7/31/2019 Chapter 4 and 5 Quiz V2

1/2

LAST NAME, FIRST NAME:______________________________ SECTION:___________

CHAPTERS 4 AND 5 QUIZ (V2)

1. Following is the GAAP income statement for Johnson and Jr., who makes a single product:Revenue $574,000Cost of Goods Sold:

Direct Materials $193,000Direct Labor 65,000Production Supplies 13,000Building Rent 80,000Equipment Depreciation 9,000Total 360,000

Gross Margin $214,000Management, Marketing and Administration:

Management Salaries $115,000Advertising 29,000Sales Commissions 38,000Office Rent 17,000Total 199,000

Profit Before Taxes $15,000

Johnson and Jr. sold 20,000 units. What is the variable cost per unit? Round youranswer to the nearest penny.

A. $15.22B. $16.63

C. $13.37D. $15.45

2. D&C Company manufacturing piping. At a volume of 20,000 units, per-unit price and costdata for the year just ended follow:

Item Value per Unit

Selling Price $100Variable manufacturing costs $30Fixed manufacturing costs $15Gross Margin $35Variable selling costs $ 5Fixed selling and administrative costs $10Profit Margin $20

Required

What is D&C Company's breakeven point?

1

7/31/2019 Chapter 4 and 5 Quiz V2

2/2

LAST NAME, FIRST NAME:______________________________ SECTION:___________

3. The Bolger Corporation has the capacity to produce 50,000 straw hats with its presentfacilities. There are no beginning or ending inventories. The following information isavailable:

Total revenue $1,200,000

Unit selling price $35Unit variable production costs $10Unit variable selling and administrative costs $5Total fixed production costs $128,000Total fixed selling and administrative costs $56,000

Lahr Company wants to buy 10,000 straw hats but cannot spend more than $15 per hat. SinceLahr Co. found Bolger Corp. over the Internet, Bolger will notpay sales commissions of $3perhat if the sale is made, as it otherwise would.Should Bolger sell the hats to Lahr Company for $15 per hat?

A. No, the offered price is half the normal selling price and Bolger Corp. would lose

$26,000 operating income.B. Cannot be determined since we dont know if Bolger Corp. has enough excesscapacity to produce an additional 10,000 hats.C. Yes, Bolger Corp.s contribution margin will increase by $30,000 total.D. Yes, Bolger Corp. will earn $.80 contribution margin on each hat sold.

4. Suppose Max's Shuttle Service wants to earn a profit before taxes of $350,000 in thecoming year. Max's selling price is $40, its variable cost per unit is $10, and its fixed costsare $100,000. How many tickets must the company sell?

A. 26,520B. 26,250C. 18,750D. 15,000

5. If revenues are $250,000, breakeven revenues are $185,000, and fixed costs are $50,000,the margin of safety is

A. 33.3%B. 44.4%C. 26.0%D. 22.2%

2