ACCT 102 flashcards

All 30 cards

1. Card 1

   A company incurred $15,000 in fixed costs and $5 per unit in variable costs. If they produced 3,000 units, what would be the total cost? A) $15,000 B) $30,000 C) $45,000 D) $60,000

   B) $30,000. Total variable cost is $5/unit * 3,000 units = $15,000. Total cost is fixed costs + total variable costs = $15,000 + $15,000 = $30,000.

2. Card 2

   A company's highest activity level was 10,000 units with a total cost of $80,000. The lowest activity level was 6,000 units with a total cost of $56,000. Using the high-low method, what is the variable cost per unit?

   The variable cost per unit is $6.00. (Change in Cost / Change in Activity) = ($80,000 - $56,000) / (10,000 units - 6,000 units) = $24,000 / 4,000 units = $6.00 per unit.

3. Card 3

   A CVP income statement reports sales of $500,000, variable costs of $300,000, and fixed costs of $150,000. What is the contribution margin?

   The contribution margin is $200,000. Sales - Variable Costs = Contribution Margin. So, $500,000 - $300,000 = $200,000.

4. Card 4

   If a product sells for $100 per unit and has variable costs of $60 per unit, what is the contribution margin ratio? A) 40% B) 60% C) 100% D) 160%

   A) 40%. The contribution margin per unit is $100 - $60 = $40. The contribution margin ratio is ($40 / $100) * 100% = 40%.

5. Card 5

   A company has fixed costs of $90,000 and a contribution margin per unit of $30. How many units must be sold to break even?

   The company must sell 3,000 units to break even. Break-even point in units = Fixed Costs / Contribution Margin per Unit = $90,000 / $30 = 3,000 units.

6. Card 6

   A company wants to earn a target profit of $60,000. Fixed costs are $120,000, and the contribution margin per unit is $40. How many units must be sold to achieve the target profit?

   The company must sell 4,500 units. Units to earn target profit = (Fixed Costs + Target Profit) / Contribution Margin per Unit = ($120,000 + $60,000) / $40 = $180,000 / $40 = 4,500 units.

7. Card 7

   If actual sales are $500,000 and the break-even sales are $400,000, what is the margin of safety in dollars? A) $100,000 B) $400,000 C) $500,000 D) $900,000

   A) $100,000. Margin of Safety = Actual Sales - Break-Even Sales. So, $500,000 - $400,000 = $100,000.

8. Card 8

   A company sells two products: Product A and Product B. Product A has sales of $300,000 and Product B has sales of $200,000. What is the sales mix for Product A?

   The sales mix for Product A is 60%. Total sales are $300,000 + $200,000 = $500,000. Sales mix for Product A = ($300,000 / $500,000) * 100% = 60%.

9. Card 9

   Which of the following is an example of a fixed cost? A) Direct materials B) Sales commissions C) Rent on factory building D) Hourly wages for production workers

   C) Rent on factory building. Fixed costs remain constant in total, regardless of changes in the level of activity, within a relevant range. Rent is a classic example of a fixed cost.

10. Card 10

    The high-low method is used to: A) Calculate the break-even point in units. B) Separate mixed costs into their fixed and variable components. C) Determine the target profit. D) Calculate the margin of safety ratio.

    B) Separate mixed costs into their fixed and variable components. The high-low method identifies the highest and lowest activity levels and their associated total costs to estimate the variable cost per unit and total fixed costs.

11. Card 11

    A CVP income statement emphasizes the distinction between: A) Operating and non-operating activities. B) Product and period costs. C) Fixed and variable costs. D) Direct and indirect costs.

    C) Fixed and variable costs. The CVP income statement presents costs based on their behavior (fixed or variable) to highlight the contribution margin, which is crucial for CVP analysis.

12. Card 12

    A company has a contribution margin ratio of 35%. If sales are $700,000, what is the total contribution margin?

    The total contribution margin is $245,000. Total Contribution Margin = Sales * Contribution Margin Ratio = $700,000 * 0.35 = $245,000.

13. Card 13

    A company's break-even point in dollars is $250,000. If the contribution margin ratio is 40%, what are the total fixed costs?

    The total fixed costs are $100,000. Break-even point in dollars = Fixed Costs / Contribution Margin Ratio. Therefore, Fixed Costs = Break-even point in dollars * Contribution Margin Ratio = $250,000 * 0.40 = $100,000.

14. Card 14

    A company has fixed costs of $180,000, a selling price of $50 per unit, and variable costs of $20 per unit. If they want to achieve a target profit of $90,000, how many units must they sell?

    The company must sell 9,000 units. The contribution margin per unit is $50 - $20 = $30. Units to earn target profit = (Fixed Costs + Target Profit) / Contribution Margin per Unit = ($180,000 + $90,000) / $30 = $270,000 / $30 = 9,000 units.

15. Card 15

    The margin of safety ratio for a company is 25%. If actual sales are $800,000, what is the break-even point in sales dollars?

    The break-even point in sales dollars is $600,000. Margin of Safety Ratio = (Actual Sales - Break-Even Sales) / Actual Sales. So, 0.25 = ($800,000 - Break-Even Sales) / $800,000. This implies $200,000 = $800,000 - Break-Even Sales, leading to Break-Even Sales = $600,000.

16. Card 16

    What is the primary purpose of calculating the sales mix?

    The primary purpose of calculating the sales mix is to understand the proportion of different products sold by a company. This information is crucial for multi-product break-even analysis and for making strategic decisions about product emphasis.

17. Card 17

    A company observes that its total utility bill increases with production volume but not proportionally. This is an example of what type of cost? A) Fixed cost B) Variable cost C) Mixed cost D) Direct cost

    C) Mixed cost. A mixed cost contains both a fixed and a variable component. The total cost changes with the level of activity, but not in direct proportion, because of the fixed element.

18. Card 18

    Using the high-low method, if the fixed costs are calculated to be $20,000 and the variable cost per unit is $8, what would be the total cost at an activity level of 7,000 units?

    The total cost would be $76,000. Total Cost = Fixed Costs + (Variable Cost per Unit * Number of Units) = $20,000 + ($8 * 7,000 units) = $20,000 + $56,000 = $76,000.

19. Card 19

    Which of the following is typically found on a CVP income statement but not on a traditional income statement? A) Sales revenue B) Cost of goods sold C) Contribution margin D) Net income

    C) Contribution margin. The CVP income statement specifically highlights the contribution margin by separating variable costs from sales, which is not explicitly shown in a traditional format that uses Cost of Goods Sold.

20. Card 20

    A company sells a product for $25 per unit. Variable costs are $15 per unit. If fixed costs are $50,000, what is the break-even point in sales dollars?

    The break-even point in sales dollars is $125,000. The contribution margin per unit is $25 - $15 = $10. The contribution margin ratio is $10 / $25 = 0.40 or 40%. Break-even point in dollars = Fixed Costs / Contribution Margin Ratio = $50,000 / 0.40 = $125,000.

21. Card 21

    The margin of safety represents: A) The amount of sales revenue needed to cover all fixed costs. B) The amount by which sales can drop before losses begin. C) The total profit earned by the company. D) The ratio of fixed costs to variable costs.

    B) The amount by which sales can drop before losses begin. The margin of safety indicates how much actual or planned sales can decrease before the company reaches its break-even point and starts incurring losses.

22. Card 22

    A company sells Product X and Product Y. Product X has a contribution margin of $10 per unit, and Product Y has a contribution margin of $15 per unit. If the sales mix is 60% for Product X and 40% for Product Y, what is the weighted-average contribution margin per unit?

    The weighted-average contribution margin per unit is $12.00. (Contribution Margin X * Sales Mix X) + (Contribution Margin Y * Sales Mix Y) = ($10 * 0.60) + ($15 * 0.40) = $6.00 + $6.00 = $12.00.

23. Card 23

    Which of the following is a key characteristic of a variable cost? A) It remains constant in total regardless of activity level. B) It changes in total in direct proportion to changes in the activity level. C) It changes per unit as activity level changes. D) It is always a product cost.

    B) It changes in total in direct proportion to changes in the activity level. Variable costs are constant per unit, but their total amount increases or decreases directly with the volume of activity.

24. Card 24

    A company's highest activity level was 20,000 units with a total cost of $120,000. The lowest activity level was 12,000 units with a total cost of $80,000. Using the high-low method, what are the total fixed costs?

    The total fixed costs are $20,000. First, calculate variable cost per unit: ($120,000 - $80,000) / (20,000 - 12,000) = $40,000 / 8,000 units = $5 per unit. Then, use either high or low point: Fixed Costs = Total Cost - (Variable Cost per Unit * Activity Level). Using high point: $120,000 - ($5 * 20,000) = $120,000 - $100,000 = $20,000.

25. Card 25

    A company has sales of $1,000,000, variable costs of $400,000, and fixed costs of $300,000. What is the margin of safety ratio? A) 30% B) 40% C) 60% D) 70%

    C) 60%. First, calculate the contribution margin: $1,000,000 - $400,000 = $600,000. The contribution margin ratio is $600,000 / $1,000,000 = 60%. The break-even point in sales dollars is Fixed Costs / Contribution Margin Ratio = $300,000 / 0.60 = $500,000. Margin of Safety = Actual Sales - Break-Even Sales = $1,000,000 - $500,000 = $500,000. Margin of Safety Ratio = Margin of Safety / Actual Sales = $500,000 / $1,000,000 = 50%. (Correction: The calculation of Margin of Safety Ratio is 50%, not 60%. Rechecking the options, none match 50%. Let's re-evaluate the question's options or assume a misinterpretation. Given the options, let's re-evaluate if the question intended to ask for Contributio

26. Card 26

    A company sells two products: Product X and Product Y. Product X has a contribution margin of $10 per unit, and Product Y has a contribution margin of $15 per unit. The sales mix is 60% Product X and 40% Product Y. What is the weighted-average unit contribution margin?

    The weighted-average unit contribution margin is calculated as (0.60 * $10) + (0.40 * $15) = $6 + $6 = $12. This metric is crucial for break-even analysis in multi-product companies.

27. Card 27

    A company is considering a special order for 1,000 units at a price of $50 per unit. The variable cost per unit is $30, and fixed costs are $25,000. Current production is 10,000 units, and the plant has capacity for 12,000 units. Should the company accept the special order?

    Yes, the company should accept the special order. The incremental revenue from the special order is 1,000 units * $50/unit = $50,000. The incremental cost is 1,000 units * $30/unit = $30,000. The special order will increase profit by $20,000 ($50,000 - $30,000), as fixed costs are irrelevant if within existing capacity.

28. Card 28

    Which of the following is an example of a sunk cost? A) The cost of raw materials for a new product line. B) The future advertising expenses for an upcoming campaign. C) The original purchase price of a machine bought five years ago. D) The interest expense on a new loan taken out this month.

    C) The original purchase price of a machine bought five years ago. Sunk costs are past costs that cannot be recovered and are irrelevant to future decisions, unlike future variable or fixed costs.

29. Card 29

    A company has beginning inventory of 5,000 units, desires an ending inventory of 7,000 units, and expects to sell 20,000 units. How many units should the company produce?

    The company should produce 22,000 units. This is calculated by taking expected sales (20,000 units) plus desired ending inventory (7,000 units) minus beginning inventory (5,000 units), following the production budget formula.

30. Card 30

    A company manufactures a product that can be sold at an intermediate stage for $10 per unit or processed further at an additional cost of $4 per unit to be sold as a finished product for $18 per unit. Should the company sell or process further?

    The company should process further. The incremental revenue from processing further is $18 - $10 = $8 per unit. The incremental cost is $4 per unit. Since the incremental revenue ($8) exceeds the incremental cost ($4), processing further increases profit by $4 per unit.

More flashcard decks

• ACCT 102 CHP 10. flashcards (20 cards)
• Thermochemistry and Thermodynamics flashcards (149 cards)
• Género Bacillus y Clostridium flashcards (100 cards)
• Ψηφιακά Παιχνίδια και Μάθηση flashcards (100 cards)
• Philosophy AS flashcards (100 cards)
• Nervous system flashcards (100 cards)

Browse every shared deck