Question

1. The following data are available for the Midwest Division of Dimension Products, Inc. and the single product it makes. (Note that this is the same data as that provided for the question above.)

Unit selling price $40

Variable cost per unit       $24

Annual fixed costs           $560,000

Average operating assets   $3,000,000

How many units must the Midwest Division sell each year to have an ROI of 16%?

A)         52,000.

            B)         65,000.  

            C)         240,000.

            D)         1,300,000

2. Which of the following variances is caused by a difference between the denominator activity in the predetermined overhead rate and the standard hours allowed for the actual production of the period?

1. Fixed overhead budget variance.
2. fixed overhead volume variance.
3. variable overhead efficiency variance.
4. variable overhead spending variance.

3. A favorable materials price variance indicates that                        

1. actual quantity exceed standard quantity.
2. standard quantity exceed actual quantity.
3. actual price exceeded the standard price.
4. Standard price exceeded the actual price.

4. The "standard quantity allowed" or "standard hours allowed" is computed by multiplying the:

A)         actual input in units by the standard output allowed.

B)         actual output in units by the standard input allowed.

C)         actual output in units by the standard output allowed.

D)         standard output in units by the standard input allowed.

5. The budget or schedule that provides necessary input data for the direct materials budget is the:

A)         cash budget.

B)         production budget.

C)         raw materials purchases budget.

D)         schedule of cash collections.

6. Sauk Trail Company uses an accounting system that charges costs to the manager who has been delegated the authority to make decisions concerning the costs. For example, if the sales manager accepts a rush order that will result in higher than normal shipping costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as:

            A)         absorption accounting.      

            B)         contribution accounting.   

            C)         operational budgeting.

            D)        responsibility accounting.

7. Roberto Company has a cash balance of $18,000 on April The company is required to maintain a minimum cash balance of $12,000. During April expected cash receipts are $90,000. Expected cash disbursements during the month total $104,000. During April the company will need to borrow:

A. $4,000.

B. $6,000.

C.$8,000.

$14,000.

8. Carrington Company produces a product that sells for $60. Variable manufacturing costs are $30 per unit. Fixed manufacturing costs are $10 per unit based on the current level of activity, and fixed selling and administrative costs are $8 per unit. A selling commission of 10% of the selling price is paid on each unit sold. The contribution margin per unit is:

1. $24.
2. $30.
3. $36.
4. $54.

9. Capulet Company sells a single product. The product has a selling price of $50 per unit and variable expenses of 80% of sales. If the company's fixed expenses total $75,000 per year, then it will have a break-even of:

1. $1,875.
2. $7,500.
3. $93,750.
4. $375,000.

Answer 1

1.Answer is B) 65,000

Desired profit (ROI) = $3,000,000 x 16% = $480,000

Sales in units = (Fixed costs + Desired profit) ÷ Contribution margin per unit

= ($560,000+$480,000)/$16

= 1,040,000/$16

= 65,000 units

2.Answer is B) Fixed overhead volume variance

Fixed overhead volume variance is denominator activity in the predetermined overhead rate and the standard hours allowed for the actual production

3.Answer is D) Standard price exceeded the actual price

A favorable materials price variance indicates that Standard price exceeded the actual price

4.Answer is B) actual output in units by the standard input allowed

Standard quantity allowed/Standard hours allowed = Actual output x Standard input allowed

5.Answer is C) raw materials purchases budget

The budget or schedule that provides necessary input data for the direct materials budget is ‘the raw materials purchases budget’.

6.Answer is D) responsibility accounting

Sauk Trail Company uses an accounting system that charges costs to the manager who has been delegated the authority to make decisions concerning the costs

7. Answer is C) $8,000

Beginning cash balance	$18,000
Cash receipts	$90,000
Cash disbursements	($104,000)
Available cash (a)	$4,000
Minimum cash balance to be maintained (b)	$12,000
Need to borrow (b) - (a)	$8,000

8. Answer is A) $24

Selling price per unit	$60
Variable costs per unit:
Manufacturing costs	($30)
Selling commission ($60 x 10%)	($6)
Contribution margin per unit	$24

9.Answer is D)$375,000

Contribution margin ratio = 100 - 80% variable cost ratio = 20%

Break-even sales = Fixed costs ÷ Contribution margin ratio

= $75,000/20%

=$375,000