Please Help! It\'s 6 questions and I promise I\'ll rate well! I have a test tomo
ID: 2737453 • Letter: P
Question
Please Help! It's 6 questions and I promise I'll rate well! I have a test tomorrow and this is part of the review sheet
Question 2) Which of the following statements concerning manufacturing costs is incorrect?
A. All salaries incurred by the sales department are expensed as incurred.
B. Direct labor costs are recorded initially in an inventory account.
C. Depreciation on manufacturing equipment is a period cost.
D. The cost of direct materials can be readily traced to products.
Question 3:
Martinez Company sells one product that has a sales price of $20 per unit, variable costs of $8 per unit, and total fixed costs of $200,000, what is the contribution margin ratio?
A. 40%
B. 60%
C. 50%
D. 66%
Question 10:
Which of the following statements is correct?
A. The amortization of the discount reduces the bond interest expense.
B. A discount results when the bond's issue price is greater than its face value.
C. A premium results when the bond's issue price is greater than its face value.
D. The amortization of the premium increases the bond interest expense.
Question 12
Cooper Company sells a product at $50 per unit that has unit variable costs of $20. The company's break-even sales volume is $150,000. How much profit will the company make if it sells 4,000 units?
A. $210,000
B. $120,000
C. $60,000
D. $30,000
Question 16
In order to prepare a contribution format income statement:
A. costs must be separated into manufacturing and selling, general, and administrative costs.
B. costs must be separated into cost of goods sold and operating expenses.
C. costs must be separated into variable and fixed costs.
D. costs must be separated into mixed, variable and fixed costs.
Question 20
Select the correct statement from the following.
A. A fixed cost structure offers less risk (i.e., less earnings volatility) and higher opportunity for profitability than does a variable cost structure.
B. A variable cost structure offers less risk and higher opportunity for profitability than does a fixed cost structure.
C. A fixed cost structure offers greater risk but higher opportunity for profitability than does a variable cost structure.
D. A variable cost structure offers greater risk but higher opportunity for profitability than does a fixed cost structure.
A. 40%
B. 60%
C. 50%
D. 66%
Explanation / Answer
Answer:
2) C is incorrect statement -- Depreciation on manufacturing equipment is a period cost.
Reason -- Depreciation of equipment is treated as production cost (assumed that equipment is used for production purpose) or product cost. It is not treated as Period Cost hence this statement is incorrect.
3) Correct answer is B. 60%
Calculation
Cpntribution margin rayio = contribution / sales x 100
= (20 - 8) / 20 × 100
= 12 / 20 × 100
= 60%
10) Correct answrr is C.
Premium on Bond payable = Issue price of bond - face value of bond
When issue price is higher than face value, the bonds are issued at premium.
12) correct answer is D. $30,000
break even sales means the level of sales at which fixed costs are recovered.
Break even sale in units = Break even sales in dollar / per unit selling price = 150000 / 50 = 3000 units
Profit if company sells 4,000 units = (4,000 - 3,000)units x contribution margin
= 1000 unit x (50 - 20)
= 1000 × 30
= $30,000
Note -- after meeting break even all contribution margin is converted into profit becoz all fixed costs are recovered at break even sales.
16) Correct answer is C. Costs must be separated into variable and fixed in making contribution format income statement.