ACC3000 Topic 11 Mastery Assessments PDF

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Topic 11 MyEducator Mastery Assessments for Fall 2019 ACC-3000 with Max Cannon....

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1 ACC-3000 Topic 11 Mastery Assessments Table of Contents Topic 11 -- Mastery Assessment A

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Topic 11 -- Mastery Assessment B

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Topic 11 -- Mastery Assessment C

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Topic 11 -- Mastery Assessment A 1. Which ONE of the following is a VARIABLE cost? a. Depreciation on corporate headquarters building b. Salary paid to production supervisor c. Depreciation on factory machinery d. Salary paid to company executive vice president 2. Which ONE of the following statements describes a FIXED COST? a. Constant per unit over the relevant range b. Increasing in total over the relevant range c. Constant in total over the relevant range d. Decreasing in total over the relevant range 3. Within the relevant range, per-unit variable cost: a. Increases as activity level increases b. Remains constant as activity level increases c. Decreases as activity level decreases d. Decreases as activity level increases 4. In a graph used for breakeven analysis, what is represented by the SLOPE of the TOTAL COST LINE? a. Price per unit b. Fixed cost per unit c. Variable cost per unit d. Total fixed cost e. Total revenue 5. Hayley Company reported the following data. Price per unit = $10 Variable cost per unit = $7 Fixed cost = $1,500 Given these data, compute the BREAKEVEN number of UNITS. a. 150 units b. 214 units c. 88 units d. 612 units

3 e. 500 units $0 = (Sales Price * Units) - (Variable Cost per Unit * Units) - Fixed Costs Let x = Units: 0 = 10x - 7x - 1500 1500 = 10x - 7x 1500 = 3x 500 = x 6. Collins Company had the following cost data available. The Collins accountant believes that direct labor hours is the correct cost driver to use to predict and manage these costs. $100,000; 15,000 direct labor hours for January $80,000; 12,000 direct labor hours for February $90,000; 14,000 direct labor hours for March $75,000; 11,000 direct labor hours for April $85,000; 12,500 direct labor hours for May $70,000; 10,000 direct labor hours for June Use the high-low method to compute the total amount of monthly fixed costs for Collins Company. a. $15,000 b. $10,000 High Point: $100,000; 15,000 direct labor hours for January Low Point: $70,000; 10,000 direct labor hours for June. Variable Cost Rate = Change in Costs / Change in Direct Labor Hours = ($100,000 - $70,000) / (15,000 hr. - 10,000 hr.) = $30,000 / 5,000 hr. = $6.00 per hour Determine fixed costs based on variable cost rate (using highest or lowest point will yield the same answer). Fixed Costs = Total Costs - Variable Costs Highest Point: FC = $100,000 - ($6.00 per hr. * 15,000 hr.) = $10,000 Lowest Point: FC = $70,000 - ($6.00 per hr. * 10,000 hr.) = $10,000 c. $90,000 d. $30,000 e. $0

4 f.

$60,000

7. Yvonne Company reported the following data. Price per unit = $20 Fixed cost = $6,000 Variable cost per unit = $11 How many units must Yvonne Company sell in order to reach a TARGET PROFIT OF $30,000? a. 3,000 units b. 6,000 units c. 7,000 units d. 4,000 units Profit = (Sales Price * Units) - (Variable Cost per Unit * Units) - Fixed Costs $30,000 = ($20 * Units) - ($11 * Units) - $6,000 Let x = Units: 30,000 = 20x - 11x - 6,000 36,000 = 9x 4,000 = x e. 5,000 units 8. The following data are for Julian Mark Company. Selling price per unit

$5.00

Variable cost per unit

$2.00

Number of units sold

50,000 units

Net income

$40,000

Calculate the breakeven point in number of units. a. 39,286 units b. 28,000 units c. $36,667 units Profit = (Sales Price * Units) - (Variable Cost per Unit * Units) - Fixed Costs First, find Fixed Costs: $40,000 = ($5 * 50,000 units) - (2 * 50,000 units) - Fixed Costs $40,000 = $250,000 - $100,000 - Fixed Costs $40,000 = $150,000 - Fixed Costs $40,000 + Fixed Costs = $150,000 Fixed Costs = $110,000

5 Second, calculate the breakeven point in number of units. Let x = Units 0 = 5x - 2x - 110,000 110,000 = 3x x ~= 36,667 units d. 45,455 units e. 35,714 units 9. The following data are for Jay Robert Company. Breakeven sales revenue

$250,000

Selling price per unit

$10

Contribution margin ratio

75%

Calculate the number of units that must be sold to generate net income of $50,000. a. 18,333 units b. 40,000 units c. 31,667 units Sales Revenue (100%) = Contribution Margin + Variable Cost => Variable Costs = 25% Variable Cost per Unit = $10 * 0.25 = $7.50 Net Income = Contribution Margin - Fixed Costs Find Fixed Costs (FC): Contribution Margin = $250,000 * 0.75 = $187,500 For breakeven: 0 = $187,500 - Fixed Costs => Fixed Costs = $187,500 Find units to generate a net income of $50,000: Profit = (Sale Price * Units) - (Variable Cost per Unit * Unit) * FC Let x = Units: 50,000 = 10x -7.5x - 187,500 237,500 = 2.5x x = 31,667 units d. 95,000 units e. 120,000 units 10. The following data are for Kylie Ramona Company. Contribution margin ratio

15%

6 Fixed costs

$100,000

Calculate the breakeven sales revenue. a. $623,459 b. $578,647 c. $666,667 Sales Revenue (100%) = Contribution Margin Ratio + Variable Costs => Variable Costs = 85% Breakeven point: $0 = Sales - Variable Costs - Fixed Costs $0 = x - 0.85x - $100,000 $100,000 = 0.15x x = $666,667 d. $150,000 e. $415,000 Topic 11 -- Mastery Assessment B 1. Which ONE of the following questions is related to BREAKEVEN ANALYSIS? a. How large is the manufacturing overhead cost compared to the sum of the direct materials and direct labor costs? b. How much will net income be if sales next year decrease by 20%? c. Was the actual cost higher or lower than the budgeted cost? d. When do product costs appear as an expense on the income statement? Note: Breakeven analysis [or cost-volume-profit (C-V-P) analysis] allows managers to determine what level of activity is necessary to break even, how much profit or loss will be earned (lost) at each level of activity, and why a certain level of profit or loss is being experienced. 2. The two components of a mixed cost are a. Variable costs and fixed costs b. Fixed costs and overhead costs c. Variable costs and opportunity costs d. Relevant costs and fixed costs e. Variable costs and relevant costs 3. Within the relevant range, the fixed cost per unit

7 a. Remains constant as activity level increases b. Increases as activity level increases c. Decreases as activity level increases d. Decreases as activity level decreases 4. In a graph used for breakeven analysis, what is represented by the VERTICAL INTERCEPT of the TOTAL COST LINE? a. Variable cost per unit b. Fixed cost per unit c. Price per unit d. Total revenue e. Total fixed cost 5. Ramona Company reported the following data. Price per unit = $10 Variable cost per unit = $7 Fixed cost = $1,500 Number of units sold = 700 units Given these data, compute NET INCOME. a. $800 b. $600 Net Income = Sales Revenue - Variable Costs - Fixed Costs Net Income = ($10 * 700 units) - ($7 * 700 units) - $1,500 = $7,000 - $4,900 - $1,500 = $600 c. $3,400 d. $5,500 e. $1,200 6. Tilly Company had the following cost and volume data for the first four months of the year. January: Cost of $52,500; volume of 9,000 units February: Cost of $40,000; volume of 6,500 units March: Cost of $70,000; volume of 14,000 units April: Cost of $60,000; volume of 11,000 units Using the scattergraph method, which ONE of the following is the BEST estimate of the variable cost per unit?

8 a. $35.00 per unit b. $4.00 per unit Draw the graph:

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Visual inspection suggests that the slope of the line is about $4.00 per unit. This can be confirmed with the high-low method. 1. Identify the highest and lowest activity levels ●

Highest = 14,000 units in March; Cost = $70,000

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Lowest = 6,500 units in February; Cost = $40,000

2. Determine the differences between the high and low points ●

Difference/Change in Units = 14,000 – 6,500 = 7,500

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Difference/Change in Cost = $70,000 – $40,000 = $30,000

3. Calculate the variable cost rate = Change in costs / Change in units ● ●

$4.00 per unit = $30,000 / 7,500 units

The EXACT correspondence between the casual visual inspection and the high-low method in this case is just a coincidence.

c. $15.00 per unit d. $25.00 per unit

9 e. $10.00 per unit f.

$8.00 per unit

7. Jeff Co. sells its giant cheese wheels for $36 per wheel. The contribution margin ratio is 75% and total fixed costs are $270,000. How many wheels must Jeff sell in order to generate a profit of $54,000? a. 36,000 wheels b. 43,200 wheels c. 9,000 wheels d. 11,500 wheels e. 12,000 wheels Sales Revenue = Contribution Margin + Variable Costs 100% = 75% + 25% => Variable Costs = 25% Find Variable Costs per Unit: Sales Revenue per Unit = $36 $36 * 0.25 = $9

Profit = Sales Revenue - Variable Costs - Fixed Costs $54,000 = ($36 * Units) - ($9 * Units) - $270,000 Let x = Units 54000 = 36x - 9x - 270000 324,000 = 27x 12,000 = x

f.

2,000 wheels

8. The following data are for Julian Mark Company. Total sales revenue

$250,000

Number of units sold

50,000 units

Fixed costs

$100,000

Net income

$40,000

Calculate the breakeven point in number of units. a. 35,714 units Profit = Sales Revenue - Variable Costs - Fixed Costs

10 Find Variable Costs: $40,000 = $250,000 - Variable Costs - $100,000 $40,000 = $150,000 - Variable Costs ($110,000) = Variable Costs Variable Cost per Unit = $110,000 / 50,000 units = $2.20 per unit Find breakeven point in number of units: Sales Price per Unit = $250,000 / 50,000 units = $5 per unit $0 = ($5 * Units) - ($2.20 * Units) - $100,000 Let x = Units 0 = 5x - 2.2x - 100,000 100,000 = 2.8x x = 35,714 units b. 24,678 units c. 45,455 units d. 39,286 units e. 28,000 units 9. The following data are for Lily Kay Company. Total sales revenue

$250,000

Number of units sold

50,000 units

Contribution margin per unit

$3.50

Fixed costs

$100,000

Calculate the number of units that must be sold to generate net income of $80,000. a. 51,429 units Sales Revenue = Contribution Margin + Variable Costs Sales Revenue per Unit = $250,000 / 50,000 units = $5 per unit $5 per unit = $3.50 per unit + Variable Costs $1.50 per unit = Variable Costs Profit = Sales Revenue - Variable Costs - Fixed Costs $80,000 = ($5 * Units) - ($1.50 * Units) - $100,000 Let x = Units 80,000 = 5x - 1.5x - 100,000 180,000 = 3.5x x = 51,429 units

11 b. 120,000 units c. 13,333 units d. 5,714 units e. 22,857 units 10. The following data are for Bernie Marie Company. Variable cost ratio

35%

Number of units sold

20,000

Net income

$50,000

Fixed cost

$80,000

Calculate the breakeven number of sales units. a. 17,824 units b. 16,578 units c. 12,308 units Profit = Sales Revenue - Variable Costs - Fixed Costs Find Sales Revenue: Sales Revenue = Contribution Margin + Variable Costs If Variable Cost Ratio = 35%, then: 100% = 65% + 35% $50,000 = Sales Revenue - (Sales Revenue * .35) - 80,000 Let x = Sales Revenue 50,000 = x - 0.35x - 80,000 130,000 = 0.65x $200,000 = Sales Revenue Sales Revenue per Unit = $200,000 / 20,000 units = $10 Variable Cost per Unit = $10 * 0.35 = $3.5 Find the breakeven number of sales units $0 = ($10 * Units) - ($3.5 * Units) - $80,000 Let x = Units 0 = 10x - 3.5x - 80,000 80,000 = 6.5x x = 12,308 units d. 20,000 units e. 10,000 units

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Topic 11 -- Mastery Assessment C 1. Which ONE of the following is most likely to be a variable cost? a. Supervisor salary b. Insurance c. Rent d. Direct labor 2. Which ONE of the following statements describes a VARIABLE COST? a. Constant in total over the relevant range b. Increasing per unit over the relevant range c. Constant per unit over the relevant range d. Decreasing in total over the relevant range e. Decreasing per unit over the relevant range 3. Costs that contain both fixed and variable components are a. Mixed costs b. Relevant range costs c. Variable costs d. Fixed costs 4. The purpose of the high-low method is to a. Separate a relevant cost into its direct and indirect components b. Separate a product cost into its materials and overhead components c. Separate an overhead cost into its product and period components d. Separate a mixed cost into its fixed and variable components 5. Brendon Company reported the following data. Price per unit = $20 Fixed cost = $6,000 Breakeven number of units = 1,000 units Given these data, compute the VARIABLE COST PER UNIT. a. $12 per unit b. $18 per unit c. $14 per unit Profit = Sales Revenue - Variable Cost - Fixed Cost Find Variable Cost per Unit:

13 $0 = ($20 * 1,000 units) - (Variable Cost per Unit * 1,000 units) - $6,000 Let x = Variable Cost per Unit $0 = $20,000 - 1000x - $6,000 $0 = $14,000 - 1000x - $14,000 = - 1000x x = $14 per unit d. $10 per unit e. $16 per unit 6. Collins Company had the following cost data available. The Collins accountant believes that direct labor hours is the correct cost driver to use to predict and manage these costs. $50,000; 15,000 direct labor hours for January $40,000; 12,000 direct labor hours for February $35,000; 10,000 direct labor hours for March $38,000; 11,000 direct labor hours for April $45,000; 12,500 direct labor hours for May $45,000; 14,000 direct labor hours for June Use the high-low method to compute the total amount of monthly fixed costs for Collins Company. a. $8,000 b. $15,000 c. $5,000 Highest Point: $50,000; 15,000 direct labor hours for January Lowest Point: $35,000; 10,000 direct labor hours for March Variable Cost per Hour = ($50,000 - $35,000) ÷ (15,000 hr. - 10,000 hr.) = $15,000 ÷ 5,000 hr = $3 per direct labor hour Use either the high or low point to calculate the fixed cost: Fixed Cost = Total Costs - Variable Costs = $50,000 - (15,000 hr. * $3) = $50,000 - $45,000 = $5,000 d. $30,000 e. $0

14 f.

$45,000

7. New Braunfel’s Flood Insurance Agency had total sales last year of $500,000, total variable costs of $200,000, and total fixed costs of $125,000. Accordingly, New Braunfel’s net income for last year was $175,000 ($500,000 - $200,000 - $125,000). What is New Braunfel’s break-even point in total sales dollars? a. $125,000 b. $200,000 c. $325,000 d. $312,500 e. $1,250,000 f.

$208,333 In order to find the breakeven point in sales, we first have to find the contribution margin ratio. Sales Revenue = Contribution Margin - Variable Costs $500,000 = Contribution Margin - $200,000 => Contribution Margin = $300,000 Contribution Margin Ratio = Contribution Margin ÷ Sales Revenue Contribution Margin Ratio = $300,000 ÷ $500,000 = 0.60 Find break-even point in Sales Revenue: Profit = Sales Revenue - Variable Costs - Fixed Costs (or do Profit = (Contribution Margin Ratio * Sales Revenue) Fixed Costs) Let x = Sales Revenue $0 = x - 0.4x - $125,000 $125,000 = 0.6x Sales Revenue = $208,333

8. The following data are for Kylie Ramona Company. Variable cost ratio

15%

Fixed costs

$100,000

Calculate the breakeven sales revenue. a. $15,000

15 b. $117,647 Find the contribution margin ratio: Sales Revenue Ratio = Contribution Margin Ratio + Variable Cost Ratio 100% = CM Ratio + 15% CM Ratio = 85% Find the breakeven sales revenue Profit = (Contribution Margin Ratio * Sales Revenue) - Fixed Costs $0 = 0.85 * Sales Revenue - $100,000 $100,000 = 0.85 * Sales Revenue $117,647 = Sales Revenue c. $85,000 d. $123,986 e. $115,000 9. The following data are for Sophie Wynn Company. Variable cost per unit

$12.50

Fixed costs

$500,000

Calculate the selling price per unit that must be charged in order to generate a profit of $270,000 with a sales volume of 50,000 units. a. $23.30 b. $27.90 Find Sales Revenue per Unit: Profit = (Sales Revenue per Unit * Units) - (Variable Costs per Unit * Units) FC Let x = Sales Revenue per Unit: $270,000 = (x * 50,000 units) - ($12.50 * 50,000 units) - $500,000 $770,000 = 50,000x - $625,000 $1,395,000 = 50,000x x = $27.90 per unit c. $15.40 d. $24.90 e. $17.90 10. The following data are for Jay Robert Company. Breakeven sales revenue

$250,000

16 Fixed costs

$150,000

Calculate the sales revenue necessary to generate net income of $100,000. a. $400,000 b. $533,333 c. $625,000 d. $618,667 e. $416,667 $250,000 = Sales Revenue - Variable Costs - $150,000 Fixed Costs = Total Costs - Variable Costs If $250,000 is needed to breakeven with the costs, then $250,000 is the total costs. $150,000 = $250,000 - Variable Costs Variable Costs = $100,000 => Variable Cost Margin = $100,000 / $250,000 = 0.4 Find Sales Revenue to generate a net income of $100,000: Profit = Sales Revenue - Variable Costs - Fixed Costs Let x = Sales Revenue $100,000 = x - 0.4x - $150,000 $250,000 = 0.6x $416,666 = Sales Revenue...