Chapter 5: CVP Relationships
True or False: If the variable expense per unit decreases, and all other factors remain the same, the contribution margin ratio increases.
True
If a company produces more products than they sold, which operating income will be higher, absorption or variable?
Absorption Costing
Company Under Flower is trying to determine their sales budget for the month of April. In March, they sold 5,000 units, in April they sold 6,000 units, and in May they sold 5,500. The product cost per unit is 12, and they sell it at 20. What is the sales budget for April?
120,000
The _____________ is prepared before the period begins and is valid for only the planned level of activity, which many times is different than the actual level of activity.
Planning/Static Budget
What is your SI's email? :)
imma not type it here as this is a public jeopardy lol
The Racing Bicycle Company (RBC) sells 20,000 units, with 460,000 in sales, 220,000 in variable expenses, and 200,000 in fixed expenses. Calculate the net operating income.
40,000
Company Solar wants to know how much their costs of goods sold would be under variable and absorption costing. They produced 12,000 units and sold 14,000 units. Direct material per unit was 8, direct labor per unit was 5, variable MOH was 10, and fixed MOH was 24,000. They know for COGS, they need to multiply the product cost by how many units they sold. What is the product cost under variable and the product cost under absorption?
V = 23, A = 25
Apex Electronics sells computers. Here are the first two months of the year: January: $30,000, February: $35,000. Cost of Goods Sold is projected to be 60% of sales. Ending inventory should be 35% of the next month’s cost of goods sold. Ending inventory on December 31st is $10,000. What are budgeted inventory purchases for January?
15,350
McComet’s is looking at their budgets for the year. They thought they were going to sell 200 units, at 15 dollars each. But they actually sold 214 units, with an actual sales revenue of 3,424. What is the sales revenue under the flexible budget? Is it favorable or unfavorable?
3,210 F
True or False: Using the least-squares regression method, y = mx + b means that y is the fixed cost, x is the cost driver, m is the variable cost, and b is the total cost.
False
The Hartford Guild is planning a fundraising event to benefit a local charitable organization. They are expecting 2,500 guests to attend. The following is the admission and cost information: Admission Ticket Per Person: $54, Variable Cost Per Person: $35, Fixed Costs: $40,000. What is the break-even point in units?
2,106
Reconcile the two costing methods, and state which costing method will have a greater net operating income. Company Kicks sold 52,000 units last year, and they produced 55,000 products to be sold. Their fixed costs for the year were $165,000.
9,000 more in absorption.
Spider Co. Has sales of 8,000 in January, 9,000 in February, and 10,000 in March. Their purchases were as follows; 2,000 in January, 2,500 in February, and 3,000 in March. Of it’s direct materials purchases, 20% are paid in the month of purchase, and the remainder paid in the following purchase. Prepare a cash payments budget for DM for February.
2,100
Tractor Co. Has a planned operating income of the year at 200,000. They had a 12,000 unfavorable activity variance for their operating income, and a favorable revenue variance of 3,000. What is the actual operating income for the year?
191,000
What term is this? Gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.
Controlling
A company sells trading cards, with each pack costing $1.5 to make. Their machinery, which is their only fixed cost, costs them 75,000 dollars a year to operate. This past year, they made 120,000 dollars. Their contribution margin per unit was $4.5. What is the margin of safety in dollars?
20,000
Company Billy's Burgers wants to know their operating income under the variable method. They sold 20,000 burgers and made 21,000 burgers over the past year. Per burger, direct materials were 6, direct labor was 2, variable MOH was 4, and fixed overhead was 7,000. For operating expenses, it was 5 per unit and 3,000 fixed. If they sold each burger for 25 each, what is their operating income under the variable method?
150,000
Sales for the first three months of the year in units are as follows: 5,000, 5,500, and 4,500 respectively. Company Apricots sells their rugs at 50 dollars each. They have a policy stating that each month’s ending inventory of finished goods be 25% of the following month’s unit sales, and 5% of the month thereafter. January's beginning inventory is 1,500. What is the required production in units for the first month of the year?
5,100
Red Solo is a company that sells cups, and for the year they predicted they’d sell 400,000 units. They actually sold 450,000, and had an actual sales revenue of 315,000. They planned on selling them at 75 cents per cup. Its budgeted variable costs are 25 cents per cup, and budgeted total fixed costs were 50,000 dollars. What is the activity variance of the contribution margin? Is it favorable or unfavorable?
25,000 F
In a given month, a certain percentages of sales are collected in cash. The rest of the sales are often on credit, and are to be collected in the following months. In the current month where those sales have not been collected yet, what journal entry do they fall under?
Accounts Receivable
A movie theater has VIP viewing and standard viewing. They sell their VIP tickets at a 25% increase from their standard ticket price. They sold 3,500 standard tickets, making 42,000 dollars in sales with standard tickets alone. They sold 2,000 VIP tickets. If the variable costs for each ticket is 5 dollars, what is the contribution margin in units for ONLY VIP tickets?
10
What is the net operating income under absorption costing? Company StarTrack produced 4,000 units. Their net operating income under variable costing was 10,000. For their product costs, they spent $12 per product for direct materials, $4 per product for direct labor, $2 per product for variable MOH, and 8,000 for fixed costs. The cost of goods sold under variable costing was 90,000.
8,000
January's production budget is 12,000 units, whereas February's production budget is 13,000. Each unit requires 3 yards of wood. The company also has a desired ending inventory of 12 percent of the next month’s direct materials needed. The cost per yard of wood is 75 cents. What is the cost of the DM to purchase in the month of January?
27,270
Company Boko has a product that sells for 30 dollars. They planned on selling 5,000 units but actually sold 6,000 units. The budgeted variable cost per unit is 14 dollars, and the budgeted fixed product cost is 12,000 dollars. For selling and administrative, its budgeted variable cost is 10 and its budget fixed is 7,000. However, the actual VMOH was 15 dollars, and the actual total fixed costs was 20,000. What is the flexible budget operating income?
17,000
What is the Variance Analysis Cycle?
Preparing Performance Report, Analyze Variance, Ask Questions, Identify Root Causes, Consider Answers, and Conduct Next Period Operations.