1. Which of the following formulas is used to calculate the contribution margin ratio?

A. (Sales - Fixed expenses) Sales

B. (Sales - Cost of goods sold) Sales

C. (Sales - Variable expenses) Sales

D. (Sales - Total expenses) Sales

2. The break-even point in unit sales is found by dividing total fixed expenses by:

A. the contribution margin ratio.

B. the variable expenses per unit.

C. the sales price per unit.

D. the contribution margin per unit.

3. The break-even point in unit sales increases when variable expenses:

A. increase and the selling price remains unchanged.

B. decrease and the selling price remains unchanged.

C. decrease and the selling price increases.

D. remain unchanged and the selling price increases.

4. The margin of safety percentage is computed as:

A. Break-even sales Total sales.

B. Total sales - Break-even sales.

C. (Total sales - Break-even sales) Break-even sales.

D. (Total sales - Break-even sales) Total sales.

5. The amount by which a company's sales can decline before losses are incurred is called the:

A. contribution margin.

B. degree of operating leverage.

C. margin of safety.

D. contribution margin ratio.

6. The degree of operating leverage can be calculated as:

A. contribution margin divided by sales.

B. gross margin divided by net operating income.

C. net operating income divided by sales.

D. contribution margin divided by net operating income.

7. Menlove Company had the following income statement for the most recent year:

Given this data, the unit contribution margin was:

A. $2 per unit

B. $15 per unit

C. $6 per unit

D. $4 per unit

8. Mancuso Corporation has provided its contribution format income statement for January. The

company produces and sells a single product.

If the company sells 3,100 units, its total contribution margin should be closest to:

A. $27,045

B. $181,000

C. $162,400

D. $173,600

9. Dimitrov Corporation, a company that produces and sells a single product, has provided its

contribution format income statement for July.

If the company sells 6,900 units, its net operating income should be closest to:

A. $35,979

B. $34,500

C. $36,500

D. $32,000

10. The following monthly data in contribution format are available for the MN Company and its only

product, Product SD:

The company produced and sold 300 units during the month and had no beginning or ending

inventories.

Required:

a. Without resorting to calculations, what is the total contribution margin at the break-even point?

b. Management is contemplating the use of plastic gearing rather than metal gearing in Product SD. This

change would reduce variable expenses by $18 per unit. The company's sales manager predicts that this

would reduce the overall quality of the product and thus would result in a decline in sales to a level of

250 units per month. Should this change be made?

c. Assume that MN Company is currently selling 300 units of Product SD per month. Management wants

to increase sales and feels this can be done by cutting the selling price by $22 per unit and increasing the

advertising budget by $20,000 per month. Management believes that these actions will increase unit

sales by 50 percent. Should these changes be made?

d. Assume that MN Company is currently selling 300 units of Product SD. Management wants to

automate a portion of the production process for Product SD. The new equipment would reduce direct

labor costs by $20 per unit but would result in a monthly rental cost for the new robotic equipment of

$10,000. Management believes that the new equipment will increase the reliability of Product SD thus

resulting in an increase in monthly sales of 12%. Should these changes be made?

a. The total contribution margin would be $40,000 since it is equal to the fixed expenses at the break-

even point.

b. The $18 decrease in variable costs will cause the contribution margin per unit to increase from $170

to $188.

The less costly components should not be used in the manufacture of Product SD. Net operating income

will decrease by $4,000.

c. The decrease in selling price per unit will cause the unit contribution margin to decrease from $170 to

$148.

The changes should not be made.

d. The use of the automated process would affect both fixed and variable costs. Fixed expenses will

increase by $10,000 from $40,000 to $50,000. Variable costs will decrease by $20 from $109 to $89, and

the unit contribution margin will increase from $170 to $190.

The changes should be made.

11. Selling and administrative expenses are considered to be:

A. a product cost under variable costing.

B. a product cost under absorption costing.

C. part of fixed manufacturing overhead under variable costing.

D. a period cost under variable costing.

12. A common cost that should not be assigned to a particular product on a segmented income

statement is:

A. the product's advertising costs.

B. the salary of the corporation president.

C. direct materials costs.

D. the product manager's salary.

13. Segment margin is sales minus:

A. variable expenses.

B. traceable fixed expenses.

C. variable expenses and common fixed expenses.

D. variable expenses and traceable fixed expenses.

14. Gangwer Corporation produces a single product and has the following cost structure:

The absorption costing unit product cost is:

A. $95

B. $119

C. $61

D. $56

15. Olds Inc., which produces a single product, has provided the following data for its most recent

month of operations:

There were no beginning or ending inventories. The absorption costing unit product cost was:

A. $97

B. $130

C. $99

D. $207

16. A manufacturing company that produces a single product has provided the following data

concerning its most recent month of operations:

What is the absorption costing unit product cost for the month?

A. $102

B. $130

C. $97

D. $125

17. Swiatek Corporation produces a single product and has the following cost structure:

The variable costing unit product cost is:

A. $161

B. $225

C. $153

D. $158

18. A manufacturing company that produces a single product has provided the following data

concerning its most recent month of operations:

What is the total period cost for the month under absorption costing?

A. $58,300

B. $37,100

C. $259,900

D. $201,600

19. A manufacturing company that produces a single product has provided the following data

concerning its most recent month of operations:

The total gross margin for the month under absorption costing is:

A. $42,000

B. $14,700

C. $69,000

D. $79,800

20. Last year, Salada Corporation's variable costing net operating income was $97,000. Fixed

manufacturing overhead costs released from inventory under absorption costing amounted to $14,000.

What was the absorption costing net operating income last year?

A. $14,000

B. $111,000

C. $97,000

D. $83,000

21. Gore Corporation has two divisions: the Business Products Division and the Export Products Division.

The Business Products Division's divisional segment margin is $55,700 and the Export Products Division's

divisional segment margin is $70,600. The total amount of common fixed expenses not traceable to the

individual divisions is $107,400. What is the company's net operating income?

A. $233,700

B. $(126,300)

C. $126,300

D. $18,900

22. Sugiki Corporation has two divisions: the Alpha Division and the Delta Division. The Alpha Division

has sales of $820,000, variable expenses of $369,000, and traceable fixed expenses of $347,300. The

Delta Division has sales of $460,000, variable expenses of $294,400, and traceable fixed expenses of

$134,100. The total amount of common fixed expenses not traceable to the individual divisions is

$97,300. What is the company's net operating income?

A. $135,200

B. $37,900

C. $616,600

D. $519,300

Green Enterprises produces a single product. The following data were provided by the company for the

most recent period:

23. For the period above, one would expect the net operating income under absorption costing to be:

A. higher than the net operating income under variable costing.

B. lower than the net operating income under variable costing.

C. the same as the net operating income under variable costing.

D. The relation between absorption costing net operating income and variable costing net operating

income cannot be determined.

Whitney, Inc., produces a single product. The following data pertain to one month's operations:

24. The carrying value on the balance sheet of the ending finished goods inventory under variable

costing would be:

A. $16,000

B. $10,000

C. $19,000

D. $12,000

25. The carrying value on the balance sheet of the ending finished goods inventory under absorption

costing would be:

A. $16,000

B. $10,000

C. $12,000

D. $21,000

26. Gaucher Corporation has provided the following data from its activity-based costing accounting

system:

The activity rate for the "designing products" activity cost pool is closest to:

A. $78 per product design hour

B. $582,016 per product design hour

C. $128 per product design hour

D. $89 per product design hour

27. Wecker Corporation uses the following activity rates from its activity-based costing to assign

overhead costs to products:

Data concerning two products appear below:

How much overhead cost would be assigned to Product V09X using the activity-based costing system?

A. $157.87

B. $91,722.47

C. $10,385.22

D. $5,485.50

28. A transaction driver is:

A. An event that causes a transaction to begin.

B. A measure of the amount of time required to perform an activity.

C. An event that causes a transaction to end.

D. A simple count of the number of times an activity occurs.

MGMT-027 Q4

17. The purpose of a flexible budget is to:

C. update the static planning budget to reflect the actual level of activity of the period.

21. Salyers Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion.

The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's

overhead budget for the most recent month appears below:

The Inn's variable overhead costs are driven by the number of guests.

What would be the total budgeted overhead cost for a month if the activity level is 53 guests?

A. $7,159.20

Variable cost per guest for supplies = $148.20 57 guests = $2.60 per guest

Variable cost per guest for laundry = $216.60 57 guests = $3.80 per guest

22. Stock Manufacturing Corporation has prepared the following overhead budget for next

month.

The company's variable overhead costs are driven by machine-hours.

What would be the total budgeted overhead cost for next month if the activity level is 6,600

machine-hours rather than 6,900 machine-hours?

C. $84,860.00

Variable cost per MH for supplies = $21,390 6,900 MHs = $3.10 per MH

Variable cost per MH for indirect labor = $41,400 6,900 MHs = $6.00 per MH

23. Gummer Hospital bases its budgets on patient-visits. The hospital's static budget for February

appears below:

The total overhead cost at an activity level of 10,800 patient-visits per month should be:

D. $302,850

39. Sissac Catering uses two measures of activity, jobs and meals, in the cost formulas in its

budgets and performance reports. The cost formula for catering supplies is $470 per month plus

$101 per job plus $24 per meal. A typical job involves serving a number of meals to guests at a

corporate function or at a host's home. The company expected its activity in May to be 12 jobs

and 123 meals, but the actual activity was 9 jobs and 126 meals. The actual cost for catering

supplies in May was $4,240. The spending variance for catering supplies in May would be

closest to:

C. $163 F

Because the actual expense is less than the flexible budget, the variance is favorable (F).

42. Brayboy Tile Installation Corporation measures its activity in terms of square feet of tile

installed. Last month, the budgeted level of activity was 1,360 square feet and the actual level of

activity was 1,300 square feet. The company's owner budgets for supply costs, a variable cost, at

$3.90 per square foot. The actual supply cost last month was $4,300. In the company's flexible

budget performance report for last month, what would have been the spending variance for

supply costs?

A. $770 F

Because the actual expense is less than the flexible budget; the variance is favorable (F).

Bamba Corporation's cost formula for its selling and administrative expense is $47,900 per

month plus $52 per unit. For the month of April, the company planned for activity of 6,000 units,

but the actual level of activity was 5,960 units. The actual selling and administrative expense for

the month was $364,490.

51. The selling and administrative expense in the planning budget for April would be closest to:

B. $359,900

Cost = Fixed cost + Variable cost per unit q

= $47,900 + $52 6,000 = $359,900

52. The selling and administrative expense in the flexible budget for April would be closest to:

C. $357,820

Cost = Fixed cost + Variable cost per unit q

= $47,900 + $52 5,960 = $357,820

53. The activity variance for selling and administrative expense in April would be closest to:

B. $2,080 F

Because the flexible budget is less than the planning budget, the variance is favorable (F).

54. The spending variance for selling and administrative expense in April would be closest to:

C. $6,670 U

Because the actual expense is greater than the flexible budget, the variance is unfavorable (U).

11. When computing standard cost variances, the difference between actual and standard price

multiplied by actual quantity yields a(n):

C. price variance.

Materials price variance = AQ (AP - SP)

18. If the labor efficiency variance is unfavorable, then

A. actual hours exceeded standard hours allowed for the actual output.

Labor efficiency variance = (AH - SH) SR. An unfavorable variance occurs if AH > SH.

24. Last month 75,000 pounds of direct material were purchased and 71,000 pounds were used.

If the actual purchase price per pound was $0.50 more than the standard purchase price per

pound, then the materials price variance was:

C. $37,500 U

Materials price variance = (AQ AP) - (AQ SP) = AQ (AP - SP)

= 75,000 pounds $0.50 per pound = $37,500 U

25. The following materials standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month:

What is the materials quantity variance for the month?

D. $20,230 F

SQ = 7.3 pounds per unit 1,000 units = 7,300 pounds

Materials quantity variance = (AQ - SQ) SP

= (5,900 pounds - 7,300 pounds) $14.45 per pound

= (-1,400 pounds) $14.45 per pound = $20,230 F

30. The following labor standards have been established for a particular product:

The following data pertain to operations concerning the product for the last month:

What is the labor efficiency variance for the month?

B. $13,530 U

SH = 1,500 units 4 hours per unit = 6,000 hours

Labor efficiency variance = (AH - SH) SR

= (7,100 hours - 6,000 hours) $12.30 per hour

= (1,100 hours) $12.30 per hour = $13,530 U

13. Turnover is computed by dividing average operating assets into:

D. sales.

16. Which of the following is not an operating asset?

D. Common stock

21. The purpose of the Data Processing Department of Falena Corporation is to assist the various

departments of the corporation with their information needs free of charge. The Data Processing

Department would best be evaluated as a:

A. cost center.

26. A company's current net operating income is $16,800 and its average operating assets are

$80,000. The company's required rate of return is 18%. A new project being considered would

require an investment of $15,000 and would generate annual net operating income of $3,000.

What is the residual income of the new project?

D. $300

27. Soderquist Corporation uses residual income to evaluate the performance of its divisions.

The company's minimum required rate of return is 11%. In April, the Commercial Products

Division had average operating assets of $100,000 and net operating income of $9,400. What

was the Commercial Products Division's residual income in April?

A. -$1,600

28. In August, the Universal Solutions Division of Jugan Corporation had average operating

assets of $670,000 and net operating income of $77,500. The company uses residual income,

with a minimum required rate of return of 12%, to evaluate the performance of its divisions.

What was the Universal Solutions Division's residual income in August?

B. -$2,900

31. Galanis Corporation keeps careful track of the time required to fill orders. Data concerning a

particular order appear below:

The throughput time was:

C. 14.1 hours

Throughput time = Process time + Inspection time + Move time + Queue time

= 1.4 hours + 0.4 hours + 3.6 hours + 8.7 hours = 14.1 hours

Aide Industries is a division of a major corporation. Data concerning the most recent year

appears below:

36. The division's margin is closest to:

B. 5.0%

Margin = Net operating income Sales = $870,000 $17,400,000 = 5.0%

37. The division's turnover is closest to:

B. 4.35

Turnover = Sales Average operating assets = $17,400,000 $4,000,000 = 4.35