SI Managerial Accounting Test 1 Review PDF

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Managerial Accounting Test 1 Review___________________________________ 1. Contribution margin is the amount remaining after: A. Fixed expenses have been deducted from sales revenue B. Costs of goods sold has been deducted from variable expenses C. Fixed expenses have been deducted from variable expenses D. Variable expenses have been deducted from sales revenue 2. At the breakeven point, which of the following is NOT true? A. At the breakeven point, sales revenue is exactly equal to total costs. B. Contribution margin is exactly equal to total variable costs. C. Contribution margin is exactly equal to total fixed costs. D. Operating income exactly equals zero. Use the following information relating to Dental Associates Inc. to answer questions 3-4: Total number of visits 4,500 Total revenue $365,000 Total fixed expenses $104,500 Total variable expenses $225,000 3. What is Dental Associates Inc. contribution margin per unit? A. $29 B. $31 C. $33 D. $38 4. What is the contribution margin ratio? A. 38% B. 45% C. 62% D. 35% 5. Assume total fixed costs of $160,000 variable costs per unit of $6, and contribution margin per unit of $4. How many units must be sold to meet a target operating income of $50,000? A. 5,000 B. 25,000 C. 40,000 D. 52,500

6. Deaton, Inc., sells computer backpacks. The company purchases the backpacks from its supplier for $15 and sells them to office supply stores for $25. Deaton’s fixed expenses are $100,000. What is Deaton’s breakeven point in sales dollars?

2 A. B. C. D.

$100,000 $166,667 $175,000 $250,000

7. Conrad Steele sells bridge supports. Currently, the company’s sales revenue is $5,000,000. If Conrad’s controller has calculated the company’s breakeven point to be $3,975,000, what is the company’s margin of safety? A. $1,025,000 B. $2,950,000 C. $3,975,000 D. $5,000,000 8. Sweet Tooth Bakery sells cake balls for $2 each. The bakery’s variable cost per cake ball is $0.50, and total fixed expenses are $3,000 per month. If the Sweet Tooth Bakery’s owners want to earn a monthly operating income of $9,000, how many cake balls must the bakery sell during the month? A. 8,000 B. 6,000 C. 4,000 D. 2,000 9. All other things equal, an increase in the number of units sold will A. increase operating income B. increase total variable expenses C. increase total contribution margin D. all of the above 10. Campus Crates wants to know how many sales it must make to have $55,000 in net income. Campus Crates income taxes are 20% of operating income. How much operating income will Campus Crates have to make in order to meet its goal? A. 56,780 B. 65,800 C. 54,230 D. 68,750 11. Which major activities do managers carry out? A. Planning B. Directing and motivating C. Controlling D. All of the above 12. Which of the following would most likely use managerial accounting information? A. SEC B. Employees

3 C. Investors D. Creditor 13. Managerial accounting: A. Primarily involves recording the financial history of an organization. B. Is governed by generally accepted accounting principles. C. Involves providing information primarily to external users. D. Involved providing information primarily to internal users. E. Both B and C above. 14. Managerial accounting: A. Is required for all companies. B. Focuses more on timeliness than precision. C. Is oriented more towards past information. D. Is meant to be distributed to external parties. 15. Which of the following is not one of the functions of managers? A. Planning B. Evaluating C. Controlling D. Decision-making E. All of the above are functions of managers 16. Which of the following would most likely use financial accounting information? A. Creditors B. Chief Executive Officer C. Management D. Chief Financial Officer 17. Which of the following statements about the relevant range is false? A. Fixed cost per unit remains constant. B. Variable costs change in direct proportion to changes in activity. C. Total fixed costs remain constant. D. Mixed costs contain both fixed and variable components.

Use the following for question 19-22: An income statement from Sam’s Bookstore for the first quarter of the year is presented below:

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Sam’s Bookstore Income Statement For the Quarter Ended March 31 Sales $900,000 Cost of Goods Sold 630,000 Gross Margin 270,000 Less operating expenses: Selling $100,000 Administration 104,000 204,000 Net operating income $66,000 On average, a book sells for $50. Variable selling expenses are $5 per book with the remaining selling expense being fixed. The variable administrative expenses are 4% of sales with the remainder being fixed. 18. The contribution margin for Sam’s Bookstore for the first quarter is: A. $180,000 B. $774,000 C. $144,000 D. $756,000 19. The net operating income using the contribution approach for the first quarter is: A. $270,000 B. $180,000 C. $144,000 D. $66,000 20. The cost formula for operating expenses with “x” equal to the number of books sold is: A. Y=$102,000+$42x B. Y=$102,000+$5x C. Y=$78,000+$42x D. Y=$78,000+$7x 21. If 20,000 books are sold during the second quarter and this activity is within the relevant range, the company’s expected contribution margin would be: A. $300,000 B. $160,000 C. $860,000 D. $58,000 22. Hurt Company reported 250,000 dollars in depreciation for plant facilities. This is an example of a: A. Discretionary fixed cost

5 B. Committed fixed cost C. Variable cost D. Mixed cost 23. Riddle’s Pantsuits has the following machine hours and production costs for the last six months of last year: Month July August September October November December

Machine Hours 15,000 13,500 11,500 15,500 14,800 12,100

Production Cost $12,075 $10,800 $9,580 $12,080 $11,692 $9,922

If Riddle expects to incur 14,000 machine hours in January, what will be the total production cost estimate using the high-low method? A. $8,750 B. $11,142.50 C. $22,400 D. $31,220 E. None of the above Wally and Beaver Cleavor were in need of some money so they decided to have an Eddie Haskal look-a-like contest. Each contestant would be charged $10 for entry into the contest and the winner would receive $100. Beaver just finished his first course in managerial accounting, so he decided to compute the profit on this venture. Beaver figured out the results and went running to tell Wally. “Gee Wally,” said Beaver, “if we get 80 contestants, we will have a contribution margin of $620 and a net income of $360!” “Wow Beav,” Wally replied, “we’re making all that money off of dumb ‘ol Eddie Haskal.” 24. What is the cost formula for Wally and Beaver’s venture? A. Y=$260+2.25x B. Y=$260+180x C. Y=$260+3.25x D. Y=$260+260x E. None of the above

25. What will be the effect on the following items if Wally and Beaver raise the prize money up from $100 to $300?

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A. B. C. D.

Variable Cost Increase No change No change Decrease

Fixed Cost no change increase increase no change

Contribution Margin no change no change decrease increase

26. Jed Clifton is a dentist in Dallas, Texas. Jed still only charges $20 per patient visit. Jed has his accountant prepare a cost formula for his practice based on the number of patient visits. The cost formula is: Y=$232+13.10x Jed had 160 patient visits last year. If Jed’s business increases 10% this year, what will be the total increase in contribution margin? A. $320.00 B. $209.60 C. $110.40 D. $88.00 E. None of the above 27. Blue Co. had the following income statement in February: Sales Costs Loss

$150,000 170,000 ($20,000)

The firm’s contribution margin ratio at its current selling price of $20 per unit is 40%. A. What is the firm’s break-even point in sales dollars?

B. What is the firm’s break-even point in units?

C. What are the total costs if it sells 8,000 units?

The Chadley Company sells at a sales price of $5.00 per unit. The company has gathered the following information for the past year. Sales $ 50,000 Cost of Goods Sold (100% variable) 26,000

7 Selling Expenses (20% variable) 8,000 Administrative Expenses (60% variable) 12,000 1.

Create a Contribution Margin Income Statement for Chadley Company.

2.

What is Chadley’s Contribution Margin per widget? Contribution Margin Ratio?

3.

What is Chadley’s breakeven point in units? In dollars?

4.

How many widgets would Chadley Company have to sell to earn an income of $20,000?...