# Exam: Costs

How many units must be sold in order to obtain a before-tax profit of \$20,000? A. 343 units b. 640 units c. 914 units d. 915 units . The unit contribution margin completely excludes which cost? A. Fixed cost per unit b. Variable cost per unit c. Product cost per unit d. Conversion cost per unit 6. Queen sells a single product to wholesalers. The company’s budget for the upcoming year revealed anticipated unit sales of 22,600, a selling price of \$40, margin in units is: a. 13,000 b. 22,600 c.

9,600 d. 16,100 7. Florida Co. As computed the following unit costs for the year Just ended: Variable manufacturing cost Fixed manufacturing cost Variable selling and administrative cost Fixed selling and administrative cost \$45 \$20 \$10 12 Which of the following choices correctly depicts the per-unit cost of inventory under variable costing and absorption costing? A. Variable, \$45; absorption, \$65 b. Variable, \$55; absorption, \$65 c. Variable, \$55; absorption, \$87 d. Variable, \$45; absorption, \$75 8. Costs that, in total, increase across the relevant range, but which are not completely eliminated when production is zero, are termed: a.

Step-fixed costs b. Tepee-variable costs c. Semiprivate costs d. Curvilinear costs MGM 201 Midterm Exam?page 3 9. Tiffany charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of labor hours, and closes under- and over- applications to cost of goods sold. The following data pertain to the current year: Budgeted manufacturing overhead: \$2,600,000 Actual manufacturing overhead: \$2,420,000 Budgeted labor hours: 130,000 Actual Labor Hours: 121,000 Unadjusted cost of goods sold was \$6,090,000. What is the adjusted cost of goods sold as reported on the income statement at year-end? . \$180,000 difference between actual and budgeted contribution margin is explained by a combination of which two variances? A.

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The sales-volume variance and the fixed-overhead volume variance b. The sales- volume variance and the fixed-overhead budget variance c. The sales-price variance and the fixed-overhead volume variance d. The sales-price variance and sales-volume variance Buffet Enterprises purchased 33,000 pounds of direct material for \$49,500 to be used in the manufacture of the company’s only product. Each completed unit requires five pounds of direct material at a standard cost of \$1. 40 per pound.

Direct materials consumed by the end of the period totaled 24,680 pounds in the manufacture of 5,000 finished units. An examination of Buffet’s payroll records revealed that the company worked 12,000 labor hours at a cost of \$180,000 during the period, and each completed unit typically requires two hours of labor at a standard cost of \$14. 50 per hour. Assume that the company computes variances at the earliest point in time. 1 1 . Buffet’s direct-material price variance was: a. \$2,OFF b. \$2,UH c. \$3,UH d. \$3џOF MGM 201 Midterm Exam?page 4 12. Buffet’s direct-material quantity variance was: a. \$OFF b. \$UH c. UH d. \$OFF 13. Buffet’s direct-labor efficiency variance was a. \$29,OFF b. \$29,OOH c. \$30,OFF . \$30,OOH 14. Buffet’s direct-labor rate variance was a. \$6,OFF b. \$6,OOH c. \$5,OFF d. \$5,OOH 15. The Chair Division at the El Dorado Furniture Company is being considered for closure. The following information relates to chair activity: Sales revenue Variable costs: COGS Sales Commissions \$450,000 \$181,000 \$9,000 \$280,000 If 65% of the fixed operating costs are avoidable, should the Chair Division be closed? A. Yes, El Dorado would be better off by \$78,000 b. Yes, El Dorado would be better off by \$20,000 c.

No, El Dorado would be worse off by \$78,000 d. No, El Dorado would be worse off by \$260,000 MGM 201 Midterm Exam?page 5 16. Tidewater plans to sell 85,000 units of product no. 794 in May, and each of these units requires three units of raw material. Pertinent data follow. On the basis of the information presented, how many units of raw material should Tidewater purchase for use in May production? A. 228,000. B. 246,000. C. 264,000. D. 282,000. 17. Unguent plans to sell 40,000 units of product no. 75 in June, and each of these units requires five square feet of raw material. Pertinent data follow.

If the company purchases 201 ,OHO square feet of raw material during the month, the estimated raw-material inventory on June 30 would be: A. 11,000 square feet. B. 13,000 square feet. C. 23,000 square feet. D. 25,000 square feet. 18. A production supervisor generally has little influence over the: A. Direct-material quantity variance. B. Direct-labor efficiency variance. C. Direct-material price variance. D. Number of units produced. 19. The cost of inventory currently owned by a company is an example of a(n): A. Opportunity cost. B. Sunk cost. C. Relevant cost. D. Differential cost. 20.

Nelson Company owes money to Nash Company for the purchase of equipment. Nash Company has given Nelson the following payment options: l. Immediate payment in full of \$38,000. II. Annual payments of \$15,000 made at the end of each of the next three years. Ill. A single payment of \$48,000 made at the end of three years. Assume that both Nelson and Nash use a 10% interest rate compounded annually. What option would Nash prefer, and what is the present value of that option? A. Option I, \$34,542. B. Option l, \$38,000. C. Option II, \$37,305. D. Option Ill, \$34,164. 21 . Discounted-cash-flow analysis focuses primarily on: A. He stability of cash flows. B. He timing of cash flows. C. The probability of cash flows. D. The sensitivity of cash flows. 22. Burette Company can acquire a \$900,000 machine now that will benefit the firm over the next 6 years. Annual savings in cash operating costs are expected to total \$190,000. If the hurdle rate is 8%, the investment’s net present value is: A. \$(181џ00). C. \$44,970. D. \$184,920. MGM 201 Midterm Exam?page 7 Abbott has a standard variable overhead rate of \$4. 50 per machine hour, and each unit produced has a standard time allowed of three hours. The company’s static budget was based on 46,000 units.

Actual results for the year follow. Actual units produced: 42,000 Actual machine hours worked: 120,000 Actual variable overhead incurred: \$520,000 23. Abbot’s variable-overhead spending variance is: A. \$20,000 favorable. B. \$20,000 unfavorable. C. \$27,000 favorable. D. \$27,000 unfavorable. 24. Abbot’s variable-overhead efficiency variance is: hours, reported the following data for the period Just ended: Actual units produced: 14,800 Actual fixed overhead incurred: \$791,000 Standard fixed overhead rate: \$13 per hour Budgeted fixed overhead: \$780,000 Planned level of machine-hour activity: 60,000

If Ember estimates four hours to manufacture a completed unit, the company’s fixed- overhead volume variance would be: A. \$10,400 favorable. B. \$10,400 unfavorable. C. \$11,000 favorable. D. \$11,000 unfavorable. MGM 201 Midterm Exam? 26. Page 8 For mixed costs (that have fixed and variable costs), what happens to average cost per unit and total cost when production levels decline within the relevant range?