Multiple Choice Questions – QUIZ 3Select the best answer for the following questions. Each question isworth 5 points.Q...

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Multiple Choice Questions – QUIZ 3
Select the best answer for the following questions. Each question is
worth 5 points.
Question 1 (5 points)
Joe's Tuxedos has monthly fixed costs of $12,000. The variable costs of sales are 60%. What
is the break-even monthly sales revenue?
Question 1 options:
A)
B)
C)
D)

$20,000
$30,000
$19,200
$7,200

Question 2 (5 points)
Delta Manufacturing has sales of $2,000,000 with direct materials cost of $400,000, direct
labor of $280,000, variable overhead of $120,000, and fixed costs of $300,000. What is
Delta's contribution margin percentage?
Question 2 options:
A)
B)
C)
D)

40%
55%
60%
45%

Question 3 (5 points)
If a company has a 45% contribution margin ratio and has fixed costs of $250,000, how much
sales does it need to earn a gross profit of $200,000?

Question 3 options:
A)
B)
C)
D)

$1,000,000
$555,556
$818,182
$652,500

Question 4 (5 points)
Leisure Products management wants to ensure that each product makes a profit. The
company produced a hammock that sold 3,500 units at $80 per unit. The variable cost of
production was $36 per unit. The fixed costs were $110,000. What was the margin of safety?
Question 4 options:
A)
B)
C)
D)

$54,000
$80,000
$126,000
$20,000

Question 5 (5 points)
Sports Specialty Inc. produces a bicycle that it normally sells wholesale for $250 per bike.
The variable costs of production are $160 and the fixed cost for this product line is $154,000
per month. The company has been selling this product at a rate of 2,000 units per month. The
company has received an order for 1,000 bikes at a price of $182 per bike. The order is to ship
to a market where the company has no business, so it is believed it will not adversely affect
existing business. The company has the capacity to produce the special order. How much will
operating profit increase if Sports Specialty accepts this order?

Question 5 options:
A)
B)
C)
D)

increase of $26,000
increase of $48,000
decrease of $55,000
increase of $22,000

Question 6 (5 points)
Premier Manufacturing makes and distributes a wall clock that is popular with schools and
other institutions. Normal monthly sales are 2,500 clocks at an average sale price of $40 per
clock. Production of each clock takes 15 minutes of direct labor and has material costs of $14.
The direct labor rate is $22 per hour, and overhead is applied at a rate of $40 per direct labor
hour. The overhead spending is 60% fixed and 40% variable costs. Premier has been
approached by a supplier offering to supply all of the clocks at a finished cost of $25 per
clock. Assume that all fixed overhead would remain, but the variable overhead would be
eliminated. What would be the change in monthly operating income if Premier buys the
clocks instead of making them?
Question 6 options:
A)
B)
C)
D)

increase of $3,750
decrease of $3,750
increase of $11,250
decrease of $11,250

Question 7 (5 points)
Roscoe Enterprises has sales for a three-month period as follows: May, $240,000; June,
$280,000; July, $275,000. All sales are on account, and history has shown that accounts
receivable are typically collected 10% in the month of the sale, 60% in the month after the
sale, and 30% two months after the sale. What are Roscoe's expected cash collections in the
month of July?
Question 7 options:
A)

$267,500

B)
C)
D)

$172,000
$275,000
$280,000

Question 8 (5 points)
Mega Manufacturing has a budget to sell 100,000 units of a certain product at a selling price
of $35 per unit. Variable costs for materials, labor, and overhead are $18 per unit. Fixed cost is
$800,000. Actual sales were 110,000 units, and management would like to see actual
manufacturing performance compared to a budget adjusted for volume (flexible budget).
What would be the adjusted budgeted operating profit?
Question 8 options:
A)
B)
C)
D)

$1,870,000
$900,000
$1,070,000
$990,000

Question 9 (5 points)
A company president wants the chief financial officer to tell him how many sales are required
to make a $1,000,000 operating profit. Variable production costs are 70% of sales, and fixed
costs are $2,750,000. What are the required sales, rounded to the closest dollar?
Question 9 options:
A)
B)
C)

$8,750,000
$5,357,143
$9,166,667

D)

$12,500,000

Question 10 (5 points)
Top Dog Company has a budget with sales of 5,000 units and $3,200,000. Variable costs are
budgeted at $1,750,000, and fixed overhead is budgeted at $900,000. What is the budgeted
manufacturing cost per unit?
Question 10 options:
A)
B)
C)
D)

$350
$530
$640
$460

Question 11 (5 points)
Zarena was reviewing the water bill for her dog day care and spa and determined that her
highest bill, $3,800, occurred in May when she washed 400 dogs and her lowest bill, $2,400,
occurred in November when she washed 200 dogs. What was the variable cost per dog
associated with Zarena’s water bill?
Question 11 options:
A) $6.00
B) $12.00
C) $9.50
D) $7.00
Question 12 (5 points)
Phan Company sold 2,000 units in December at a price of $35 per unit. The variable cost is
$20 per unit. The monthly fixed costs are $10,000. What is the operating income earned in
December?
Question 12 options:
A) $30,000
B) $70,000
C) $20,000

D) $40,000
Question 13 (5 points)
Vatsala sells hand-knit scarves at the flea market. Each scarf sells for $25.Vatsala pays $30 to
rent a vending space for one day. The variable costs are $15 per scarf. What total revenue
amount does she need to earn to break even?
Question 13 options:
A) $85
B) $75
C) $50
D) $100
Question 14 (5 points)
Brielle Company sells glass vases at a wholesale price of $2.50 per unit. The variable cost of
manufacture is $1.75 per unit. The monthly fixed costs are $7,500. Brielle’s current sales are
25,000 units per month. If Brielle wants to increase operating income by 20%, how many
additional units, must Brielle sell? (Round your intermediate calculations to two decimal
places)
Question 14 options:
A) 145,000 glass vases
B) 7,500 glass vases
C) 13,500 glass vases
D) 3,000 glass vases

Question 15 (5 points)
Venkat Company has provided the following information regarding the two products that it
sells:
Jet Boats

Ski Boats

Sales Price per unit

$8000

$20000

Variable Cost per unit

4800

14000

Annual fixed costs are $280,000.
How many units must be sold in order for Venkat to breakeven, assuming
that Venkat sells five jet boats for every two ski boats sold?
Question 15 options:
A) 70 jet boats and 28 ski boats
B) 50 jet boats and 20 ski boats
C) 20 jet boats and 50 ski boats
D) 45 jet boats and 28 ski boats

Question 16 (5 points)
White Marsh Company has prepared the following sales budget:
Month

Budgeted Sales

March

$200,000

April

180,000

May

220,000

June

260,000

Cost of goods sold is budgeted at 60% of sales and the inventory at the
end of February was $36,000. Desired inventory levels at the end of each
month are 20% of the next month's cost of goods sold. What is the
desired beginning inventory on June 1?
Question 16 options:
A) $52,000

B) $26,400
C) $43,200
D) $31,200
Question 17 (5 points)
EZ Financing Inc. has prepared the operating budget for the first quarter of 2015. They
forecast sales of $50,000 in January, $60,000 in February, and $70,000 in March. Variable and
fixed expenses are as follows:
Variable: Power cost (40% of Sales)
Miscellaneous expenses: (5% of Sales)
Fixed: Salary expense: $8,000 per month
Rent expense: $5,000 per month
Depreciation expense: $1,200 per month
Power cost/fixed portion: $800 per month
Miscellaneous expenses/fixed portion: $1,000 per month
Calculate total selling and administrative expenses for the month of
January.
Question 17 options:
A) $38,500
B) $47,500
C) $41,700
D) $43,000
Question 18 (5 points)
Mumbai Inc. has prepared the following purchases budget:
Month
Budgeted Purchases
JUNE

$67,000

JULY

72,500

AUGUST

76,300

SEPTEMBER

73,700

OCTOBER

69,200

All purchases are paid for as follows: 10% in the month of purchase,
50% in the following month, and 40% two months after purchase.
Calculate total cash payments made in October for purchases.
Question 18 options:
A) $72,630
B) $70,680
C) $70,520
D) $74,290

Question 19 (5 points)
Mumbai Inc. has prepared the following purchases budget:
Month
Budgeted Purchases
JUNE

$67,000

JULY

72,500

AUGUST

76,300

SEPTEMBER

73,700

OCTOBER

69,200

All purchases are paid for as follows: 10% in the month of purchase,
50% in the following month, and 40% two months after purchase.
Calculate balance of Accounts payable at the end of October.
Question 19 options:
A) $77,680
B) $91,760
C) $69,330
D) $74,290
Question 20 (5 points)

The budgeted production of Fells Point Inc. is 8,000 units. Each unit
requires 40 minutes of direct labor work to complete. The direct labor

rate is $100 per hour. Calculate the budgeted cost of direct labor for the
month.
Question 20 options:
A) $533,333.33
B) $500,000.00
C) $566,666.66
D) $633,333.33










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