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# \$7.007 accounting questions correct answers

Chapter 1, # 0
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141.

A toy manufacturer’s contribution margin per toy is \$20. The fixed cost per year is \$25,000. The variable cost of making one toy is \$5.

How many toys must this company sell to break even?

1. 5,000
2. 1,667
3. 1,250
4. 1,000

142.

The following information is available for four divisions (A, B, C and D) of a company:

Division

A                     B                     C                     D

Sales                            \$1,000             \$2,000             \$3,000             \$4,000

Operating profit          300                  400                  500                  500

Division assets            5,700               2,100               5,200               3,000

Capital charge 15%

On the basis of residual income, which division performs best?

1. Division A
2. Division B
3. Division C
4. Division D

143.

A company produces and sells basic meters and deluxe meters. Its manufacturing overhead is \$100,000. Given the following information:

Basic               Deluxe             Total

Sales volume (in units)            320,000           100,000

Direct labor cost                      \$150,000         \$50,000           \$200,000

Direct materials                       \$200,000         \$100,000         \$300,000

What is the total unit cost of the deluxe meter if labor cost is used to allocate overhead?

1. \$2.00
2. \$1.75
3. \$2.75
4. \$1.50

144.

A company has two profit centers: Division X and Division Y. Division X has a total cost of \$15 per unit for its product of which \$10 is fixed. The normal price at which it sells is \$20 per unit. Division X also has idle capacity for up to 25,000 units per month. Division Y would like to purchase 20,000 units from X, but it could buy from outside at \$12.

The natural bargaining range for the two divisions is between _______

1. \$5 and \$15
2. \$5 and \$12
3. \$10 and \$12
4. \$12 and \$15

145.

An analyst has compiled the following historical data in a maintenance operation:

Month             Operating hours          Expenses (\$)

Sep                  230                              2600

Oct                  190                              2000

Nov                 120                              1700

Dec                  120                              2000

Jan                   90                                1300

Feb                  110                              1700

Using he high-low method, what are the expected total costs for March for 160 hours of operation?

1. \$1850
2. \$1900
3. \$1950
4. \$2000

146.

Period costs, as defined here, consist of all non-variable costs, both manufacturing and marketing. What do inventoriable costs under absorption costing include?

1. All costs
2. All variable costs
3. All production costs
4. All variable production costs

148.

A company sells four products: A, B, C and D. Other information available is:

Product

A                     B                     C                     D

Selling price (per unit) \$8                    \$10                  \$12                  \$11

Variable cost (per unit)           3                      4                      9                      7

Allocated fixed cost/unit        2                      4                      6                      3

Units sold                                1000                2000                3000                4000

Given the opportunity to sell one more unit, which product should you sell

1. Product A
2. Product B
3. Product C
4. Product D
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