Managerial Accounting Practice Exam Quiz
Which of the following best defines a variable cost?
a) A cost that remains constant per unit but varies in total with changes in activity level.
b) A cost that remains constant in total but varies per unit with changes in activity level.
c) A cost that does not change with changes in the level of activity.
d) A cost that is incurred only once.
The contribution margin is calculated as:
a) Sales – Variable costs
b) Sales – Fixed costs
c) Sales – Total costs
d) Sales – Depreciation
A company is using absorption costing. Which of the following costs is included in the cost of goods manufactured?
a) Direct materials used
b) Advertising expenses
c) Sales commissions
d) Rent on office space
Under which costing method is fixed manufacturing overhead treated as a period cost?
a) Absorption costing
b) Variable costing
c) Job order costing
d) Process costing
Which of the following is an example of a non-financial performance measure?
a) Return on investment (ROI)
b) Net income
c) Customer satisfaction
d) Earnings per share
A company has the following sales and costs: Sales = $500,000, Variable Costs = $300,000, and Fixed Costs = $120,000. What is the contribution margin ratio?
a) 60%
b) 40%
c) 24%
d) 10%
Which inventory method results in the highest net income when prices are rising?
a) FIFO
b) LIFO
c) Weighted average
d) Specific identification
In flexible budgeting, what does the term “activity level” refer to?
a) The number of units produced
b) The level of sales
c) The range of production activity
d) The production time per unit
If actual production is greater than expected production, what is likely to happen to the fixed overhead variance?
a) It will be favorable
b) It will be unfavorable
c) It will have no effect
d) It will be zero
Which of the following is true about a static budget?
a) It is prepared for a specific level of activity
b) It adjusts for changes in activity levels during the period
c) It includes both fixed and variable costs in a flexible way
d) It is only useful for manufacturing companies
Which of the following is a limitation of using financial measures alone to evaluate performance?
a) They do not reflect long-term goals.
b) They are always easy to measure.
c) They always correlate directly with productivity.
d) They are more accurate than non-financial measures.
A company’s budgeted fixed costs are $150,000, and it expects to produce 100,000 units. The actual fixed costs were $160,000, and 90,000 units were produced. What is the fixed cost variance?
a) $10,000 favorable
b) $10,000 unfavorable
c) $20,000 favorable
d) $20,000 unfavorable
The break-even point is calculated as:
a) Fixed costs / Contribution margin ratio
b) Contribution margin / Fixed costs
c) Sales price per unit / Contribution margin per unit
d) Fixed costs / Contribution margin per unit
Which of the following best describes a sunk cost?
a) A cost that will be incurred in the future.
b) A cost that has already been incurred and cannot be recovered.
c) A cost that can be avoided if a decision is made.
d) A variable cost that changes with the level of production.
The direct materials cost is calculated by:
a) Adding the direct materials used to the opening inventory.
b) Subtracting the cost of materials purchased from the ending inventory.
c) Adding the cost of materials purchased to the opening inventory.
d) Adding the cost of materials purchased to the closing inventory.
Which of the following is not a component of total cost in a cost-volume-profit analysis?
a) Fixed costs
b) Variable costs
c) Product price
d) Contribution margin
Which of the following is a budgeting technique that involves reviewing each budget item in detail from scratch?
a) Incremental budgeting
b) Zero-based budgeting
c) Flexible budgeting
d) Historical budgeting
The cost of goods manufactured is determined by:
a) Adding beginning raw materials inventory to purchases
b) Adding total manufacturing costs to beginning finished goods inventory
c) Adding beginning finished goods inventory to total manufacturing costs
d) Adding raw materials costs to beginning work-in-process inventory
A performance measure that compares actual performance against a benchmark is called:
a) Variance analysis
b) Profitability ratio
c) Efficiency ratio
d) Activity ratio
Which of the following is most likely to be a variable cost?
a) Rent for office space
b) Direct labor for assembly workers
c) Property taxes
d) Insurance premiums
Which of the following is true about job order costing?
a) It is used when products are indistinguishable.
b) It is used when each unit or batch of products is unique.
c) It is used for continuous production.
d) It does not require the tracking of costs per job.
Which of the following methods assumes that the oldest inventory is sold first?
a) FIFO
b) LIFO
c) Weighted average
d) Specific identification
A company is considering a special order for 1,000 units at a price lower than the regular selling price. Which of the following costs should be considered when making the decision?
a) Fixed costs
b) Sunk costs
c) Variable costs
d) Depreciation on equipment
The margin of safety is calculated as:
a) Sales – Break-even sales
b) Break-even sales – Variable costs
c) Fixed costs – Contribution margin
d) Total sales / Contribution margin ratio
What is the primary purpose of a master budget?
a) To plan the organization’s financial performance
b) To compare actual performance to expected performance
c) To allocate funds for each department
d) To record actual financial data
Which of the following is an example of a discretionary fixed cost?
a) Depreciation on machinery
b) Rent on factory space
c) Advertising expenses
d) Salaries of permanent staff
A company produces 10,000 units of a product. The variable costs are $5 per unit, and the fixed costs are $50,000. What is the total cost for producing 10,000 units?
a) $50,000
b) $100,000
c) $150,000
d) $200,000
The cost of inventory is calculated using which method?
a) FIFO
b) LIFO
c) Weighted average
d) All of the above
In variance analysis, a favorable variance occurs when:
a) Actual costs are greater than budgeted costs
b) Actual revenues are less than budgeted revenues
c) Actual revenues are greater than budgeted revenues
d) Actual costs are less than budgeted costs
Which of the following is most likely to use a process costing system?
a) Custom furniture manufacturer
b) Electronics manufacturer
c) Petroleum refinery
d) Software development company
Which of the following best describes an indirect cost?
a) A cost that can be traced directly to a specific product or service.
b) A cost that cannot be traced directly to a specific product or service.
c) A cost that changes in total with changes in activity level.
d) A cost that remains fixed per unit of activity.
What is the purpose of a flexible budget?
a) To calculate total expenses at various activity levels.
b) To set a fixed budget for the year.
c) To track actual expenses.
d) To allocate fixed costs across departments.
In a cost-volume-profit analysis, the contribution margin per unit is used to:
a) Determine the selling price per unit.
b) Calculate the break-even point in units.
c) Set the desired profit margin.
d) Calculate the total fixed costs.
Which of the following is an example of a period cost?
a) Direct materials
b) Direct labor
c) Selling and administrative expenses
d) Factory rent
The standard cost of direct materials is $5 per unit, and the company used 1,000 units for production. The actual cost was $4.50 per unit. What is the direct materials price variance?
a) $500 favorable
b) $500 unfavorable
c) $450 favorable
d) $450 unfavorable
What is the cost of goods sold (COGS) calculated under the periodic inventory system?
a) Beginning inventory + Purchases – Ending inventory
b) Purchases – Beginning inventory + Ending inventory
c) Beginning inventory – Purchases + Ending inventory
d) Purchases + Beginning inventory – Ending inventory
Which of the following is not included in a cost center’s performance evaluation?
a) Revenue generation
b) Control of costs
c) Efficient use of resources
d) Budget performance
What does the operating leverage ratio measure?
a) The proportion of fixed costs in total costs.
b) The relationship between fixed and variable costs.
c) The break-even point in sales dollars.
d) The ability of a company to cover its fixed costs.
Which of the following methods calculates the weighted average cost of inventory?
a) FIFO
b) LIFO
c) Moving average
d) Specific identification
What is the primary disadvantage of using LIFO for inventory valuation?
a) It leads to lower net income during inflationary periods.
b) It does not comply with GAAP.
c) It results in higher tax liabilities.
d) It can lead to inventory write-downs.
In managerial accounting, a relevant cost is defined as:
a) A cost that has been incurred in the past.
b) A cost that will not affect the decision at hand.
c) A cost that differs between alternatives and will impact future decisions.
d) A cost that cannot be avoided regardless of the decision.
Which of the following is the formula for calculating the contribution margin ratio?
a) Contribution margin / Sales
b) Fixed costs / Contribution margin
c) Sales / Contribution margin
d) Variable costs / Sales
What does the total cost formula in a cost-volume-profit analysis consist of?
a) Fixed costs + Variable costs
b) Selling price + Variable costs
c) Fixed costs + Contribution margin
d) Variable costs + Contribution margin
A company is considering whether to accept a special order that is below its normal selling price. What is the most important factor to consider?
a) The effect on customer relations
b) The contribution margin of the special order
c) The total fixed costs of the company
d) The potential impact on regular sales
What is the formula for calculating the break-even point in units?
a) Fixed costs / Contribution margin per unit
b) Fixed costs / Sales price per unit
c) Total costs / Sales price per unit
d) Contribution margin / Sales price per unit
What type of cost is most likely to be allocated based on the number of machine hours used?
a) Direct labor
b) Indirect labor
c) Manufacturing overhead
d) Selling and administrative expenses
What is the correct approach to determine the economic order quantity (EOQ)?
a) Minimize total inventory holding costs and ordering costs
b) Maximize the number of orders placed per year
c) Increase inventory holding costs
d) Increase ordering costs
In which situation would activity-based costing (ABC) be most beneficial?
a) When overhead costs are low and simple
b) When there are multiple products with significantly different overhead consumption
c) When a company has a uniform production process
d) When direct costs represent a large portion of total costs
The primary advantage of a decentralized management structure is:
a) Increased control over financial reporting.
b) Faster decision-making and better responsiveness to local conditions.
c) Reduction in overhead costs.
d) Improved central coordination of departments.
Which of the following would be classified as a direct labor cost?
a) Wages of factory workers directly involved in manufacturing the product
b) Wages of supervisors in the factory
c) Utility expenses for the factory
d) Depreciation of office equipment
A company is using a job order costing system. What would be included in the job cost sheet?
a) Total sales revenue
b) Direct materials, direct labor, and manufacturing overhead
c) Variable costs of production
d) Fixed costs per unit
A company produces 5,000 units. The fixed costs are $20,000, and the variable costs are $10 per unit. What is the total cost?
a) $30,000
b) $50,000
c) $70,000
d) $90,000
In absorption costing, what costs are included in the cost of goods sold?
a) Only variable costs
b) Direct materials, direct labor, and both fixed and variable manufacturing overhead
c) Only fixed manufacturing overhead
d) Only direct materials and direct labor
In a flexible budget, how are fixed costs treated?
a) Fixed costs are adjusted based on the level of activity.
b) Fixed costs remain unchanged regardless of the level of activity.
c) Fixed costs are ignored in the budget.
d) Fixed costs are allocated to each department.
What is the purpose of a responsibility accounting system?
a) To track the company’s overall profitability
b) To hold managers accountable for revenues and costs under their control
c) To allocate fixed costs across departments
d) To calculate the break-even point for each product line
What type of budget is created by analyzing past financial performance and adjusting for expected changes in the future?
a) Flexible budget
b) Zero-based budget
c) Historical budget
d) Incremental budget
Which of the following best defines a sunk cost in managerial accounting?
a) A cost that can be avoided if a decision is made differently.
b) A cost that has been incurred in the past and cannot be recovered.
c) A cost that will change in the future depending on a decision.
d) A cost that is relevant to decision-making.
What is the primary objective of a budgeting process in a business?
a) To evaluate historical performance
b) To ensure that costs are minimized
c) To plan for future revenues and expenditures
d) To allocate profits between departments
Which of the following is a limitation of traditional costing methods?
a) They do not provide information on product profitability.
b) They over-simplify cost allocations for overhead.
c) They are not compliant with tax regulations.
d) They do not account for direct materials costs.
If a company’s actual costs are higher than the budgeted costs, it is called:
a) A favorable variance
b) An unfavorable variance
c) A zero variance
d) A positive variance
A company is considering outsourcing a specific component. The relevant cost to consider in this decision is:
a) The total cost of producing the component in-house
b) The sunk costs of previous investments
c) The fixed costs that will remain even if outsourcing occurs
d) The variable costs that will change with outsourcing
A company uses activity-based costing (ABC). Which of the following would likely be an activity cost driver for machine maintenance?
a) Number of units produced
b) Number of machine hours used
c) Number of employees
d) Number of sales transactions
What is the primary purpose of budgeting in a company?
a) To calculate taxes owed
b) To plan, control, and evaluate performance
c) To determine profit-sharing amounts for employees
d) To track historical performance
Which of the following is an example of a variable cost?
a) Rent for factory space
b) Salaries of factory supervisors
c) Direct materials cost
d) Depreciation of machinery
If a company’s contribution margin is $100,000 and fixed costs are $70,000, what is the break-even point in dollars?
a) $30,000
b) $70,000
c) $100,000
d) $170,000
What does a “favorable variance” indicate in a variance analysis?
a) Actual costs are higher than budgeted costs.
b) Actual revenue is lower than budgeted revenue.
c) Actual costs are lower than budgeted costs or actual revenue is higher than budgeted revenue.
d) Actual revenue is exactly equal to budgeted revenue.
A company is evaluating a new project and considers a fixed cost of $500,000. If the sales price per unit is $50 and the variable cost per unit is $30, what is the break-even point in units?
a) 10,000 units
b) 20,000 units
c) 25,000 units
d) 50,000 units
Which of the following costing methods assigns overhead costs based on the activities that drive costs?
a) Absorption costing
b) Job order costing
c) Activity-based costing
d) Variable costing
Which of the following is an example of an operating expense in managerial accounting?
a) Rent for the production facility
b) Raw materials used in production
c) Salary of the sales team
d) Depreciation on manufacturing equipment
A company’s fixed costs total $80,000, and its contribution margin per unit is $40. What is the break-even point in units?
a) 1,500 units
b) 2,000 units
c) 2,500 units
d) 3,000 units
What is the primary disadvantage of using a budgeted overhead rate for applying overhead in a job order costing system?
a) It requires calculating actual overhead costs.
b) It can lead to over- or under-applied overhead.
c) It does not consider fixed costs.
d) It complicates cost allocation.
A company’s fixed costs are $150,000, and the variable cost per unit is $20. If the company wants to earn a profit of $100,000, what should be the selling price per unit if 10,000 units are produced and sold?
a) $30
b) $25
c) $20
d) $40
The “payback period” method of investment evaluation is:
a) The time it takes for an investment to recover its initial cost through cash inflows.
b) The rate of return expected from an investment.
c) The time it takes for an investment to break even.
d) The time it takes to reduce fixed costs to zero.
What is the primary objective of a responsibility accounting system?
a) To evaluate overall company profitability
b) To track the performance of individual managers and departments
c) To allocate overhead costs
d) To determine the company’s break-even point
Which of the following is a limitation of using direct labor as the only basis for allocating overhead costs?
a) It can ignore the impact of machine-based overhead.
b) It may lead to inaccurate allocation of indirect costs.
c) It is too complex to implement.
d) It overestimates the variable costs.
If a company’s variable costs per unit are $10, the selling price is $30, and fixed costs are $100,000, what is the contribution margin per unit?
a) $30
b) $20
c) $10
d) $40
A company’s direct materials cost is $500,000, and the factory’s manufacturing overhead is $200,000. If the company uses an overhead rate based on machine hours, what is the total cost of goods manufactured?
a) $700,000
b) $500,000
c) $700,000 + machine hours
d) Direct materials cost only
What does the cost of goods manufactured (COGM) include?
a) Only the direct costs associated with production
b) Direct materials, direct labor, and manufacturing overhead applied during production
c) Only variable manufacturing costs
d) Total selling expenses
What is the effect of applying fixed costs to a cost object in a job order costing system?
a) It allows for direct allocation of expenses to the product.
b) It results in a more accurate reflection of actual costs.
c) It helps determine the break-even point.
d) It may distort the actual cost per unit if the number of units produced varies.
Which of the following is considered a discretionary fixed cost?
a) Depreciation on factory equipment
b) Rent for office space
c) Salaries of production workers
d) Advertising expenses
Which of the following is an example of a committed fixed cost?
a) Advertising budget
b) Research and development costs
c) Lease payments on factory equipment
d) Employee training expenses
**82. A company has the following information:
Sales = $500,000
Variable costs = $300,000
Fixed costs = $100,000
What is the contribution margin ratio?** a) 20%
b) 30%
c) 40%
d) 50%
What does an income statement prepared under variable costing exclude?
a) Sales revenue
b) Variable production costs
c) Fixed manufacturing overhead
d) Gross profit
Which of the following best describes a favorable variance in the context of budgeting?
a) Actual costs are higher than budgeted costs.
b) Actual revenue is lower than budgeted revenue.
c) Actual costs are lower than budgeted costs or actual revenue is higher than budgeted revenue.
d) Actual revenue is exactly equal to budgeted revenue.
What is the primary purpose of a cost-volume-profit analysis?
a) To determine the selling price of a product
b) To estimate the future cost of goods sold
c) To understand the relationships between sales, costs, and profits at different levels of production
d) To determine the cost of a product’s raw materials
The primary difference between absorption costing and variable costing is:
a) The treatment of fixed manufacturing overhead costs.
b) The treatment of variable selling and administrative costs.
c) The calculation of gross profit.
d) The allocation of indirect costs.
The formula for the contribution margin is:
a) Sales – Variable costs
b) Sales – Fixed costs
c) Sales – Total costs
d) Sales – Direct costs
Which of the following would be considered a “direct” cost in a job order costing system?
a) Factory rent
b) Factory supervisor’s salary
c) Raw materials used in production
d) Depreciation on factory equipment
In a flexible budget, what happens to variable costs when the activity level changes?
a) They remain unchanged.
b) They change in direct proportion to the level of activity.
c) They decrease as the activity level increases.
d) They increase in a non-linear manner.
A company’s operating income is $500,000, and its sales are $2,000,000. What is the operating income margin?
a) 20%
b) 25%
c) 40%
d) 50%
If a company has total sales of $200,000, variable costs of $120,000, and fixed costs of $50,000, what is its contribution margin?
a) $30,000
b) $120,000
c) $80,000
d) $200,000
The break-even point in units is calculated by dividing fixed costs by:
a) Contribution margin per unit
b) Sales price per unit
c) Variable cost per unit
d) Sales volume
A company has a standard cost of $10 for direct materials per unit and $5 for direct labor per unit. If actual costs are $12 for direct materials and $6 for direct labor per unit, what is the total cost variance?
a) $1 unfavorable
b) $2 unfavorable
c) $3 unfavorable
d) $2 favorable
The fixed costs in a manufacturing company are $100,000. If the company produces 10,000 units, what is the fixed cost per unit?
a) $10
b) $100
c) $50
d) $1
In an activity-based costing (ABC) system, which of the following would likely be an activity cost driver for the setup of machines?
a) Direct labor hours
b) Number of machine setups
c) Number of units produced
d) Number of employees
The variance between the actual and budgeted costs is referred to as:
a) Standard cost variance
b) Contribution margin variance
c) Budget variance
d) Profit variance
A company applies overhead using a predetermined rate based on direct labor hours. If actual direct labor hours were higher than estimated, which of the following is likely to happen?
a) Over-applied overhead
b) Under-applied overhead
c) Unchanged overhead
d) Profit decrease
A company uses absorption costing. Which of the following costs is included in the product cost?
a) Fixed manufacturing overhead
b) Selling expenses
c) Administrative expenses
d) Interest expense
If a company has an overhead rate of $20 per labor hour and it uses 500 labor hours, how much overhead will be applied?
a) $20
b) $500
c) $10,000
d) $50,000
What does a high contribution margin ratio indicate?
a) The company has high fixed costs.
b) The company has high variable costs.
c) The company can cover fixed costs more easily.
d) The company is selling products at a loss.
What is the main objective of using a flexible budget?
a) To create a fixed budget
b) To compare actual performance to expected performance based on different levels of activity
c) To adjust for changes in fixed costs
d) To calculate the break-even point
Which of the following best describes a product cost under absorption costing?
a) Only variable manufacturing costs
b) Direct materials, direct labor, and both fixed and variable manufacturing overhead
c) Only direct materials and direct labor
d) Selling and administrative expenses
The cost of inventory includes which of the following under the absorption costing method?
a) Only direct materials
b) Direct materials, direct labor, and variable manufacturing costs
c) Direct materials, direct labor, and both fixed and variable manufacturing costs
d) Fixed selling and administrative expenses
What is a “sunk cost” in the context of managerial decision-making?
a) A future cost that can be avoided
b) A cost that cannot be recovered once incurred
c) A cost that changes based on production levels
d) A cost that varies with each product
A company has fixed costs of $200,000, variable costs of $5 per unit, and sells each unit for $20. What is the break-even point in units?
a) 10,000 units
b) 20,000 units
c) 40,000 units
d) 50,000 units
If a company’s actual revenue is higher than its budgeted revenue, the variance is:
a) Favorable
b) Unfavorable
c) Neutral
d) Zero
What is the main purpose of a responsibility center in an organization?
a) To set performance benchmarks
b) To track revenue generation
c) To allocate costs to individual departments
d) To evaluate the performance of individual managers or departments
The cost of goods manufactured (COGM) includes which of the following?
a) Only direct labor costs
b) Direct materials used, direct labor, and manufacturing overhead applied
c) Only variable costs
d) Selling and administrative expenses
A favorable variance indicates that:
a) Actual costs are higher than budgeted costs
b) Actual revenue is lower than budgeted revenue
c) Actual costs are lower than budgeted costs or actual revenue is higher than budgeted revenue
d) Actual revenue is exactly equal to budgeted revenue
What does the “cost of capital” refer to in investment decisions?
a) The amount of capital invested by shareholders
b) The cost of financing the investment, such as interest rates or required return rates
c) The depreciation of capital assets
d) The initial investment amount
What is the primary purpose of standard costing?
a) To compare actual costs with expected costs
b) To allocate fixed overhead to products
c) To calculate the break-even point
d) To determine profit margins
Which of the following best describes “contribution margin”?
a) Sales minus fixed costs
b) Sales minus variable costs
c) Sales minus both fixed and variable costs
d) Revenue minus net income
What is the formula for calculating the contribution margin ratio?
a) Contribution margin / Sales
b) Sales / Contribution margin
c) Contribution margin / Fixed costs
d) Sales – Variable costs
What is the purpose of using a master budget?
a) To track actual performance in comparison to planned performance
b) To forecast future costs
c) To measure the profitability of individual departments
d) To control labor costs
A company produces and sells 5,000 units at a price of $40 per unit. The total fixed costs are $100,000, and the variable costs are $20 per unit. What is the contribution margin per unit?
a) $10
b) $20
c) $30
d) $40
Which of the following is the correct formula for operating income in cost-volume-profit analysis?
a) Sales – Fixed costs
b) Sales – Variable costs
c) Sales – Total costs
d) Contribution margin – Fixed costs
What is the effect of a “favorable” sales volume variance?
a) Actual sales volume was lower than the budgeted volume.
b) Actual sales volume was higher than the budgeted volume.
c) Actual revenue was lower than budgeted revenue.
d) Actual costs were lower than budgeted costs.
If a company has a high degree of operating leverage, it means that:
a) The company has low fixed costs
b) The company has high variable costs
c) A small change in sales can lead to a large change in operating income
d) The company operates with a low level of risk
What is the formula for the break-even point in sales dollars?
a) Fixed costs / Contribution margin ratio
b) Fixed costs / Contribution margin per unit
c) Sales – Variable costs
d) Sales – Fixed costs
In an activity-based costing system, which of the following would be considered a unit-level activity?
a) Machine setups
b) Product design
c) Direct materials handling
d) Facility maintenance
If a company has a sales price of $25 per unit, variable cost of $15 per unit, and fixed costs of $100,000, what is the contribution margin per unit?
a) $5
b) $10
c) $15
d) $25
Which of the following is NOT a limitation of using standard costing?
a) It may not reflect current operating conditions.
b) It may lead to inefficiencies in production.
c) It provides valuable information for future planning.
d) It might encourage employees to focus on meeting standards rather than improving efficiency.
Which of the following is an example of a non-controllable cost?
a) Direct labor cost
b) Variable manufacturing overhead
c) Corporate office rent
d) Direct materials cost
What is the primary purpose of the sales mix variance?
a) To compare actual sales volume with forecasted sales volume
b) To determine the profit impact of different product sales in a multi-product environment
c) To calculate the breakeven point for different products
d) To measure the impact of direct materials price changes
What is the break-even point in units if the fixed costs are $120,000 and the contribution margin per unit is $20?
a) 2,400 units
b) 6,000 units
c) 12,000 units
d) 24,000 units
The “high-low method” is used to:
a) Estimate total variable costs
b) Estimate total fixed costs
c) Calculate the contribution margin
d) Estimate the relationship between variable and fixed costs
Which of the following is a characteristic of a decentralized organization?
a) All decisions are made by top management
b) The organization is less flexible in responding to market changes
c) Lower-level managers have decision-making authority
d) The company is highly controlled and rigid in its structure
If a company produces 100 units at a cost of $2,000 and increases production to 150 units with an additional cost of $3,000, what is the cost per unit for the increased production?
a) $40
b) $30
c) $25
d) $35
When calculating return on investment (ROI), which of the following formulas is correct?
a) ROI = Operating Income / Total Assets
b) ROI = Operating Income / Net Income
c) ROI = Sales / Operating Income
d) ROI = Net Income / Total Assets
The difference between actual and expected costs in a standard costing system is known as:
a) A flexible budget variance
b) A cost variance
c) A sales variance
d) An efficiency variance
What does the term “margin of safety” refer to?
a) The amount by which sales can drop before the company reaches its break-even point
b) The total amount of contribution margin for a company
c) The minimum sales required to achieve target profit
d) The amount of fixed costs that a company can safely incur
A company produces a product with the following data: Selling price = $50, Variable cost per unit = $30, Fixed costs = $200,000. What is the break-even point in dollars?
a) $600,000
b) $400,000
c) $500,000
d) $300,000
If a company produces 10,000 units of product A and incurs $80,000 in total costs, what is the average cost per unit?
a) $4
b) $8
c) $10
d) $12
What is the purpose of variance analysis in budgeting?
a) To forecast future sales
b) To understand the reasons behind the differences between actual and expected performance
c) To calculate the contribution margin
d) To determine the number of units needed to break even
A company has sales of $500,000 and variable costs of $300,000. What is its contribution margin?
a) $100,000
b) $200,000
c) $300,000
d) $400,000
The variable cost per unit is $15, the fixed costs are $100,000, and the sales price per unit is $30. What is the break-even point in units?
a) 6,667 units
b) 10,000 units
c) 3,000 units
d) 5,000 units
A company uses job order costing. If the company incurs $50,000 in direct labor costs and $30,000 in direct material costs, how would this be recorded in the general ledger?
a) Debit Work in Process Inventory, Credit Accounts Payable
b) Debit Work in Process Inventory, Credit Direct Labor
c) Debit Work in Process Inventory, Credit Cash
d) Debit Work in Process Inventory, Credit Direct Materials
What is the “cost-volume-profit” (CVP) analysis used for?
a) To determine the break-even point and assess the impact of changes in cost and sales volume on profits
b) To forecast future sales revenues
c) To calculate the cost of capital
d) To allocate costs to specific products
What does “ABC” (Activity-Based Costing) help a company to achieve?
a) Allocate costs based solely on direct labor hours
b) Assign overhead costs to specific products or services based on activities
c) Eliminate fixed costs from the costing process
d) Simplify the cost structure by eliminating variable costs
The master budget includes which of the following?
a) Sales budget, production budget, cash budget
b) Only the sales budget and production budget
c) Only the sales and cash budgets
d) Operating budgets and capital budgets only
If actual revenue is less than budgeted revenue, the variance is:
a) Favorable
b) Unfavorable
c) Neutral
d) None of the above
The cost of producing a product under job order costing includes which of the following?
a) Direct materials, direct labor, and applied overhead
b) Only direct materials and direct labor
c) Only direct labor and overhead
d) Only direct materials and overhead
Which of the following is true about the operating income method of performance measurement?
a) It includes only fixed costs
b) It focuses on profitability rather than return on investment
c) It measures performance by dividing operating income by invested capital
d) It uses only financial performance data
What type of cost is depreciation on machinery used in manufacturing?
a) Variable cost
b) Fixed cost
c) Semi-variable cost
d) Sunk cost
In which situation would a company use “absorption costing”?
a) For external financial reporting
b) For internal management decision-making only
c) For tax calculation purposes
d) Only when producing inventory
The contribution margin ratio is calculated as:
a) Sales – Variable Costs / Sales
b) Contribution Margin / Sales
c) Fixed Costs / Sales
d) Variable Costs / Sales
A company that produces units at $20 each has a total fixed cost of $80,000. If they want to achieve a target profit of $40,000, what is the required sales volume in units?
a) 6,000 units
b) 4,000 units
c) 3,000 units
d) 2,000 units
If a company has sales of $200,000, variable costs of $120,000, and fixed costs of $50,000, what is the contribution margin ratio?
a) 0.4
b) 0.6
c) 0.5
d) 0.7
What is a standard cost?
a) The actual cost of producing a product
b) The estimated cost of producing a product
c) The cost expected for a specific level of activity
d) The cost incurred in the past
A company uses a predetermined overhead rate based on direct labor hours. If actual direct labor hours worked are higher than estimated, which of the following is true?
a) Over-applied overhead
b) Under-applied overhead
c) Fixed costs will decrease
d) Direct labor costs will increase
A company is considering whether to make or buy a part for its product. Which of the following costs should NOT be considered in the make-or-buy decision?
a) Direct materials
b) Variable manufacturing overhead
c) Sunk costs
d) Direct labor
The principal purpose of a flexible budget is to:
a) Determine fixed costs
b) Estimate expected profits at different levels of activity
c) Calculate contribution margin
d) Measure performance for a specific period
Which of the following is a characteristic of a fixed cost?
a) It remains the same regardless of changes in the activity level
b) It changes directly with production volume
c) It is incurred only when the production is above a certain threshold
d) It fluctuates in direct proportion to sales
A company has an operating leverage of 3. What does this mean?
a) The company’s fixed costs are three times the variable costs
b) A 10% increase in sales will lead to a 30% increase in operating income
c) The company’s fixed costs exceed variable costs by a factor of 3
d) The company will break even at three units of sales
In the high-low method, what is the formula used to calculate the variable cost per unit?
a) (Highest cost – lowest cost) / (Highest activity – lowest activity)
b) Total fixed costs / Total activity
c) (Highest cost + lowest cost) / (Highest activity + lowest activity)
d) Total activity / Total costs
Which of the following statements about job order costing is true?
a) It is used for products that are identical and mass-produced
b) It tracks direct materials, direct labor, and overhead for each job separately
c) It is only used by service companies
d) It is used to accumulate costs for each unit produced in a batch
In absorption costing, which of the following is included in the cost of goods manufactured?
a) Only variable costs
b) Only fixed manufacturing overhead
c) Direct materials, direct labor, and both variable and fixed manufacturing overhead
d) Only direct materials and direct labor
A company is deciding whether to accept an order at a special price. Which of the following is the primary factor to consider?
a) Whether the order will increase fixed costs
b) Whether the order will increase variable costs
c) Whether the order will cover incremental costs and contribute to profits
d) Whether the order will affect the regular pricing strategy
The principal difference between financial accounting and managerial accounting is:
a) Managerial accounting focuses on external users, while financial accounting focuses on internal users
b) Managerial accounting is primarily concerned with historical data, while financial accounting is focused on future projections
c) Financial accounting provides information for decision-making, while managerial accounting provides information for controlling operations
d) Managerial accounting is governed by GAAP, while financial accounting is not
Which of the following is NOT typically considered a product cost in manufacturing?
a) Direct materials
b) Direct labor
c) Advertising costs
d) Manufacturing overhead
A company manufactures a product that requires direct materials costing $5 per unit, direct labor costing $3 per unit, and manufacturing overhead of $4 per unit. If 1,000 units are produced, what is the total manufacturing cost?
a) $8,000
b) $12,000
c) $10,000
d) $14,000
Which of the following costs are likely to be relevant in a make-or-buy decision?
a) Sunk costs
b) Opportunity costs
c) Depreciation on existing equipment
d) Both b and c
A company reports a contribution margin of $300,000 and fixed costs of $200,000. What is the break-even point in sales dollars?
a) $500,000
b) $200,000
c) $100,000
d) $300,000
If a company has sales of $1,000,000 and variable costs of $600,000, what is the contribution margin ratio?
a) 40%
b) 60%
c) 50%
d) 70%
Which of the following best describes a variable cost?
a) A cost that varies in direct proportion to changes in production or sales volume
b) A cost that remains constant per unit, but increases in total as production increases
c) A cost that is incurred regardless of the production level
d) A cost that remains constant regardless of production levels
If a company’s sales are $500,000, its contribution margin is 40%, and its fixed costs are $150,000, what is the break-even point in sales dollars?
a) $250,000
b) $375,000
c) $500,000
d) $600,000
The purpose of a flexible budget is to:
a) Create a standard cost system
b) Adjust for changes in activity levels
c) Provide detailed information for fixed costs only
d) Predict future cash flows
What is the term for the costs that change in total, but not per unit, as production levels increase?
a) Variable costs
b) Fixed costs
c) Semi-variable costs
d) Step costs
The contribution margin per unit is the difference between:
a) Sales revenue and fixed costs
b) Sales revenue and variable costs
c) Fixed costs and total revenue
d) Direct labor and direct materials costs
Which of the following is a key component of a master budget?
a) Capital expenditures budget
b) Only the income statement and cash flow statement
c) Only the sales forecast
d) Only fixed cost budgets
What is the purpose of a cost-volume-profit (CVP) analysis?
a) To calculate the break-even point and evaluate the impact of sales and cost changes
b) To allocate overhead costs to products
c) To determine the tax liability of a company
d) To set product prices based on production costs
If a company’s variable cost per unit is $12 and the sales price per unit is $20, what is the contribution margin per unit?
a) $8
b) $12
c) $20
d) $32
Which of the following is a characteristic of a mixed cost?
a) It is composed of both fixed and variable components
b) It varies in direct proportion to the level of activity
c) It remains constant as production levels change
d) It is considered a fixed cost in the short run
What is the primary advantage of using activity-based costing (ABC) over traditional costing methods?
a) It is less expensive to implement
b) It more accurately assigns overhead costs based on activities that drive costs
c) It simplifies cost allocation by using fewer cost drivers
d) It eliminates the need for fixed costs
The breakeven point in units is calculated as:
a) Total fixed costs / Contribution margin per unit
b) Contribution margin per unit / Total fixed costs
c) Sales price per unit / Contribution margin
d) Total fixed costs / Sales price per unit
Which of the following costs is considered a fixed cost in the short run?
a) Direct materials
b) Variable labor costs
c) Rent on factory building
d) Sales commissions
In the context of managerial accounting, which of the following statements is true regarding sunk costs?
a) Sunk costs should be considered when making future decisions
b) Sunk costs are variable costs that change with the level of production
c) Sunk costs are costs that have already been incurred and cannot be recovered
d) Sunk costs are always relevant in decision-making
What is the formula for the contribution margin ratio?
a) Contribution margin / Sales
b) Fixed costs / Contribution margin
c) Sales / Contribution margin
d) Total costs / Sales
A company produces 1,000 units of a product at a cost of $25 per unit. If they increase production to 1,500 units and the total cost increases to $40,000, what is the variable cost per unit?
a) $10
b) $25
c) $15
d) $20
The concept of “just-in-time” inventory management aims to:
a) Increase inventory levels to prevent stockouts
b) Minimize inventory holding costs by producing goods only when needed
c) Maximize storage space for raw materials
d) Avoid paying overtime wages to workers
What is the main difference between job order costing and process costing?
a) Job order costing is used for identical products, while process costing is used for unique products
b) Job order costing accumulates costs by individual jobs, while process costing accumulates costs by processes or departments
c) Job order costing is used in service industries, while process costing is used in manufacturing industries
d) Job order costing uses only direct costs, while process costing uses both direct and indirect costs
Which of the following best describes an example of a discretionary fixed cost?
a) Depreciation on factory machinery
b) Salaries of permanent employees
c) Advertising expenditures
d) Insurance on company vehicles
If a company has total fixed costs of $300,000 and a contribution margin of 40%, what is the required sales revenue to break even?
a) $120,000
b) $750,000
c) $500,000
d) $300,000
A company produces and sells a product for $20 each. The variable cost per unit is $12, and fixed costs total $48,000. How many units must be sold to break even?
a) 6,000 units
b) 4,000 units
c) 2,400 units
d) 8,000 units
If a company’s contribution margin ratio is 30%, how much additional sales is required to increase profit by $15,000?
a) $50,000
b) $45,000
c) $40,000
d) $30,000
A company is evaluating whether to continue or discontinue a product line. Which of the following costs would be considered avoidable if the product line is discontinued?
a) Allocated fixed overhead costs
b) Sunk costs
c) Direct materials and labor
d) Common costs
In the contribution margin income statement, which of the following is subtracted from sales to determine the contribution margin?
a) Fixed costs
b) Variable costs
c) Gross profit
d) Selling and administrative expenses
Which of the following is true of absorption costing?
a) It includes only variable manufacturing costs in the cost of goods sold
b) It excludes fixed manufacturing overhead from product costs
c) It includes both fixed and variable manufacturing costs in the cost of goods sold
d) It is used primarily by service companies
A company has fixed costs of $200,000, a contribution margin per unit of $50, and sales of $400,000. How many units must be sold to break even?
a) 4,000 units
b) 5,000 units
c) 6,000 units
d) 7,000 units
The high-low method is used to estimate:
a) Fixed costs and total costs
b) Variable costs and fixed costs
c) The break-even point
d) Contribution margin
Which of the following is NOT a characteristic of activity-based costing (ABC)?
a) It assigns overhead costs based on cost drivers
b) It provides more accurate product costing than traditional costing methods
c) It uses broad averages to allocate costs to products
d) It helps identify non-value-added activities
A company uses a standard costing system. The direct labor efficiency variance is calculated as:
a) (Actual hours worked – Standard hours allowed) × Standard hourly rate
b) (Standard hours allowed – Actual hours worked) × Actual hourly rate
c) (Actual rate paid – Standard rate) × Standard hours allowed
d) (Standard rate – Actual rate) × Actual hours worked
In a cost-volume-profit analysis, what is the margin of safety?
a) The number of units sold above the break-even point
b) The total sales revenue at the break-even point
c) The difference between sales and variable costs
d) The contribution margin ratio
A company’s contribution margin ratio is 60%. If the company’s fixed costs are $100,000, how much in sales revenue is needed to achieve a target profit of $50,000?
a) $250,000
b) $250,000 plus fixed costs
c) $150,000
d) $83,333
Which of the following is an example of a sunk cost?
a) The purchase cost of machinery
b) The cost of research and development already incurred for a project
c) Future costs of maintaining a product
d) The cost of labor to produce a product
What does a cost behavior analysis help a company to determine?
a) The contribution margin ratio
b) How costs change as production or sales volume changes
c) The break-even point
d) The company’s ability to cover fixed costs
What is the primary advantage of flexible budgeting over static budgeting?
a) It adjusts for changes in the volume of activity
b) It allows for easier cost allocation
c) It focuses on short-term goals
d) It eliminates the need for variance analysis
The contribution margin is best used to:
a) Measure a company’s ability to pay fixed costs
b) Determine the break-even point in units
c) Calculate the amount of profit that can cover fixed costs and contribute to profit
d) Calculate total operating expenses
What is the breakeven point in sales dollars, if the breakeven point in units is 1,000 and the selling price per unit is $40?
a) $40,000
b) $60,000
c) $80,000
d) $100,000
A company uses activity-based costing (ABC) to allocate overhead costs. Which of the following activities is likely to be considered a cost driver in ABC?
a) Direct labor hours
b) Number of machine setups
c) Direct materials used
d) Number of units produced
In a make-or-buy decision, which of the following costs should be excluded from the analysis?
a) Relevant costs that differ between making and buying
b) Fixed manufacturing overhead costs that will be eliminated if the part is purchased
c) Sunk costs
d) Variable manufacturing costs incurred in producing the part
Which of the following is true regarding the break-even point?
a) It is the point at which total revenue equals total variable costs
b) It is the point at which total revenue equals total fixed costs
c) It is the point at which total revenue equals total costs, resulting in no profit or loss
d) It is the point at which profit is maximized
Which of the following costs would NOT be included in the product cost under absorption costing?
a) Direct materials
b) Direct labor
c) Fixed selling and administrative expenses
d) Variable manufacturing overhead
The direct labor rate variance is calculated as:
a) (Actual rate – Standard rate) × Actual hours worked
b) (Standard hours allowed – Actual hours worked) × Standard rate
c) (Actual hours worked – Standard hours allowed) × Actual rate
d) (Actual rate – Standard rate) × Standard hours allowed
In an absorption costing system, which of the following would be classified as a product cost?
a) Fixed administrative costs
b) Depreciation on factory machinery
c) Advertising costs
d) Selling expenses
A company plans to sell 5,000 units at $30 each. Variable costs are $18 per unit, and fixed costs are $50,000. What is the contribution margin per unit?
a) $12
b) $18
c) $30
d) $50
A company produces 10,000 units at a total cost of $300,000. The fixed costs are $150,000, and variable costs are $15 per unit. What is the total variable cost?
a) $100,000
b) $150,000
c) $250,000
d) $300,000
A company uses a process costing system. The cost of work in process at the beginning of the period was $60,000. Additional costs incurred during the period were $140,000. What is the total cost of work in process?
a) $60,000
b) $100,000
c) $140,000
d) $200,000
Which of the following is NOT included in product costs under absorption costing?
a) Direct materials
b) Direct labor
c) Selling expenses
d) Manufacturing overhead
In a make-or-buy decision, which of the following costs should be considered relevant?
a) Sunk costs
b) Fixed costs that will continue regardless of the decision
c) Variable costs that will differ between the alternatives
d) Depreciation on existing equipment
The primary purpose of cost-volume-profit (CVP) analysis is to:
a) Determine the selling price of a product
b) Calculate the break-even point
c) Analyze the company’s tax obligations
d) Determine the total cost of production
Which of the following is an example of a fixed cost?
a) Direct materials
b) Direct labor
c) Rent on a factory building
d) Sales commissions
What is the break-even point in units, given fixed costs of $100,000, a contribution margin of $25 per unit, and a selling price of $50 per unit?
a) 2,000 units
b) 4,000 units
c) 5,000 units
d) 10,000 units
A company has total sales of $500,000, variable costs of $300,000, and fixed costs of $100,000. What is the contribution margin ratio?
a) 20%
b) 40%
c) 60%
d) 80%
The total cost of producing 2,000 units includes $50,000 in fixed costs and $60,000 in variable costs. What is the average cost per unit?
a) $25
b) $55
c) $60
d) $75
In a job order costing system, the costs of direct materials, direct labor, and manufacturing overhead are accumulated in which account?
a) Work in process inventory
b) Finished goods inventory
c) Raw materials inventory
d) Cost of goods sold
What is the primary disadvantage of using absorption costing over variable costing?
a) It overstates fixed costs
b) It can lead to overproduction
c) It ignores variable manufacturing costs
d) It does not allocate fixed manufacturing overhead to products
If a company has fixed costs of $200,000, a contribution margin per unit of $50, and sells each unit for $100, how many units must the company sell to break even?
a) 2,000 units
b) 4,000 units
c) 6,000 units
d) 8,000 units
A company has a direct labor efficiency variance of $5,000 favorable. This indicates that:
a) The company used more labor hours than expected
b) The company used fewer labor hours than expected
c) The actual labor rate was higher than the standard labor rate
d) The company produced more units than expected
What is the purpose of a flexible budget?
a) To estimate revenues at a given level of sales
b) To show the expected revenues and costs at various levels of activity
c) To measure the difference between actual and budgeted performance
d) To determine the break-even point
What type of cost is depreciation on equipment used in a factory?
a) Variable cost
b) Fixed cost
c) Mixed cost
d) Sunk cost
If a company uses a standard costing system, how is the direct materials price variance calculated?
a) (Actual price – Standard price) × Actual quantity
b) (Standard price – Actual price) × Standard quantity
c) (Actual quantity – Standard quantity) × Actual price
d) (Actual price – Standard price) × Standard quantity
Which of the following would most likely be treated as an indirect cost in a manufacturing company?
a) Direct labor
b) Factory supervisor’s salary
c) Direct materials
d) Factory utilities
What is the key difference between relevant and irrelevant costs in decision-making?
a) Relevant costs can be avoided depending on the decision, while irrelevant costs cannot be changed
b) Relevant costs are fixed costs, while irrelevant costs are variable
c) Relevant costs do not impact future decisions, while irrelevant costs do
d) Relevant costs are sunk costs, while irrelevant costs are future costs
A company uses a job order costing system and incurs $50,000 in manufacturing overhead costs. The company applies overhead based on direct labor hours. If the company worked 2,000 direct labor hours, what is the predetermined overhead rate?
a) $25 per labor hour
b) $50 per labor hour
c) $100 per labor hour
d) $200 per labor hour
In an absorption costing system, which of the following is included in the cost of goods sold?
a) Variable selling expenses
b) Variable administrative expenses
c) Fixed manufacturing overhead
d) Fixed selling expenses
What is the main advantage of activity-based costing (ABC)?
a) It is simpler to implement than traditional costing
b) It provides more accurate cost information by assigning overhead based on activities
c) It allocates costs based on direct labor hours
d) It excludes fixed costs from product costs
A company uses process costing. The ending inventory consists of 2,000 partially completed units. The degree of completion for materials is 80%, and for conversion costs, it is 50%. What is the equivalent units of production for materials?
a) 1,600
b) 2,000
c) 2,400
d) 2,800
Which of the following is considered a non-controllable cost for a department manager?
a) Departmental labor costs
b) Fixed overhead allocated to the department
c) Departmental supplies
d) Departmental direct materials
In a flexible budget, the total cost of production is calculated by:
a) Multiplying fixed costs by the number of units produced
b) Adding variable costs to fixed costs at each level of production
c) Subtracting the break-even point from the total sales
d) Using standard costs for each cost element
Which of the following is a direct cost for a manufacturing company?
a) Indirect labor
b) Direct materials
c) Depreciation on factory equipment
d) Factory rent
Which of the following is the primary purpose of an operating budget?
a) To plan for capital expenditures
b) To prepare the financial statements
c) To forecast future income and expenses
d) To evaluate actual performance
A company uses absorption costing. If production increases, the unit cost of production will:
a) Increase
b) Decrease
c) Stay the same
d) Not be affected by production levels
The flexible budget variance is the difference between the:
a) Actual costs and the flexible budget costs
b) Flexible budget costs and the static budget costs
c) Static budget costs and the actual costs
d) Actual costs and the static budget costs
Which of the following would be considered a sunk cost?
a) The cost of raw materials currently in inventory
b) The fixed cost of a factory lease that cannot be avoided
c) The cost of training new employees
d) The variable cost of direct materials
Which of the following is a characteristic of activity-based costing (ABC)?
a) It assigns costs based solely on direct labor hours
b) It eliminates the need for overhead cost allocation
c) It allocates indirect costs based on activities that drive costs
d) It is only applicable for large businesses
A company has fixed costs of $120,000 and a contribution margin of $10 per unit. What is the break-even point in units?
a) 6,000 units
b) 8,000 units
c) 12,000 units
d) 15,000 units
A company produces 5,000 units at a cost of $25,000 in direct materials, $15,000 in direct labor, and $10,000 in manufacturing overhead. What is the cost per unit?
a) $5
b) $6
c) $8
d) $10
In which of the following cases would a company likely use job order costing?
a) A company that produces large quantities of identical products
b) A company that manufactures custom-built machinery
c) A company that processes raw materials into finished goods
d) A company that mass-produces standard products
The direct materials price variance is calculated as:
a) (Actual price – Standard price) × Actual quantity
b) (Actual quantity – Standard quantity) × Standard price
c) (Standard price – Actual price) × Standard quantity
d) (Actual price – Standard price) × Standard quantity
If a company’s contribution margin ratio is 40%, what is the break-even point if fixed costs are $200,000?
a) $80,000
b) $100,000
c) $500,000
d) $1,000,000
A company uses a predetermined overhead rate based on direct labor hours. If the company applied $25,000 of overhead based on 5,000 direct labor hours worked, what is the predetermined overhead rate?
a) $1 per labor hour
b) $5 per labor hour
c) $10 per labor hour
d) $50 per labor hour
Which of the following statements best describes a flexible budget?
a) It adjusts budgeted revenues and expenses based on changes in production levels or activity
b) It is a budget that is used only for manufacturing companies
c) It is fixed and does not change once it is prepared
d) It only focuses on variable costs
A company has total variable costs of $500,000, total fixed costs of $200,000, and total revenue of $1,000,000. What is the contribution margin ratio?
a) 50%
b) 60%
c) 70%
d) 80%
A company is considering an investment in new machinery. The machinery will cost $100,000 and is expected to save $25,000 in costs annually. If the company requires a 10% return on investment, how many years will it take to recover the cost of the machinery using the payback period method?
a) 2 years
b) 3 years
c) 4 years
d) 5 years
Which of the following costs would NOT be included in a flexible budget?
a) Variable production costs
b) Fixed production costs
c) Variable selling and administrative costs
d) Variable direct materials
The cost of producing 500 units includes $40,000 in fixed costs and $60,000 in variable costs. What is the total cost per unit?
a) $100
b) $120
c) $140
d) $160
Which of the following is a disadvantage of using the weighted-average method in process costing?
a) It ignores beginning inventory costs
b) It is difficult to compute
c) It assumes all units are homogeneous
d) It does not account for unit cost differences
A company is comparing two alternatives. Alternative A has fixed costs of $50,000, and the variable costs are $20 per unit. Alternative B has fixed costs of $30,000, and the variable costs are $30 per unit. What is the indifference point in units?
a) 2,000 units
b) 2,500 units
c) 3,000 units
d) 3,500 units
The total cost for a product includes $500,000 in fixed costs and $200,000 in variable costs. If the company produces 10,000 units, what is the cost per unit?
a) $60
b) $70
c) $80
d) $90
If a company has an unfavorable direct labor efficiency variance, this means:
a) The company used more labor hours than the standard allowed
b) The company used fewer labor hours than the standard allowed
c) The actual labor rate was higher than expected
d) The company produced fewer units than expected
What type of variance occurs when the actual quantity of input exceeds the standard quantity allowed?
a) Price variance
b) Efficiency variance
c) Spending variance
d) Volume variance
A company produces and sells a product for $50 each. The variable cost is $30 per unit, and fixed costs are $100,000. How many units must be sold to break even?
a) 1,000 units
b) 2,000 units
c) 3,000 units
d) 4,000 units
In process costing, the equivalent units of production are:
a) The number of units completed and transferred to the next process
b) The number of units in process at the beginning of the period
c) The number of completed units and the portion of work done on partially completed units
d) The same as the number of units produced during the period
The primary purpose of cost-volume-profit (CVP) analysis is to:
a) Determine the total fixed costs
b) Identify the contribution margin
c) Determine the effect of changes in costs and volume on profits
d) Analyze variances in actual costs versus budgeted costs
A company’s fixed costs are $120,000. The contribution margin per unit is $30, and the selling price per unit is $50. What is the break-even point in units?
a) 2,000 units
b) 4,000 units
c) 6,000 units
d) 8,000 units