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# &quot;3. Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year....

"3. Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year.

Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity
Ordering and Receiving Orders \$ 120,000 500 orders
Machine Setup Setups 297,000 450 setups
Machining Machine hours 1,500,000 125,000 MH
Assembly Parts 1,200,000 1,000,000 parts
Inspection Inspections 300,000 500 inspections
If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is
A) \$9.60.
B) \$12.00.
C) \$15.00.
D) \$34.17.
5. Donkey Company manufactures two products, Standard and DeLuxe. Donkey's overhead costs consist of machining, \$2,000,000; and assembling, \$1,000,000. Information on the two products is:
Standard DeLuxe
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead applied to Standard using traditional costing using direct labor hours is
A) \$860,000.
B) \$1,200,000.
C) \$1,800,000.
D) \$2,140,000.

6. Donkey Company manufactures two products, Standard and DeLuxe. Donkey's overhead costs consist of machining, \$2,000,000; and assembling, \$1,000,000. Information on the two products is:
Standard DeLuxe
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead applied to Standard using activity-based costing is
A) \$860,000.
B) \$1,200,000.
C) \$1,800,000.
D) \$2,140,000.

7. OldMaid Inc. computed an overhead rate for machining costs (\$1,000,000) of \$10 per machine hour. Machining costs are driven by machine hours. If computed based on direct labor hours, the overhead rate for machining costs would be \$20 per direct labor hour. The company produces two products, Gert and Mill. Gert requires 60,000 machine hours and 20,000 direct labor hours, while Mill requires 40,000 machine hours and 30,000 direct labor hours. Using activity-based costing, machining costs assigned to each product is

10. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs:

11. Fontain, Inc. collected the following production data for the past month:
Units Produced Total Cost
1,600 \$22,000
1,300 19,000
1,500 22,500
1,100 16,500
If the high-low method is used, what is the monthly total cost equation?
A) Total cost = \$4,400 + \$11/unit
B) Total cost = \$5,500 + \$10/unit
C) Total cost = \$0 + \$15/unit
D) Total cost = \$3,300 + \$12/unit

14. Clark Company produces flash drives for computers, which it sells for \$20 each. Each flash drive costs \$12 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were \$2 per unit for a total of \$1,000 for the month. How much is the contribution margin ratio?
A) 30%.
B) 40%.
C) 60%.
D) 70%.

15. If a company had a contribution margin of \$500,000 and a contribution margin ratio of 40%, total variable costs must have been
A) \$750,000.
B) \$300,000.
C) \$1,250,000.
D) \$200,000.

18. Variable costs for Foley, Inc. are 25% of sales. Its selling price is \$80 per unit. If Foley sells one unit more than break-even units, how much will profit increase?
A) \$60.00.
B) \$20.00.
C) \$26.66.
D) \$320.00.

19. A company requires \$1,020,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are \$180,000. What is the target net income?
A) \$306,000.
B) \$234,000.
C) \$420,000.
D) \$126,000.

26. Fields Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Fields incurs \$2,220,000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division at the break-even point?
A) \$1,800,000
B) \$2,100,000
C) \$3,355,814
D) \$3,900,000

29. Which of the following statements is not true?
A) Operating leverage refers to the extent to which a company's net income reacts to a given change in sales.
B) Companies that have higher fixed costs relative to variable costs have higher operating leverage.
C) When a company's sales revenue is increasing, high operating leverage is good because it means that profits will increase rapidly.
D) When a company's sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease.
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