# 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),

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

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:

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:

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

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:

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

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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 |

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