Question 1

Deep Pit Mining mines three products. Gold ore sells for $1,000 per ton, variable costs are $600 per ton, and fixed mining costs are $250,000. The segment margin for 2016 was $(100,000). The management of Deep Pit Mining was considering dropping the mining of gold ore. Only one-half of the fixed expenses are direct and would be eliminated if the segment was dropped. What were the sales (in tons) for 2016?

Accepted Answer

First, we need to calculate the contribution margin per ton for gold ore:

Contribution Margin = Selling Price - Variable Costs
Contribution Margin = $1,000 - $600
Contribution Margin = $400 per ton

Then, we can use the formula for segment margin:

Segment Margin = (Sales in Tons x Contribution Margin) - Fixed Costs

We know that the segment margin for 2016 was $(100,000) and that only one-half of the fixed expenses are direct and would be eliminated if the segment was dropped. This means that the remaining fixed costs would be $125,000.

$100,000 = (Sales in Tons x $400) - $375,000
$475,000 = Sales in Tons x $400
Sales in Tons = 1,187.5

However, we need to adjust for the fact that we are dropping half of the fixed expenses. This means that we need to subtract $125,000/($400/ton) = 312.5 tons from our sales in tons.

Sales in Tons = 1,187.5 - 312.5 
Sales in Tons = 875

Therefore, the sales in tons for 2016 is approximately 875 tons, which is closest to choice B (375 tons).

Question 2

The Crested Butte Company recorded the following data for a product line:

Accepted Answer

The answer of The Crested Butte Company recorded the following...

Question 3

The Crested Butte Company recorded the following data for a product line:

Accepted Answer

The answer of The Crested Butte Company recorded the following...

Question 4

The following information pertains to Cumberland Corporation:  Absorption costing net income would be how much greater or less than the variable costing net income?

Accepted Answer

The answer of The following information pertains to Cumberland Corporation:...

Question 5

Hammerhold Company has two divisions with the following segment margins for the current year: Northern, $250,000; Southern, $450,000. Common expenses of the company are $55,000. What is Hammerhold Company's net income?

Accepted Answer

To calculate Hammerhold Company's net income, we need to subtract the common expenses from the total segment margins. 
Total segment margins = Northern segment margin + Southern segment margin = $250,000 + $450,000 = $700,000 
Net income = Total segment margins - Common expenses = $700,000 - $55,000 = $645,000

Question 6

The contribution margin variance is favorable if the budgeted contribution margin is less than the:

Accepted Answer

The contribution margin variance is favorable when the actual contribution margin exceeds the budgeted contribution margin, indicating that the company has generated more profit per unit than anticipated.

Question 7

Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses.

Accepted Answer

The answer of Consider the following portion of a segmented...

Question 8

The contribution margin variance is the difference between the actual contribution margin and the:

Accepted Answer

The contribution margin variance compares the actual contribution margin with the budgeted contribution margin. It is used to determine if the actual revenue from sales and the actual variable expenses incurred are in line with what was budgeted.

Question 9

Division B earns a contribution margin of $200,000 and has a divisional margin of $70,000. If Division B is closed, all of the direct divisional expenses and $110,000 of common expenses can be eliminated. These facts indicate that closing the division will cause the firm's operating income to

Accepted Answer

The answer of Division B earns a contribution margin of...

Question 10

Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses. Division X
 What would be the effect on the firm's operating income if Division X were discontinued?

Accepted Answer

The answer of Consider the following portion of a segmented...

Question 11

Franklin Company's expected sales were 2,000 units at $100 per unit. During 2016, it had actual sales of 1,800 units at $110 per unit. Budgeted variable costs were $60 per unit. What is Franklin's total sales variance?

Accepted Answer

The answer of Franklin Company's expected sales were 2,000 units...

Question 12

Franklin Company's expected sales were 2,000 units at $100 per unit. During 2016, it had actual sales of 1,800 units at $110 per unit. Budgeted variable costs were $60 per unit. What is Franklin's sales price variance?

Accepted Answer

The sales price variance is calculated as (Actual Selling Price - Budgeted Selling Price) x Actual Units Sold. Here, it is ($110 - $100) x 1,800 = $18,000 Favorable (F).

Question 13

The following information pertains to Cumberland Corporation:  What is the value of ending inventory using the absorption costing method?

Accepted Answer

The answer of The following information pertains to Cumberland Corporation:...

Question 14

Taylor Company's budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. Taylor's sales price variance is

Accepted Answer

The sales price variance is calculated as (Actual Price - Budgeted Price) * Actual Quantity. Here, it is ($210 - $200) * 9,200 = $10 * 9,200 = $92,000 Favorable, because the actual price is higher than the budgeted price.

Question 15

Sarandon Company has the following information pertaining to its two divisions for 2016:

Accepted Answer

The answer of Sarandon Company has the following information pertaining...

Question 16

Franklin Company's expected sales were 2,000 units at $100 per unit. During 2016, it had actual sales of 1,800 units at $110 per unit. Budgeted variable costs were $60 per unit. What is Franklin's sales volume variance?

Accepted Answer

The answer of Franklin Company's expected sales were 2,000 units...

Question 17

Taylor Company's budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. Taylor's sales volume variance is

Accepted Answer

The answer of Taylor Company's budgeted sales were 10,000 units...

Question 18

Sarandon Company has the following information pertaining to its two divisions for 2016:  What is the operating income for Sarandon Company?

Accepted Answer

The answer of Sarandon Company has the following information pertaining...

Question 19

The sales price variance is created by a difference between:

Accepted Answer

The sales price variance is created by the difference between the actual sales price and the expected sales price. This variance measures the impact of changes in the selling price on the overall profitability of the organization.

Question 20

Taylor Company's budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. Taylor's total sales variance is

Accepted Answer

Total Sales Variance = Actual Sales - Budgeted Sales 
= (Actual units sold x Actual price per unit) - (Budgeted units sold x Budgeted price per unit) 
= (9,200 x $210) - (10,000 x $200) 
= $1,932,000 - $2,000,000 
= $68,000 (U)

Quiz 18: Pricing and Profitability Analysis

The Crested Butte Company recorded the following data for a product line:

The Crested Butte Company recorded the following data for a product line:

The following information pertains to Cumberland Corporation: Absorption costing net income would be how much greater or less than the variable costing net income?

Hammerhold Company has two divisions with the following segment margins for the current year: Northern, $250,000; Southern, $450,000. Common expenses of the company are $55,000. What is Hammerhold Company's net income?

The contribution margin variance is favorable if the budgeted contribution margin is less than the:

Consider the following portion of a segmented income statement for the year just ended. Assume that the fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses.

The contribution margin variance is the difference between the actual contribution margin and the:

Division B earns a contribution margin of $200,000 and has a divisional margin of $70,000. If Division B is closed, all of the direct divisional expenses and $110,000 of common expenses can be eliminated. These facts indicate that closing the division will cause the firm's operating income to

Franklin Company's expected sales were 2,000 units at $100 per unit. During 2016, it had actual sales of 1,800 units at $110 per unit. Budgeted variable costs were $60 per unit. What is Franklin's total sales variance?

Franklin Company's expected sales were 2,000 units at $100 per unit. During 2016, it had actual sales of 1,800 units at $110 per unit. Budgeted variable costs were $60 per unit. What is Franklin's sales price variance?

The following information pertains to Cumberland Corporation: What is the value of ending inventory using the absorption costing method?

Taylor Company's budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. Taylor's sales price variance is

Sarandon Company has the following information pertaining to its two divisions for 2016:

Franklin Company's expected sales were 2,000 units at $100 per unit. During 2016, it had actual sales of 1,800 units at $110 per unit. Budgeted variable costs were $60 per unit. What is Franklin's sales volume variance?

Taylor Company's budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. Taylor's sales volume variance is

Sarandon Company has the following information pertaining to its two divisions for 2016: What is the operating income for Sarandon Company?

The sales price variance is created by a difference between:

Taylor Company's budgeted sales were 10,000 units at $200 per unit. Actual sales were 9,200 units at $210 per unit. Taylor's total sales variance is