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Managerial accounting quiz.

Most accounting practitioners do not spend much time working in the areas of managerial and cost accounting. However, many of the concepts can be applied to everyday business and can be used to help guide clients as they analyze their business decisions.

Additionally, for those practitioners planning on sitting for the ACAT accounting examination scheduled for may 8, 1992, understanding managerial accounting has traditionally been a big help. In anticipation of this examination, this month's column is made up of typical problems in managerial accounting. Work the problems either as a review for the exam or just for fun to test your knowledge. Answers appear at the end of this column. If you have any questions, please call the NSPA Education Department. We will be happy to help you. 1. The excess of sales revenues over

variable costs and expenses

called:

a. gross profit

b. contribution margin

c. operating income

d. profit margin

2. Salter Inc., unit selling price is

$40, the unit variable costs is

$25, fixed costs are $135,000

and current sales are 10,000 units.

How much will operating income

change if sales increase by

5,000 units?

a. $60,000 decrease

b. $75,000 increase

c. $100,000 increase

d. $135,000 increase

3. If fixed costs are $450,000, the

unit selling price is $75 and the

unit variable costs are $50, what

is the old and new break-even

sales (units) if the unit selling

price increases by $5?

a. 6,000 units and 5,250 units

b. 9,000 units and 6,000 units

c. 15,000 units and 18,000

units

d. 18,000 units and 15,000

units

4. The method of analyzing capital

investment proposals that divides

the estimated average annual income

by the average investment

is:

a. average rate of return method

b. cash payback method

c. net present value method

d. internal rate of return

method

5. The expected average rate of return

for a proposed investment

of $300,000 in a plant asset,

giving effect to depreciation

(straight-line years, no residual

value and an expected total

income yield of $108,000 is:

a. 9%

b. 15%

c. 18%

d. 27%

6. To maximize profits, which of

the following statements is true?

a. The cost of ordering inventory

must not be greater than

the inventory purchase cost.

b. The cost of carrying inventory

must be balanced with

the opportunity costs related

to inventory.

c. The cost of interrupting

production because of

inventory shortages must be

reduced to zero.

d. The cost of storing inventory

must be reduced below

the cost of ordering

inventory.

7. Production estimates for August

are as follows: Estimated inventory (units),
 August 1 12,000
Desired inventory (units),
 August 31 9,000
Expected sales volume (units),
 August 75,000
For each unit produced, the direct
materials requirements are as follows:
Direct material A
 ($5 per lb.) 3 lbs.
Direct material B
 ($18 per lb.) 1/2 lb.


The number of pounds of materials A and B required for August production is:

a. 216,000 lbs. of A;

36,000 lbs. of B

b. 216,000 lbs. of A;

72,000 lbs. of B

c. 225,000 lbs. of A;

37,500 lbs. of B.

d. 234,000 of A;

39,000 lbs. of B

8. The following data relate to direct

materials costs for November:

Actual
 costs 4,500 pounds at $6.00
Standard
 costs 4,600 pounds at $5.50


What is the direct materials price variance?

a. $1,700 unfavorable

b. $2,250 unfavorable

c. $2,250 favorable

d. $2,300 unfavorable

9. The following condensed data

were extracted from the accounting

records of a company.: Cost of goods sold:
 Department M $450,000
Direct expenses:
 Department M 175,000
Indirect expenses 60,000
Interest expense 20,000
Net sales:
 Department M 700,000


What is the departmental margin for Department M?

a. $(5,000)

b. $15,000

c. $75,000

d. $250,000

10. The following list includes several

bases for allocating expenses,

their account totals and the percent

chargeable to each department:
 Dept. Dept.
Account Total A B
Payroll $ 112,500 30% 70%
Sales 2,500,000 15% 85%
Store
 equipment 1,250,000 25% 75%
Floor space
 (square feet) 50,000 40% 60%


Use the proper base to apportion $30,000 for billboard advertising between Departments A and B.

a. Department A - $4,500,

Department B - $25,500

b. Department A - $7,500,

Department B - $22,500

c. Department A - $9,000,

Department B - $21,000

d. Department A - $12,000,

Department B - $18,000

11. Based on the following data for

the current year, what is the accounts

receivable turnover?

Net sales on account
 during year $1,000,000
Cost of merchandise sold
 during year 600,000
Accounts receivable,
 beginning of year 110,000
Accounts receivable,
 end of year 90,000
Inventory,
 beginning of year 110,000
Inventory
 end of year 130,000


a. 5.1

b. 9.1

c. 10.0

d. 11.1

12. For the coming year, Swain company

estimates fixed costs at

$50,000, a unit selling price at

$5 and unit variable costs of $3.

Determine:

a. The break-even point sales

(units);

b. The number of units

required to be sold to realize

operating income of

$100,000; and

c. The probable operating

income if sales total

30,000 units.

13. Prepare a monthly flexible selling

expense budget for Prater

Company for sales volumes of

$500,000, $600,000, and

$750,000, based on the following

data:
Sales commissions 4% of sales
Sales manager's salary $80,000
Advertising expense $75,000
Shipping expense 1% of sales
Miscellaneous selling
 expense $2,000 plus 3/4% of sales
 Answer to Problems
12. (a) Break-Even Sales (Units) = Fixed Costs/Unit Contribution Margin
 Break-Even Sales (Units) = $50,000 = 25,000 units
 $2
12. (b) Break-Even Sales (Units) = Fixed Costs + Desired Profit/Unit Contributio
n Margin
 Break-Even Sales (Units) = $50,000 + $100,00/$2 = 75,000 units
12. (c) $10,000 {$2 x (30,000 units - 25,000 units)}
13. PRATER COMPANY
Monthly Selling Expense Budget
Sales volume $500,000 $600,000 $700,000
Variable expense:
 Sales commissions $ 20,000 $ 24,000 $ 28,000
 Shipping expense 5,000 6,000 7,000
 Miscellaneous selling expense 3,750 4,500 5,250
Total variable expense $ 28,750 $ 34,500 $ 40,250
Fixed expense:
 Sales manager's salary $ 80,000 $ 80,000 $ 80,000
 Advertising expense 75,000 75,000 75,000
 Miscellaneous selling expense 2,000 2,000 2,000
 Total fixed expense $157,000 $157,000 $157,000
Total selling expense $185,750 $191,500 $197,250
 Answers to Multiple Choice
1. B 5. C 9. C
2. B 6. B 10. A
3. D 7. A 11. C
4. A 8. B
 Answers to March Quiz
1. C 10. C
2. A 11. A
3. B 12. B
4. A 13. C
5. C 14. B
6. B 15. A
7. A 16. A
8. C 17. B
9. A
COPYRIGHT 1992 National Society of Public Accountants
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Accounting Scene
Author:Schwartz, Marlyn A.
Publication:The National Public Accountant
Article Type:Column
Date:Apr 1, 1992
Words:1171
Previous Article:Tax talk.
Next Article:Stemmy receives NSPA Golden Quill Award.
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