Stripes and Stars Manufacturing produces and manufactures two types of products. Product I uses 600 machine hours to produce, and Product II uses 2 machine hours to produce.
What is the total contribution margin at full capacity of each product combined?
Product I
|
Product II
|
Total
| |
Contribution margin per machine hour
|
$145
|
$155
| |
Number of machine hours devoted to product
|
600
|
1,200
|
1,800
|
Total contribution margin at full capacity
|
?
|
?
|
?
|
ANSWER
INCORRECT
·
$2,700
·
$27,300
·
THE CORRECT ANSWER
$273,000
·
YOU WERE SURE AND INCORRECT
$27.30
·
I DON'T KNOW YET
What is the contribution margin at full capacity is $273,000. The other answers are not correct.
Product 1: $145 × 600 = 87,000
Product II: $155 × 1,200 = 186,000
$87,000 + $186,000 = $273,000
Which of the following is a TRUE statement about a special order?
·
A special order occurs when a customer requests continuous orders at an increase in the sales price.
A special order occurs when a customer requests continuous orders at an increase in the sales price.
·
THE CORRECT ANSWER
A special order occurs when a customer requests a one-time order at a reduction in the sales price.
·
YOU WERE SURE AND INCORRECT
A special order occurs when a customer requests continuous orders at a reduction in the sales price.
·
A special order occurs when a customer requests a one-time order but the manager increases the sales price.
·
I DON'T KNOW YET
A special order occurs when a customer requests a one-time order at a reduction in the sales price is a TRUE statement about special orders. The other answers are not correct.
The ________ contain(s) NO allocation of common fixed costs.
· THE CORRECT ANSWER
segment margin income statement
·
unavoidable fixed costs
·
YOU WERE SURE AND INCORRECT
avoidable fixed costs
·
segment margin income
·
I DON'T KNOW YET
The segment margin income statement contains NO allocation of common fixed costs.
Segment margin income refers to the result of operating income or loss for each individual product line.
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
________ costs include costs that may be eliminated as a result of discontinuing the product
· Unavoidable fixed
·
THE CORRECT ANSWER
Avoidable fixed
·
YOU WERE SURE AND INCORRECT
Segment margin income
·
Segment margin income statement
·
I DON'T KNOW YET
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
A segment margin income statement contains NO allocation of common fixed costs on the statement.
Segment margin income refers to the result of operating income or loss for each individual product line.
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Mike’s Auto Service reported information about the cost associated to sell as is or process further. The managerial accountant recorded $150,000 of extra revenue from selling parts.
State whether the managerial accountant should “Process Further” or “Do Not Process” based on the Decision Rule.
Sell As Is
|
Process Further
|
Differences: Additional Revenue/(Costs) from Processing Further
| |
Expected revenue from selling parts @$6
|
$200,000
| ||
Expected revenue from selling parts@$8
|
$250,000
|
$50,000
| |
Additional cost to remanufacture
|
($35,000)
|
$35,000
| |
Total Net Benefit
|
$200,000
|
$215,000
|
$115,000
|
· Do not process further because the sell as is cost is less than the process further cost.
·
Do not process further because the extra revenue from processing further is less than the sell as is cost.
·
YOU WERE UNSURE AND CORRECT
Process further because the extra revenue from processing further is more than extra cost of processing further.
·
YOU WERE UNSURE AND INCORRECT
Do not process further because the extra revenue from processing further is less than extra cost of processing further.
·
I DON'T KNOW YET
Do not process further because the extra revenue from processing further is less than extra cost of processing further.
Martha’s Delivery Service reported total variable cost of $2,000,000. The managerial accountant reported 950,000 total number of units. What is the target variable cost per unit?
Martha’s Delivery Service
Target Variable Cost per Unit
| |
Target total cost
|
$5,000,000
|
Less: Fixed costs
|
$3,000,000
|
Target total variable cost
|
$2,000,000
|
Number of units
|
950,000
|
Target variable cost per unit
|
?
|
· $1.05
·
THE CORRECT ANSWER
$2.11
·
YOU WERE SURE AND INCORRECT
$1.90
·
$2.95
·
I DON'T KNOW YET
The target variable cost per unit is $2.11. The other answers are not correct.
$2,000,000 / 950,000 = $2.11
A segment margin income statement ________.
· THE CORRECT ANSWER
contains NO allocation of common fixed costs on the statement
·
includes fixed costs that continue to be incurred even if the product line is discontinued
·
YOU WERE SURE AND INCORRECT
includes costs that may be eliminated as a result of discontinuing the product
·
refers to the result of operating income or loss for each individual product line
·
I DON'T KNOW YET
A segment margin income statement contains NO allocation of common fixed costs on the statement.
Segment margin income refers to the result of operating income or loss for each individual product line.
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
Sal’s Manufacturing manufactures and sells couches and tables. The following data was reported by the managerial accountant. The company can manufacture two couches per machine hour and one table per machine hour. The company’s production capacity is 800 machine hours per month.
What is the contribution margin per machine hour for the couches?
Couches
|
Tables
| |
Sales price
|
$600
|
$580
|
Variable costs
|
$350
|
$200
|
· $5,000
·
$5
·
YOU WERE SURE AND INCORRECT
$50
·
THE CORRECT ANSWER
$500
·
I DON'T KNOW YET
The contribution margin per machine hour for the couches is $500.
$600 - $350 = $250 contribution margin per couch
Couches per hour = 2 × $250 = $500
A special order should be rejected when ________.
·
excess capacity is available
·
the price of special order is not more than the regular sales price
·
YOU WERE SURE AND INCORRECT
variable nonmanufacturing expenses result from the special order costs
·
THE CORRECT ANSWER
the price of the special order is NOT more than variable costs of the order
·
I DON'T KNOW YET
A special order should be rejected when the price of the special order is NOT more than variable costs of the order. The other answers are not correct.
Which of the following is a TRUE concept about what a manager should consider when a customer requests a one-time special order?
· Whether special prices exceed normal variable costs.
·
THE CORRECT ANSWER
Available capacity
·
YOU WERE SURE AND INCORRECT
Existing fixed costs should not be considered.
·
The standard selling price
·
I DON'T KNOW YET
A manager considers available capacity when a customer requests a one-time special order. Managers should consider the incremental cost of filling the order (which includes both fixed and variable components). They should not consider the regular selling price, but instead whether the special order will affect regular sales in the long run.
________ refers to the result of operating income or loss for each individual product line
·
Avoidable fixed costs
·
THE CORRECT ANSWER
Segment margin income
·
YOU WERE SURE AND INCORRECT
Unavoidable fixed costs
·
Segment margin income statement
·
I DON'T KNOW YET
Segment margin income refers to the result of operating income or loss for each individual product line.
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Segment margin income statement contains NO allocation of common fixed costs.
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
When should a manager accept a special order job?
·
The special order results in a loss of $8,000 of operating income.
·
THE CORRECT ANSWER
The special reduced sales price is high enough to cover the incremental costs of filling the order.
·
YOU WERE SURE AND INCORRECT
The special order provides a negative contribution margin.
·
The special price does NOT exceed the variable costs of filling an order.
·
I DON'T KNOW YET
A manager accepts a special order job when the special reduced sales price is high enough to cover the incremental costs of filling the order. The other answers are not correct.
________ include fixed costs that continue to be incurred even if the product line is discontinued.
·
Segment margin income statements
·
Avoidable fixed costs
·
YOU WERE SURE AND INCORRECT
Segment margin income
·
THE CORRECT ANSWER
Unavoidable fixed costs
·
I DON'T KNOW YET
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Segment margin income statement contains NO allocation of common fixed costs.
Segment margin income refers to the result of operating income or loss for each individual product line.
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
Sam’s Auto Repair reported total cost to produce parts of $50,000. The managerial accountant needs a gross profit of $5,500 to meet monthly expenses.
What is the cost-plus price?
·
$91,000
·
THE CORRECT ANSWER
$55,500
·
YOU WERE SURE AND INCORRECT
$275,000
·
$44,500
·
I DON'T KNOW YET
The cost-plus price is $55,500. The other answer choices are not correct.
$50,000 + $5,500 = $55,500
Tina’s Manufacturing Company reported total variable cost of $1,000,000. The managerial accountant reported 50,000 total number of units. What is the target variable cost per unit?
Martha’s Delivery Service
Target Variable Cost per Unit
| |
Target total cost
|
$4,000,000
|
Less: Fixed costs
|
$3,000,000
|
Target total variable cost
|
$1,000,000
|
Number of units
|
50,000
|
Target variable cost per unit
|
?
|
·
THE CORRECT ANSWER
$20
·
$60
·
YOU WERE SURE AND INCORRECT
$80
·
$50
·
I DON'T KNOW YET
The target variable cost per unit is $20. The other answers are not correct.
$1,000,000 / 50,000 = $20
Sandy’s Manufacturing Service reported fixed manufacturing overhead of $3,800,000, and 3,900,000 total units. The variable manufacturing costs were $1.50 per unit.
What is the cost per unit using absorption costing?
·
$1.57
·
$.35
·
YOU WERE SURE AND INCORRECT
$1.75
·
THE CORRECT ANSWER
$.53
·
I DON'T KNOW YET
The cost per unit using absorption costing is $.53. The other answers are not correct.
$3,800,000 / 3,900,000 units = $.97
$1.50 - $.97 = $.53
Avoidable fixed costs ________.
· THE CORRECT ANSWER
include costs that may be eliminated as a result of discontinuing the product
·
contain NO allocation of common fixed costs on the statement
·
YOU WERE SURE AND INCORRECT
refers to the result of operating income or loss for each individual product line
·
include fixed costs that continue to be incurred even if the product line is discontinued
·
I DON'T KNOW YET
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
A segment margin income statement contains NO allocation of common fixed costs on the statement.
Segment margin income refers to the result of operating income or loss for each individual product line.
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Stripes and Stars Manufacturing produces and manufactures sweat shirts and socks. Based on the information listed below, what is the contribution margin ratio for sweat shirts and socks?
Sweat Shirts
|
Socks
| |
Sales price
|
$20
|
$18
|
Less: Variable expenses
|
($12)
|
($6)
|
Contribution margin
|
$8
|
$12
|
Contribution margin ratio:
| ||
Sweat shirts:
|
?
| |
Socks:
|
?
|
·
THE CORRECT ANSWER
40%; 67%
·
40%; 6.7%
·
YOU WERE SURE AND INCORRECT
60%; 40%
·
4%; 60%
·
I DON'T KNOW YET
The contribution margin ratio for sweat shirts and socks is 40%; 67%. The other answers are not correct.
Sweat shirts: $8 / $20 = 40%
Socks: $12 / $18 = 67%
Each of the following includes correct concepts a manager should consider when implementing a special order EXCEPT ________.
·
THE CORRECT ANSWER
existing fixed costs
·
reduced sales price can cover incremental costs of filling order
·
extra fixed costs
·
YOU WERE SURE AND INCORRECT
available capacity
·
I DON'T KNOW YET
Existing fixed costs is NOT a concept a manager should consider when implementing a special order, because of the excess capacity, the existing fixed costs would occur with or without the special order. The other answers are things that should be considered when implementing a special order.
Marla’s Antique Shoppe reported total cost to produce authentic antiques of $10,500,000. The managerial accountant needs a gross profit of $50,000 to meet monthly expenses.
What is the cost-plus price?
·
THE CORRECT ANSWER
$10,550,000
·
YOU WERE SURE AND INCORRECT
$210,000,000
·
$525,000,000,000
·
$10,450,000
·
I DON'T KNOW YET
The cost-plus price is $10,550,000. The other answer choices are not correct.
$10,500,000 + $50,000 = $10,550,000
Sandy’s Sewing Service has 500 damaged silk remnants that cost $25,000. The damaged silk remnants could be sold as is for $10,000, or repaired for $15,000 and then sold for $55,000.
Compute the opportunity cost of selling the damaged silk remnants without the repairs.
·
$25,000
·
YOU WERE SURE AND INCORRECT
$55,000
·
THE CORRECT ANSWER
$40,000
·
$15,000
·
I DON'T KNOW YET
The opportunity cost of selling the damaged silk remnants without the repairs is $40,000. The other answers are not correct.
Sale price after repair costs = $55,000 - $15,000 = $40,00
Offshoring ________.
·
refers to contracting an outside company to reduce a product or perform a service
·
refers to manufacturers who only make products for other companies instead of for themselves.
·
YOU WERE SURE AND INCORRECT
is the benefit foregone by choosing a particular course of action
·
THE CORRECT ANSWER
refers to a company having work performed overseas
·
I DON'T KNOW YET
Offshoring refers to a company having work performed overseas.
Outsourcing refers to contracting an outside company to reduce a product or perform a service.
Opportunity cost is the benefit foregone by choosing a particular course of action.
Contract manufacturers are manufacturers who only make products for other companies instead of for themselves.
Josh’s Manufacturing Company reported fixed manufacturing overhead of $2,500,000, and 2,600,000 total units. The variable manufacturing costs were $1.50 per unit.
What is the cost per unit using absorption costing?
·
$.45
·
THE CORRECT ANSWER
$.54
·
YOU WERE SURE AND INCORRECT
$.90
·
$.09
·
I DON'T KNOW YET
The cost per unit using absorption costing is $.54. The other answers are not correct.
$2,500,000 / 2,600,000 units = .96
$1.50 - .96 = $.54
Which of the following is TRUE about a relevant costs and information?
·
THE CORRECT ANSWER
A manager focuses only on relevant costs and benefits, which include costs that differ amongst alternatives and impact the future.
·
YOU WERE SURE AND INCORRECT
A manager who uses relevant information understands costs NEVER differ amongst the alternatives.
·
Relevant information includes only numerical data instead of nonfinancial information.
·
A relevant cost includes costs incurred in the past, which cannot be used in the future.
·
I DON'T KNOW YET
A manager focuses only on relevant costs and benefits, which include costs that differ amongst alternatives and impact the future is a TRUE statement about relevant information. The other answer choices are not correct.
Which of the following is NOT relevant in the thought process to make a “Sell as Is” or “Process Further” decision?
·
THE CORRECT ANSWER
Identifying all costs except the cost of extra revenue from processing further
·
YOU WERE SURE AND INCORRECT
Identifying the revenue generated if “Process Further” is considered
·
Identifying the “Sold as Is” cost if revenue is involved
·
Identifying the costs of “Further Processing” a product
·
I DON'T KNOW YET
Identifying all costs except the cost of extra revenue from processing further is NOT relevant in the thought process to make a “Sell as Is” or “Process Further” decision. The other choices ARE relevant.
________ costs include costs that may be eliminated as a result of discontinuing the product
·
Unavoidable fixed
·
THE CORRECT ANSWER
Avoidable fixed
·
Segment margin income statement
·
YOU WERE SURE AND INCORRECT
Segment margin income
·
I DON'T KNOW YET
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
A segment margin income statement contains NO allocation of common fixed costs on the statement.
Segment margin income refers to the result of operating income or loss for each individual product line.
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
·
includes only numerical data instead of nonfinancial information
·
THE CORRECT ANSWER
is expected future data and differs amongst the alternatives
·
YOU WERE SURE AND INCORRECT
includes past incurred costs which cannot be used in the future
·
includes only nonfinancial information rather than financial data
·
I DON'T KNOW YET
Relevant information is expected future data and differs amongst the alternatives. The other answers are incorrect.
A special order ________.
·
occurs when a customer request a one-time order but the manager increases the sales price
·
YOU WERE SURE AND INCORRECT
occurs when a customer requests continuous orders at an increase in the sales price
·
THE CORRECT ANSWER
occurs when a customer requests a one-time order at a reduction in the sales price
·
occurs when a customer requests continuous orders at a reduction in the sales price
·
I DON'T KNOW YET
A special order occurs when a customer requests a one-time order at a reduction in the sales price. The other answers are not correct.
________ include fixed costs that continue to be incurred even if the product line is discontinued.
·
YOU WERE SURE AND INCORRECT
Segment margin income
·
THE CORRECT ANSWER
Unavoidable fixed costs
·
Segment margin income statements
·
Avoidable fixed costs
·
I DON'T KNOW YET
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Segment margin income statement contains NO allocation of common fixed costs.
Segment margin income refers to the result of operating income or loss for each individual product line.
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
Segment margin income ________.
·
contains NO allocation of common fixed costs
·
YOU WERE SURE AND INCORRECT
includes fixed costs that continue to be incurred even if the product line is discontinued
·
includes costs that may be eliminated as a result of discontinuing the product
·
THE CORRECT ANSWER
refers to the result of operating income or loss for each individual product line
·
I DON'T KNOW YET
Segment margin income refers to the result of operating income or loss for each individual product line.
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Segment margin income statement contains NO allocation of common fixed costs.
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
Cindy’s Manufacturing Services produces and manufactures two types of products. Product I uses 800 machine hours to produce, and Product II uses 2 machine hours to produce.
What is the total contribution margin at full capacity of the combined products?
Product I
|
Product II
|
Total
| |
Contribution margin per machine hour
|
$165
|
$155
| |
Number of machine hours devoted to product
|
500
|
1,400
|
?
|
Total contribution margin at full capacity
|
?
|
?
|
?
|
·
THE CORRECT ANSWER
$299,500
·
YOU WERE SURE AND INCORRECT
$29.95
·
$299
·
$299,050
·
I DON'T KNOW YET
What is the contribution margin at full capacity is $299,500. The other answers are not correct.
Product 1: $165 × 500 = $82,500
Product II: $155 × 1,400 = $217,000
$87,000 + $186,000 = $299,500
Sandspring Resorts manufactures pool supplies. Ladders and diving boards are produced locally and sold online. Based on the information listed below, what is the contribution margin ratio for ladders and diving boards?
Ladders
|
Diving Boards
| |
Sales price
|
$1500
|
$100
|
Less: Variable expenses
|
($100)
|
($60)
|
Contribution margin
|
$500
|
$40
|
Contribution margin ratio:
| ||
Ladders:
|
$?
| |
Diving Boards:
|
?
|
·
THE CORRECT ANSWER
33.33%; 40%
·
30%; 45%
·
YOU WERE SURE AND INCORRECT
350%; 450%
·
333%; 400%
·
I DON'T KNOW YET
The contribution margin ratio for ladders and diving boards is 33.33%; 40%.
Ladders: $500 / $1,500 = 33.33%
Diving boards: $40 / $100 = 40%
Which of the following choices represents the computation of contribution margin per unit of a constraint?
·
YOU WERE UNSURE AND CORRECT
Contribution margin per unit × Units per constraint
·
Contribution margin per unit ÷ Unit per constraint
·
YOU WERE UNSURE AND INCORRECT
Contribution margin per unit × Constraint per unit
·
Contribution margin per unit + Constraint per unit
·
I DON'T KNOW YET
Contribution margin per unit × Units per constraint represents the computation of margin per unit of a constraint. The other answers are not correct.
Segment margin income ________.
·
THE CORRECT ANSWER
refers to the result of operating income or loss for each individual product line
·
YOU WERE SURE AND INCORRECT
contains NO allocation of common fixed costs
·
includes costs that may be eliminated as a result of discontinuing the product
·
includes fixed costs that continue to be incurred even if the product line is discontinued
·
I DON'T KNOW YET
Segment margin income refers to the result of operating income or loss for each individual product line.
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Segment margin income statement contains NO allocation of common fixed costs.
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
Which of the following is TRUE about constraints?
·
A manager may assemble the product using the least contribution margin per unit as a constraint to increase organizational profits.
·
YOU WERE SURE AND INCORRECT
A constraint is referred to as an expected future cost which may differ amongst the alternatives.
·
THE CORRECT ANSWER
A constraint limits assembly or sale of a product.
·
A constraint is referred to as the distribution of product sales.
·
I DON'T KNOW YET
A constraint limits assembly or sale of a product is a TRUE statement about a constraint. The other answers are not correct.
Segment margin income ________.
·
includes costs that may be eliminated as a result of discontinuing the product
·
THE CORRECT ANSWER
refers to the result of operating income or loss for each individual product line
·
YOU WERE SURE AND INCORRECT
contains NO allocation of common fixed costs
·
includes fixed costs that continue to be incurred even if the product line is discontinued
·
I DON'T KNOW YET
Segment margin income refers to the result of operating income or loss for each individual product line.
Unavoidable fixed costs include fixed costs that continue to be incurred even if the product line is discontinued.
Segment margin income statement contains NO allocation of common fixed costs.
Avoidable fixed costs include costs that may be eliminated as a result of discontinuing the product.
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