Question-1
In a special sales order decision, incremental fixed costs that will be incurred if the special order is accepted are considered to be:
A. opportunity costs.
B. irrelevant to the decision.
C. relevant to the decision.
D. sunk costs.
Question-2
Blue Technologies manufactures and sells DVD players. Great Products Company has offered Blue Technologies $22 per DVD player for 10,000 DVD players. Blue Technologies’ normal selling price is $30 per DVD player. The total manufacturing cost per DVD player is $18 and consists of variable costs of $14 per DVD player and fixed overhead costs of $4 per DVD player. (NOTE: Assume excess capacity and no effect on regular sales.)
How much are the expected increase (decrease) in revenues and expenses from the special sales order?
A. Expected increase in revenues $220,000; expected increase in expenses $140,000
B. Expected increase in revenues $220,000; expected increase in expenses $40,000
C. Expected increase in revenues $300,000; expected increase in expenses $140,000
D. Expected increase in revenues $220,000; expected increase in expenses $120,000
Question-3
The horizontal line intersecting the vertical y-axis at the level of total cost on a CVP graph represents:
A. total costs.
B. total variable costs.
C. total fixed costs.
D. breakeven point.
Question-4
A product is sold at $60.00 per unit, the variable expense per unit is $30, and total fixed expenses are $200,000, what are the breakeven sales in dollars?
A. $3,333
B. $100,000
C. $133,333
D. $400,000
Question-5
To find the number of units that need to be sold in order to breakeven or generate a target profit, the formula used is:
A. (fixed expenses + operating income) ÷ contribution margin per unit.
B. (fixed expenses + operating income) ÷ contribution margin ratio.
C. (fixed expenses – operating income) ÷ contribution margin ratio.
D. (fixed expenses – operating income) ÷ contribution margin per unit.
Question-6
Sky High Seats manufactures seats for airplanes. The company has the capacity to produce 100,000 seats per year, but is currently producing and selling 75,000 seats per year. The following information relates to current production:
Sale price per unit
$400
Variable costs per unit:
$220
Manufacturing
$50
Marketing and administrative
Total fixed costs:
Manufacturing
$750,000
Marketing and administrative
$200,000
If a special sales order is accepted for 3,000 seats at a price of $300 per unit, and fixed costs increase by $10,000, how would operating income be affected? (NOTE: Assume regular sales are not affected by the special order.)
A. Decrease by $80,000
B. Increase by $230,000
C. Increase by $90,000
D. Increase by $80,000
Question-7
Samson Incorporated provided the following information regarding its only product:
Sale price per unit
$50.00
Direct materials used
$160,000
Direct labor incurred
$185,000
Variable manufacturing overhead
$120,000
Variable selling and administrative expenses
$70,000
Fixed manufacturing overhead
$65,000
Fixed selling and administrative expenses
$12,000
Units produced and sold
20,000
