Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Decision Making
113) Contribution margin is:
A) Sales less cost of goods sold.
B) Sales less variable production, variable selling, and variable administrative expenses.
C) Sales less variable production expense.
D) Sales less all variable and fixed expenses.
Answer: B
Difficulty: 1 Easy
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
114) Which of the following approaches to preparing an income statement includes a calculation of the gross margin?
Traditional
Approach
Contribution
Approach
A)
Yes
Yes
B)
Yes
No
C)
No
Yes
D)
No
No
A) Choice A
B) Choice B
C) Choice C
D) Choice D
Answer: B
Difficulty: 2 Medium
Topic: Using Different Cost Classifications for Different Purposes
Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking; FN Measurement
115) Meginnis Corporation's relevant range of activity is 3,000 units to 7,000 units. When it produces and sells 5,000 units, its average costs per unit are as follows:
Average
Cost per Unit
Direct materials
$
5.20
Direct labor
$
3.75
Variable manufacturing overhead
$
1.65
Fixed manufacturing overhead
$
2.60
Fixed selling expense
$
0.50
Fixed administrative expense
$
0.40
Sales commissions
$
1.50
Variable administrative expense
$
0.50
If 6,000 units are produced, the total amount of direct manufacturing cost incurred is closest to:
A) $79,200
B) $63,600
C) $62,700
D) $53,700
Answer: D
Explanation:
Direct materials
$
5.20
Direct labor
3.75
Direct manufacturing cost per unit (a)
$
8.95
Number of units produced (b)
6,000
Total direct manufacturing cost (a) × (b)
$
53,700
Difficulty: 2 Medium
Topic: Cost Classifications for Assigning Costs to Cost Objects; Cost Classifications for Manufacturing Companies; Cost Classifications for Predicting Cost Behavior
Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.; 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.
Bloom's: Apply
AACSB: Analytical Thinking
AICPA: BB Critical Thinking; FN Measurement
116) Perkey Corporation has provided the following information:
Cost per Unit
Cost per Period
Direct materials
$
5.00
Direct labor
$
2.90
Variable manufacturing overhead
$
1.25
Fixed manufacturing overhead
$
21,000
Sales commissions
$
1.00
Variable administrative expense
$
0.55
Fixed selling and administrative expense
$
7,500
If 4,000 units are produced, the total amount of direct manufacturing cost incurred is closest to:
A) $53,400.
B) $35,600.
C) $36,600.
D) $31,600.
Answer: D
Explanation:
Direct materials
$
5.00
Direct labor
2.90
Direct manufacturing cost per unit (a)