ACC 202 Practice test

Bendel Incorporated has an operating leverage of 6.2. If the company's sales volume increases by 13%, its net operating income should increase by about: A) 80.6% B) 2.1% C) 13.0% D) 66.0%

13%*6.1x=0.806 Answer: 80.6

Sedita Incorporated is working on its cash budget for July. The budgeted beginning cash balance is $18,000. Budgeted cash receipts total $190,000 and budgeted cash disbursements total $189,000. The desired ending cash balance is $32,000. The excess (deficiency) of cash available over disbursements for July will be: A) $19,000 B) $17,000 C) $1,000 D) $208,000

18,000+ 190,000 =208,000 208,000-189,000 =19,000 Answer: 19,000

Paradise Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. Beginning Inventory. Ending Inventory Raw material. 49,000. 59,000 Finished goods. 89,000. 59,000 * Three pounds of raw material are needed to produce each unit of finished product. If Paradise Corpora

525,000 +59,000 -89,000 Answer: 495,000

Sufra Corporation is planning to sell 100,000 units for $2.25 per unit and will break even at this level of sales. Fixed expenses will be $90,000. What are the company's variable expenses per unit? A) $0.90 B) $2.03 C) $1.35 D) $0.45

90,000/100,000 =$0.9/unit ($2.25-0.9) =1.35 Answer: $1.35

Bristo Corporation has sales of 1,750 units at $40 per unit. Variable expenses are 30% of the selling price. If total fixed expenses are $39,000, the degree of operating leverage is: A) 2.10 B) 7.00 C) 2.27 D) 4.90

= No. of Units sold * Selling price per unit No. of units sold = 1750 Selling price per unit = 40 US Dollars per unit Total sales = 1750*40 =70,000 US Dollars Variable expenses (30% of selling price)=70000*(30/100) =21,000 US Dollars Fixed expenses=39,000 US Dollars Contribution margin=Sales-Variable cost =70,000 - 21,000 =49,000 US Dollars Operating income=Contribution margin- Fixed cost =49,000 - 39,000 =10,000 US Dollars Step 2 Degree of Operating leverage=Contribution margin/Operating income =49,000/10,000 =4.9 Answer 4.9

Pooler Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.25 direct labor-hours. The direct labor rate is $9.00 per direct labor-hour. The production budget calls for producing 6,800 units in April and 6,600 units in May. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months? A) $30,640 B) $30,815 C) $30,150 D) $30,325

= Total units X Direct labor hour per unit X Labor rate per labor hour = (6,800 + 6,600) = 13,400 = 13,400 * 0.25 = 3,350 = 3350 * $9 = $30,150 Answer: 30,150

The Bandeiras Corporation, a merchandising firm, has budgeted its activity for December according to the following information: Sales at $470,000, all for cash. Merchandise inventory on November 30 was $210,000. The cash balance at December 1 was $20,000. Selling and administrative expenses are budgeted at $66,000 for December and are paid in cash. Budgeted depreciation for December is $29,000. The planned merchandise inventory on December 31 is $240,000. The cost of goods sold is 70% of the sa

Answer: 470,000

The Bandeiras Corporation, a merchandising firm, has budgeted its activity for December according to the following information: Sales at $630,000, all for cash. Merchandise inventory on November 30 was $290,000. The cash balance at December 1 was $36,000. Selling and administrative expenses are budgeted at $114,000 for December and are paid in cash. Budgeted depreciation for December is $61,000. The planned merchandise inventory on December 31 is $320,000. The cost of goods sold is 70% of the s

Answer: 630,000

Which of the following budgets are prepared before the sales budget? Budgeted Income Statement. Direct Labor Budget A). Yes Yes B). Yes. No C). No. Yes D). No. No Choice A Choice B Choice C Choice D

Answer: Choice D

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget? A) It details the required direct labor hours B) It details the required raw materials purchases C) It is calculated based on the sales budget and the desired ending inventory D) It summarizes the costs of producing units for the budget period.

Answer: It is calculated based on the sales budget and the desired ending inventory

Which of the following statements is NOT correct concerning the Cash Budget? A) It is not necessary to prepare any other budgets before preparing the Cash Budget. B) The Cash Budget should be prepared before the Budgeted Income Statement. C) The Cash Budget should be prepared before the Budgeted Balance Sheet. D) The Cash Budget builds on earlier budgets and schedules as well as additional data.

Answer: It is not necessary to prepare any other budgets before preparing the Cash Budget.

The usual starting point for a master budget is: A) the direct materials purchase budget B) the budgeted income statement. C) the sales forecast or sales budget. D) the production budget.

Answer: the sales forecast or sales budget

Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $25,380 and variable expenses of $8,883. Product Y45E had sales of $32,550 and variable expenses of $17,902. The fixed expenses of the entire company were $24,400. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company: A) would decrease. B) would increase. C) could increase or decrease. D) would not c

Answer: would decrease

Sparks Corporation has a cash balance of $8,100 on April 1. The company must maintain a minimum cash balance of $6,500. During April, expected cash receipts are $49,000. Cash disbursements during the month are expected to total $53,500. Ignoring interest payments, during April the company will need to borrow: A) $2,900 B) $3,600 C) $6,500 D) $4,500

Cash balance at end = Cash balance at beginning + Cash receipts - Cash disbursements =8,100+49,000-53,500 =3,600 amount required to borrow =6,500-3,600 =2,900 Answer: 2,900

Moyas Corporation sells a single product for $20 per unit. Last year, the company's sales revenue was $225,000 and its net operating income was $38,500. If fixed expenses totaled $74,000 for the year, the break-even point in unit sales was: A) 11,250 units B) 5,625 units C) 13,175 units D) 7,400 units

Contribution margin= Fixed expenses + operating income =$74,000 + $38,500 =112,500 225,000/20 =11,250 112,500/11,250 = 10$ per unit 74,000/ 10 Answer: 7,400

Alpha Corporation reported the following data for its most recent year: sales, $610,000; variable expenses, $305,000; and fixed expenses, $244,000. The company's degree of operating leverage is closest to: Multiple Choice A) 10.00 B) 1.00 C) 5.00 D) 2.00

Contribution margin=Salews-Variable expenses =(610,0000-305000)=$305000 Net operating income=Contribution margin-Fixed costs =(305000-244000)=$61000 Hence DOL=Contribution margin/Net operating income =(305000/61000)=5 Answer: 5.00

If the degree of operating leverage is 4, then a one percent change in quantity sold should result in a four percent change in: Multiple Choice A) unit contribution margin B) revenue C) variable expense D) net operating income.

D) net operating income

POLL EVERYWHERE Data concerning Follick Corporation's single product appear below: Selling price per unit. $340.00 Variable expense per unit. $74.80 Fixed expense per month. $176,280 The break-even in monthly dollar sales is closest to A) $226,000 B) $275,720 C) $176,280 D) $452,000

Fixed cost=176,280 Contribution margin 340-74.80/340=0.78 BEP= 176,280 / 0.78 = 226,00 Answer: $226,000

The BRS Corporation makes collections on sales according to the following schedule: 20% in month of sale 71% in month following sale 9% in second month following sale The following sales have been budgeted: Sales April. $ 110,000 May. $ 130,000 June. $ 120,000 Budgeted cash collections in June would be: A) $126,200 B) $120,000 C) $120,990 D) $116,300

June sales collected in June =120,000 * 20% = 24,000 May sales collected in june =130,000 * 71% =92,300 Credit sales in April = 110,000 = 110,000 * 9% =9,900 Add all together 24,000+92,300+9,900 Answer: $126,200

Serfass Corporation's contribution format income statement for July appears below: Sales. $ 388,800 Variable expenses. 213,840 Contribution margin. 174,960 Fixed expenses. 83,980 Net operating income. $ 90,980 The degree of operating leverage is closest to: A) 0.23 B) 0.52 C) 2.22 D) 1.92

Operating leverage means the degree at which company can increase its net income by increasing the revenue. Operating leverage = Contribution Margin/Net Operating Income = 174,960/90,980 = 1.9231 Therefore, a 10% revenue increase should result in a 19.23% increase in operating income (10% x 1.9231 = 19.23%). Answer:1.92

The manufacturing overhead budget at Foshay Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in May. The variable overhead rate is $8.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $132,770 per month, which includes depreciation of $24,870. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every mont

Predetermined overhead rate= (estimated fixed overhead/ estimated direct labor hours) + variable overhead rate = ( 132,770/7100) +8.80 =27.50 Answer: 27.50

Jilk Incorporated's contribution margin ratio is 62% and its fixed monthly expenses are $45,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $132,000? A) $81,840 B) $5,160 C) $36,840 D) $87,000

Profit = (CM ratio x Sales) - Fixed Expenses = (0.62 × $132,000) - $45,000 = $81,840 - $45,000 = $36,840 Answer: $36,840

Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (6,400 units). $403,200 Variable expenses. 275,200 ------------- Contribution margin. 128,000 Fixed expenses. 103,500 ------------- Net operating income. 24,500. If the company sells 6,300 units, its net operating income should be closest to:

Sales =(403,200/6,400) * 6,300 =396,900 Variable expenses =(275,200/6,400) * 6,300 =270,900 Contribution Margin = 396,900-270,900 =126,000 Fixed expenses =126,000-103,500 =22,500 Answer: 22,500

Rovinsky Corporation, a company that produces and sells a single product, has provided its contribution format income statement for November. Sales (6,600 units). $ 402,600 Variable expenses. 270,600 Contribution margin. 132,000 Fixed expenses. 103,500 Net operating income. $ 28,500 If the company sells 6,500 units, its net operating income should be closest to: A) $27,979 B) $26,500 C) $28,500 D) $24,000

Selling Price per unit = $402,600 / 6,600 units = $61 Variable Cost = $270,600 / 6,600 units = $41 Sales ( 6,500 * $61) $396,500 variable Expense ( 6,500 * $41) $(266,500) Contribution Margin $130,000 Fixed Cost $(103,500) Net Operating Income $26,500 Answer: $26,500

Paradise Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. Beginning Inventory. Ending Inventory Raw material. 46,000. 56,000 Finished goods. 86,000. 56,000 * Three pounds of raw material are needed to produce each unit of finished product. If Paradise Corporation plans to sell 510,000 uni

Units manufacture during the year=Units to sell+Ending finished goods-Begining finished goods =510,000+56,000-86,000 =480,000 Answer: 480,000

Which of the following would not affect the break-even point? Multiple Choice a) number of units sold b) variable expense per unit c) total fixed expense D) selling price per unit

a) number of units sold

Schister Systems uses the following data in its Cost-Volume-Profit analyses: Sales. $ 310,000 variable expenses 170,500 Contribution margin 139,500 Fixed expenses. 102,000 Net operating income $ 37,500 What is the total contribution margin if sales volume increases by 30%? A) $139,500 B) $48,750 C) $181,350 D) $26,250

cm/sales: 139,500/310,000= 45% sales x 100% + 30%: 310,000 x 130%= 403,000 new sales x cm/sales: 403,000 * 45%= 181,350 Answer= 181,350

Derst Incorporated sells a particular textbook for $21. Variable expenses are $11 per book. At the current volume of 40,000 books sold per year, the company is just breaking even. Given these data, the annual fixed expenses associated with the textbook total: A) $400,000 B) $840,000 C) $1,240,000 D) $440,000

cm= 21-11=10 40,000 * 10=400,000 A) $400,000

POLL EVERYWHERE The manufacturing overhead budget at Polich Corporation is based on budgeted direct labor hours. The direct labor budget indicated that 8,600 direct labor hours will be required in February. The variable overhead rate is $9.40 per direct labor hour. The company's budgeted fixed manufacturing overhead is $103,200 per month, which includes depreciation of 18,220. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined over

labor hours x var. man. OH rate = 8,600 x 9.40 = 80840+ fixed man. OH (80840 + 103,200) = 184040/ direct labor hours (184040 / 8600) = 21.40 Answer: 21.40

POLL EVERYWHERE Parwin corporation plans to sell 42,000 units during August. If the company has 17,500 units on hand at the start of the month, and plans to have 18,500 units on hand at the end of the month, how many units must be produced during the month? A) 43,000 B) 41,000 C) 60,500 D) 59,500

sales units. 42,000 + End. 18,500 - Beg. 17,500 Answer: 43,000 units