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Exam 7: Job Costing Systems

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Question 21

Multiple Choice

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The management accountant at Essex Engineering has prepared the budget for 2003. All managers are concerned about the possibility of recession in Europe. - In the last financial year nearly 80% of total output was exported to Europe. If fixed expenses increased £31,500, the break-even sales in units would be

A) 34,500 units.
B) 80,500 units.
C) 69,000 units.
D) 94,500 units.

E) All of the above
F) None of the above

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Question 22

Multiple Choice

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Cardiff Electronics Company had the following income statement for the most recent year. Given this data, the unit contribution margin was: $\begin{array}{lrr} \text { Sales (17,000 units) } &£ 357,000 \\ \text { Less: Variable expenses.} &225,000\\ \text {Contribution margin. } &102,000\\ \text {Less: Fixed expenses. } &68,000\\ \text { Net Income. } &£ 34,000\\\end{array}$

A) £ 2.
B) £15.
C) £ 6.
D) £ 4.

E) C) and D)
F) A) and B)

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Question 23

Multiple Choice

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Manchester Shoes sells a range of umbrellas. All of the products have the same selling price and variable cost per unit. The following data has been prepared by the management accountant. $\begin{array}{lrr}&\text { standard }&\text { Deluxe }\\ \text {Selling price. } &£ 40 &£ 55 \\ \text { Variable production cost.} &£ 10& £ 16\\ \text {Variable selling and administrative expense. } & £ 15 &£ 12\\ \text { Expected monthly sales in units. } &600 & 1,200 \\\end{array}$ - In the last financial year nearly 80% of total output was exported to Europe. The number of units the company would have to sell to earn a net operating income of £150,000 is

James Company has a margin of safety percentage of 20%. The Break-even point is £200,000 and the variable expenses are 45% of Sales. Given this information, the net operating income is

Which of the following formulas is used to calculate the contribution margin ratio

The following information pertains to Sisk Co.: $\begin{array}{lrr} \text {Sales (25,000 units) . } &£ 500,000\\ \text { Manufacturing expenses: } &\\ \text { Variable. } &170,000\\ \text { Fixed. } &35,000\\ \text { Selling and general expenses: } &\\ \text { Variable. } &5,000\\\text {Fixed. } &30,000\end{array}$ Sisk's break-even point in number of units is

Last year Easton Company reported sales of £720,000, a contribution margin ratio of 30% and a net loss of £24,000. Based on this information, the break-even point was

Southwest Industries produces a sports glove that sells for £15 per pair. Variable expenses are £8 per pair and fixed expenses are £35,000 annually. The break-even point for Southwest industries is

The European Electronics Company has 3 divisions. The following budgeted data is available. $\begin{array}{lccc}&\text { German}&\text { Italian }&\text {Sweden }\\ \text { Sales } &\text { 2,500 units } &\text { 2,500 units} &\text { 2,500 units } \\ \text {Selling price } &\text { £ 80 per unit } &\text {£85 per unit } &\text { £ 90 per unit } \\ \text { Variable expense } &\text { £ 35 per unit } &\text { £ 40 per unit } &\text { £ 38 per unit } \\ \text {Fixed expense } &\text {£ 37,500 } &\text {£ 40,000 } &\text { £ 50,000 } \\\end{array}$ - Italian Division: If the unit contribution margin is increased by 10%, the total fixed expense is decreased by 20%, and all other data remain as in the budget, net operating income will be:

Kendall Company has sales of 1,000 units at £60 a unit. Variable expenses are 30% of the selling price. If total fixed expenses are £30,000, the degree of operating leverage is

Southwest Industries produces a sports glove that sells for £15 per pair. Variable expenses are £8 per pair and fixed expenses are £35,000 annually. The contribution margin ratio is closest to

The company's total monthly fixed expense is £13,800. The break-even in sales pounds for the expected sales mix is (rounded)

If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the break-even point in units is

The degree of operating leverage is computed by dividing sales by the contribution margin

Fawn Company's margin of safety is £90,000. If the company's sales drop by £80,000, it will still have positive net operating income.

The impact on net operating income of a given pound change in sales can be computed by applying the contribution margin ratio to the pound change in sales

The margin of safety is

Assuming no change in the level of fixed expenses, the addition to a company's sales mix of a product with a low contribution margin that increases the total contribution margin could also increase the break-even point expressed in pounds.

If a company decreases the variable expense per unit while increasing the total fixed expenses, the total expense line relative to its previous position will

The degree of operating leverage in a company is smallest at the break-even point and increases as sales rise.