School

University of Maryland, Baltimore County **We aren't endorsed by this school

Course

ECON 122

Subject

Economics

Date

Nov 20, 2023

Type

Other

Pages

3

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ECON 122
Test II Test Review
Identify whether the following (questions 1-6) is a variable, fixed, or mixed cost:
1.
Eggs to bake a cake
2.
Supervisor salary
3.
Depreciation on ovens
4.
Patents on recipes
5.
Compensation for salesperson making salary and commission based on number of sales
6.
Flour to bake cake
Use the following information to answer questions 7-10
Machine Hours
Total Costs
1000
$1500
1200
$1600
1500
$1800
1900
$2200
2000
$2250
7.
What is the variable cost per unit using the high-low method?
8.
What is the total fixed cost using the high-low method?
9.
What is the total cost formula (y = mx + b) for the information above?
10.
What would be the total cost if 1100 units were produced?
Use the following information to answer questions 11-20
ABC sold 200 units
Each unit sells for $100
Variable cost per unit is $30
Total fixed costs are $5000
Target profit is $3000
11.
What is the contribution margin per unit?
12.
What is the total contribution margin?
13.
What is the contribution margin ratio?
14.
What is the operating income?
15.
What is the breakeven in units?
16.
What is the breakeven in sales dollars?
17.
What are the target units sales to earn the target profit?
18.
What are the target sales dollars to earn the target profit?
19.
What is the margin of safety in units?
20.
What is the margin of safety in dollars?

Use the same information above for the following questions (21-23) and treat each question
independently:
21.
If variable costs increase by $10/unit, how will breakeven change?
22.
If total fixed costs decrease by $500, how will breakeven change?
23.
If the selling price increase by $10/unit, how will breakeven change?
Use the following information to answer questions 24-27
Units produced
1000 units
Units sold
800 units
Direct materials
$20 per unit
Direct labor
$40 per unit
VMOH
$10 per unit
FMOH
$5000 per year
VS&A
$25 per unit
FS&A
$3000 per year
24.
What is the total unit product cost under absorption costing?
25.
What is the total unit product cost under variable costing?
26.
What is the operating income under absorption costing?
27.
What is the operating income under variable costing?
Use the following information to answer questions 28-35
ABC company has a capacity of 15,000 machine hours
ABC company can produce 70 small units in an hour or 30 large units in an hour
The small units have a VC/unit of $15 and a selling price of $20/unit
The large units have a VC/unit of $20 and a selling price of $30/unit
28.
What is the contribution margin per unit for small units?
29.
What is the contribution margin per unit for large units?
30.
What is the total contribution margin if we only produce small units?
31.
What is the total contribution margin if we only produce large units?
32.
What is the contribution margin per machine hour for small units?
33.
What is the contribution margin per machine hour for large units?
34.
Which unit should we make more of?
35.
If there is a demand constraint of 750,000 small units and 400,000 large units, how many units of
each should we produce?
36.
ABC company makes 200 cakes per year and is thinking of outsourcing. They currently have DM of
$5/cake, DL of $10/cake, VMOH of $2/cake and total FMOH of $1500. They can buy the cakes for
$25/cake from an outside vendor. Assuming none of the fixed costs can be avoided, should we make
or buy? What are the cost associated with making and buying?
37.
ABC company makes 200 cakes per year and is thinking of outsourcing. They currently have DM of
$5/cake, DL of $10/cake, VMOH of $2/cake and total FMOH of $1500. They can buy the cakes for
$25/cake from an outside vendor. Assuming half of the fixed costs can be avoided, should we make
or buy? What are the cost associated with making and buying?