FINANCE

Question 1. 1. In correspondence with SLOATS 1a Last month, when 10,000 units of a product were manufactured, the cost per unit was $60. At this level of activity, variable costs are 50% of total unit costs. If 10,500 units are manufactured next month and cost behavior patterns remain unchanged the: (Points : 5)

total variable cost will remain unchanged. fixed costs will increase in total. variable cost per unit will increase. total cost per unit will decrease.

Question 2. 2. In correspondence with SLOATS 1b Within the relevant range, variable cost per unit will: (Points : 5)

increase as the level of activity increases. remain constant. decrease as the level of activity increases none of these.

Question 3. 3. In correspondence with SLOATS 1c Given the cost formula, Y = $9,000 + $2.50X, total cost for an activity level of 3,000 units would be: (Points : 5)

$9,750 $12,000 $16,500 $7,500

Question 4. 4. In correspondence with SLOATS 1d Blore Corporation reports that at an activity level of 7,300 units, its total variable cost is $511,803 and its total fixed cost is $76,650. What would be the total cost, both fixed and variable, at an activity level of 7,500 units? Assume that this level of activity is within the relevant range. (Points : 5)

$604,575 $602,475 $596,514 $588,453

Question 5. 5. In correspondence to SLOAT question number 2a. Compute pre-determined overhead rate under job order costing and determine the elements of manufacturing costs that are included in the Work in process Inventory, Finished Goods Inventory, and Cost of Goods Sold accounts. (Points : 5)

Numerator: Actual manufacturing overhead ; Denominator: Actual machine-hours Numerator: Actual manufacturing overhead ; Denominator: Estimated machine-hours Numerator: Estimated manufacturing overhead ; Denominator: Actual machine-hours Numerator: Estimated manufacturing overhead ; Denominator: Estimated machine-hours

Question 6. 6. In correspondence to SLOAT question number 2b. Chipata Corporation applies manufacturing overhead to jobs on the basis of machine-hours. Chipata estimated 25,000 machine-hours and $10,000 of manufacturing overhead cost for the year. During the year, Chipata incurred 26,200 machine-hours and $11,300 of manufacturing overhead. What was Chipata’s underapplied or overapplied overhead for the year? (Points : 5)

$480 overapplied $820 underapplied $1,300 overapplied $1,300 underapplied

Question 7. 7. In correspondence to SLOAT question number 2c. Which of the following would usually be contained in the work-in-process inventory account balance of a manufacturing company? (Points : 5)

Actual direct material cost: Yes; Actual direct labor cost: Yes; Actual manufacturing overhead cost: Yes Actual direct material cost: Yes; Actual direct labor cost: Yes; Actual manufacturing overhead cost: No Actual direct material cost: Yes; Actual direct labor cost: No; Actual manufacturing overhead cost: No Actual direct material cost: No; Actual direct labor cost: No; Actual manufacturing overhead cost: No

Question 8. 8. In correspondence to SLOAT question number 2d. Which of the following tasks produces an increase in work-in-process inventory? (Points : 5)

Finishing a job in process Selling finished goods inventory Purchasing raw materials Using and paying for direct labor

Question 9. 9. In correspondence to SLOAT question number 3a. Apply manufacturing overhead to each of several jobs using both a single overhead-rate approach and an activity-based-costing approach, and explain the advantages and disadvantages of the latter, as compared to the former. Use the following information to answer the following TWO questions: Acton Company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 500 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools–Activity 1, Activity 2, and General Factory–with estimated overhead costs and expected activity as follows: The predetermined overhead rate under the traditional single-rate costing system is closest to: (Points : 5)

$ 37.46. $ 21.60. $ 13.17. $ 53.68.

Question 10. 10. In correspondence to SLOAT question number 3b. The overhead cost per unit of Product B under the traditional costing system is closest to: (Points : 5)

$10.74 $7.49 $4.32 $2.63

Question 11. 11. In correspondence to SLOAT question number 3c. The amount of Activity 1 cost per unit of Product B under the activity based costing system is closest to: (Points : 5)

$24.17 $26.36 $15.82 $29.00

Question 12. 12. In correspondence to SLOAT question number 3d. For companies that make a highly diverse set of products, Activity Based Costing provides more precise costing information for each product than does the traditional single-rate approach because it: (Points : 5)

more closely adheres to GAAP principles. uses multiple cost drivers to allocate different types of overhead resources. separates the variable and fixed elements of mixed costs more precisely. is more complex and more costly to implement.

Question 13. 13. In correspondence to SLOAT question number 4a. Analyze mixed (semi-variable) costs into variable and fixed components, using both the “high-low” method, and the Excel scatter-graph approach, and explain the purpose for such an analysis. When there is a change in the level of activity, which of the following does NOT remain constant? (Points : 5)

Variable cost per unit Contribution margin per unit Contribution margin ratio Contribution margin in total for all units

Question 14. 14. In correspondence to SLOAT question number 4b. (Points : 5)

The variable cost is $0.70 per unit of activity The fixed cost is $2,050 The variable cost is $2.50 per unit of activity The fixed cost is $1,800

Question 15. 15. In correspondence to SLOAT question number 4c. The analysis of mixed costs into their variable and fixed components is necessary in order to: (Points : 5)

predict costs at various levels of activity. apply a single plant-wide overhead rate to each product. apply activity-based overhead rates to each product. use the high-low method.

Question 16. 16. In correspondence to SLOAT question number 4d. (Points : 5)

$63.70 $84.40 $53.30 $20.70

Question 17. 17. In correspondence to SLOAT question number 5a. Which of the following is correct? The break-even point occurs when: (Points : 5)

total profit equals total expenses. total profit equals total fixed expenses. total contribution margin equals total fixed expenses. total variable expenses equal total contribution margin.

Question 18. 18. In correspondence to SLOAT question number 5b. Cost-Volume-Profit analysis helps management to: (Points : 5)

determine the price of a product needed to achieve profit goals. forecast unit or dollar sales that will be achieved in future periods. predict costs at the breakeven point. determine the amount of sales needed to achieve profit goals.

Question 19. 19. In correspondence to SLOAT question number 5c. Hollis Company sells a single product for $20 per unit. The company’s fixed expenses total $240,000 per year, and variable expenses are $12 per unit of product. The company’s break-even point is: (Points : 5)

$400,000 $600,000 20,000 units 12,000 units

Question 20. 20. In correspondence to SLOAT question number 5d. Company A has a higher operating leverage then Company B. Which of the following is LEAST likely to be true? (Points : 5)

A 10% increase or decrease in sales will have a greater impact on Company A’s net income than on Company B’s net income. Company A has a higher proportion of fixed costs than Company B. Company A has a higher proportion of variable costs than Company B. Company A’s margin of safety ratio is greater than Company B’s.

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