# Question 1 Use the following information to answer this question.

| October 3, 2018

Question 1
Use the following information to
Callaham Corporation is a wholesaler
that sells a single product. Management has provided the following cost data
for two levels of monthly sales volume. The company sells the product for
\$115.80 per unit.

Sales volume (units)

4,000

5,000

Cost of sales

\$338,000

\$422,500

\$89,600

\$106,000

The best estimate of the
total contribution margin when 4,300 units are sold is

Question 2

Indiana Corporation produces a
single product that it sells for \$9 per unit. During the first year of
operations, 100,000 units were produced, and 90,000 units were sold.
Manufacturing costs and selling and administrative expenses for the year were
as follows:

Fixed Costs

Variable Costs

Raw materials

\$1.75
per unit produced

Direct labor

\$1.25
per unit produced

\$100,000

\$0.50
per unit produced

\$70,000

\$0.60
per unit
sold

What was Indiana Corporation’s net
operating income for the year using variable costing?

Question 3

Green Company’s variable expenses
are 75% of sales. At a sales level of \$400,000, the company’s degree of
operating leverage is 8. At this sales level, fixed expenses are

Question 4
Callaham Corporation is a wholesaler
that sells a single product. Management has provided the following cost data
for two levels of monthly sales volume. The company sells the product for
\$115.80 per unit.

Sales volume (units)

4,000

5,000

Cost of sales

\$338,000

\$422,500

\$89,600

\$106,000

The best estimate of the
total variable cost per unit is

Question 5

Last year, Gransky Corporation’s
variable costing net operating income was \$52,100, and its ending inventory
increased by 400 units. Fixed manufacturing overhead cost was \$7 per unit.
What was the absorption costing net operating income last year?

Question 6

Lifsey
Wedding Fantasy Company makes very elaborate wedding cakes to order. The
owner of the company has provided the following data concerning the activity
rates in its activity-based costing system:

Activity Cost Pools

Activity Rate

Size-related

\$0.94 per guest

Complexity-related

\$31.62 per
tier

Order-related

\$55.70 per
order

The measure of activity for
the size-related activity cost pool is the number of planned guests at
the wedding reception. The greater the number of guests, the larger the
cake.
The measure of complexity is
the number of tiers in the cake.
The activity measure for the
order-related cost pool is the number of orders. (Each wedding involves
one order.)
The activity rates include
the costs of raw ingredients, such as flour, sugar, eggs, and
shortening. The activity rates don’t include the costs of purchased
decorations, such as miniature statues and wedding bells, which are
accounted for separately.

Data
concerning two recent orders are listed here:

Pyburn Wedding

Smith Wedding

Number of
reception guests

72

189

Number of
tiers on the cake

4

5

Cost of
purchased decorations for cake

\$29.92

\$68.75

Assuming that
the company charges \$556.96 for the Smith wedding cake, what would be the
overall margin on the order?

Question
7
Slosh Cleaning Corporation services
both residential and commercial customers. Slosh expects the following
operating results next year for each type of customer:

Operating Results

Residential

Commercial

Sales

\$60,000

\$140,000

Contribution margin ratio

50%

30%

Slosh expects to have \$18,000 in
fixed expenses next year. What would Slosh’s total dollar sales have to be next
year to generate a profit of \$90,000?

Question 8
Daniele Corporation uses an
activity-based costing system with the following three activity cost pools:

Activity
Cost Pool

Total
Activity

Fabrication

50,000 machine-hours

Order processing

500 orders

Other

not applicable

The Other activity cost pool is used
to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the
following data concerning its costs:

Cost Data

Wages and salaries

\$280,000

Depreciation

\$200,000

Occupancy

\$140,000

Total

\$620,000

The distribution of resource
consumption across activity cost pools is given below:

Activity Cost Pools

Fabrication

Order
Processing

Other

Total

Wages and salaries

60%

30%

10%

100%

Depreciation

20%

35%

45%

100%

Occupancy

10%

50%

40%

100%

The activity rate for the
Fabrication activity cost pool is closest to _______ per machine hour.

Question 9
Callaham Corporation is a wholesaler
that sells a single product. Management has provided the following cost data
for two levels of monthly sales volume. The company sells the product for
\$115.80 per unit.

Sales volume (units)

4,000

5,000

Cost of sales

\$338,000

\$422,500

\$89,600

\$106,000

The best estimate of the
total monthly fixed cost is

Question 10
Lifsey Wedding Fantasy Company makes
very elaborate wedding cakes to order. The owner of the company has provided
the following data concerning the activity rates in its activity-based costing
system:

Activity Cost Pools

Activity Rate

Size-related

\$0.94 per guest

Complexity-related

\$31.62 per tier

Order-related

\$55.70 per order

The measure of activity for the
size-related activity cost pool is the number of planned guests at the
wedding reception. The greater the number of guests, the larger the cake.
The measure of complexity is
the number of tiers in the cake.
The activity measure for the
order-related cost pool is the number of orders. (Each wedding involves
one order.)
The activity rates include the
costs of raw ingredients, such as flour, sugar, eggs, and shortening. The
activity rates don’t include the costs of purchased decorations, such as
miniature statues and wedding bells, which are accounted for separately.

Data concerning two recent orders
are listed here:

Pyburn
Wedding

Smith
Wedding

Number of reception guests

72

189

Number of tiers on the cake

4

5

Cost of purchased decorations for
cake

\$29.92

\$68.75

Suppose the company decides that the
present activity-based costing system is too complex and that all costs (except
for the costs of purchased decorations) should be allocated on the basis of the
number of guests. In that event, what would you expect to happen to the costs
of cakes?

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