Question 1

The type of information provided by managerial accounting differs from the information provided by financial accounting.

Accepted Answer

Managerial accounting focuses on internal decision-making and provides information to management for planning, controlling, and evaluating business operations. Financial accounting, on the other hand, is geared towards external reporting requirements and provides information to stakeholders such as investors, creditors, and regulatory agencies. The two types of accounting serve different purposes and provide different types of information.

Question 2

The purpose of managerial accounting is to provide managers with information that is useful for internal decision making.

Accepted Answer

Managerial accounting focuses on providing information that is relevant and helpful for managers in making decisions related to the operation and management of the company. This information is used internally and is not typically disclosed to outside parties.

Question 3

Antique Works is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. The cost data are as follows:  If Antique expects to sell 40 units per month, what is his margin of safety expressed in units per month?

Accepted Answer

The answer of Antique Works is owned and operated by...

Question 4

Divine Foods produces a gourmet condiment which sells for $16.00 per unit. Variable costs are $6 per unit, and fixed costs are $5,000 per month. If Divine expects to sell 1,500 units, compute the margin of safety in dollars.

Accepted Answer

The answer of Divine Foods produces a gourmet condiment which...

Question 5

Becky's Bakery sells three large muffins for every two small ones. A small muffin sells for $3.00, with a variable cost of $2.00. A large muffin sells for $5.00 with a variable cost of $2.50. What is the weighted-average contribution margin? (Round your intermediate calculations to one decimal place)

Accepted Answer

The answer of Becky's Bakery sells three large muffins for...

Question 6

Browning Company sells two products-X and Y. Product X is sold for $25 per unit and has a variable cost per unit of $15. Product Y is sold for $30 per unit and has a unit variable cost of $20. Total fixed costs for the company are $20,000. Browning Company typically sells three units of Product X for every unit of Product Y. What is the breakeven point in total units?

Accepted Answer

To find the breakeven point, calculate the weighted average contribution margin per unit. Product X has a contribution margin of $10 ($25 - $15), and Product Y has a contribution margin of $10 ($30 - $20). The sales mix is 3:1, so the weighted average contribution margin is (3/4)*$10 + (1/4)*$10 = $10. The breakeven point in units is total fixed costs divided by the weighted average contribution margin, which is $20,000 / $10 = 2,000 units.

Question 7

Jackson Company has provided the following information regarding the two products that it sells:  Annual fixed costs are $280,000. How many units must be sold in order for Jackson to breakeven, assuming that Jackson sells five jet boats for every two ski boats sold?

Accepted Answer

The answer of Jackson Company has provided the following information...

Question 8

Which of the following costs is considered a period cost under variable costing?

Accepted Answer

Under variable costing, only variable costs are considered as product costs. Fixed manufacturing overhead is considered a period cost because it is not directly tied to the production of a specific product and is expensed in the period it is incurred.

Question 9

Mist Company sells two products-A and B. Mist predicts that it will sell 2,500 units of A and 1,500 units of B during the next period. The unit contribution margins are $3.50 and $4.80, respectively. What is the weighted-average unit contribution margin?

Accepted Answer

The weighted-average unit contribution margin is calculated by multiplying each product's contribution margin by its proportion of total sales, then summing these amounts: [(2500 * $3.50) + (1500 * $4.80)] / (2500 + 1500) = $3.99 per product.

Question 10

Antique Works is owned and operated by a craftsman who makes replicas of historic firearms for museums, sportsmen, and collectors. He is currently producing 40 flintlock muskets per month. Cost data are as follows:  If Antique expects to sell 40 units per month, how much is his margin of safety expressed in sales revenue?

Accepted Answer

The answer of Antique Works is owned and operated by...

Question 11

Under variable costing, fixed manufacturing overhead costs are treated as a product cost.

Accepted Answer

Under variable costing, fixed manufacturing overhead costs are treated as a period cost and are not included in calculating the cost of the product.

Question 12

Variable costing cannot be used for preparing financial reports for external users, such as investors and creditors.

Accepted Answer

Variable costing is a managerial accounting technique that only includes variable costs in the cost of goods sold and does not allocate fixed costs. As a result, it may not accurately reflect the full cost of producing a product or service and may not be acceptable for external financial reporting purposes, which require the full absorption costing method.

Question 13

Which of the following is true of absorption costing?

Accepted Answer

Absorption costing treats both variable and fixed manufacturing costs as product costs, meaning they are included in the cost of goods sold and inventory valuation. This is in contrast to variable costing, where only the variable manufacturing costs are considered product costs, and the fixed manufacturing costs are treated as period costs.

Question 14

Pep Soda, a local convenience store, sells soft drinks. It sells two large drinks for every small drink. A large drink sells for $1.50 with a variable cost of $0.60. A small drink sells for $1.00 with a variable cost of $0.50. The weighted average contribution margin is: (Round your intermediate calculations and final answer to two decimal places)

Accepted Answer

The weighted average contribution margin is calculated by considering the sales mix and the contribution margin of each product. For large drinks: Contribution Margin = $1.50 - $0.60 = $0.90. For small drinks: Contribution Margin = $1.00 - $0.50 = $0.50. The sales mix is 2 large drinks for every 1 small drink, so the weighted average contribution margin = (2/3 * $0.90) + (1/3 * $0.50) = $0.77 per drink.

Question 15

The only difference between absorption costing and variable costing in the determination of product costs is the way fixed manufacturing overhead costs are treated.

Accepted Answer

The statement is true. In absorption costing, fixed manufacturing overhead costs are included in the product cost, while in variable costing, they are treated as period expenses and not allocated to the product cost.

Question 16

The primary focus of a contribution margin income statement is on gross profit.

Accepted Answer

A contribution margin income statement focuses on separating variable costs from fixed costs to highlight the contribution margin, not gross profit.

Question 17

Under variable costing, the fixed manufacturing overhead costs are classified as period costs and are expensed in the period in which they are incurred.

Accepted Answer

Under variable costing, only variable manufacturing costs are included in the product cost and fixed manufacturing overhead costs are treated as period costs and expensed in the period in which they are incurred.

Question 18

Which of the following is true of variable costing?

Accepted Answer

Variable costing method assigns only variable manufacturing costs to products. Fixed manufacturing overhead costs are treated as period costs and are expensed in the period in which they are incurred. Administration and selling overhead costs, whether fixed or variable, are also treated as period costs and are expensed in the period in which they are incurred.

Question 19

Divine Foods produces a gourmet condiment which sells for $16 per unit. Variable costs are $6 per unit, and fixed costs are $5,000 per month. If Divine expects to sell 1,500 units, compute the margin of safety in units.

Accepted Answer

Margin of safety in units = Expected sales - Break-even sales
Break-even sales = (Fixed costs / Contribution margin per unit)
Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $16 - $6 = $10
Break-even sales = ($5,000 / $10) = 500 units
Margin of safety in units = 1,500 units - 500 units = 1,000 units. Therefore, the best choice is B.

Question 20

McDaniel Company sells two products-J and B. McDaniel predicts that it will sell 7,200 units of J and 5,600 units of B in the next period. The unit contribution margins are $2.85 and $6.30, respectively. What is the weighted-average unit contribution margin?

Accepted Answer

The weighted-average unit contribution margin is calculated by multiplying each product's contribution margin by its proportion of total sales, then summing these amounts. For McDaniel Company: [(7,200 units * $2.85) + (5,600 units * $6.30)] / (7,200 + 5,600) = $4.36 per product.

Quiz 21: Cost-Volume-Profit Analysis