Question 1 Star Services, Inc., a manufacturer of telescopes, began operations on October 1 of the current year. During

Question 1

Star Services, Inc., a manufacturer of telescopes, began operations on October 1 of the current year. During this time, the company produced 50,000 units and sold 35,000 units at a sales price of $500 per unit. Cost information for this year is shown below. 

Production Costs:

Direct materials ...$85 per unit

Direct Labor ...$65 per unit

Variable overhead ...$200,000 in total

Fixed overhead ...$350,000 in total

Non-production costs:

Variable selling and administrative ...$90,000 in total

Fixed selling and administrative ...$500,000 in total

Given the Star Services Inc. data, what is the net income using variable costing?

 $18,670,000 

$18,774,000 

$16,360,000 

$11,274,000 

$11,170,000   

Question 2

Conan Company has total fixed costs of $112,000. Its product sells for $35 per unit and variable costs amount to $25 per unit. Next year Conan Company wishes to earn a pretax income that equals 10% of fixed costs. How many units must be sold to achieve this target income level?

 1,120 

8,214 

11,200 

12,320 

14,080

Question 3

A method that estimates cost behavior by connecting the costs linked to the highest and lowest volume levels on a scatter diagram with a straight line is called the:

 Scatter method 

High-low method 

Least-squares method 

Break-even method 

Step-wise method

Question 4

Red and White Company reported the following monthly data.

Units produced2,000 units

Sales price$25 per unit

Direct materials$1 per unit

Direct labor$2 per unit

Variabl overhead$3 per unit

Fixed overhead$8,000 in total

What is the company's contribution margin for this month if 980 units were sold? 

$38,000 

$18,620   

$24,500 

$50,000 

$21,560

Question 5

The Haskins Company manufactures and sells radios. Each radio sells for $23.75 and the variable cost per unit is $16.25. Haskin's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit? 

$7.50     

$16.25 

$23.75 

$60,000 

$1.25

Question 6

Which of the following best describes costs assigned to the product under the variable costing method?

Direct labor

Direct materials

Variable selling and administrative

Variable manufacturing overhead

Fixed selling and administrative

Fixed manufacturing overhead

All of the above costs 

Direct labor, direct materials, and variable manufacturing overhead 

Direct labor, direct materials, variable manufacturing overhead, and fixed manufacturing overhead 

Direct labor and direct materials 

Direct labor, direct materials, fixed selling and administrative, and fixed manufacturing overhead

Question 7

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

 6,500   

6,000 

500 

5,000 

5,500

Question 8

A product sells for $30 per unit and has variable costs of $18 per unit. The fixed costs are $720,000. If the variable costs per unit were to decrease to $15 per unit and fixed costs increase to $900,000, and the selling price does not change, break-even point in units would: 

Increase by 20,000 

Equal 6,000 

Increase by 6,000 

Decrease by 20,000 

Not change   

Question 9

A firm expects to sell 25,000 units of its product at $11 per unit. Pretax income is predicted to be $60,000. If the variable costs per unit are $6, total fixed costs must be:

$ 65,000   

$ 90,000 

$ 125,000 

$ 215,000 

$ 275,000

Question 10

Under absorption costing, a company had the following unit costs when 8,000 units were produced.

Direct labor$8.40 per unit

Direct material$9.00 per unit

Variable overhead$6.75 per unit

Fixed overhead ($60,000/8,000 units)$7.50 per unit

Total production cost$31.65 per unit

Compute the total production cost per unit under absorption costing if 30,000 units had been produced.

 $31.65 

$26.15     

$24.15 

$17.40