FINANCE

__ 29. A firm operated at 80% of capacity for the past year, during which fixed costs were $210,000, variable costs
were 65% of sales, and sales were $1,000,000. Operating profit was:
a. $140,000
b. $150,000
c. $310,000
d. $200,000
____ 30. If sales are $425,000, variable costs are 63% of sales, and operating income is $50,000, what is the
contribution margin ratio?
a. 37%
b. 26.8%
c. 11.8%
d. 63%
____ 31. If fixed costs are $750,000 and variable costs are 70% of sales, what is the break-even point (dollars)?
a. $1,071,429
b. $525,000
c. $2,500,000
d. $1,275,000
Name: ________________________ ID: A
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____ 32. If fixed costs are $1,400,000, the unit selling price is $220, and the unit variable costs are $120, what is the
amount of sales required to realize an operating income of $200,000?
a. 14,000 units
b. 12,000 units
c. 16,000 units
d. 13,333 units
____ 33. If fixed costs are $300,000, the unit selling price is $25, and the unit variable costs are $20, what is the
break-even sales (units) if fixed costs are reduced by $40,000?
a. 60,000 units
b. 52,000 units
c. 62,000 units
d. 64,000 units
____ 34. If fixed costs are $200,000 and the unit contribution margin is $20, what amount of units must be sold in
order to have a zero profit?
a. 25,000
b. 20,000
c. 200,000
d. 10,000
____ 35. If fixed costs are $500,000 and the unit contribution margin is $12, what amount of units must be sold in
order to realize an operating income of $100,000?
a. 5,000
b. 41,667
c. 50,000
d. 58,333
____ 36. If fixed costs are $500,000 and the unit contribution margin is $20, what is the break-even point in units if
fixed costs are reduced by $80,000?
a. 25,000
b. 29,000
c. 4,000
d. 21,000
____ 37. If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:
a. decrease
b. increase
c. remain the same
d. increase or decrease, depending upon the percentage increase in wage rates
____ 38. If fixed costs increased and variable costs per unit decreased, the break-even point would:
a. increase
b. decrease
c. remain the same
d. increase, decrease, or remain the same, depending upon the amounts of increase in fixed
cost and decrease in variable cost
____ 39. Which of the following conditions would cause the break-even point to decrease?
a. Total fixed costs increase
b. Unit selling price decreases
c. Unit variable cost decreases
d. Unit variable cost increases
Name: ________________________ ID: A
9
____ 40. Which of the following conditions would cause the break-even point to increase?
a. Total fixed costs decrease
b. Unit selling price increases
c. Unit variable cost decreases
d. Unit variable cost increases
____ 41. Flynn Co. has the following operating data for its manufacturing operations:
Unit selling price $ 250
Unit variable cost 100
Total fixed costs $840,000
The company has decided to increase the wages of hourly workers which will increase the unit variable cost
by 10%. Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed
costs by 4%. If sales prices are held constant, the next break-even point for Flynn Co. will be:
a. increased by 640 units
b. increased by 400 units
c. decreased by 640 units
d. increased by 800 units
____ 42. The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents:
a. the maximum possible operating loss
b. the maximum possible operating income
c. the total fixed costs
d. the break-even point
____ 43. The point where the total costs line intersects the left-hand vertical axis on the cost-volume-profit chart
represents:
a. the minimum possible operating loss
b. the maximum possible operating income
c. the total fixed costs
d. the break-even point
____ 44. The relative distribution of sales among the various products sold by a business is termed the:
a. business’s basket of goods
b. contribution margin mix
c. sales mix
d. product portfolio
____ 45. Assume that Crowley Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year.
The unit contribution margins for Products A and B are $20 and $45 respectively. Crowley has fixed costs of
$350,000. The break-even point in units is:
a. 14,000 units
b. 25,278 units
c. 8,000 units
d. 10,769 units
Name: ________________________ ID: A
10
____ 46. Phipps Co. sells two products, Arks and Bins. Last year Phipps sold 12,000 units of Arks and 28,000 units of
Bins. Related data are:
Product
Unit Selling
Price
Unit Variable
Cost
Unit Contribution
Margin
Arks $120 $80 $40
Bins 80 60 20
What was Phipps Co.’s overall unit contribution margin?
a. $26
b. $60
c. $92
d. $20
____ 47. Phipps Co. sells two products, Arks and Bins. Last year, Phipps sold 12,000 units of Arks and 28,000 units of
Bins. Related data are:
Product
Unit Selling
Price
Unit Variable
Cost
Unit Contribution
Margin
Arks $120 $80 $40
Bins 80 60 20
Assuming that last year’s fixed costs totaled $910,000, what was Phipps Co.’s break-even point in units?
a. 40,000 units
b. 12,000 units
c. 35,000 units
d. 28,000 units
____ 48. If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of
$4,500,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety
expressed as a percentage of sales?
a. 25%
b. 18%
c. 33.3%
d. 15%
____ 49. If a business had a margin of safety ratio of 20%, variable costs of 75% of sales, fixed costs of $240,000, a
break-even point of $960,000, and operating income of $60,000 for the current year, what are the current
year’s sales?
a. $1,200,000
b. $1,040,000
c. $1,260,000
d. $1,020,000
____ 50. Under absorption costing, which of the following costs would not be included in finished goods inventory?
a. Direct labor cost
b. Direct materials cost
c. Variable and fixed factory overhead cost
d. Variable and fixed selling and administrative expenses
Name: ________________________ ID: A
11
____ 51. Under absorption costing, which of the following costs would not be included in finished goods inventory?
a. Hourly wages of assembly worker
b. Straight-line depreciation on factory equipment
c. Overtime wages paid factory workers
d. Advertising costs for a furniture manufacturer
____ 52. Under variable costing, which of the following costs would not be included in finished goods inventory?
a. Direct labor cost
b. Direct materials cost
c. Variable factory overhead cost
d. Fixed factory overhead cost
____ 53. Under variable costing, which of the following costs would be included in finished goods inventory?
a. Advertising costs
b. Salary of vice-president of finance
c. Wages of carpenters in a furniture factory
d. Straight-line depreciation on factory equipment
____ 54. A business operated at 100% of capacity during its first month and incurred the following costs:
Production costs (20,000 units):
Direct materials $180,000
Direct labor 240,000
Variable factory overhead 280,000
Fixed factory overhead 100,000 $800,000
Operating expenses:
Variable operating expenses $130,000
Fixed operating expenses 50,000 180,000
If 1,600 units remain unsold at the end of the month, what is the amount of inventory that would be reported
on the variable costing balance sheet?
a. $64,000
b. $56,000
c. $66,400
d. $68,000
Name: ________________________ ID: A
12
____ 55. A business operated at 100% of capacity during its first month and incurred the following costs:
Production costs (10,000 units):
Direct materials $170,000
Direct labor 340,000
Variable factory overhead 190,000
Fixed factory overhead 50,000 $750,000
Operating expenses:
Variable operating expenses $ 60,000
Fixed operating expenses 18,000 78,000
If 300 units remain unsold at the end of the month, what is the amount of inventory that would be reported on
the variable costing balance sheet?
a. $22,500
b. $21,000
c. $23,040
d. $24,300
____ 56. A business operated at 100% of capacity during its first month and incurred the following costs:
Production costs (10,000 units):
Direct materials $140,000
Direct labor 40,000
Variable factory overhead 20,000
Fixed factory overhead 4,000 $204,000
Operating expenses:
Variable operating expenses $ 34,000
Fixed operating expenses 2,000 36,000
If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what is the
amount of the manufacturing margin that would be reported on the variable costing income statement?
a. $100,000
b. $108,000
c. $140,000
d. $114,800
Name: ________________________ ID: A
13
____ 57. A business operated at 100% of capacity during its first month, with the following results:
Sales (160 units) $160,000
Production costs (200 units):
Direct materials $100,000
Direct labor 20,000
Variable factory overhead 10,000
Fixed factory overhead 4,000 134,000
Operating expenses:
Variable operating expenses $ 12,000
Fixed operating expenses 2,000 14,000

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