ACCT 526 CERTIFICATION EVALUATION SCRIPT Questions
with Correct Answers (Grade A+)
Question 1: An advantage of using regression analysis over the high-low and scattergraph methods is
that
Answer: regression analysis is a more precise approach than the high- low or scattergraph methods
Question 2: An example of a discretionary fixed cost is:
Answer: management training
Question 3: Tucker, Inc collected the following production data for the past month: Units Produced
Total Cost 1,600 1,300 1,500 1,100 $22,000 19,000 22,500 16,500 If the high-low method is used, what is
the monthly total cost equation?
Answer: Total cost = $4,400 + $11/unit
Question 4: Roddy Company has the following cost formulas for overhead: Cost Indirect materials
Maintenance Machine setup Utilities Depreciation Cost Formula $2,000 + $0.40/machine hour $1,500 +
$0.60/machine hour $0.30/machine hour$200 + $0.10/machine hour $800 Based on these cost formulas,
the total overhead cost at 600 machine hours is expected to be:
Answer: $5,340
Question 5: When comparing a traditional income statement to a contribution margin income
statement:
Answer: net income will always be identical on both
Question 6: Kendra Corporation sells 100,000 wrenches for $12 a unit. Fixed costs are $300,000, and
net income is $200,000. What should be reported as variable expenses in the CVP income statement?
Answer: $700,000
Question 7: Snyder Corporation, which produces and sells a single product, recently experienced an
increase in fixed costs relating to depreciation on new equipment. If variable costs and sales price
remain unchanged, what will happen to contribution margin and the break-even point?
Answer: contribution margin will be unchanged and the break-even point will increase
Question 8: The following is last month's contribution format (CVP) income statement: Sales (10,000
units) Less: variable expenses Contribution margin Less: fixed expenses Net income $1,200,000 800,000
400,000 240,000 $160,000 What is the company's break-even sales in units?
Answer: 6,000 units
Page 1
, Question 9: A 45% contribution margin ratio means that:
Answer: 45% of the company's revenue is available to cover fixed costs and to contribute toward operating
income.
Question 10: Suppose Motel 6 has annual fixed costs applicable to its rooms of $1.2 million for its
300-room motel, average daily room rents of $50, and average variable costs of $10 for each room
rented. It operates 365 days per year. How much net income on rooms will be generated if the motel is
completely full throughout the entire year?
Answer: $3,180,000
Question 11: Brant Company manufactures a part for its production cycle. The costs per unit for 5,000
units of this part are as follows: Direct materials $3 Direct labor 5 Variable factory overhead 4 Fixed
factory overhead 2 Total costs $14 The fixed factory overhead costs are unavoidable. Assuming no
other use of their facilities, the highest price that Brant Company should be willing to pay for the part
is
Answer: $12
Question 12: In a decision to retain or replace equipment, the book value of the old equipment is a:
Answer: sunk cost
Question 13: A segment of Duke Inc has the following data: Sales $200,000 Variable expenses $140,000
Fixed expenses $100,000 If this segment is eliminated, what will be the effect on the remaining
company? Assume that 50% of the fixed expenses will be eliminated and the rest will be allocated to the
segments of the remaining company.
Answer: $10,000 decrease
Question 14: Which of the following are risks of outsourcing the production of a part?
A. unscheduled price increases
B. unreliable delivery
C. all of these are risks of outsourcing
D. unpredictable quality
Answer: c. all of these are risks of outsourcing
Question 15: If a plant is operating at full capacity and receives a one-time opportunity to accept an
order at a special price below its usual price, then
Answer: the order will likely be rejected
Page 2
with Correct Answers (Grade A+)
Question 1: An advantage of using regression analysis over the high-low and scattergraph methods is
that
Answer: regression analysis is a more precise approach than the high- low or scattergraph methods
Question 2: An example of a discretionary fixed cost is:
Answer: management training
Question 3: Tucker, Inc collected the following production data for the past month: Units Produced
Total Cost 1,600 1,300 1,500 1,100 $22,000 19,000 22,500 16,500 If the high-low method is used, what is
the monthly total cost equation?
Answer: Total cost = $4,400 + $11/unit
Question 4: Roddy Company has the following cost formulas for overhead: Cost Indirect materials
Maintenance Machine setup Utilities Depreciation Cost Formula $2,000 + $0.40/machine hour $1,500 +
$0.60/machine hour $0.30/machine hour$200 + $0.10/machine hour $800 Based on these cost formulas,
the total overhead cost at 600 machine hours is expected to be:
Answer: $5,340
Question 5: When comparing a traditional income statement to a contribution margin income
statement:
Answer: net income will always be identical on both
Question 6: Kendra Corporation sells 100,000 wrenches for $12 a unit. Fixed costs are $300,000, and
net income is $200,000. What should be reported as variable expenses in the CVP income statement?
Answer: $700,000
Question 7: Snyder Corporation, which produces and sells a single product, recently experienced an
increase in fixed costs relating to depreciation on new equipment. If variable costs and sales price
remain unchanged, what will happen to contribution margin and the break-even point?
Answer: contribution margin will be unchanged and the break-even point will increase
Question 8: The following is last month's contribution format (CVP) income statement: Sales (10,000
units) Less: variable expenses Contribution margin Less: fixed expenses Net income $1,200,000 800,000
400,000 240,000 $160,000 What is the company's break-even sales in units?
Answer: 6,000 units
Page 1
, Question 9: A 45% contribution margin ratio means that:
Answer: 45% of the company's revenue is available to cover fixed costs and to contribute toward operating
income.
Question 10: Suppose Motel 6 has annual fixed costs applicable to its rooms of $1.2 million for its
300-room motel, average daily room rents of $50, and average variable costs of $10 for each room
rented. It operates 365 days per year. How much net income on rooms will be generated if the motel is
completely full throughout the entire year?
Answer: $3,180,000
Question 11: Brant Company manufactures a part for its production cycle. The costs per unit for 5,000
units of this part are as follows: Direct materials $3 Direct labor 5 Variable factory overhead 4 Fixed
factory overhead 2 Total costs $14 The fixed factory overhead costs are unavoidable. Assuming no
other use of their facilities, the highest price that Brant Company should be willing to pay for the part
is
Answer: $12
Question 12: In a decision to retain or replace equipment, the book value of the old equipment is a:
Answer: sunk cost
Question 13: A segment of Duke Inc has the following data: Sales $200,000 Variable expenses $140,000
Fixed expenses $100,000 If this segment is eliminated, what will be the effect on the remaining
company? Assume that 50% of the fixed expenses will be eliminated and the rest will be allocated to the
segments of the remaining company.
Answer: $10,000 decrease
Question 14: Which of the following are risks of outsourcing the production of a part?
A. unscheduled price increases
B. unreliable delivery
C. all of these are risks of outsourcing
D. unpredictable quality
Answer: c. all of these are risks of outsourcing
Question 15: If a plant is operating at full capacity and receives a one-time opportunity to accept an
order at a special price below its usual price, then
Answer: the order will likely be rejected
Page 2
