1.      Which of the following is a variable cost?

2.      When the total fixed costs decreases, the contribution margin per unit _____

3.      An activity-based costing system is developed in four steps.

4.      Fixed costs per unit decrease as production levels decrease true or false

5.      Companies calculate the predetermined overhead rate at the beginning of an accounting period using the actual values of overhead costs. True or false

6.      The margin of safety focuses on how much operating income is left over from sales revenue after covering all variable and fixed costs. True or false

7.      Variable cost per unit is constant throughout various relevant ranges. True or false

8.      Consider the following information

Number of units          130,000
Sales price per unit  $          1,000
Variable cost per unit                  400
Total fixed cost          720,000
Target Profit (operating income)      1,800,000


a)       Contribution margin per unit

b)       Contribution margin ratio

c)       Breakeven points in units

d)       Breakeven points in sales dollars

e)       Units to achieve target profit  (operating income)

9. Activity-based costing focuses on a single predetermined overhead rate for cost analysis. True or false

10. Contribution margin ratio is equal to ________.

11. ————— is a method of assigning costs to inventories backwards from Cost of Goods Sold to Finished Goods
Inventory and/or Work in Process Inventory accounts.

12. Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of twenty separate parts. The direct material cost is $95 and each ceiling fan requires 2.5 hours of machine time to manufacture. Additional information is as follows:

Activity Allocation Base Cost Allocation Rate $
Materials handling Number of parts 0.08
Machining Machine hours 7.20
Assembling Number of parts 0.35
Packaging Number of finished units 2.70

13. What is the cost of machining per ceiling fan?

Appraisal costs are costs incurred ________.

14. Modiste Inc. manufactures two kinds of bags—totes and satchels. The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base. Estimated overhead costs for the year are $24,250. Additional information is given below.

Totes Satchels
Direct materials cost per unit $35 $40
Direct labor cost per unit $55 $60
Number of units 500 350

Calculate the predetermined overhead allocation rate.

15. Companies use balanced scorecard to measure how well one is doing against performance levels either inside or outside of the organization. True or false

16. ________ is a “what if” technique that estimates profit or loss results if selling price, costs, volume, or underlying assumptions change.

17. Agostino Inc. uses a just-in-time costing system. During the month, Agostino Inc. incurred $300,000 as direct labor and $9,000 as overhead. Which of the following is the correct journal entry to record the conversion costs?

18. Just-in-time management systems use a combined account for Raw Materials Inventory and Work-in-Process Inventory known as the ________.

19. Venus Inc. has fixed costs of $300,000. Total costs, both fixed and variable, are $450,000 when 30,000 units are produced. Calculate the total costs if the volume increases to 60,000 units.

20. Young Guns Company, which sells tents, has provided the following information:

Price per unit $40
Variable cost per unit 12
Fixed costs per month $12,600

What are the required sales in units for Young to break even?

21. Young Company has provided the following information:

Price per unit $40
Variable cost per unit 12
Fixed costs per month $10,000

Calculate the contribution margin per unit.

22. Which of the following is an example of internal failure costs?

23. The Perfect Fit Company sells hand-sewn shirts for $40 per shirt. It incurs monthly fixed costs of $5,000. The contribution margin ratio is calculated to be 20%. What is the breakeven point in units?

24. The dollar amount that provides for covering fixed costs and then provides for operating income is called ________.

25. From the graph given below, identify the fixed costs line.

26. The activity-based costing system improves the allocation of ________.




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