Practice+exercise+with+answer

Use the following data for Fireware  Software Corporation to answer the next four questions:

 Sales price per unit $44.95

 Variable manufacturing cost per unit $17.03

 Variable sales commissions per unit $ 3.20

 Variable shipping expense per unit $ 1.14

 Fixed administrative cost per unit $ 5.77

 Other fixed costs per unit $ 1.12

 Average production 2,100 units per month

D8. If Fireware <span style="background-color: rgba(255,255,255,0);"> makes 2,500 units, total fixed cost would be?

<span class="GramE" style="background-color: rgba(255,255,255,0);">a <span style="background-color: rgba(255,255,255,0);">. $6.89

<span class="GramE" style="background-color: rgba(255,255,255,0);">b <span style="background-color: rgba(255,255,255,0);">. $17,225

<span class="GramE" style="background-color: rgba(255,255,255,0);">c <span style="background-color: rgba(255,255,255,0);">. $11,133

<span class="GramE" style="background-color: rgba(255,255,255,0);">d <span style="background-color: rgba(255,255,255,0);">. $14,469

2100*(5.77+1.12)=14469

<span style="background-color: rgba(255,255,255,0);">C9. How many units must <span class="SpellE" style="background-color: rgba(255,255,255,0);">Fireware <span style="background-color: rgba(255,255,255,0);"> sell in order to break even? ( <span class="GramE" style="background-color: rgba(255,255,255,0);">round <span style="background-color: rgba(255,255,255,0);"> to the nearest whole unit)

<span style="background-color: rgba(255,255,255,0);">a. 308

<span style="background-color: rgba(255,255,255,0);">b. 500

<span style="background-color: rgba(255,255,255,0);">c. 614

<span style="background-color: rgba(255,255,255,0);">d. 620

14469/(44.95-17.03-1.14-3.2)

<span style="background-color: rgba(255,255,255,0);">D10. How many units must <span class="SpellE" style="background-color: rgba(255,255,255,0);">Fireware <span style="background-color: rgba(255,255,255,0);"> sell in order to make a $50,000 profit? <span class="GramE" style="background-color: rgba(255,255,255,0);">(Round to the nearest whole unit.)

<span style="background-color: rgba(255,255,255,0);">a. 505

<span style="background-color: rgba(255,255,255,0);">b. 1,090

<span style="background-color: rgba(255,255,255,0);">c. 1,708

<span style="background-color: rgba(255,255,255,0);">d. 2,734 (14469+50000)/(44.95-17.03-1.14-3.2)=2734

<span style="background-color: rgba(255,255,255,0);"> 12. Which of the following is not usually a responsibility of the <span class="GramE" style="background-color: rgba(255,255,255,0);">controller <span style="background-color: rgba(255,255,255,0);">? <span class="GramE" style="background-color: rgba(255,255,255,0);">a <span style="background-color: rgba(255,255,255,0);">. preparing budgets and performance reports <span class="GramE" style="background-color: rgba(255,255,255,0);">b <span style="background-color: rgba(255,255,255,0);">. filing tax returns <span class="GramE" style="background-color: rgba(255,255,255,0);">c <span style="background-color: rgba(255,255,255,0);">. managing cash and marketable securities <span class="GramE" style="background-color: rgba(255,255,255,0);">d <span style="background-color: rgba(255,255,255,0);">. providing information for management decisions

<span style="background-color: rgba(255,255,255,0);">Answer:c

<span style="background-color: rgba(255,255,255,0);"> 15. Megan's Muffins projects the cost of rent to be $10,000 in a period

<span class="GramE" style="background-color: rgba(255,255,255,0);">when <span style="background-color: rgba(255,255,255,0);"> 50,000 units are produced. If rent is a fixed cost, and if

<span class="GramE" style="background-color: rgba(255,255,255,0);">production <span style="background-color: rgba(255,255,255,0);"> is expected to drop to 45,000 units next period, what

<span class="GramE" style="background-color: rgba(255,255,255,0);">is <span style="background-color: rgba(255,255,255,0);"> the expected cost of rent in the next period?

<span class="GramE" style="background-color: rgba(255,255,255,0);">a <span style="background-color: rgba(255,255,255,0);">. $9,000

<span class="GramE" style="background-color: rgba(255,255,255,0);">b <span style="background-color: rgba(255,255,255,0);">. $10,000

<span class="GramE" style="background-color: rgba(255,255,255,0);">c <span style="background-color: rgba(255,255,255,0);">. $11,000

<span style="background-color: rgba(255,255,255,0);"> d. The answer can not be determined with the information that is given.

<span style="background-color: rgba(255,255,255,0);"> 19. Variable cost per unit is budgeted to be $6.00 and fixed cost per

<span class="GramE" style="background-color: rgba(255,255,255,0);">unit <span style="background-color: rgba(255,255,255,0);"> is budgeted to be $3.00 in a period when 5,000 units are

<span class="GramE" style="background-color: rgba(255,255,255,0);">produced <span style="background-color: rgba(255,255,255,0);">. If production is actually 4,500 units, what is the

<span class="GramE" style="background-color: rgba(255,255,255,0);">expected <span style="background-color: rgba(255,255,255,0);"> total cost of the units produced?

<span class="GramE" style="background-color: rgba(255,255,255,0);">a <span style="background-color: rgba(255,255,255,0);">. $45,000

<span class="GramE" style="background-color: rgba(255,255,255,0);">b <span style="background-color: rgba(255,255,255,0);">. $40,500

<span class="GramE" style="background-color: rgba(255,255,255,0);">c <span style="background-color: rgba(255,255,255,0);">. $43,500

<span class="GramE" style="background-color: rgba(255,255,255,0);">d <span style="background-color: rgba(255,255,255,0);">. $42,000

<span style="background-color: rgba(255,255,255,0);">Answer: 3*5000+6*4500=42000

<span style="background-color: rgba(255,255,255,0);"> 22. Which of the following approaches to cost estimation is not based <span class="GramE" style="background-color: rgba(255,255,255,0);">on

<span class="GramE" style="background-color: rgba(255,255,255,0);">fitting <span style="background-color: rgba(255,255,255,0);"> data points to a line?

<span class="GramE" style="background-color: rgba(255,255,255,0);">a <span style="background-color: rgba(255,255,255,0);">. account analysis

<span class="GramE" style="background-color: rgba(255,255,255,0);">b <span style="background-color: rgba(255,255,255,0);">. <span class="SpellE" style="background-color: rgba(255,255,255,0);">scattergraph <span style="background-color: rgba(255,255,255,0);"> approach

<span class="GramE" style="background-color: rgba(255,255,255,0);">c <span style="background-color: rgba(255,255,255,0);">. high-low method

<span class="GramE" style="background-color: rgba(255,255,255,0);">d <span style="background-color: rgba(255,255,255,0);">. regression analysis

<span style="background-color: rgba(255,255,255,0);">Answer : a

<span style="background-color: rgba(255,255,255,0);"> 24. Which of the following statements regarding the contribution margin

<span class="GramE" style="background-color: rgba(255,255,255,0);">ratio <span style="background-color: rgba(255,255,255,0);"> is not true?

<span style="background-color: rgba(255,255,255,0);"> a. The contribution margin ratio is equal to the contribution margin

<span class="GramE" style="background-color: rgba(255,255,255,0);">per <span style="background-color: rgba(255,255,255,0);"> unit divided by the selling price.

<span style="background-color: rgba(255,255,255,0);"> b. The contribution margin ratio is the amount of each sales dollar

<span class="GramE" style="background-color: rgba(255,255,255,0);">that <span style="background-color: rgba(255,255,255,0);"> goes toward covering fixed costs and generating a profit.

<span style="background-color: rgba(255,255,255,0);"> c. The contribution margin ratio is equal to variable cost per unit

<span class="GramE" style="background-color: rgba(255,255,255,0);">divided <span style="background-color: rgba(255,255,255,0);"> by fixed cost per unit.

<span style="background-color: rgba(255,255,255,0);"> d. The contribution margin ratio is useful when companies that sell

<span class="GramE" style="background-color: rgba(255,255,255,0);">a <span style="background-color: rgba(255,255,255,0);"> variety of products calculate a break-even point.

<span style="background-color: rgba(255,255,255,0);">Answer:c

<span style="background-color: rgba(255,255,255,0);"> 25. If a company with a contribution margin ratio of 30% is operating

<span class="GramE" style="background-color: rgba(255,255,255,0);">above <span style="background-color: rgba(255,255,255,0);"> its break-even point

<span class="GramE" style="background-color: rgba(255,255,255,0);">a <span style="background-color: rgba(255,255,255,0);">. each additional $1.00 in sales will contribute $0.70 towards

<span class="GramE" style="background-color: rgba(255,255,255,0);">fixed <span style="background-color: rgba(255,255,255,0);"> costs.

<span class="GramE" style="background-color: rgba(255,255,255,0);">b <span style="background-color: rgba(255,255,255,0);">. it is not earning a profit.

<span class="GramE" style="background-color: rgba(255,255,255,0);">c <span style="background-color: rgba(255,255,255,0);">. each additional $1.00 in sales will contribute $0.30 to profit.

<span class="GramE" style="background-color: rgba(255,255,255,0);">d <span style="background-color: rgba(255,255,255,0);">. each additional unit sold will add 30% to total variable costs.

Answer: c <span style="background-color: rgba(255,255,255,0);"> 26. Which of the following is not involved in determining the <span class="GramE" style="background-color: rgba(255,255,255,0);">contribution <span class="GramE" style="background-color: rgba(255,255,255,0);">margin <span style="background-color: rgba(255,255,255,0);">? <span class="GramE" style="background-color: rgba(255,255,255,0);">a <span style="background-color: rgba(255,255,255,0);">. anticipated sales for the next period <span class="GramE" style="background-color: rgba(255,255,255,0);">b <span style="background-color: rgba(255,255,255,0);">. fixed costs <span class="GramE" style="background-color: rgba(255,255,255,0);">c <span style="background-color: rgba(255,255,255,0);">. selling price per unit <span class="GramE" style="background-color: rgba(255,255,255,0);">d <span style="background-color: rgba(255,255,255,0);">. variable cost per unit

<span style="background-color: rgba(255,255,255,0);"> --

Answer: b