Answer & Explanation:5 practice test questions. Must be done in excel. Sophomore level accounting
practice_test_4.xlsx
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3 Parts to this Question
Problem 1 – CVP Analysis – 12 Points
Bob’s corporation produces a single product. Use the information below to answer the questions.
Per Unit
Percent of Sales
Selling Price
Variable Expenses
Contribution Margin
$
Fixed Expenses are:
Current Sales
$
$
500
325
175
100%
65%
35%
52,500 per Month
1,000 units per Month
Part 1 (4 Points)
How many units should the company sell in a month to breakeven?
Part 2 (2 Points)
What is the margin of safety in units?
Part 3 (6 Points)
The marketing manager would like to cut the selling price by $25 and increase the advertising budget by $5,000 per month. Th
marketing manager predicts that these two changes would increase monthly sales by 200 units. What should be the overall effe
of this change on the company’s monthly net operating income? Show your work!
budget by $5,000 per month. The
. What should be the overall effect
3 Parts to this Question
Problem 2 – Segmented Income Statement – 12 Points
Writing and erasing are two divisions of Accounting Corporation.
Use the information below to answer the following questions.
Writing
Division
Sales Revenue
Variable Expenses
Traceable Fixed Expenses
$
$
$
Total Common Fixed Expenses $
450,000
332,000
50,000
Erasing
Division
$
$
$
225,000
150,000
41,000
130,000 of which
and
$
$
75,000 Allocated to Writing Division
55,000 Allocated to Erasing Division
Part 1 (6 Points)
Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amount
Part 2 (3 Points)
What would the impact be on company net operating income, if the Writing division were dropped? (3 points) Assume that all
fixed costs are eliminated if the division is dropped.
Part 3 (3 Points)
By how much would the company’s net operating income increase if sales for the Erasing division increased by $85,000? Roun
intermediate and final answers to two decimal places.
o Writing Division
o Erasing Division
rcentages; show only dollar amounts.
dropped? (3 points) Assume that all traceable
ivision increased by $85,000? Round all
6 Parts to this Question
Problem 3 – Variance Analysis – 27 Points
My Company produces a single product.
The following data for the standard cost system are available:
Actual results for the current year:
Purchases of raw materials
7,500 yards
Direct Labor Costs
5,100 hours
Raw materials used
6,000 yards
Actual Variable OH Costs $ 20,200
Units Produced
6,300 units
Standards per unit of product:
Raw Materials
Direct Labor
Variable OH
1.1 yards
0.8 hours
Total
$ 48,750.00
$ 25,500.00
at $
at $
6.50 per yard
5.00 per hour
at $
at $
$
7.50 per yard
4.75 per hour
4.00 per Direct Labor Hour
Part 1 (5 Points)
Compute the direct materials quantity variance and indicate if F or U. Show Calculations.
Part 2 (4 Points)
Compute the direct materials price variance and indicate if F or U. Assume that the price variance is recognized at point of
purchase. Show Calculations.
Part 3 (5 Points)
Compute the direct labor efficiency variance and indicate if F or U. Show Calculations.
Part 4 (4 Points)
Compute the direct labor rate variance and indicate if F or U. Show Calculations.
Part 5 (5 Points)
Compute the variable overhead efficiency variance and indicate if F or U. Show Calculations.
Part 6 (4 Points)
Compute the variable overhead rate variance and indicate if F or U. Show Calculations.
riance is recognized at point of
ns.
5 Parts to this question
Problem 4 – ROI, Residual Income, and Investment Evaluation – 20 Points
Flow Corporation is organized in multiple segments.
The segment managers are evaluated and bonuses are awarded based on ROI.
Last year, the overall company produced a 15% return on its investment.
Managers of the Suma segment recently studied an investment opportunity that would assist in the division’s future growth.
Relevant data for the Suma division and the new investment follow.
Suma
Segment
Net Operating Income $
Sales
$
Average Assets
$
1,250,000
10,000,000
5,850,000
Investment
Opportunity
$
$
$
380,000
5,000,000
2,750,000
Part 1 (6 Points)
Compute the current margin, asset turnover and ROI of the Suma Division. Show two decimal places, i.e. 13.52%.
Margin =
Asset Turnover =
ROI =
Part 2 (4 Points)
Compute the division’s ROI if the investment opportunity is pursued. Show two decimal places, i.e. 14.80%.
Part 3 (2 Points)
Will segment management make the acquisition? Why?
Would Flow’s corporate management want the acquisition to be made? Why?
Assume that Flow uses residual income to evaluate performance and desires an 14% minimum return on invested capital.
Compute the current residual income of the Suma segment and the segment’s residual income if the investment is made. Will
segment management make the acquisition? Why?
the division’s future growth.
places, i.e. 13.52%.
s, i.e. 14.80%.
return on invested capital.
f the investment is made. Will
4 Parts to this Question
Problem 5 – Operational Performance Measures – 13 Points
Stapler Corporation records the following avarage times for the past month per order:
Days
Wait Time
Inspection Time
Process Time
Move Time
Queue Time
12.2
0.4
3.7
1.2
2.7
Part 1 (4 Points)
Compute the throughput time.
Part 2 (3 Points)
Compute the manufacturing cycle efficiency (MCE). Show two decimals.
Part 3 (2 Points)
Compute the delivery cycle time.
Part 4 (4 Points)
Stapler is considering using a balanced scorecard approach to measure performance. What are the four groups of
performance measures that the balanced scorecard includes?
e the four groups of
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