COST BEHAVIOR A. CostVolume Profit Analysis 1. _Thebreakeven point in units increases when unit costs ‘A. Increase and sles price remains unchanged. B. Decrease and sales pice remains unchanged. ‘© Remainunchanged and sles price increases. D._Decreaseand sales price increases, 2 Fora proftable company the amount by which sles can decline beforelosses occuris knowm as the ‘A. Sales volume variance. 1B Hurdlerate Variable sales ratio, D. Marginofsafery. 3. Which one of the following is correct regarding a relevant range? ‘Total variable costs willnot change Tota ised costs wllnot change poe established. Actual fed costs usual louse the elevant range The relevant range cannot be changed afer being The breakeven point in units sold for Tierson Corporation is 44,000, If xed costs for Tierson ate equal to $880,000 annually and variable costs are $10 per unit, what isthe contribution margin per unit for Tieton Corporation? A $005 B. $2000 ©. $4400 D. $8800 Questions 5 through 8 are based onthe fllowing information XerbertCo. ‘Budget and Actual income Statements For the Year Ending December 31, 250 $1,900 —1200 709 $200 133, ws (000s mited) Budget Xenox Xeon Tota Unitsales 130100 Netdola sales $900 $1,000 Variable expenes 430750 so 80 Fed expenses Manufacturing Total fied expenses ‘ncome befor taxes 448 22 Muss Xeon —sTat Unitsles 130 130-260 Netolases $780 $1235 S215 Varableexpenses m0 S13 ss im ie Facd expenses 190 ‘Manofictuing 140 Marketing = ‘Total fixed expenses £20 Income before taxes ie & ‘The percentage diference between the actual and budgeted breakeven point in units was that actual was A. S00%above budget B. G67%below budget CC 667%¢above budget D. S00% below budget ‘The budgeted total volume of250000 unis was based upon “erberts achieving a marketshare of 10%, Actual industry volume was 2.580000 units Xerbers increased volume ‘owingto improved marketshare is A 100% C.20% Bo 80% Daw ‘The variance of actual contibution margin from budgeted poe ‘Whena frm prepares franc rpors by using absorption costing Profits wil aways increase with nereatsinsales ‘B._ Profs will ahray decrease with decreases in ales C._ Profits may decrease with increased sales even fthere D. > iso change seling prices and costs Decreased outpet and constant sles resultin increased profits ‘Which method ofinventory costing treats direct manufacturing costs and manufacturing overhead costs, both variable and fed, asinventorable costs? A. Directeosting B._Varable costing Absorption costing D. Conversion costing Which one ofthe following statements i correct regarding, absorption costing and variable costing? A Overhead costs are treated inthe same manner under both costing methods B. finished goodsinventory increases absorption costing results in higher Income. C._ Variable manufacturing costsare costing D. Grossmarginsare methods. lowerunder variable the same under both costing “Thecostng method thats properly classified for both extemal and internal reporting porporesis xtemal Internal ‘Reporting Repating A Aatieybased costing ‘No Yes B. Jobordercosting No Yes Variable costing No Yes D. Processcosting No No cosingare to dierent | cs prouced.OFthe cost that isnot correct” 28. Resorption costingand vale methods of asigning costo tem ited below dent the 0 accounted forasa product com Partof Product Costunder —Fierpion Verb ce Sat A Manaactong opps 7 = | § Meeeen by Yeo | (Direct abor cost a a 1D. Packaging and shipping costs Ye fe 19,__Jansetnepysbonusest manage basen oP dari The company uses absorption costing and sreeeadis apple on he basis of iret aor hours TO orrebonues janse's managers may doalofthe falowingercept oe pe ce those products equringthe most direct labor. B Delerepes CC. Increase production caster demands D._ Decrease production ofthose items requ direct labor. ‘Qgestions 30 and31arebased on the following information & ses such as maintenance toa fature period schedules independent of ingthe most manufacturer atthe end of ts cal year recorded the data below: Primecost 3800000 ‘Variable manufacrring overhead 100,000 Faced manufacturing oveshead 160,000 ‘Variable selling and other expenses 80,000 40900 Fraed selling and other expenses 30. fthe manafsctureruses variable costing the inventorable costs forthe sca year are ‘A $800,000 CC. $980,000 B. $900000 D. $1,060000 41, Usingabsorption (full) costing inventoriable costs are ‘A $800.00 $1,060000 B. $900,000 D. $1,060,000 Questions 32 through 38 are based on the fllowinginformation. ‘Val Corporation employs a absorption costing system for intemal reporting purposes; however, the company isconsidering using sariable costing, Data regarding Vals planned and actal operations {or the calendar yearare presented below.00, eaten coningripens ae sold account at thee was employed for rot underlie manutictung goods nd ofthe ost Operating income because actual production exceeded actual eae 68 Val Corpotion tot dco % the absorption costing basis were ‘A. $2095000 B $2,120,000 36 Refertotheinformation p reced Corporation's actual manufsctur se grcalected on the vale costing A. $4375,000 B. $4935000 37. —_Refertothe information 38. —_Referto the information 38 Randall Corpor has the fallow Manubety Sate $47.00 nd Ra "PPly matietng buying the tng them in Ments is c¢ 2 Randallehoud 100 ‘manufacturing ovethead IMB question 32 y, IB ontrbuton bag be c $4,910,009 D. $5,625000 an abl mansctung company hy Bees sce produing tenn 300 000 ho 200 300 $610 Crorationreceivedan of oma the tabletops to Randal Randalls tabletops from Blur inseadof “erally. Which one ofthe lowing has: reject Bl reject Blar'sofferifitislessthan dallas Xcess manufacturingcapaiy. ring capacity. acct Blur’ offer ifitisless than cal ess manufacturing capaci. lur's offerifitis $50.00 ormore basedon the ‘Sllowing information. Osawa manufactured 200,000, units ofits single ind actual fixed) ‘manuficturingcoss were anuficturingcosswe and selling and administrative costs totaled $400,000, al 120,000 unit ofprodac ta sling pric of $40 per unit ‘g.__Osstsopeatng income wsingabsorpton (il costings ‘A $200000 ‘©. $600000 B. $440000 $840,000 ‘a. Osavabopeting income forthe year using arable costing is A. $200000 1B $440000 uesions ADand 43a based on the istaken from Valenz Company's records for the current fiscal yearended November Diet materalsused 300000 Diet bor 100,000 Vath factory overhead 0,000 Fed tory ovesead 80,000 Selingand admin. costs -varable +0000 ‘Selig and admin. costs fied 20900 1fValenz Company uses variable costing the inventoriable a costs forthe sal yearare ‘A 400000 c $490000 B $450,000 . $530000 48. Usingsbsorption (ful) casting inventorabl costs are ‘A. $490000 CC. $530,000 B. $450000 D. $590000 C Joint Products and By-Products 4 Theprincipal disadvantage of using the physical quantity method of llocating joint costsis that ‘A. Contsatsigned o inventories mayhave no relationship tovalue. Physical quantities maybe dificult to measure. ‘Additional processing costs affect the allocation base, Joint costs, by definition should not be separated ona unit bass B c D 45. Lankip Company produces two main products and a by- Product out ofa joint process. The ratio of output quantities tolnpur quantities ofirect material used inthe joint process ‘emains consistent fom month to month. Lankip has employed the physca-volume method to allocate joint Production coststothe two main prodacts. The net, ‘eallable valve ofthe by-product is used to reduce the joint Production costs before the join costs are allocated tothe ‘main products Data regarding Lankip’s operations forthe urent month are presented inthe chart below. During the ° ncurred join production costs of cehtt ecco Jpltvoffpintand thus have tobe processed ther. Fe Second van Main Product Prod mda Moxy ouput pounds os on 2. Seing pe cece ssigg00 $640.00 would “The amount ofjoint production costthat Lankip. ; allocate tothe Second Main Product by using the physica! solume method allocste joint production costs would be A $1,200000 . $1,500000 B. $1,260,000 D, $1,575,000 (Questions 46and 47 are bated on the following information. Petro~ Chem ing, sa small company that acquires high-grade crude ol rom low-velume production wells owned by individuals and small partnerships The erude oii processed in singe refinery into Two Oil Six, and impure distillates Petro-Chem does nothave the technology or apacty to process these product father and sels most ‘ofitsourput each month to majorefineries. There were no beginning Jnventories offirished goods ot work-in-process on November I The rodction costs and output of Petro-Chem for November are in the rightcolumn. ‘Crade oll acquired and placedin production _—_—$5,000,000 Diectlaborand related costs 2,000,000 Factory overhead 3900,000 Production and sales '* Two 300,000 barrels produced; 80,000 barrels sold at $20 each, ‘Six Oi, 240,000 barrels produced; 120,000 barrels sold at $30 each, Distillate, 120.000 bares produced and sold t $15 per barrel. ‘The portion ofthe oint production costs assigned to Six Oil based upon physical output would be A $3636000 C. $1,818,000 B. $3,750,000 D. $7,500,000 47, Theportion ofthe joint production costs assigned to Two COilbased upon the relative sales value of output would be ‘A $4800000 C. $2,286,000 B $4,000,000 . $2,500.00 ‘Questions 48 through $0 are based on the following information. ‘Travis Petroleum is asmall company that acquires crude ol and ‘manufactures t into three intermediate products di in grade The products are Grade One, Gade Twrand Cre Pe No beginning inventories of finshed goods or work in-process existed onNovember The production costs for November were as fellows (assume separable costs were negligible): (Crude cil acquired and put into production $4,000,000 Direct aborand related costs 2,00,000 Factory overhead 3900,000 ‘The outpot and sales for November were a follows Grade GadeOne GndeTwo These Barrels Produced 300000 240,000 120,000 Barrels Sold 80000 120.000 120000 Prices per Barrel Sold $30 $40 $50 48 Theportionofthe joint production costs assignedto Grade ‘Two based upon physical output i (rounded tothe nearest thousand dollars) A $3273,000 $1,636,000 B. $3,375,000 D. $3,512,000 49. ___Theportion ofthe joint production costs assigned to Grade ‘One based upon the relative sales values ofoutputis (rounded to the nearest thousand dollars) A. $3,512,000 C. $1,636000 B. $5,293,000 D. $4,091,000 $0. _Basedo the relative sales values f output, cost ofthe endinginventory of Grade Twois A. $3,512,000 . $1,636000 B $1,756,000 D. $3375000 Questions $1 and $2 are based on the following Information. A ‘manofacturing company uses joint production process that produces three products at the spil-offpoint Joint production costs during April ‘were $720 000, The company uses the sales value method for allocating joint costs, Product information for April was an fllows: Product R s T Units produced 2500 $00 | 7500 Unis sold 2,000 | 6 000_|~ 7,000 Sales prices Atthe spitoff sioo_ | $80_| $20 ‘Afr farther processing $is0_|“s1is_ [$30 Coststoprocessafer split off | $150,000 | $150,000 | $100000 -main products and that thatall three products are ser esol atthe spi-of point or processed further, vache ‘seconomically beneficial to the company. What isthe total cost of Product Sin Apa ifjoint cost allocation g based onsales value atsplitoff? ‘A $375000 B. $390,000 that Product Tis treated a a by-product and that Jee pany acum forte byprodoctat net rete valueasa reduction ofjoint cost Assume also that Products ‘Sand T must be procested farther before they can be sold ‘Whatisthe total cost ofProduct Rin Apriifjoint cost C.$510,000 D.$571,463, 32 allocation is based on net realizable values? 4. 030 C. $374630 B. $370,370 D. $596,000 restos 53 through $7 are based on the following information. Alas Poa ree detehosig tine nypleneral food products simultaneously through a reining process costing $93,000. The joint products, Alfa and Betters,have final selling price of$4 per pound and $10 per pound, cerpectvey, afer additional processing costs of $2 per pound ofeach product are incurred after the split-off point. Morefed, a by produc, is soldat the split-off point for $3 per pound, Alfa 10000 pounds of Alfa popular but relatively rare grain supplement having a caloric value of 4,400 calories per pound, Better: $5000 pounds of Betters a favoring material high in carbohydrates with a caloric value of | 1,200 calories per pound, 1/000 pounds of Morefeed, used a cattle feed ‘supplement witha caloric value of 1,000 calories per pound Morefeed S3__Assuming Alas Foods Inventories Moreeed the by-prodocy, the oint cost to be allocated to Alf, using the net realizable ‘value method is A $3000 . $31,000 B. $30,000 D.$60,000 S4. Assuming Alas Foods inventories Morefeed, the by-product, the joint costo be allocated to lf i guintiy methodig neha! A. $3000 Berk C. $31,000 D. $60,0007. ‘Assuming Atlas Foodsinventories Morefeed the by- product the ointcost to be allocated to Beters using the ‘weighted quantity method based on calorie value per pound A $39208 $40920 BR $39,600 . $50000 ‘Assuming Atlas Foods inventories Morefeed the by product, and that it incurs no additional processing costs for ‘Nfaand Setters the joint cost tobe allocated to Als using the gross market value methodis ‘A $36000 $4133 B. $40,000 1D. $50,000 Assuming Attas Foods does not inventory Morefeeds, the by-product the join, costo be allocated to Setters using the ret realizable value A $3000 $52,080 B $31,000 $60,000 1COST BEHAVIOR 6c LB 16.B 2.D 26.8 31.C 36.D 41.A 46.8 SLC 56.B 72D ILA 17.C 22.€ 22.€ 32.B 37.A “42.83 47.B SLA 57.D 9B 14.D 1D.A 24.C 29.D 3A 39.C aaa 49.B 4D 10.C 15.B 20.D 25.C 30.B 35.4 40.B 45.C 50.B $8.D