Chapter 6 Review Guide PDF

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Chapter 6 Review Guide 4/24/18 This is a suggested review guide. It is not intended to be all inclusive. You should also study the course material covered. Remember – anything in the book or covered in class is fair game! Chapter 6:  Know which costs would be considered traceable vs. fixed for a particular situation.  Understand how to apply traceable fixed expenses and common fixed expenses when calculating segment margins.  If given sales, contribution margin %, and traceable fixed costs for some segments, be able to calculate missing data.  Be able to calculate contribution margin and operating income if given divisional data. 1.

In an income statement segmented by product line, a fixed expense that cannot be allocated among product lines on a cause-and-effect basis should be: A. classified as a traceable fixed expense and not allocated. B. classified as a common fixed expense and not allocated. C. allocated to the product lines on the basis of sales dollars. D. allocated to the product lines on the basis of segment margin.

2.

Sugiki Corporation has two divisions: the Alpha Division and the Delta Division. The Alpha Division has sales of $820,000, variable expenses of $369,000, and traceable fixed expenses of $347,300. The Delta Division has sales of $460,000, variable expenses of $294,400, and traceable fixed expenses of $134,100. The total amount of common fixed expenses not traceable to the individual divisions is $97,300. What is the company's net operating income? A. $37,900 B. $616,600 C. $519,300 D. $135,200

3.

Ring, Incorporated's income statement for the most recent month is given below.

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The marketing department believes that a promotional campaign at Store P costing $5,000 will increase sales by $15,000. If the campaign is adopted, overall company net operating income should: A. decrease by $5,800 B. increase by $10,000 C. increase by $5,800 D. decrease by $800 4.

Gore Corporation has two divisions: the Business Products Division and the Export Products Division. The Business Products Division's divisional segment margin is $55,700 and the Export Products Division's divisional segment margin is $70,600. The total amount of common fixed expenses not traceable to the individual divisions is $107,400. What is the company's net operating income? A. B. $126,300 C. $18,900 D. $233,700

5.

Pong Incorporated's income statement for the most recent month is given below.

If Store G sales increase by $40,000 with no change in fixed costs, the overall company net operating income should: A. increase by $8,000 B. increase by $24,000 C. increase by $20,000 D. increase by $4,000 6.

Gough Corporation has two divisions. Domestic and Foreign. Data from the most recent month appears below:

2

The break-even in sales dollars for the company as a whole is closest to: A. B. C. D.

$502,579 $107,216 $436,424 $609,794

7. When using data from a segmented income statement, the dollar sales for a segment to break even is equal to: A. Traceable fixed expenses divided by unit CM B. Traceable fixed expenses divided by Segment CM ratio C. Common fixed expenses divided by segment CM ratio D. Common fixed expenses divided by unit CM 8.

Carrejo Corporation has two divisions: Division M and Division N. Data from the most recent month appear below:

Management has allocated common fixed expenses to the division based on their sales. The break-even in sales dollars for Division N is closest to: A. $392,211 B. $258,230 C. $172,131 D. $219,656 9.

Bode Corporation has two divisions. East and West. Data from the most recent month appears below:

The company's common fixed expenses total $47,300. If the company operates at exactly the break-even sales of the East and West division, what would be the company's overall net operating income? A. $51,470 B. ($293,300) C. ($47,300) D. $0

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10.

When using data from a segmented income statement, the dollar sales for the company to break even overall is equal to: A. (Non-traceable fixed expenses + Common fixed expenses) divided by Overall CM Ratio B. (Allocated fixed expenses + Traceable fixed expenses) divided by Overall CM Ratio C. Traceable fixed expenses divided by Overall CM Ratio D. (Traceable fixed expenses + Common fixed expenses) divided by Overall CM Ratio

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Question 1 2 3 4 5 6 7 8 9 10

Answer B A D C C D B C C D

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