ACCT 526 COMPREHENSIVE STUDY GUIDE
COMPLETE QUESTIONS AND CORRECT
ANSWERS
●● 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
●● An example of a discretionary fixed cost is:
Answer: management training
●● 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
●● 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
●● When comparing a traditional income statement to a contribution
margin income statement:
Answer: net income will always be identical on both
●● 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
●● 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
, ●● 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
●● 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.
●● 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
●● 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
COMPLETE QUESTIONS AND CORRECT
ANSWERS
●● 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
●● An example of a discretionary fixed cost is:
Answer: management training
●● 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
●● 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
●● When comparing a traditional income statement to a contribution
margin income statement:
Answer: net income will always be identical on both
●● 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
●● 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
, ●● 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
●● 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.
●● 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
●● 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
