BA 215 Final Exam test with correct
answers
Based on the income statements shown below, which division has the cost structure
with the highest operating leverage? - CORRECT ANSWERS-Bottled Water.
Explanation: Contribution margin / Net income = Magnitude of Operating Leverage
Soft Drink: $40,000 / $10,000 = 4
Bottled Water: $45,000 / $5,000 = 9
Fruit Juice = $20,000 / $10,000 = 2
Bates Company plans to add a new item to its line of consumer product offerings. Two
possible products are under consideration. Each unit of Product A costs $6 to produce
and has a contribution margin of $3, while each unit of Product B costs $12 and has a
contribution margin of $4. What is the differential revenue for this decision? - CORRECT
ANSWERS-$7
Explanation:
Companies A and B are in the same industry and are identical except for cost structure.
At a volume of 50,000 units, the companies have equal net incomes. When sales at
both companies increase to 60,000 units, Company A's net income would be
substantially higher than B's. Based on this information, - CORRECT ANSWERS-
Company A's cost structure has higher fixed costs than B's
Cool Runnings operates a chain of frozen yogurt shops. The company pays $5,000 of
rent expense per month for each shop. The managers of each shop are paid a salary of
$3,000 per month and all other employees are paid on an hourly basis. Relative to the
total number of shops, the cost of rent is what kind of cost? - CORRECT ANSWERS-
Variable cost
During its first year of operations, Connor Company paid $33,160 for direct materials
and $18,600 in wages for production workers. Lease payments and utilities on the
production facilities amounted to $7,600. General, selling, and administrative expenses
were $8,600. The company produced 5,600 units and sold 4,600 units for $15.60 a unit.
, The average cost to produce one unit is which of the following amounts? - CORRECT
ANSWERS-$10.60
Explanation: Direct Materials ($33,160) + Wages for Production Workers ($18,600) +
Lease and Utilities ($7,600) / Produced Units (5,600) = $10.60
During its first year of operations, Forrest Company paid $34,840 for direct materials
and $50,200 in wages for production workers. Lease payments, utility costs, and
depreciation on factory equipment totaled $14,800. General, selling, and administrative
expenses were $20,200. The average cost to produce one unit was $5.20. How many
units were produced during the period? - CORRECT ANSWERS-$19,200
Explanation: Direct Materials ($34,840) + Wages for Production Workers ($50,200) +
Lease and Utilities ($14,800) / Multiple Choice Answers = Average Cost to Produce One
Unit ($5.20)
During its first year of operations, Silverman Company paid $10,000 for direct materials
and $11,500 for production workers' wages. Lease payments and utilities on the
production facilities amounted to $10,500 while general, selling, and administrative
expenses totaled $3,000. The company produced 8,000 units and sold 5,000 units at a
price of $6.50 a unit.
What is the amount of gross margin for the first year? - CORRECT ANSWERS-$12,500
Explanation: Direct Materials ($10,000) + Wages for Production Workers ($11,500) +
Lease and Utilities ($10,500) / Produced Units (8,000) = Average Cost Per Unit ($4) X
Units Sold (5,000) = Cost of Goods Sold ($20,000)
Selling Price ($6.50) X Units Sold (5,000) = Revenue ($32,500)
Revenue ($32,500) - CoGS ($20,000) = Gross Margin ($12,500)
During its first year of operations, Silverman Company paid $12,385 for direct materials
and $10,600 for production workers' wages. Lease payments and utilities on the
production facilities amounted to $9,600 while general, selling, and administrative
expenses totaled $3,900. The company produced 6,650 units and sold 4,100 units at a
price of $7.40 a unit.
What is the amount of finished goods inventory on the balance sheet at year-end? -
CORRECT ANSWERS-Explanation: Direct Materials ($12,385) + Wages for Production
Workers ($10,600) + Lease and Utilities ($9,600) / Produced Units (6,650) = Average
Cost Per Unit ($4.90)
Cost Per Unit ($4.90) X Units Produced (6,650) = $32,585
Cost Per Unit ($4.90) X Units Sold (4,100) = $20,090
answers
Based on the income statements shown below, which division has the cost structure
with the highest operating leverage? - CORRECT ANSWERS-Bottled Water.
Explanation: Contribution margin / Net income = Magnitude of Operating Leverage
Soft Drink: $40,000 / $10,000 = 4
Bottled Water: $45,000 / $5,000 = 9
Fruit Juice = $20,000 / $10,000 = 2
Bates Company plans to add a new item to its line of consumer product offerings. Two
possible products are under consideration. Each unit of Product A costs $6 to produce
and has a contribution margin of $3, while each unit of Product B costs $12 and has a
contribution margin of $4. What is the differential revenue for this decision? - CORRECT
ANSWERS-$7
Explanation:
Companies A and B are in the same industry and are identical except for cost structure.
At a volume of 50,000 units, the companies have equal net incomes. When sales at
both companies increase to 60,000 units, Company A's net income would be
substantially higher than B's. Based on this information, - CORRECT ANSWERS-
Company A's cost structure has higher fixed costs than B's
Cool Runnings operates a chain of frozen yogurt shops. The company pays $5,000 of
rent expense per month for each shop. The managers of each shop are paid a salary of
$3,000 per month and all other employees are paid on an hourly basis. Relative to the
total number of shops, the cost of rent is what kind of cost? - CORRECT ANSWERS-
Variable cost
During its first year of operations, Connor Company paid $33,160 for direct materials
and $18,600 in wages for production workers. Lease payments and utilities on the
production facilities amounted to $7,600. General, selling, and administrative expenses
were $8,600. The company produced 5,600 units and sold 4,600 units for $15.60 a unit.
, The average cost to produce one unit is which of the following amounts? - CORRECT
ANSWERS-$10.60
Explanation: Direct Materials ($33,160) + Wages for Production Workers ($18,600) +
Lease and Utilities ($7,600) / Produced Units (5,600) = $10.60
During its first year of operations, Forrest Company paid $34,840 for direct materials
and $50,200 in wages for production workers. Lease payments, utility costs, and
depreciation on factory equipment totaled $14,800. General, selling, and administrative
expenses were $20,200. The average cost to produce one unit was $5.20. How many
units were produced during the period? - CORRECT ANSWERS-$19,200
Explanation: Direct Materials ($34,840) + Wages for Production Workers ($50,200) +
Lease and Utilities ($14,800) / Multiple Choice Answers = Average Cost to Produce One
Unit ($5.20)
During its first year of operations, Silverman Company paid $10,000 for direct materials
and $11,500 for production workers' wages. Lease payments and utilities on the
production facilities amounted to $10,500 while general, selling, and administrative
expenses totaled $3,000. The company produced 8,000 units and sold 5,000 units at a
price of $6.50 a unit.
What is the amount of gross margin for the first year? - CORRECT ANSWERS-$12,500
Explanation: Direct Materials ($10,000) + Wages for Production Workers ($11,500) +
Lease and Utilities ($10,500) / Produced Units (8,000) = Average Cost Per Unit ($4) X
Units Sold (5,000) = Cost of Goods Sold ($20,000)
Selling Price ($6.50) X Units Sold (5,000) = Revenue ($32,500)
Revenue ($32,500) - CoGS ($20,000) = Gross Margin ($12,500)
During its first year of operations, Silverman Company paid $12,385 for direct materials
and $10,600 for production workers' wages. Lease payments and utilities on the
production facilities amounted to $9,600 while general, selling, and administrative
expenses totaled $3,900. The company produced 6,650 units and sold 4,100 units at a
price of $7.40 a unit.
What is the amount of finished goods inventory on the balance sheet at year-end? -
CORRECT ANSWERS-Explanation: Direct Materials ($12,385) + Wages for Production
Workers ($10,600) + Lease and Utilities ($9,600) / Produced Units (6,650) = Average
Cost Per Unit ($4.90)
Cost Per Unit ($4.90) X Units Produced (6,650) = $32,585
Cost Per Unit ($4.90) X Units Sold (4,100) = $20,090
