Eveluate the margin of safety - percentage of sales

Reference no: EM1310173

1.Given the following cost and activity observations for Wondrous Company's utilities, use the high-low method to calculate Wondrous' variable utilities costs per machine hour.

	Cost	Machine Hours
March	$3,100	15,000
April	2,700	10,000
May	2,900	12,000
June	3,500	18,000

a.$10.00

b.$.67

c.$.10

d.$.63

2.Variable costs as a percentage of, sales for Leamon Inc. are 75%, current sales are $600,000, and fixed costs are $110,000. How much will operating income change if sales increase by $40,000?

a.$30,000 decrease

b.$10,000 decrease

c.$30,000 increase

d.$10,000 increase

3.If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

a.increase

b.decrease

c.increase or decrease, depending upon the percentage increase in utility rates

d.remain the same

4.Assume that Crowley Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $20 and $45 respectively. Crowley has fixed costs of $350,000. The break-even point in units is:

a.10,769 units

b.14,000 units

c.25,278 units

d.8,000 units

5.If sales are $300,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

a.1.333

b.0

c.7.500

d.1.875

6.Cost-volume-profit analysis cannot be used if which of the following occurs?

a.The per unit variable costs change

b.The total fixed costs change

c.Per unit sales prices change

d.Costs cannot be properly classified into fixed and variable costs

7.If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,500,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?

a.33.3%

b.18%

c.25%

d.15%

8.The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured:

a.are less than units sold

b.equal units sold

c.are equal to or greater than units sold

d.exceed units sold

9.A business operated at 100% of capacity during its first month and incurred the following costs:

Production Costs (20,000 units):
Direct materials	$180,000
Direct labor	240,000
Variable factory overhead	280,000
Fixed factory overhead	100,000	$800,000

Operating expenses:
Variable operating expenses	$130,000
Fixed operating expenses	50,000	180,000

If 1,600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

a.$56,000

b.$66,400

c.$68,000

d.$64,000

10.If variable selling and administrative expenses totaled $120,000 for the year (80,000 units at $1.50 each) and the planned variable selling and administrative expenses totaled $120,900 (78,000 units at $1.55 each), the effect of the quantity factor on the change in variable selling and administrative expenses is:

a.$900 decrease

b.$4,000 decrease

c.$3,100 decrease

d.$3,100 increase

Reference no: EM1310173

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