ACCT 526 Comprehensive Final Exam

Question 1 Correct Mark 3.00 out of 3.00 Overhead costs are assigned to production using an overhead application rate, whereas no such application rate is used to assign the costs of direct materials and direct labor to production. The reason for this difference in procedures is that: Select one: a. overhead is an indirect cost which cannot be traced easily and directly to specific units of product b. independent of both the number and the type of products manufactured and also independent of the amount of overhead costs incurred c. traceable directly to the products manufactured but independent of the amount of overhead costs incurred d. independent of the type and number of units manufactured but a casual factor in the amount of overhead cost incurred Your answer is correct. The correct answer is: overhead is an indirect cost which cannot be traced easily and directly to specific units of product Comprehensive Final Exam Page 2 of 27 Question 2 Correct Mark 3.00 out of 3.00 Question 3 Correct Mark 3.00 out of 3.00 An advantage of using regression analysis over the high-low and scattergraph methods is that Select one: a. neither: regression analysis is less costly to implement than high-low or scattergraph methods or is a more precise approach than the high-low or scattergraph methods b. regression analysis is less costly to implement than high-low or scattergraph methods c. regression analysis is a more precise approach than the high-low or scattergraph methods d. both: regression analysis is less costly to implement than high-low or scattergraph methods and is a more precise approach than the high-low or scattergraph methods Your answer is correct. The correct answer is: regression analysis is a more precise approach than the high-low or scattergraph methods An example of a discretionary fixed cost is: Select one: a. depreciation of buildings and equipment b. insurance c. management training d. taxes on real estate Your answer is correct. The correct answer is: management training Comprehensive Final Exam Page 3 of 27 Question 4 Correct Mark 3.00 out of 3.00 Tucker, Inc collected the following production data for the past month: Units Produced Total Cost 1,600 $22,000 1,300 19,000 1,500 22,500 1,100 16,500 If the high-low method is used, what is the monthly total cost equation? Select one: a. Total cost = $5,500 + $10/unit b. Total cost = $0 + $15/unit c. Total cost = $4,400 + $11/unit d. Total cost = $3,300 + $12/unit Your answer is correct. The correct answer is: Total cost = $4,400 + $11/unit Comprehensive Final Exam Page 4 of 27 Question 5 Correct Mark 3.00 out of 3.00 Roddy Company has the following cost formulas for overhead: Cost Cost Formula Indirect materials $2,000 + $0.40/machine hour Maintenance $1,500 + $0.60/machine hour Machine setup $0.30/machine hour Utilities $200 + $0.10/machine hour Depreciation $800 Based on these cost formulas, the total overhead cost at 600 machine hours is expected to be: Select one: a. $5,200 b. $4,500 c. $5,620 d. $5,340 Your answer is correct. The correct answer is: $5,340 Question 6 Correct Mark 3.00 out of 3.00 When comparing a traditional income statement to a contribution margin income statement: Select one: a. net income will be greater or less depending on the sales volume b. net income will always be identical on both c. net income will always be less on the traditional income statement d. net income will always be greater on the traditional statement Your answer is correct. The correct answer is: net income will always be identical on both Comprehensive Final Exam Page 5 of 27 Question 7 Correct Mark 3.00 out of 3.00 Question 8 Correct Mark 3.00 out of 3.00 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? Select one: a. $900,000 b. $1,000,000 c. $700,000 d. $500,000 Your answer is correct. The correct answer is: $700,000 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? Select one: a. contribution margin will increase and the break-even point will increase b. contribution margin will decrease and the break-even point will increase c. contribution margin will be unchanged and the break-even point will increase d. contribution margin will be unchanged and the break-even point will decrease Your answer is correct. The correct answer is: contribution margin will be unchanged and the break-even point will increase Comprehensive Final Exam Page 6 of 27 Question 9 Correct Mark 3.00 out of 3.00 Question 10 Correct Mark 3.00 out of 3.00 The following is last month's contribution format (CVP) income statement: Sales (10,000 units) $1,200,000 Less: variable expenses 800,000 Contribution margin 400,000 Less: fixed expenses 240,000 Net income $160,000 What is the company's break-even sales in units? Select one: a. 6,000 units b. 8,000 units c. 12,000 units d. 0 units Your answer is correct. The correct answer is: 6,000 units A 45% contribution margin ratio means that: Select one: a. 45% of the company's revenue is available to cover fixed costs and to contribute toward operating income b. 55% of the company's revenue is consumed by fixed and variable costs c. the company's revenue has increase by 45% during the current accounting period d. the company should contribute 45% of its operating income to qualified charities for maximum tax benefits Your answer is correct. The correct answer is: 45% of the company's revenue is available to cover fixed costs and to contribute toward operating income Comprehensive Final Exam Page 7 of 27 Question 11 Correct Mark 3.00 out of 3.00 Question 12 Correct Mark 3.00 out of 3.00 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? Select one: a. $5,475,000 b. $3,180,000 c. $4,275,000 d. $(1,188,000) Your answer is correct. The correct answer is: $3,180,000 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 Select one: a. $14 b. $8 c. $11 d. $12 Your answer is correct. The correct answer is: $12 Comprehensive Final Exam Page 8 of 27 Question 13 Correct Mark 3.00 out of 3.00 In a decision to retain or replace equipment, the book value of the old equipment is a (an): Select one: a. opportunity cost b. incremental cost c. marginal cost d. sunk cost Your answer is correct. The correct answer is: sunk cost Question 14 Correct Mark 3.00 out of 3.00 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. Select one: a. $50,000 increase b. $120,000 increase c. $10,000 decrease d. $10,000 increase Your answer is correct. The correct answer is: $10,000 decrease