Fixed cost per unit is $9 when 20,000 units are produced and $6 when 30,000 units are produced.

6. Fixed cost per unit is $9 when 20,000 units are produced and $6 when 30,000 units are produced.

What is the total fixed cost when nothing is produced?

a. $150,000

b. $360,000

c. $180,000

d. $240,000 7. Operating income equals: a. Sales revenue – cost of goods sold b. Gross margin – selling expenses c. Sales revenue – cost of goods sold – selling and administrative expense d. Sales revenue – selling and administrative expenses   8. Lonborg Co. had the following beginning and ending inventory balances for the year ended December 31, 2011: In addition, direct labor costs of $30,000 were incurred, overhead equaled $42,000, materials purchased were $27,000 and selling and administrative costs were $22,000. Lonborg Co. sold 25,000 units of product during the year at a sales price of $5.00 per unit. Refer to Figure 2-2. What was the amount of cost of goods sold for the year? a. $128,500 b. $102,000 c. $106,500 d. $97,500 9. On a cost-volume-profit graph, the break-even point is where a. The revenue line intersects the total cost line. b. The contribution margin line intersects the fixed cost line. c. The revenue line intersects the profit line. d. The fixed cost line intersects the variable cost line. e. All of these choices are correct.   10. Shorter Company had originally expected to earn operating income of $130,000 in the coming year. Shorter’s degree of operating leverage is 2.4. Recently, Shorter revised its plans and now expects to increase sales by 20% next year. Refer to Figure 4-6. What is the percent change in operating income expected by Shorter in the coming year? a. 54.17% b. 48.0% c. 30.0% d. 20.0% e. 8.33%

A variable cost in total

a. Remains constant no matter the level of output.

b. Increases as output decreases and decreases as output increases.

c. Increases as output increases and decreases as output decreases.

d. Increases as output increases and/or decreases.

Per-unit variable costs:

a. Remain constant within the relevant range.

b. Can be misleading and lead to poor decisions.

c. Decrease as output decreases.

d. Increase as output increases.

The margin of safety in dollars is:

a. Costs at break-even minus expected profit.

b. Expected sales minus expected profit.

c. Expected costs minus costs at break-even.

d. Expected sales minus sales at break-even.

e. Expected profit minus actual profit.

Which of the following would be a variable cost for a dentist’s office?

a. Depreciation on equipment

b. Cost of teeth cleaning material

c. Cost of renting office space

d. Salary of dentist

A fixed cost within the relevant range

a. Does not change in total as output changes.

b. Increases in total as output decreases.

c. Decreases in total as output increases.

d. All of these choices are correct.

Conversion cost is the sum of

a. Direct labor cost and overhead costs.

b. Product costs and period costs.

c. Direct labor cost and direct materials costs.

d. Selling cost and administrative costs.

An indirect cost

a. Can be easily and accurately traced to a cost object.

b. Should never be assigned to a cost object.

c. Is hard to trace.

d. Do none of these.

Sarah Smith, a sole proprietor, has the following projected figures for next year:


What is the contribution margin ratio?

a. 3.333

b. 0.429

c. 1.429

d. 0.300

The unit cost

a. Includes period costs.

b. Is the total product costs divided by the number of units produced.

c. Is the total conversion costs divided by the number of units produced.

d. Is the total prime costs divided by the number of units produced. Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected. Refer to Figure 3-3. Using the high-low method calculate the variable rate for the lease cost a. $38.18 b. $61.50 c. $37.25 d. $38.20

If fixed costs increase, the break-even point in units will

a. Remain the same.

b. Remain the same; however, contribution per unit will decrease.

c. Increase.

d. Decrease.

The relevant range

a. Is the normal range of output.

b. Is the range of output where cost relationships are valid.

c. May change from period to period.

d. All of these choices are correct.

Clean Company sells its product for $80. In addition, it has a variable cost ratio of 60% and total fixed costs of $8,000. What is the break-even point in sales dollars for Baker Company?

a. $4,800

b. $20,000

c. $32,000

d. $8,000

Cost of goods manufactured equals:

a. Total product costs incurred during the current period + beginning work in process – ending work in process.

b. Sales – cost of goods sold.

c. Direct materials cost + direct labor cost + overhead cost.

d. None of these choices are correct.

Product costs consist of

a. Direct materials, direct labor, and overhead.

b. Indirect materials, indirect labor, and administrative costs.

c. Period costs.

d. Direct materials, direct labor, and selling costs.

Paney Company makes calendars. Information on cost per unit is as follows: Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10.

Refer to Figure 4-3. How many units must be sold to yield targeted income of $36,000?

a. 5,833

b. 8,167

c. 12,000

d. 14,000

e. 6,000

Which of the following would probably be a discretionary fixed cost for a law firm?

a. Salary of receptionist
b. Depreciation on furniture and equipment
c. Advertising
d. Cost of legal forms
Standlar Company makes wireless speakers. The standard model price is $360 and variable expenses are $210. The deluxe model price is $500 and variable expenses are $300. The superior model price is $1,600 and variable expense per unit is $600. Total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold.

Using the sales mix stated in the facts from Figure 4-5 to form a package, what is the total package contribution margin?

a. $1,200

b. $2,000

c. $900

d. $3,000

e. $1,110

Okafor Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected.

Refer to Figure 3-3. What would the estimate of Okafor Company’s total lease cost be at a level of 500 machine hours?

a. $16,464

b. $18,546

c. $19,556

d. $19,606

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At the break-even point,

a. Total sales equals total fixed cost.

b. Total fixed cost equals variable cost.

c. Total contribution margin equals total fixed cost.

d. Total revenue equals variable cost.

e. Total margin of safety equals variable cost.

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