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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