Decrease as the level of production and sales increases

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Reference no: EM132099280

1. A partial listing of costs incurred during December at Rooks Corporation appears below: The total of the manufacturing overhead costs listed above for December is:

Factory suppies $7000.00

Administrative wages and salaries $92,000

Direct materials $176,000

Sales staff salaries $32,000

Factory depreciation $52,000

Corporate headquarters buiolding rent $47,000

Indirect labor $23,000

Marketing $136,000

Direct labor $82,000

A. $30,000

B. $82,000

C. $647,000

D. $340,000

2. In describing the cost equation, Y = a + bX, "a" is: A. the dependent variable cost. B. the independent variable the level of activity. C. the total fixed cost. D. the variable cost per unit of activity.

3. When the level of activity decreases, variable costs will: A. increase per unit. B. increase in total. C. decrease in total. D. decrease per unit.

4. Which of the following costs, if expressed on a per unit basis, would be expected to decrease as the level of production and sales increases (ie. has an inverse relationship to the activity level)? A. Sales commissions. B. Fixed manufacturing overhead. C. Variable manufacturing overhead. D. Direct materials.

5. Maintenance costs at a Whetsel Corporation factory are listed below: Management believes that maintenance cost is a mixed cost that depends on machine-hours. Use the high-low method to estimate the variable and fixed components of this cost. Compute the variable component first and round off to the nearest whole cent. Compute the fixed component second and round off to the nearest whole dollar. These estimates would be closest to: A. $8.86 per machine-hour; $20,577 per month B. $0.11 per machine-hour; $48,192 per month C. $15.48 per machine-hour; $48,103 per month D. $8.81 per machine-hour; $20,718 per month

6. Ricwy Corporation uses the cost formula Y = $4,800 + $0.40X for the maintenance cost, where X is machine-hours. The August budget is based on 9,000 hours of planned machine time. Maintenance cost expected to be incurred during August is: A. $4,800 B. $3,600 C. $8,400 D. $1,200

7. Which of the following manufacturers would most likely use job-order costing? A. Chemical manufacturers. B. Microchip processors. C. Custom-furniture manufacturers. D. Gasoline refiners. E. Fertilizer manufacturers.

8. The unit contribution margin is calculated as the difference between: A. selling price and fixed cost per unit. B. selling price and variable cost per unit. C. selling price and product cost per unit. D. fixed cost per unit and variable cost per unit. The following is Brady Corporation's contribution format income statement for last month: Sales: $350,000 Variable Expenses: $245,000 Contribution Margin: $105,000 Fixed Expenses: $ 85,000 Operating Income: $ 20,000 The company has no beginning or ending inventories and produced and sold 20,000 units during the month. Using the information for Brady Corporation presented above, answer questions 15-19 below.

9. The company’s contribution margin ratio is: A. 70% B. 25% C. 30% D. 75%

10. The breakeven point in sales dollars would be closest to: A. $105,000 B. $350,000 C. $281,666 D. $283,333

11. If management wished to achieve a target profit of $40,000, what would the total sales dollars need to be? A. $416,666.67 B. $483,333.34 C. $500,000.00 D. $580,000.00

12. The company’s degree of operating leverage (DOL) is closest to: A. 4.75 B. 5.25 C. 4.25 D. 3.5

13. If sales were projected to increase by 15% next year, what could management anticipate the percentage change in net income to be? A. 71.25% B. 78.75% C. 63.75% D. 52.50%

Reference no: EM132099280

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