52 MCQ Walk Manufacturing gathered the following data - 62784

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Question 1 

1. 

Walk Manufacturing gathered the following data about the three products that it produces:

ProductPresent Sales ValueEstimated Additional

Processing CostsEstimated Sales

if Processed Further

A$24,000$16,000$42,000

B$28,000$10,000$36,000

C$22,000$6,000$32,000

 

Which of the products should not be processed further?

Answer 

 Product A 

 Product B 

 Product C 

 Products A and C 

2 points   

Question 2 

1. 

Cara Industries incurred the following costs for 50,000 units:

Variable Costs$90,000

Fixed Costs$120,000

 

Cara has received a special order from a foreign company for 5,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $4,250 for shipping.

If Cara wants to earn $4,000 on the order, what should the unit price be?

Answer 

 $1.65 

 $5.85 

 $2.60 

 $3.45 

2 points   

Question 3 

1. 

Opportunity cost is usually

Answer 

 a standard cost.

 a potential benefit.

 a sunk cost.

 included as part of cost of goods sold.

2 points   

Question 4 

1. 

It costs Ross Co. $24 of variable and $10 of fixed costs to produce one bathroom scale which normally sells for $70. A foreign wholesaler offers to purchase 2,000 scales at $30 each. Ross would incur special shipping costs of $2 per scale if the order were accepted. Ross has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?

Answer 

 $8,000 increase

 $8,000 decrease

 $12,000 decrease

 $60,000 increase

2 points   

Question 5 

1. 

Brave Industries is considering buying a machine for $180,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $12,000 each year. The cash payback on this investment is

Answer 

 15 years.

 10 years.

 6 years.

 3 years.

2 points   

Question 6 

1. 

If a company has limited resources, the key factor in performing incremental analysis is

Answer 

 contribution margin.

 limited resources required.

 contribution margin per unit of limited resource.

 none of these.

2 points   

Question 7 

1. 

Roger Industries is considering two capital investment proposals. Estimates regarding each project are provided below:

Project XR8Project AAA

Initial Investment$800,000$1,200,000

Annual Net Income$40,000$84,000

Net Annual Cash Inflow$200,000$284,000

Estimated Useful Life5 years6 years

Salvage Value00

 

The company requires a 10% rate of return on all new investments.

Present Value of an Annuity of 1

Periods9%10%11%12%

53.8903.7913.6963.605

64.4864.3554.2314.111

 

The annual rate of return for Project XR8 is

Answer 

 5%. 

 10%. 

 25%. 

 50%. 

2 points   

Question 8 

1. 

In incremental analysis,

Answer 

 costs are not relevant if they change between alternatives.

 all costs are relevant if they change between alternatives.

 only fixed costs are relevant.

 only variable costs are relevant.

2 points   

Question 9 

1. 

Begley, Inc. is contemplating the replacement of an old machine with a new one. The following information has been gathered:

Old MachineNew Machine

Price$250,000$500,000

Accumulated Depreciation$75,000-0-

Remaining Useful Life10 years-0-

Useful Life-0-10 years

Annual Operating Costs$200,000$150,000

 

If the old machine is replaced, it can be sold for $20,000.

The net advantage (disadvantage) of replacing the old machine is

Answer 

 $15,000 

 $20,000 

 $(5,000) 

 $(50,000) 

2 points   

Question 10 

1. 

Debra Manufacturing has identified that the cost of a new computer will be $120,000, but with the use of the new computer, net income will increase by $10,000 a year. If depreciation expense is $6,000 a year, the cash payback period is:

Answer 

 30 years.

 20 years.

 12 years.

 7.5 years.

2 points   

Question 11 

1. 

A company is considering purchasing factory equipment that costs $640,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $180,000 and annual operating expenses exclusive of depreciation expense are expected to be $76,000. The straight-line method of depreciation would be used.

The cash payback period on the equipment is

Answer 

 13.3 years.

 8.0 years.

 6.2 years.

 3.1 years.

2 points   

Question 12 

1. 

The rate of return that management expects to pay on all borrowed and equity funds is the

Answer 

 cost of capital.

 cutoff rate.

 hurdle rate.

 minimum rate.

2 points   

Question 13 

1. 

In a make-or-buy decision, opportunity costs are

Answer 

 added to the make total cost.

 deducted from the make total cost.

 added to the buy total cost.

 ignored.

2 points   

Question 14 

1. 

Cost behavior analysis is a study of how a firm's costs

Answer 

 relate to competitors' costs.

 relate to general price level changes.

 respond to changes in the level of business activity.

 respond to changes in the gross national product.

2 points   

Question 15 

1. 

CVP analysis does not consider

Answer 

 level of activity.

 fixed cost per unit.

 variable cost per unit.

 sales mix.

2 points   

Question 16 

1. 

Pascal, Inc. is planning to sell 600,000 units for $1.50 per unit. The contribution margin ratio is 20%. If Pascal will break even at this level of sales, what are the fixed costs?

Answer 

 $180,000.

 $420,000.

 $600,000.

 $720,000.

2 points   

Question 17 

1. 

Greg's Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 200 units, how much will profit change?

Answer 

 $10,000 increase

 $17,500 increase

 $27,500 increase

 $28,000 increase

2 points   

Question 18 

1. 

A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $150,000. The number of units the company must sell to break even is

Answer 

 75,000 units.

 30,000 units.

 300,000 units.

 50,000 units.

2 points   

Question 19 

1. 

Fixed costs are $900,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?

Answer 

 $2,100,000

 $2,700,000

 $3,600,000

 $1,200,000

2 points   

Question 20 

1. 

Variable costs for Abbey, Inc. are 25% of sales. Its selling price is $60 per unit. If Abbey sells one unit more than break-even units, how much will profit increase?

Answer 

 $45

 $15

 $20

 $240

2 points   

Question 21 

1. 

Cost activity indexes might help classify costs as

Answer 

 temporary.

 permanent.

 variable.

 transient.

2 points   

Question 22 

1. 

Which one of the following is a name for the range over which a company expects to operate?

Answer 

 Mixed range

 Fixed range

 Variable range

 Relevant range

2 points   

Question 23 

1. 

The break-even point cannot be determined by

Answer 

 computing it from a mathematical equation.

 computing it using contribution margin.

 reading the prior year's financial statements.

 deriving it from a CVP graph.

2 points   

Question 24 

1. 

In applying the high-low method, what is the unit variable cost?

MonthMilesTotal Cost

January80,000$96,000

February50,000$80,000

March70,000$94,000

April90,000$140,000

 

Answer 

 $1.44 

 $1.50 

 $1.60 

 Cannot be determined from the information given. 

2 points   

Question 25 

1. 

A CVP graph does not include a

Answer 

 variable cost line.

 fixed cost line.

 sales line.

 total cost line.

2 points   

Question 26 

1. 

If a company had a contribution margin of $300,000 and a contribution margin ratio of 40%, total variable costs must have been

Answer 

 $450,000.

 $180,000.

 $750,000.

 $120,000.

2 points   

Question 27 

1. 

Which of the following is not a management function?

Answer 

 Constraining

 Planning

 Controlling

 Directing

2 points   

Question 28 

1. 

Managerial accounting is applicable to

Answer 

 service entities.

 manufacturing entities.

 not-for-profit entities.

 all of these.

2 points   

Question 29 

1. 

Which one of the following costs would not be inventoriable?

Answer 

 Period costs

 Factory insurance costs

 Indirect materials

 Indirect labor costs

2 points   

Question 30 

1. 

Assuming the cost of direct materials used is $1,300,000, compute the total manufacturing costs using the information below.

Raw materials inventory, January 1$30,000

Raw materials inventory, December 31$60,000

Work in process, January 1$27,000

Work in process, December 31$18,000

Finished goods, January 1$60,000

Finished goods, December 31$48,000

Raw materials purchases$1,300,000

Direct labor$690,000

Factory utilities$225,000

Indirect labor$75,000

Factory depreciation$500,000

Operating expenses$630,000

 

Answer 

 $2,790,000. 

 $2,781,000. 

 $2,490,000. 

 $3,420,000. 

2 points   

Question 31 

1. 

In an analogous sense, external user is to internal user as generally accepted accounting principles are to

Answer 

 timely.

 special-purpose.

 relevance to decision.

 SEC.

2 points   

Question 32 

1. 

Cost of goods sold

Answer 

 only appears on merchandising companies' income statements.

 only appears on manufacturing companies' income statements.

 appears on both manufacturing and merchandising companies' income statements.

 is calculated exactly the same for merchandising and manufacturing companies.

2 points   

Question 33 

1. 

Which of the following are period costs?

Answer 

 Raw materials

 Direct materials and direct labor

 Direct labor and manufacturing overhead

 Selling expenses

2 points   

Question 34 

1. 

The subtotal, "Cost of goods manufactured" appears on

Answer 

 a merchandising company's income statement.

 a manufacturing company's income statement.

 both a manufacturing and a merchandising company's income statement.

 neither a merchandising nor a manufacturing company's income statement.

2 points   

Question 35 

1. 

The wages of a timekeeper in the factory would be classified as

Answer 

 a period cost.

 direct labor.

 indirect labor.

 compliance costs.

2 points   

Question 36 

1. 

Assuming that the cost of goods manufactured is $2,760,000 compute the cost of goods sold using the following information.

Raw materials inventory, January 1$30,000

Raw materials inventory, December 31$60,000

Work in process, January 1$27,000

Work in process, December 31$18,000

Finished goods, January 1$60,000

Finished goods, December 31$48,000

Raw materials purchases$1,300,000

Direct labor$690,000

Factory utilities$225,000

Indirect labor$75,000

Factory depreciation$500,000

Operating expenses$630,000

 

Answer 

 $2,769,000. 

 $2,712,000. 

 $2,748,000. 

 $2,772,000. 

2 points   

Question 37 

1. 

The function that pertains to keeping the activities of the enterprise on track is

Answer 

 planning.

 directing.

 controlling.

 accounting.

2 points   

Question 38 

1. 

Which of the following statements about internal reports is not true?

Answer 

 The content of internal reports may extend beyond the double-entry accounting system.

 Internal reports may show all amounts at market values.

 Internal reports may discuss prospective events.

 Most internal reports are summarized rather than detailed.

2 points   

Question 39 

1. 

Which of the following is not another name for the term manufacturing overhead?

Answer 

 Factory overhead

 Pervasive costs

 Burden

 Indirect manufacturing costs

2 points   

Question 40 

1. 

Which cost is not charged to the product under variable costing?

Answer 

 Direct materials

 Direct labor

 Variable manufacturing overhead

 Fixed manufacturing overhead

2 points   

Question 41 

1. 

Hinge Manufacturing's cost of goods sold is $420,000 variable and $240,000 fixed. The company's selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company's sales is $1,680,000, what is its net income?

Answer 

 $360,000

 $960,000

 $1,020,000

 $1,080,000

2 points   

Question 42 

1. 

In 2012, Teller Company sold 3,000 units at $300 each. Variable expenses were $210 per unit, and fixed expenses were $120,000. What was Teller's 2012 net income?

Answer 

 $150,000

 $270,000

 $630,000

 $900,000

2 points   

Question 43 

1. 

Companies that use just-in-time processing techniques will

Answer 

 have greater differences between absorption and variable costing net income.

 have smaller differences between absorption and variable costing net income.

 not be able to use absorption costing.

 not be able to use variable costing.

2 points   

Question 44 

1. 

Capitol Manufacturing sells 2,000 units of Product A annually, and 3,000 units of Product B annually. The sales mix for Product A is

Answer 

 40%.

 60%.

 67%.

 cannot determine from information given.

2 points   

Question 45 

1. 

For Buffalo Co., at a sales level of 5,000 units, sales is $75,000, variable expenses total $40,000, and fixed expenses are $21,000. What is the contribution margin per unit?

Answer 

 $2.80

 $7.00

 $8.00

 $15.00

2 points   

Question 46 

1. 

Sprinkle Co. sells its product for $60 per unit. During 2012, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: directmaterials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses. Under absorption costing, what amount of fixed overhead is deferred to a future period?

Answer 

 $30,000

 $120,000

 $150,000

 $720,000

2 points   

Question 47 

1. 

For Pierce Company, sales is $500,000, variable expenses are $310,000, and fixed expenses are $140,000. Pierce's contribution margin ratio is

Answer 

 10%.

 28%.

 38%.

 62%.

2 points   

Question 48 

1. 

Variable costing

Answer 

 is used for external reporting purposes.

 is required under GAAP.

 treats fixed manufacturing overhead as a period cost.

 is also known as full costing.

2 points   

Question 49 

1. 

What is the key factor in determining sales mix if a company has limited resources?

Answer 

 Contribution margin per unit of limited resource

 The amount of fixed costs per unit

 Total contribution margin

 The cost of limited resources

2 points   

Question 50 

1. 

For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What is net income?

Answer 

 $120,000

 $216,000

 $504,000

 $720,000

2 points   

Question 51 

1. 

Which cost is charged to the product under variable costing?

Answer 

 Variable manufacturing overhead

 Fixed manufacturing overhead

 Variable administrative expenses

 Fixed administrative expenses

2 points   

Question 52 

1. 

Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $36 and a selling price of $60. Q-Chip Plus has variable costs per unit of $42 and a selling price of $78. Ramirez's fixed costs are $540,000. How many units of Q-Chip would be sold at the break-even point?

Answer 

 5,063

 5,869

 9,000

 11,813

 
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