A company requires $1,360,000 in sales to meet its net income target. Its contribution
margin is 30%, and fixed costs are $240,000. What is the target operating income?
a. $408,000
b. $312,000
c. $560,000
d. $168,000
Which of the following items would not be included in the calculation of cash flows
provided by operating activities using the indirect method?
a. Purchasing supplies on account
b. Net income
c. Depreciation expense
d. Gain on the sale of equipment
Which of the following is not a duty of a management accountant under the IMA
Statement of Ethical Professional Practice ‘s credibility standard?
a.Communicate information fairly and objectively.
b.Disclose all relevant information that could reasonably be expected to influence an
intended user ‘s understanding of the reports, analyses, or recommendations.
c.Disclose delays or deficiencies in information, timeliness, processing, or internal
controls in conformance with organization policy and/or applicable law.
d.All of these answer choices are correct.
Kevin Jarvis is the controller of Bitterroot Industries. Kevin prepared the following
budgeted income statement at various levels of sales. After careful review of the
budgeted income statements, and after discussions with the sales and production
managers, the CEO determines that the best alternative is to base the budget on a sales
volume of 30,000 units.
Actual results for the year were 28,000 units, reflected in the following income
statement:
What is the sales volume variance for direct labor?
a. $28,000 favorable
b. $28,000 unfavorable
c. $6,000 unfavorable
d. $30,000 favorable
Walker Boat Company produces bass boats. The following comments were found in the
“Management’s Discussion and Analysis” section of the annual report.
“Bass boat production includes a significant amount of robotic manufacturing costs, a
portion of which do not vary with production rates.”
As industry practice, Walker spreads its robotic costs over the estimated number of
boats that are expected to be produced for each type of bass boat. At the end of the
previous year, the number of boats produced was 2,400 while the expected number of
boats to be produced in the current year is 2,700.
Required:
a.What effect would the change in level of boats produced have on the total robotic
costs?
b.What effect would the change in level of boats produced have on the unit costs of the
boats?
Backyard Creations purchased 7,000 feet of copper tubing at a price of $2.70 per foot
and used 7,200 feet during the period. The standard quantity allowed for the units
produced is 7,300 and the standard price of the copper tubing is $2.50 per foot. What is
Backyard Creations’ direct materials quantity variance for the period?
a. $250 favorable
b. $500 favorable
c. $750 favorable
d. None of these answer choices are correct.
ABC Corporation makes mattresses in three sizes: twin, queen and king. Twin
mattresses have shown a loss for several years, similar to the operating loss shown
below:
None of the fixed cost is avoidable. What will total operating income for the
corporation be if twin mattresses are discontinued?
a. $50,000 loss
b. $15,000 loss
c. $30,000 profit
d. $105,000 profit
Betty’s Bakery needs to purchase a new oven costing $8,000 to replace her old oven
that cannot be repaired. The new oven has several features that the old oven did not
have and is expected to have a useful life of 12 years. Betty does not expect the oven
will have any salvage value at the end of its life. Required: a. If Betty’s required rate of
return is 8%, what level of annual cash savings must the oven generate to be considered
an acceptable investment under the net present value method? b. If Betty decides the
cash savings will not be sufficient to justify the cost of the new oven, list two
alternatives she might consider.
When customers consider making purchases, which of the following is not an
expectation they have?
a. Price
b. Delivery speed
c. High profit margin for supplier
d. Quality
If the beginning balance in Raw Materials Inventory is $5,000, the ending balance is
$3,500, and $60,000 was purchased, what is the amount of materials transferred to
Work in Process Inventory during the period?
a. $58,500
b. $60,000
c. $61,500
d. $68,500
Kydell Corporation reported the following results from the sale of 6,000 units in March:
sales $300,000, variable costs $180,000, fixed costs $90,000, and operating income
$30,000. Assume that Kydell increases the selling price by 10% on April 1. How many
units will have to be sold in April to maintain the same level of operating income?
a. 4,800.
b. 5,160.
c. 5,400.
d. 6,000.