21. Ideal standards (Points: 4) are rigorous but attainable.

are the standards generally used

in a master budget. reflect optimal performance under perfect operating conditions.
will always motivate employees to achieve the maximum output.
22. n un!avorable materials "uantity variance would occur i! (Points: 4) more materials
were purchased than were used. actual pounds o! materials used were less than the
standard pounds allowed. actual labor hours used were greater than the standard labor
hours allowed. actual pounds of materials used were greater than the standard
pounds allowed.
2#. $he direct labor "uantity standard is sometimes called the direct labor (Points: 4)
volume standard. e!!ectiveness standard. efficiency standard. "uality standard.
24. $he di!!erence between a budget and a standard is that (Points: 4) a budget expresses
what costs were% while a standard expresses what costs should be. a budget expresses
management&s plans% while a standard re!lects what actually happened. a budget
expresses a total amount, while a standard expresses a unit amount. standards are
excluded !rom the cost accounting system% whereas budgets are generally incorporated
into the cost accounting system.
2'. (argent.)om plans to sell 2%*** purple lawn chairs during +ay% 1%,** in -une% and
2%*** during -uly. $he company .eeps 1'/ o! the next month&s sales as ending inventory.
0ow many units should (argent.)om produce during -une1 (Points: 4) 1,915 2%2** 1%22'
3ot enough in!ormation to determine.
(1,900 + (2,000 x .15 ! (1,900 x .15 " 1,915
24. 5hich o! the !ollowing would not appear as a !ixed expense on a selling and admini6
strative expense budget1 (Points: 4) #reight$out 7!!ice salaries Property taxes
8epreciation
29. $he direct materials budget shows: 8esired ending direct materials #4%*** pounds
$otal materials re"uired '4%*** pounds 8irect materials purchases 49%4** pounds $he
total direct materials needed !or production is (Points: 4) 1%,000 pounds. 4%4** pounds.
11%4** pounds. 1*1%4** pounds.
(5&,000 ! '(,000 " 1%,000
22. I! there were 9*%*** pounds o! raw materials on hand on -anuary 1% 14*%*** pounds
are desired !or inventory at -anuary #1% and 42*%*** pounds are re"uired !or -anuary
production% how many pounds o! raw materials should be purchased in -anuary1 (Points:
4) #'*%*** pounds '4*%*** pounds 22*%*** pounds &90,000 pounds
()0,000 + * ! &20,000 " 1&0,000+ x " &90,000
2,. 5hen will the elimination o! a product line have no e!!ect on the company&s overall
pro!it1 (Points: 4) ,hen the a-oidable fixed costs e.ual the product line/s
contribution margin 5hen the unavoidable !ixed costs e"ual the product line&s
contribution margin 5hen there are no !ixed costs incurred by the product line 5hen the
product line contribution margin is negative
#*. product line should be eliminated whenever (Points: 4) the product line generates a
net loss. the unavoidable !ixed costs exceed the product line&s contribution margin. the
product line generates a negati-e contribution margin. the avoidable costs are less
than the product line&s contribution margin.
#1. $he costs incurred prior to the split6o!! point are re!erred to as (Points: 4) separable
costs. split6o!! costs. 0oint product costs. :oint costs.
#2. $ruc.el% Inc. currently manu!actures a wic.et as its main product. $he costs per unit
are as !ollows: 8irect materials and direct labor ;22 <ariable overhead 1* =ixed overhead
14 $otal ;42 (aran )ompany has contacted $ruc.el with an o!!er to sell it '%*** o! the
wic.ets !or ;#4 each. I! $ruc.el ma.es the wic.ets% variable costs are ;22 per unit. =ixed
costs are ;14 per unit> however% ;1* per unit is unavoidable. (hould $ruc.el ma.e or buy
the wic.ets1 (Points: 4) ?uy> savings @ ;'*%*** ?uy> savings @ ;2*%*** +a.e> savings @
;4*%*** 1a2e+ sa-ings " 320,000
" (5,000 4 (322 + 310 !(5,000 4 3'(
##. (orrento )ompany&s plant is operating at less than !ull capacity. $he company :ust
received a one6time opportunity to accept an order at a special price below its usual price.
$he special price exceeds its variable costs. $here!ore% which statement is true1 (Points:
4) =ixed costs are relevant. 5he order will li2ely be accepted. $he order will li.ely be
re:ected. (orrento should expand its plant capacity be!ore accepting the order.
#4. lvareA )ompany is considering the !ollowing alternatives: lternative lternative
? Bevenues ;'*%*** ;4*%*** <ariable costs #*%*** #*%*** =ixed costs 1*%*** 14%***
5hat is the incremental pro!it1 (Points: 4) ;1*%*** ;* ;4%*** 3&,000
6lternati-e 67
Bevenues ;'*%***
Cess:<) ;#*%***
)+ ;2*%***
Cess: =) ;1*%***
7perating Income ;1*%***
6lternati-e 87
Bevenues ;4*%***
Cess:<) ;#*%***
)+ ;#*%***
Cess: =) ;14%***
7perating Income ;14%***
9ncremental :rofit " 31&,000 $ 310,000
#'. 5hat is the .ey !actor in determining sales mix i! a company has limited resources1
(Points: 4) ;ontribution margin per unit of limited resource $he amount o! !ixed costs
per unit $otal contribution margin $he cost o! limited resources
#4. In a sales mix situation% at any level o! units sold% net income will be higher i! (Points:
4) more higher contribution margin units are sold than lower contribution margin
units. more lower contribution margin units are sold than higher contribution margin
units. more !ixed expenses are incurred. weighted6average unit contribution margin
decreases.
#9. Iguchi )ompany sells 2%*** units o! Product annually% and #%*** units o! Product ?
annually. $he sales mix !or Product is (Points: 4) &0<. 4*/. 49/. cannot determine
!rom in!ormation given.
" 2,000 = (2,000 + ',000
#2. $he margin o! sa!ety ratio is (Points: 4) expected sales divided by brea.6even sales.
expected sales less brea.6even sales. margin of safety in dollars di-ided by expected
sales. margin o! sa!ety in dollars divided by brea.6even sales.
#,. In 2**2% +asset sold #%*** units at ;'** each. <ariable expenses were ;#'* per unit%
and !ixed expenses were ;2**%***. $he same selling price% variable expenses% and !ixed
expenses are expected !or 2**,. 5hat is +asset&s brea.6even point in units !or 2**,1
(Points: 4) 1,''' #%*** 4%22' 4%449
>;1 " 3500 $ 3'50 " 3150
8?: in units " 3200,000 = 3150
" 1,'''
4*. $he contribution margin ratio is (Points: 4) sales divided by contribution margin.
sales divided by !ixed expenses. sales divided by variable expenses. contribution
margin di-ided by sales.
41. $iny $ots $oys has actual sales o! ;4**%*** and a brea.6even point o! ;24*%***. 0ow
much is its margin o! sa!ety ratio1 (Points: 4) '5< 4'/ 1'4/ '#.2/
1argin of @afety " 3&00,000 $ 32(0,000 " 31&0,000
1argin of @afety Aatio " 31&0,000=3&00,000 " '5<
42. company re"uires ;1%*2*%*** in sales to meet its net income target. Its contribution
margin is #*/% and !ixed costs are ;12*%***. 5hat is the target net income1 (Points: 4)
;#*4%*** ;2#4%*** ;42*%*** 312(,000
(ales ;1%*2*%***
Cess: <) (9*/) ;914%***
)+ ;#*4%***
Cess: =) ;12*%***
Bet 9ncome 312(,000
4#. 0ess% Inc. sells a product with a contribution margin o! ;12 per unit% !ixed costs o!
;94%4**% and sales !or the current year o! ;1**%***. 0ow much is 0ess&s brea.6even
point1 (Points: 4) 4%4** units ;2'%4** (,200 units 2%1## units
8?: " 3)&,&00=312
" (,200 units
44. $he brea.6even point is where (Points: 4) total sales e"ual total variable costs.
contribution margin e.uals total fixed costs. total variable costs e"ual total !ixed costs.
total sales e"ual total !ixed costs.
4'. $iny $ots $oys has actual sales o! ;4**%*** and a brea.6even point o! ;24*%***. 0ow
much is its margin o! sa!ety ratio1 (Points: 4) '5< 4'/ 1'4/ '#.2/
1argin of @afety " 3&00,000 $ 32(0,000 " 31&0,000
1argin of @afety Aatio " 31&0,000=3&00,000 " '5<
44. $he !ollowing monthly data are available !or 5ac.adoos% Inc. which produces only
one product: (elling price per unit% ;42> Dnit variable expenses% ;14> $otal !ixed
expenses% ;42%***> ctual sales !or the month o! -une% 4%*** units. 0ow much is the
margin o! sa!ety !or the company !or -une1 (Points: 4) ;9*%*** 3105,000 ;4#%*** ;2%'**
>;1 " 3&2 $ 31& " 32%
8?: " 3&2,000 = 32% " 1,500 units
8?: 3 " 1,500 4 3&2 " 3(',000
?xpected @ales 3 " 3&2 4 &,000 " 31(%,000
1C@ " 3105,000