III are true.
B.​ Statements II and III are true.
C.​ All of the statements are true.
D.​ None of the statements are true.