Question 1

Net income under absorption costing is gross profit less

Accepted Answer

A)   cost of goods sold.
B)   fixed manufacturing overhead and fixed selling and administrative expenses.
C)   fixed manufacturing overhead and variable manufacturing overhead.
D)   variable selling and administrative expenses and fixed selling and administrative expenses.E) B) and C)
F) A) and D)

Question 2

In 2019, Hagar Corp. sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $780,000. The same variable expenses per unit and fixed expenses are expected for 2020. If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2020?

Accepted Answer

A)   5,200
B)   5,416
C)   5,760
D)   6,000E) All of the above
F) B) and C)

Question 3

The weighted-average contribution margin of all the products is computed when determining the break-even sales for a multi-product firm.

Accepted Answer

A) True 
 B)False

Question 4

When a company is in its early stages of operation, its primary goal is to generate a target net income.

Accepted Answer

A) True 
 B)False

Question 5

When production exceeds sales,

Accepted Answer

A)   ending inventory under variable costing will exceed ending inventory under absorption costing.
B)   ending inventory under absorption costing will exceed ending inventory under variable costing.
C)   ending inventory under absorption costing will be equal to ending inventory under variable costing.
D)   ending inventory under absorption costing may exceed, be equal to, or be less than ending inventory under variable costing.E) A) and C)
F) B) and C)

Question 6

Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each) , when the break-even point was 80,000 units. Warner's margin of safety ratio is

Accepted Answer

A)   20%.
B)   25%.
C)   80%.
D)   120%.E) A) and C)
F) All of the above

Question 7

Outsourcing production will

Accepted Answer

A)   reduce fixed costs and increase variable costs.
B)   reduce variable costs and increase fixed costs.
C)   have no effect on the relative proportion of fixed and variable costs.
D)   make the company more susceptible to economic swings.E) None of the above
F) All of the above

Question 8

Selling and administrative costs are period costs under both absorption and variable costing.

Accepted Answer

A) True 
 B)False

Question 9

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

Accepted Answer

A) True 
 B)False

Question 10

Only direct materials, direct labor, and variable manufacturing overhead costs are considered product costs when using

Accepted Answer

A)   full costing.
B)   absorption costing.
C)   variable costing.
D)   product costing.E) A) and D)
F) A) and B)

Question 11

A shift from high-margin sales to low-margin sales

Accepted Answer

A)   may decrease net income, even though there is an increase in total units sold.
B)   will always decrease net income.
C)   will always increase net income.
D)   will always increase units sold.E) None of the above
F) A) and B)

Question 12

Use the following information for questions.
Roosevelt Corporation has a weighted-average unit contribution margin of $30 for its two products, Standard and Supreme. Expected sales for Roosevelt are 40,000 Standard and 60,000 Supreme. Fixed expenses are $1,800,000.
-How many Standards would Roosevelt sell at the break-even point?

Accepted Answer

A)   24,000
B)   36,000
C)   40,000
D)   60,000E) B) and D)
F) B) and C)

Question 13

Management may be tempted to overproduce when using

Accepted Answer

A)   variable costing, in order to increase net income.
B)   variable costing, in order to decrease net income.
C)   absorption costing, in order to increase net income.
D)   absorption costing, in order to decrease net income.E) B) and C)
F) B) and D)

Question 14

Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs.

Accepted Answer

A) True 
 B)False

Question 15

In 2019, Raleigh sold 1,000 units at $500 each, and earned net income of $40,000. Variable expenses were $300 per unit, and fixed expenses were $160,000. The same selling price is expected for 2020. Raleigh's variable cost per unit will rise by 10% in 2020 due to increasing material costs, so they are tentatively planning to cut fixed costs by $10,000. How many units must Raleigh sell in 2020 to maintain the same income level as 2019?

Accepted Answer

A)   882
B)   1,000
C)   1,056
D)   1,118E) A) and D)
F) B) and D)

Question 16

Use the following information for questions 
Nielson Corp. sells its product for $6,600 per unit. Variable costs per unit are: manufacturing, $3,600, and selling and administrative, $75. Fixed costs are: $18,000 manufacturing overhead, and $24,000 selling and administrative. There was no beginning inventory at 1/1/15. Production was 20 units per year in 2018-2020. Sales were 20 units in 2018, 16 units in 2019, and 24 units in 2020.
-For the three years 2018-2020,

Accepted Answer

A)   absorption costing income exceeds variable costing income by $8,000.
B)   absorption costing income equals variable costing income.
C)   variable costing income exceeds absorption costing income by $8,000.
D)   absorption costing income may be greater than, equal to, or less than variable costing income, depending on the situation.E) A) and C)
F) A) and D)

Question 17

Reducing reliance on human workers and instead investing heavily in computers and online technology will

Accepted Answer

A)   reduce fixed costs and increase variable costs.
B)   reduce variable costs and increase fixed costs.
C)   have no effect on the relative proportion of fixed and variable costs.
D)   make the company less susceptible to economic swings.E) B) and D)
F) A) and D)

Question 18

When a company has limited resources to manufacture products, it should manufacture those products which have the highest unit contribution margin.

Accepted Answer

A) True 
 B)False

Question 19

Sales mix is not important to managers when different products have substantially different contribution margins.

Accepted Answer

A) True 
 B)False

Question 20

Cost-volume-profit analysis is the study of the effects of

Accepted Answer

A)   changes in costs and volume on a company's profit.
B)   cost, volume, and profit on the cash budget.
C)   cost, volume, and profit on various ratios.
D)   changes in costs and volume on a company's profitability ratios.E) All of the above
F) A) and B)

Exam 6: Cost-Volume-Profit Analysis: Additional Issues

In 2019, Hagar Corp. sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $780,000. The same variable expenses per unit and fixed expenses are expected for 2020. If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2020?

Correct Answer
verified

Management may be tempted to overproduce when using

Correct Answer
verified

Outsourcing production will

Correct Answer
verified

Sales mix is not important to managers when different products have substantially different contribution margins.

Correct Answer
verified

Correct Answer
verified

Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each) , when the break-even point was 80,000 units. Warner's margin of safety ratio is

Correct Answer
verified

Net income under absorption costing is gross profit less

Correct Answer
verified

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

Correct Answer
verified

A shift from high-margin sales to low-margin sales

Correct Answer
verified

Selling and administrative costs are period costs under both absorption and variable costing.

Correct Answer
verified

Correct Answer
verified

When a company is in its early stages of operation, its primary goal is to generate a target net income.

Correct Answer
verified

Reducing reliance on human workers and instead investing heavily in computers and online technology will

Correct Answer
verified

When a company has limited resources to manufacture products, it should manufacture those products which have the highest unit contribution margin.

Correct Answer
verified

The weighted-average contribution margin of all the products is computed when determining the break-even sales for a multi-product firm.

Correct Answer
verified

Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs.

Correct Answer
verified

When production exceeds sales,

Correct Answer
verified

Correct Answer
verified

Only direct materials, direct labor, and variable manufacturing overhead costs are considered product costs when using

Correct Answer
verified

Cost-volume-profit analysis is the study of the effects of

Correct Answer
verified

Exam 6: Cost-Volume-Profit Analysis: Additional Issues

In 2019, Hagar Corp. sold 3,000 units at $500 each. Variable expenses were $350 per unit, and fixed expenses were $780,000. The same variable expenses per unit and fixed expenses are expected for 2020. If Hagar cuts selling price by 4%, what is Hagar's break-even point in units for 2020?

Correct AnswerverifiedShow Answer

Management may be tempted to overproduce when using

Correct AnswerverifiedShow Answer

Outsourcing production will

Correct AnswerverifiedShow Answer

Sales mix is not important to managers when different products have substantially different contribution margins.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Warner Manufacturing reported sales of $2,000,000 last year (100,000 units at $20 each) , when the break-even point was 80,000 units. Warner's margin of safety ratio is

Correct AnswerverifiedShow Answer

Net income under absorption costing is gross profit less

Correct AnswerverifiedShow Answer

When a company has limited resources, management must decide which products to make and sell in order to maximize net income.

Correct AnswerverifiedShow Answer

A shift from high-margin sales to low-margin sales

Correct AnswerverifiedShow Answer

Selling and administrative costs are period costs under both absorption and variable costing.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a company is in its early stages of operation, its primary goal is to generate a target net income.

Correct AnswerverifiedShow Answer

Reducing reliance on human workers and instead investing heavily in computers and online technology will

Correct AnswerverifiedShow Answer

When a company has limited resources to manufacture products, it should manufacture those products which have the highest unit contribution margin.

Correct AnswerverifiedShow Answer

The weighted-average contribution margin of all the products is computed when determining the break-even sales for a multi-product firm.

Correct AnswerverifiedShow Answer

Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs.

Correct AnswerverifiedShow Answer

When production exceeds sales,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Only direct materials, direct labor, and variable manufacturing overhead costs are considered product costs when using

Correct AnswerverifiedShow Answer

Cost-volume-profit analysis is the study of the effects of

Correct AnswerverifiedShow Answer

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