MGA Final Exam – Flashcards

The records of the Dodge Corporation show the following results for the most recent year: Sales (16,000 units) $256,000 Variable expenses $160,000 Net operating income $32,000 Given these data, the unit contribution margin was:

Data for Hermann Corporation are shown below: Per Unit Percent of sales Selling price $ 90 100% Variable expenses 63 70% Contribution margin $ 27 30% Fixed expenses are $30,000 per month and the company is selling 2,000 units per month. 1-a. The marketing manager argues that a $5,000 increase in the monthly advertising budget would increase monthly sales by $9,000. Calculate the increase or decrease in net operating income. 1-b. Should the advertising budget be increased ?

The Clyde Corporation's variable expenses are 35% of sales. Clyde Corporation is contemplating an advertising campaign that will cost $25,000. If sales increase by $75,000, the company's net operating income will increase by:

Hartung Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $140 100% Variable expenses 42 30% Contribution margin $98 70% Fixed expenses are $147,000 per month. The company is currently selling 2,000 units per month. The marketing manager would like to introduce sales commissions as an incentive for the sales staff. The marketing manager has proposed a commission of $13 per unit. In exchange, the sales staff would accept a decrease in their salaries of $22,000 per month. (This is the company's savings for the entire sales staff.) The marketing manager predicts that introducing this sales incentive would increase monthly sales by 400 units. What should be the overall effect on the company's monthly net operating income of this change?

Garcia Veterinary Clinic expects the following operating results next year: Sales (total) $600,000 Variable expenses (total) $120,000 Fixed expenses (total) $300,000 What is Garcia's break-even point next year in sales dollars?

Holdt Inc. produces and sells a single product. The selling price of the product is $230.00 per unit and its variable cost is $66.70 per unit. The fixed expense is $212,290 per month. The break-even in monthly unit sales is closest to:

Last year Easton Corporation reported sales of $720,000, a contribution margin ratio of 30% and a net loss of $24,000. Based on this information, the break-even point was:

Moonen Corporation produces and sells a single product whose contribution margin ratio is 57%. The company's monthly fixed expense is $487,350 and the company's monthly target profit is $10,000. The dollar sales to attain that target profit is closest to:

Data concerning Matsumoto Corporation's single product appear below: Selling price per unit $130.00 Variable expense per unit $52.00 Fixed expense per month $280,800 Assume the company's target profit is $5,000. The unit sales to attain that target profit is closest to:

Molander Corporation is a distributor of a sun umbrella used at resort hotels. Data concerning the next month's budget appear below: Selling price $30 per unit Variable expenses $20 per unit Fixed expenses $7,500 per month Unit sales 1,000 units per month Required: 1. Compute the company's margin of safety. 2. Compute the company's margin of safety as a percentage of its sales.

Morganti Corporation sells a product for $140 per unit. The product's current sales are 40,700 units and its break-even sales are 31,339 units. What is the margin of safety in dollars?

Palomo Corporation sells a product for $170 per unit. The product's current sales are 35,200 units and its break-even sales are 25,344 units. The margin of safety as a percentage of sales is closest to:

Arthur Corporation has a margin of safety percentage of 25% based on its actual sales. The break-even point is $300,000 and the variable expenses are 45% of sales. Given this information, the actual profit is:

The following monthly data are available for the Wyatt Corporation and its only product: Unit selling price $36 Unit variable expenses $28 Total fixed expenses $50,000 Actual sales for the month of May 7,000 units

Engberg Company installs lawn sod in home yards. The company's most recent monthly contribution format income statement follows: Amount Percent of Sales Sales $ 80,000 100% Variable expenses 32,000 40% Contribution margin 48,000 60% Fixed expenses 38,000 Net operating income $10,000 1)Compute the company's degree of operating leverage. (Round your answer to 1 decimal place.) 2) Using the degree of operating leverage, estimate the impact on net operating income of a 5% increase in sales. (Do not round intermediate calculations.) 3) Construct a new contribution format income statement for the company assuming a 5% increase in sales.

If Q equals the level of output, P is the selling price per unit, V is the variable expense per unit, and F is the fixed expense, then the degree of operating leverage is equal to:

Alpha Corporation reported the following data for its most recent year: sales, $500,000; variable expenses, $300,000; and fixed expenses, $150,000. The company's degree of operating leverage is:

Cleckley Corporation's operating leverage is 5.9. If the company's sales increase by 19%, its net operating income should increase by about:

Sales in North Corporation increased from $60,000 per year to $63,000 per year while net operating income increased from $10,000 to $12,000. Given this data, the company's degree of operating leverage must have been:

Papenfuss Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: Activity level 86 guests Variable overhead costs: Supplies $86.00 Laundry 507.40 Fixed overhead costs: Utilities 340.00 Salaries and wages 4,790.00 Depreciation 2,620.00 Total overhead cost $8,343.40 The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 76 guests?

The standard cost card for one unit of a certain finished product shows the following: Standard Quantity or Hours Standard Price or Rate Direct materials 10 pounds $? per pound Direct labor 2.5 hours $16 per hour Variable manufacturing overhead 1.5 hours $10 per hour If the total standard variable cost for one unit of finished product is $85, then the standard price per pound for direct materials is:

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 4.6 pounds $ 2.50 per pound $ 11.50 Direct labor 0.2 hours $ 12.00 per hour $ 2.40 During the most recent month, the following activity was recorded: a. Twenty thousand pounds of material were purchased at a cost of $2.35 per pound. b. All of the material purchased was used to produce 4,000 units of Zoom. c. 750 hours of direct labor time were recorded at a total labor cost of $10,425. Required: 1. Compute the materials price and quantity variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).) 2. Compute the labor rate and efficiency variances for the month. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance).)

The standard cost card of a particular product specifies that it requires 4.5 direct labor-hours at $12.80 per direct labor-hour. During March, 2,300 units of the product were produced and direct labor wages of $128,300 were incurred. A total of 11,700 direct labor-hours were worked. The direct labor variances for the month were: Labor Rate Variance Labor Efficiency Variance A) $4,180 F $14,804 U B) $4,180 F $17,280 U C) $21,460 F $14,804 U D) $21,460 F $17,280 U

The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 7.8 hours Standard variable overhead rate $12.55 per hour The following data pertain to operations for the last month: Actual hours 2,900 hours Actual total variable manufacturing overhead cost $36,975 Actual output 200 units

The Maxwell Corporation has a standard costing system in which variable manufacturing overhead is assigned to production on the basis of standard machine-hours. The following data are available for July: • Actual variable manufacturing overhead cost incurred: $22,620 • Actual machine-hours worked: 1,600 hours • Variable overhead rate variance: $3,420 Unfavorable • Total variable overhead spending variance: $4,620 Unfavorable The standard number of machine-hours allowed for July production is:

Sharp Company manufactures a product for which the following standards have been set: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 3 feet $ 5 per foot $ 15 Direct labor ? hours ? per hour ? During March, the company purchased direct materials at a cost of $55,650, all of which were used in the production of 3,200 units of product. In addition, 4,900 hours of direct labor time were worked on the product during the month. The cost of this labor time was $36,750. The following variances have been computed for the month: Materials quantity variance $ 4,500 U Labor spending variance $ 1,650 F Labor efficiency variance $ 800 U Required: 1. For direct materials: a. Compute the actual cost per foot for materials for March. (Round your answer to 2 decimal places.) b. Compute the price variance and the spending variance. (Do not round intermediate calculations. Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance)) 2 a direct labor hours b standard hours allowed for this month's production c standard hours allowed per unit of products

Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below: Standard Quantity or Hours Standard Price or Rate Standard Cost Direct materials 4.6 pounds $ 2.50 per pound $ 11.50 Direct labor 0.2 hours $ 12.00 per hour $ 2.40 During the most recent month, the following activity was recorded: a. Twenty thousand pounds of material were purchased at a cost of $2.35 per pound. b. The company produced only 3,000 units, using 14,750 pounds of material. (The rest of the material purchased remained in raw materials inventory.) c. 750 hours of direct labor time were recorded at a total labor cost of $10,425.

The standard cost card for a product indicates that one unit of the product requires 8 kilograms of a raw material at $0.80 per kilogram. The production of the product in April was 870 units, but production had been budgeted for 850 units. During April, 8,200 kilograms of the raw material were purchased for $6,888 and 7,150 kilograms of the raw material were used in production. The material variances for April were: Material Price Variance Material Quantity Variance A) $286 U $152 U B) $286 U $280 U C) $328 U $152 U D) $328 U $280 U

Which of the following performance measures will decrease if the minimum required rate of return increases? Return on Investment Residual Income A) Yes Yes B) No Yes C) Yes No D) No No

Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below: Sales $ 7,500,000 Net operating income $ 600,000 Average operating assets $ 5,000,000 Required: 1. Compute the margin for Alyeska Services Company. (Enter your answer as a percentage (i.e., 0.12 should be entered as 12).) 2. Compute the turnover for Alyeska Services Company. (Round your answer to 1 decimal place.) 3. Compute the return on investment (ROI) for Alyeska Services Company. (Do not round intermediate calculations. Enter your answer as a percentage (i.e., 0.12 should be entered as 12).)

Last year a company had sales of $400,000, a turnover of 2.4, and a return on investment of 36%. The company's net operating income for the year was:

The Portland Division's operating data for the past two years is as follows: Year 1 Year 2 Return on investment 12% 24% Net operating income ? $288,000 Turnover ? 2 Margin ? ? Sales $1,600,000 ? The Portland Division's margin in Year 2 was 150% of the margin for Year 1. The turnover for Year 1 was:

Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $600,000 on sales of $3,000,000. The company's average operating assets for the year were $2,800,000 and its minimum required rate of return was 18%. Required: Compute the company's residual income for the year.

If operating income is $60,000, average operating assets are $240,000, and the minimum required rate of return is 20%, what is the residual income?

The following information relates to last year's operations at the Bread Division of Rison Bakery Inc.: Residual income $12,000 Net operating income $60,000 Sales $300,000 Average operating assets $400,000 What was the Bread Division's minimum required rate of return last year?

Management of Mittel Rhein AG of Köln, Germany, would like to reduce the amount of time between when a customer places an order and when the order is shipped. For the first quarter of operations during the current year the following data were reported: Inspection time 0.3 days Wait time (from order to start of production) 14.0 days Process time 2.7 days Move time 1.0 days Queue time 5.0 days Required: 1. Compute the throughput time. 2. Compute the manufacturing cycle efficiency (MCE) for the quarter. (Round your answer to 2 decimal places.) 3. What percentage of the throughput time was spent in non-value-added activities? (Enter your answer as a percentage (i.e., 0.12 should be entered as 12).)

Fruchter Corporation keeps careful track of the time required to fill orders. The times recorded for a particular order appear below: Hours Move time 2.7 Wait time 26.4 Queue time 6.4 Process time 1.8 Inspection time 0.1 the throughput time was

The following data pertain to operations at Quick Incorporated: Throughput time 4 hours Delivery cycle time 8 hours Process time 1 hour Queue time 2 hours The manufacturing cycle efficiency (MCE) for this operation would be:

Ramon Corporation makes 18,000 units of part E44 each year. This part is used in one of the company's products. The company's Accounting Department reports the following costs of producing the part at this level of activity: Per Unit Direct materials $2.20 Direct labor $5.40 Variable manufacturing overhead $8.00 Supervisor's salary $7.30 Depreciation of special equipment $6.60 Allocated general overhead $1.80 An outside supplier has offered to make and sell the part to the company for $23.30 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part E44 would be used to make more of one of the company's other products, generating an additional segment margin of $21,000 per year for that product. What would be the impact on the company's overall net operating income of buying part E44 from the outside supplier?

he Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 100,000 wheels annually are: Direct materials $30,000 Direct labor $50,000 Variable manufacturing overhead $20,000 Fixed manufacturing overhead $70,000 An outside supplier has offered to sell Talbot similar wheels for $1.25 per wheel. If the wheels are purchased from the outside supplier, $15,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $45,000 per year. Direct labor is a variable cost. At what purchase price for the wheels would Talbot be indifferent between making or buying the wheels?

Delta Company produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 60,000 units per year is: Direct materials $ 5.10 Direct labor $ 3.80 Variable manufacturing overhead $ 1.00 Fixed manufacturing overhead $ 4.20 Variable selling and administrative expense $ 1.50 Fixed selling and administrative expense $ 2.40 The normal selling price is $21 per unit. The company's capacity is 75,000 units per year. An order has been received from a mail-order house for 15,000 units at a special price of $14.00 per unit. This order would not affect regular sales. Required: 1. If the order is accepted, by how much will annual profits be increased or decreased? (The order will not change the company's total fixed costs.) 2. Assume the company has 1,000 units of this product left over from last year that are inferior to the current model. The units must be sold through regular channels at reduced prices. What unit cost is relevant for establishing a minimum selling price for these units? (Round your answer to 2 decimal places.)

Gwinnett Barbecue Sauce Corporation manufactures a specialty barbecue sauce. Gwinnett has the capacity to manufacture and sell 10,000 cases of sauce each year but is currently only manufacturing and selling 9,000. The following costs relate to annual operations at 9,000 cases: Total Cost Variable manufacturing cost $126,000 Fixed manufacturing cost $45,000 Variable selling and administrative cost $18,000 Fixed selling and administrative cost $27,000 Gwinnett normally sells its sauce for $30 per case. A local school district is interested in purchasing Gwinnett's excess capacity of 1,000 cases of sauce but only if they can get the sauce for $15 per case. This special order would not affect regular sales or total fixed costs or variable costs per unit. If this special order is accepted, Gwinnett's profits for the year will:

The Molis Corporation has the capacity to produce 15,000 haks each month. Current regular production and sales are 10,000 haks per month at a selling price of $15 each. Based on this level of activity, the following unit costs are incurred: Direct materials $5.00 Direct labor $3.00 Variable manufacturing overhead $0.75 Fixed manufacturing overhead $1.50 Variable selling expense $0.25 Fixed administrative expense $1.00 The fixed costs, both manufacturing and administrative, are constant in total within the relevant range of 10,000 to 15,000 haks per month. Direct labor is a variable cost. The Molis Corporation has received a special order from a customer who wants to pay a reduced price of $10 per hak. There would be no selling expense in connection with this special order. And, this order would have no effect on the company's other sales. Suppose the special order is for 6,000 haks this month and thus some regular sales would have to be given up. If this offer is accepted by Molis, the company's operating income for the month will:

he Melrose Corporation produces a single product, Product C. Melrose has the capacity to produce 70,000 units of Product C each year. If Melrose produces at capacity, the per unit costs to produce and sell one unit of Product C are as follows: Direct materials $20 Direct labor $17 Variable manufacturing overhead $13 Fixed manufacturing overhead $14 Variable selling expense $12 Fixed selling expense $8 The regular selling price of one unit of Product C is $100. A special order has been received by Melrose from Moore Corporation to purchase 7,000 units of Product C during the upcoming year. If this special order is accepted, the variable selling expense will be reduced by 75%. Total fixed manufacturing overhead and fixed selling expenses would be unaffected except that Melrose will need to purchase a specialized machine to engrave the Moore name on each unit of product C in the special order. The machine will cost $10,500 and will have no use after the special order is filled. Assume that direct labor is a variable cost. Assume that Melrose expects to sell 60,000 units of Product C to regular customers next year. At what selling price for the 7,000 units would Melrose be economically indifferent between accepting and rejecting the special order from Moore?

Hoang Corporation makes three products that use compound W, the current constrained resource. Data concerning those products appear below: KI LH RP Selling price per unit $252.42 $543.75 $222.84 Variable cost per unit $199.92 $426.30 $163.80 Centiliters of compound W 4.20 8.70 3.60 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized.

Manico Corporation produces three products - X, Y, & Z - with the following characteristics: X Y Z Selling price per unit $20 100% $16 100% $15 100% Variable cost per unit 12 60% 12 75% 6 40% Contribution margin per unit $ 8 40% $ 4 25% $ 9 60% Machine hours per unit 5 3 6 The company has only 2,000 machine-hours available each month. If demand exceeds the company's capacity, in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Oruro Chemical Corporation manufactures a variety of household cleaners, solvents, and beverages. Because of a recent shortage of mytron, a key ingredient needed for three of its products, the corporation has to decide what amount of each product would be most advantageous to produce. Information related to the three products that use mytron are shown below: Hand Soap Paint Remover Root Beer Contribution margin per case $24 $20 $12 Contribution margin ratio 50% 70% 60% Mytron required per case (in ounces) 3 5 2 Maximum monthly demand (in cases) 500 200 2,000 Assume that Oruro only has 3,000 ounces of mytron available next month. What is the maximum amount of contribution margin that Oruro can generate next month from the three products above given the shortage of mytron?

Consider the following production and cost data for two products, Q and P: Product Q Product P Contribution margin per unit $40 $36 Machine minutes needed per unit 8 minutes 6 minutes A total of 24,000 machine minutes are available each period and there is unlimited demand for each product. What is the largest possible total contribution margin that can be realized each period?

Wexpro, Inc., produces several products from processing 1 ton of clypton, a rare mineral. Material and processing costs total $60,000 per ton, one-fourth of which is allocated to product X15. Seven thousand units of product X15 are produced from each ton of clypton. The units can either be sold at the split-off point for $9 each, or processed further at a total cost of $9,500 and then sold for $12 each. Required: Should product X15 be processed further or sold at the split-off point?

Gary Corporation produces products X, Y, and Z from a single raw material input. Budgeted data for the next month is as follows: Product X Product Y Product Z Units produced 2,500 3,000 4,000 Per unit sales value at split-off $20.00 $22.00 $25.00 Added processing costs per unit $8.00 $8.50 $8.00 Per unit sales value if processed further $30.00 $30.00 $35.00 If the cost of raw material input is $150,000, which of the products should be processed beyond the split-off point? Product X Product Y Product Z A) no yes no B) no yes yes C) yes no yes D) yes yes no

Gierlach Beet Processors Inc., processes sugar beets in batches. A batch of sugar beets costs $27 to buy from farmers and $17 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $27 or processed further for $14 to make the end product industrial fiber that is sold for $34. The beet juice can be sold as is for $32 or processed further for $29 to make the end product refined sugar that is sold for $58. How much more profit (loss) does the company make by processing the intermediate product beet juice into refined sugar rather than selling it as is?

Yukon Perfume Corporation manufactures three distinct perfumes (I, II, and III) from a single joint process. The three perfumes can be sold to discount stores in the form they are in at the split-off point. However, if the perfumes are further processed, they can be sold to specialty stores. Costs related to each batch of perfume separation is as follows: Perfume I Perfume II Perfume III Sales value at split-off point $1,500 $800 $900 Allocated joint costs $1,000 $1,000 $1,000 Sales value after further processing $3,500 $2,500 $2,000 Cost of further processing $1,600 $1,400 $500 For which product(s) above would it be more profitable for Yukon to sell after further processing rather than at the split-off point?

Two products, LB and NH, emerge from a joint process. Product LB has been allocated $30,800 of the total joint costs of $44,000. A total of 2,000 units of product LB are produced from the joint process. Product LB can be sold at the split-off point for $13 per unit, or it can be processed further for an additional total cost of $14,000 and then sold for $15 per unit. If product LB is processed further and sold, what would be the effect on the overall profit of the company compared with sale in its unprocessed form directly after the split-off point?