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ACT506 Midterm




Question;1. Which of the following is not an example of a product cost at a gym?A. Salary paid to instructors.B. Corporate office rent.C. SuppliesD. Utility cost in the gymnasium.2. Gross margin equals:A. Revenues less product costs.B. Revenues less period costs.C. Revenues less selling and administrative expenses.D. Revenues less depreciation expense.3. Metal used to make components is an example of:A. Direct LaborB. Variable Manufacturing OverheadC. Direct MaterialsD. Fixed Manufacturing Overhead4. Which of the following is not an example of a direct material?A. Steel.B. Packaging Materials.C. Leather.D. Canvas.5. Which account would not be shown under inventory in a manufacturing firm'sbalance sheet?A. Work-in-Process.B. Merchandising Inventory.C. Finished Goods.D. Held on Consignment.6. Aspen Company has sales of $2,000,000, cost of goods sold of $200,000, andselling and administrative costs of $500,000. Aspen Company's gross margin is:A. $1,800,000.B. $1,500,000.C. $1,300,000.D. $1,700,000.7. Suppose Max's Shuttle Service wants to earn a profit before taxes of $375,000 inthe coming year. Max's selling price is $40, its variable cost per unit is $20, and itsfixed costs are $150,000. How many tickets must the company sell?a. 26,520b. 26,250c. 18,750d. 11,250e.8 A firm performs CVP analysis for three primary purposes:a. calculating measures that help assess operating riskb. evaluating the profit impact of short-term decision alternativesc. profit planningD. All of the Above9. Which of the following is most likely a primary user of managerial accounting?a. Tax Authorities.b. Employees.c. Creditors.d. Shareholders.10. Which of the following is a characteristic of financial accounting?a. Periodicity of reporting is often generated on an as-needed basis.b. Focus is on estimates on future performance.c. Governed by Generally Accepted Accounting Principles (GAAP)d. Information relevance valued most.11 ABC uses which of the following as the denominator volume when calculatingallocations rates:a. Unused capacity.b. Budgeted volume.c. Practical capacity.d. Actual volume.12. ABC Systems:a. Allows us to estimate to cost of capacity resources consumed by each productaccurately when capacity costs are grouped into carefully designed cost pools.b. Frequently uses practical capacity as the denominator value when calculatingallocation rates.c. Is an approach in determining product costs.d. All of the above.13. Which is a characteristic of a "high cost-to-serve" customer?a. Large order sizes.b. Minimal order change requests.c. Require more customization.d. Pay on time.14. Product planning involves:A. Identifying profitable and unprofitable customers.B. Making appropriate add/drop decisions.C. Taking actions to improve customer profitability.D. Ensuring that in the short-run product prices are set so that they deliver positiveprofit margins.15. Suppose a firm's price per unit is $10, variable cost per unit is $5, total overheadis $15,000,000, and direct labor hours is 7,000,000. The firm allocates overheadusing direct labor hours as the allocation basis. What is the firm's overhead rate?a. $2.41b. $2.31c. $2.14d. $2.1616. Which is an incorrect statement of a job-costing system?a. Orders are customized.b. Orders are for large quantities.c. Average costing per unit is sufficient in a job shop environment.d. The setting can be described as "discrete" production.17. Using the following information: Beginning materials inventory = $50,000, Rawmaterials purchased on account = $20,000, Material issued out to the shop floor =$45,000, the ending balance of materials inventory is:a. $45,000b. $95,000c. $65,000d. $25,00018. Humprey's Airlines is considering two different options: install 10 self-servicecheck-in machines which would increase profits by $2,800, or install 3 additionalfull-service check-in stations which would increase profits by $700. What is thevalue and opportunity cost of the option of installing the 3 additional full-servicecheck-in stations?A.B.C.D.Value$700$700$2,800$2,800Opportunity Cost$700$2,800$700$2,80019. Fixed costs of operating a factory are examples of:a. Unit-level costs.b. Facility-level costs.c. Product-level costs.d. Batch-level costs.e. None of the above.20. Advertising costs are examples of:a. Unit-level costs.b. Facility-level costs.c. Product-level costs.d. Batch-level costs.e. None of the above.21. In August, a manufacturing plant produced 100 units of tubes for sale. The totalvariable costs were $6,000 and the fixed costs for the plant amounted to $5,000.How much is the unit variable cost for the tubes if 130 tubes are produced?a. $60.00b. $84.61c. $46.15d. $110.0022. The following table presents total cost for three types of cost (x, y, and z) for twothree different activity levels in a manufacturing process. Identify which cost type isfixed.Cost:XYZ2,000 units$10,000$15,000$20,0003,000 units$11,000$15,000$20,0004,000 units$12,000$15,000$20,000a.b.c.d.XYZY and Z23. During the current year, Britton?s Bread Bakery reported the following costs:Building rent$60,000Equipment depreciation$13,000Supervisor?s salary$50,000Bread ingredients, per loaf$0.89Packaging, per loaf$0.07Britton baked and sold 375,000 loaves of bread during the year. What was thetotal cost incurred for the year?A. $360,000B. $123,000C. $483,000D. $237,00024. Which of the following is not a characteristic of managerial accounting?A. Information is used by internal parties.B. Information is subjective, relevant, future-oriented.C. Reports are prepared as needed.D. Information is reported for the company as a whole.25. Which of the following types of firms would most likely use process costing?A. Superior Auto Body & RepairB. Crammond Custom CabinetsC. Sunshine Soft DrinksD. Jackson & Taylor Tax Service26. The normal cost for support activity was estimated to be $400,000 for the yearand the average usable capacity was estimated to be 20,000 direct labor hours. Theactual cost for support activity was $415,000 and actual direct labor hours were21,000. The activity rate for support activity is:A. $20.00B. $0.05C. $20.75D. $19.0527. Conversion costs consist ofA. all costs of production.B. raw materials and direct labor.C. direct labor and manufacturing overhead.D. raw materials and manufacturing overhead.28. Which of the following accounts will be treated differently by a process costingsystem than by a job order costing system?A. Raw Materials InventoryB. Work in Process InventoryC. Finished Goods InventoryD. Cost of Goods Sold29. When Shasta, Inc. sells 40,000 units, its total variable cost is $96,000. What is itstotal variable cost when it sells 45,000 units?A. $84,000B. $96,000C. $108,000D. It cannot be determined from the information given.30. Which of the following is a variable cost?A. A cost that is $20,000 when production is 50,000, and $20,000 when production is70,000.B. A cost that is $20,000 when production is 50,000, and $28,000 when production is70,000.C. A cost that is $20,000 when production is 50,000, and $40,000 when production is70,000.D. A cost that is $40,000 when production is 50,000, and $40,000 when production is70,000.31. When Bosco Inc. sells 40,000 units, its total fixed cost is $96,000. What is its totalfixed cost when it sells 45,000 units?A. $84,000B. $96,000C. $108,000D. It cannot be determined from the information given.32. Arnold Corp has a selling price of $20, variable costs of $15 per unit, and fixedcosts of $25,000. If Arnold sells 12,000 units, the contribution margin ratio willequalA. $60,000B. 25%C. 14.6%D. 10.4%33. Allain Corp has a selling price of $30, and variable costs of $20 per unit. When12,000 units are sold, profits equaled $70,000. How many units must be sold tobreak-even?A. 19,000B. 12,000C. 14,333D. 5,00034. Alfred Corp has a selling price of $25per unit, variable costs of $20 per unit, andfixed costs of $25,000. What sales revenue is needed to break-even?A. $100,000B. $5,000C. $125,000D. $50,00035. Gavin Inc. currently sells 15,000 units a month for $50 each, has variable costs of$20 per unit, and fixed costs of $300,000. Gavin is considering increasing the price ofits units to $60 per unit. This will not affect costs, but demand is expected to drop20%. Should Gavin increase the cost of its product?A. Yes, profit will increase $30,000.B. Yes, profit will increase $150,000.C. No, profit will decrease $150,000.D. No, profit will decrease $30,000.36. Nikko Corp sells two products. Product A sells for $100 per unit, and has unitvariable costs of $60. Product B sells for $70 per unit, and has unit variable costs of$50. Currently, Nikko sells three units of product B for every one unit of product Asold. Nikko has fixed costs of $750,000. What is Nikko's break-even point in units?A. 30,000 units of A and 30,000 units of BB. 7,500 units of A and 22,500 units of BC. 22,500 units of A and 7,500 units of BD. 15,000 units of A and 15,000 units of B37. Which of the following statements is false?A. Sunk costs are never relevant.B. Sunk costs are costs that occurred in the past.C. To be relevant, a cost must be an opportunity cost.D. To be relevant, a cost must occur in the future.38. The manager of Jiffy Inc. is trying to decide whether to make or buy acomponent of the product they sell. Which of the following costs and benefits is notrelevant to the decision?A. Direct labor cost involved in making the component.B. The purchase price of the component if it is bought.C. Variable manufacturing overhead involved in making the component.D. The selling price of the product.39. The law firm of Ginger and Maddux is examining its client base to determinehow profitable its regular clients are. Its analysis indicates that Furber, Inc. paid$128,000 in fees last year, but cost the firm $149,000 ($120,000 in billable labor,supplies, and copying, and $29,000 in allocated common fixed costs). If Ginger andMaddux dropped Furber, Inc. as a client, how would profit be affected?A. $0B. Increase $21,000C. Decrease $8,000D. Decrease $128,00040. Anders Corp produces three products, and is currently facing a labor shortage.The selling price, costs, and labor requirements of the three products are as follows:Anders has unlimited demand for all its products. Which product/s should AndersCorp produce to maximize profit during the labor shortage?A. Product A onlyB. Product B onlyC. Product A and BD. Product A, B, and C


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