Assumptions limiting the reliability of breakeven analysis

ACCOUNTING 321 MCQs
Subject: Business    / Accounting
Question
One of the major assumptions limiting the reliability of breakeven analysis is that
A. Efficiency and productivity will continually increase. B. Total variable costs will remain unchanged over the relevant range. C. Total fixed costs will remain unchanged over the relevant range. D. The cost of production factors varies with changes in technology. The breakeven point in units increases when unit costs
A. Increase and sales price remains unchanged. B. Decrease and sales price remains unchanged. C. Remain unchanged and sales price increases. D. Decrease and sales price increases. A manufacturer has a limited supply of 1,200 lbs of raw materials that can be used to produce
either Product X or Y, details of which are given below.
Product X Product Y
Selling price per unit $200 $250 Variable costs per unit $176 $200 Raw materials used per unit 8 lbs 10 lbs Which one of the following should the manufacturer produce in order to maximize contribution
margin?
A. 150 units of Product X. B. 120 units of Product Y. C. 100 units of Product X and 40 units of Product Y. D. 100 units of Product X and 80 units of Product Y. Kator Co. is a manufacturer of industrial components. One of their products that is used as a
subcomponent in auto manufacturing is KB-96. This product has the following financial
structure per unit:
Selling price
$150 Direct materials
$ 20
Direct labor
15
Variable manufacturing overhead
12
Fixed manufacturing overhead
30
Shipping and handling
3
Fixed selling and administrative
10 Total costs
$ 90 Kator Co. has received a special, one-time order for 1,000 KB-96 parts.
Kator Co. has received a special, one-time order for 1,000 KB-96 parts. Assume that Kator is
operating at full capacity and that the contribution margin of the output that would be displaced
by the special order is $10,000. Using the original data, the minimum price that is acceptable for
this one-time special order is in excess of
A. $60 B. $70 C. $87 D. $100 Panyer Co. is a producer of a tank component. This product, J-5, has the following selling price
and costs per unit:
Selling price
$300
Direct materials
125
Direct labor
25
Variable manufacturing overhead
50
Shipping and handling
5
Fixed manufacturing overhead
15
Fixed selling and administrative
10 Total costs
$230 Panyer has recently received a special, one-time order for 2,000 units of J-5. Panyer currently has
enough excess capacity for this order. What should be the minimum price charged by Panyer?
A.
$155
B.
$205
C.
$230 D.
$300
Production of a special order will increase gross profit when the additional revenue from the
special order is greater than
A.
The direct materials and labor costs in producing the order.
B.
The fixed costs incurred in producing the order.
C.
The indirect costs of producing the order.
D.
The marginal cost of producing the order.
A company’s approach to an insourcing vs. outsourcing decision
A.
Depends on whether the company is operating at or below normal volume.
B.
Involves an analysis of avoidable costs.
C.
Should use absorption (full) costing.
D.
Should use activity-based costing
A company manufactures components for use in producing one of its finished products. When
12,000 units are produced, the full cost per unit is $35, separated as follows:
Direct materials
Direct labor $ 5
15 Variable overhead 10
Fixed overhead 5 A supplier has offered to sell 12,000 components to the company for $37 each. If the company
accepts the offer, some of the facilities currently being used to manufacture the components can
be rented as warehouse space for $40,000. However, $3 of the fixed overhead currently applied
to each component would have to be covered by the company’s other products. What is the
differential cost to the company of purchasing the components from the supplier? A.
$8,000
B.
$20,000
C.
$24,000
D.
$44,000
The Robo Division, which is part of a large company, has been approached to submit a bid for a
potential project for a customer. Robo Division has been informed by the customer that they will
not consider bids over $8,000,000. Robo Division purchases its materials internally from the
Cross Division. There would be no additional fixed costs for either the Robo or Cross Divisions.
Information regarding this project is as follows:
Cross Division
Robo Division Variable costs
$1,500,000
$4,800,000
Transfer price
3,700,000
-If Robo Division submits a bid for $8,000,000, the amount of contribution margin recognized by
the Robo Division and the company, respectively, is
A.
$(500,000) and $(2,000,000).
B.
$3,200,000 and $(500,000).
C.
$(500,000) and $1,700,000. D.
$3,200,000 and $1,700.000.