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# \$6.00Accounting Chapter 4 Quiz #2

Chapter 4, # 0
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1. The Harold Corporation just started business in January of 2010. They had no beginning inventories. During 2010 they manufactured 12,000 units of product, and sold 10,000 units. The selling price of each unit was \$20. Variable manufacturing costs were \$4 per unit, and variable selling and administrative costs were \$2 per unit. Fixed manufacturing costs were \$24,000 and fixed selling and administrative costs were \$6,000.

What would be the difference in Harold Corporation’s Net income for 2010 if they used direct costing instead of absorption costing?
1. \$4,000 less
2. \$6,000 less
3. No difference
4. \$2,000 greater
2. Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks and 56,000 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 Carter Co.'s weighted average unit contribution margin?
1. \$20
2. \$92
3. \$24
4. \$60
3. If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.
1. True
2. False
4. The adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced.
1. False
2. True
5. If sales total \$2,000,000, fixed costs total \$800,000, and variable costs are 60% of sales, the contribution margin ratio is 40%.
1. True
2. False
6. If employees accept a wage contract that increases the unit contribution margin, the break-even point will decrease.
1. True
2. False
7. Selling price = \$80 per unit
Variable cost = \$30 per unit
Units = 20,000
Fixed costs = \$240,000

This company is considering a 20% drop in selling price that they believe will raise units sold by 20%.   All other costs stay the same.  How much will income go up or down if they make this change?
1. \$320,000  less income
2. \$20,000 more income
3. \$40,000 more income
4. \$184,000 less income
8. If sales are \$820,000, variable costs are 58% of sales, and operating income is \$260,000, what is the contribution margin ratio?
1. 53.1%
2. 62%
3. 32%
4. 42%
9. The contribution margin ratio is:
1. the same as the profit-volume ratio
2. the portion of equity contributed by the stockholders
3. the same as the variable cost ratio
4. the same as profit
10. If sales are \$400,000, variable costs are 80% of sales, and operating income is \$40,000, what is the operating leverage?
1. 1.333
2. 7.500
3. 2.0
4. 0
11. Even if a business sells six products, it is possible to estimate the break-even point.
1. True
2. False
12. A low operating leverage is normal for highly automated industries.
1. True
2. False
13. Given the following cost and activity observations for Smithson Company’s utilities, use the high-low method to calculate Smithson’s fixed costs per month.  Round variable cost per unit to two decimal places in your calculations.

Cost                   Machine Hours
January                    \$52,200                    20,000
February                     75,000                     29,000
March                     57,000                     22,000
April                             64,000                     24,500

1. \$12,500
2. \$50,000
3. \$5,000
4. \$1,630
14. Safari Co. sells two products, Orks and Zins. Last year Safari sold 21,000 units of Orks and 14,000 units of Zins. Related data are:

Product                    Unit Selling Price                Unit Variable Cost             Unit Contribution Margin
Orks                              \$120                                    \$80                            \$40
Zins                                 80                                      60                             20

What was Safari’s Co.’s weighted average unit selling price?
1. \$200
2. \$80
3. \$120
4. \$104
15. If sales are \$500,000, variable costs are 75% of sales, and operating income is \$50,000, what is the operating leverage?
1. 2.2
2. 2.5
3. 1.25
4. 0
16. If the volume of sales is \$6,000,000 and sales at the break-even point amount to \$4,800,000, the margin of safety is 25%.
1. False
2. True
17. If sales are \$914,000, variable costs are \$514,800, and operating income is \$260,000, what is the contribution margin ratio?
1. 64%
2. 33%
3. 53.1%
4. 43.7%
18. When the fixed costs are \$120,000 and the contribution margin is \$20, the break-even point is
1. 8,000 units
2. 16,000 units
3. 6,000 units
4. 7,998 units
19. Because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.
1. True
2. False
20. If fixed costs are \$1,400,000, the unit selling price is \$240, and the unit variable costs are \$110, what is the amount of sales required to realize an operating income of \$200,000?
1. 10,769 units
2. 12,000 units
3. 1,538 units
4. 12,308 units

Tutorial

\$6.00
Accounting Chapter 4 Quiz #2
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• Posted on Dec 04, 2010 at 3:05:29PM
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Preview: ... 3 3. If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease. 1. True Â  2. False Â  Answer: T 4. The adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced. 1. False Â  2. True Â  Answer: T 5. If sales total \$2,000,000, fixed costs total \$800,000, and variable costs are 60% of sales, the contribution margin ratio is 40%. 1. True Â  2. False Â  Answer: T 6. If employees accept a wage contract that increases the unit contribution margin, the break-even point will decrease. 1. True Â Â Â  2. False Â  Answer: T 7.Selling price = \$80 per unit Variable cost = \$30 per unit Units = 20,000 Fixed costs = \$240,000 This company is considering a 20% drop in selling price that they believe will raise units sold by 20%. Â  All other costs stay the same. Â How much will income go up or down if they make this change? 1. \$320,000 Â less income Â  2. \$20,000 more income Â  3. \$40,000 more income Â  4. \$184,000 less income Â  Answer: 4 8. If sales are \$82 ...

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