Test bank managerial accounting by garrison 13e chapter 12

#Carolina#Sanders##A#accept#reject##B#reject#accept##C#accept#accept##D#reject#reject## Ans:��C AACSB:��Analytic AICPA BB:� ��Decision Making �AICPA FN:� ��Reporting LO:��3 Level:��EasyU

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AACSB:��Analytic AICPA BB:� ��Critical Thinking �

AICPA FN:� ��Reporting; Measurement LO:� ��1 Level:��Easy Solution:

##Total Company#East#West###Sales #$830,000#$690,000#$140,000###Variable

expenses #408,000#352,000#56,000###Contribution margin

#422,000#338,000#84,000###Traceable fixed expenses

#128,000#104,000#24,000###Segment margin

#294,000#$234,000#$60,000###Common fixed expenses #162,000#####Net operating income #$132,000####Use the following to answer questions 66-68:Data for January for Bondi Corporation and its two major business segments, North andSouth, appear below:#Sales revenues, North #$660,000###Variable expenses, North #$383,000###Traceable fixed expenses, North #$79,000###Sales revenues, South #$510,000###Variable expenses, South #$291,000###Traceable fixed

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expenses, South #$66,000##In addition, common fixed expenses totaled $179,000 and were allocated as follows: $93,000 to the North business segment and $86,000

to the South business segment

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66 The contribution margin of the South business segment is: A)

$198,000 B) $496,000 C) $219,000 D) $105,000

Ans:��C AACSB:��Analytic AICPA BB:� ��Critical Thinking �AICPA FN:� ��Reporting LO:��1 Level:��Easy Solution:

#Sales #$510,000###Variable expenses # 291,000###Contribution margin

#$219,000## 67 A properly constructed segmented income statement in a contribution format would show that the segment margin of the North business segment is: A) $105,000 B) $383,000 C) $198,000 D) $184,000

Ans:��C AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting; Measurement LO:� ��1 Level:��Easy Solution: ##North###Sales #$660,000###Variable expenses # 383,000###Contribution margin #277,000###Traceable fixed

expenses # 79,000###Segment margin #$198,000##

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68 A properly constructed segmented income statement in a contribution format would show that the net operating income of the company as a whole is:

expenses, Consumer #$394,000###Variable expenses, Commercial

#$143,000###Traceable fixed expenses, Consumer #$102,000###Traceable fixedexpenses, Commercial #$45,000##In addition, common fixed expenses totaled

$210,000 and were allocated as follows: $122,000 to the Consumer business

segment and $88,000 to the Commercial business segment

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69 The contribution margin of the Commercial business segment is: A)

$137,000 B) $184,000 C) $62,000 D) $423,000

Ans:��A AACSB:��Analytic AICPA BB:� ��Critical Thinking �AICPA FN:� ��Reporting LO:��1 Level:��Easy Solution:

#Sales #$280,000###Variable expenses # 143,000###Contribution margin

#$137,000## 70 A properly constructed segmented income statement in a contribution format would show that the segment margin of the Consumer business segment is: A) $164,000 B) $62,000 C) $394,000 D) $184,000

Ans:��D AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting; Measurement LO:� ��1 Level:��Easy Solution: ##Consumer###Sales

#$680,000###Variable expenses # 394,000###Contribution margin

#286,000###Traceable fixed expenses # 102,000###Segment margin

#$184,000##

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71 A properly constructed segmented income statement in a contribution format would show that the net operating income of the company as a whole is:

on investment #20%###Minimum required rate of return #12%###Residual income #$50,000##

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72 Tipton Division's average operating assets last year were: A)

$625,000 B) $250,000 C) $416,677 D) $333,333

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#o#p#e#r#a#t#i#n#g# #a#s#s#e#t#s# #=# #R#e#s#i#d#u#a#l# #i#n#c#o#m#e# # # �

#(#R#O#I# ##" #M#i#n#i#m#u#m# #r#e#q#u#i#r#e#d# #r#a#t#e# #o#f# #r#e#t#u#r#n#)#

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Use the following to answer questions 74-75:The following data pertain to Turk Company's operations last year:#Sales #$900,000###Net operating income

#$36,000###Contribution margin #$150,000###Average operating assets

#$180,000###Stockholders equity� #$100,000###Plant, property, &

equipment #$120,000## 74 Turk's return on investment for the year was: A)

AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��2 Level:��Medium Solution: ROI = Net operating income Average operating assets

residual income for the year was $9,000, the minimum required rate of return must have been: A) 15% B) 4% C) 20% D) 36%

Ans:��A AACSB:��Analytic AICPA BB:� ��Critical Thinking �

AICPA FN:� ��Reporting LO:��3 Level:��Hard Solution:

Residual

incom###########################################################################

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#7#6#-77:The Hum Division of the Ho Company reported the following data for lastyear:#Sales #$800,000###Operating expenses #$650,000###Interest expense

#$50,000###Tax expense #$30,000###Stockholders equity�

#$200,000###Average operating assets #$600,000###Minimum required rate

of return #12%## 76 The residual income for the Hum Division last yearwas: A) $126,000 B) $46,000 C) $78,000 D) $22,000

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#L#e#v#e#l#:# # #M#e#d#i#u#m###� � # #S#o#l#u#t#i#o#n#: ROI = Netoperating income Average operating assets� = $150,000 $600,000 = 25%�Use the following to answer questions 78-79:The following selected data pertain

to Beck Co.'s Beam Division for last year:#Sales #$2,000,000###Variable expenses #$800,000###Traceable fixed expenses #$900,000###Average

operating assets #$500,000###Minimum required rate of return #20%##Note: thetraceable fixed expenses do not include any interest expense

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78 How much is the residual income? A) $400,000 B) $200,000

AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��3 Level:��Medium Source:��CPA; adapted� Solution:

#Sales #$2,000,000###Variable expenses #800,000###Traceable fixed

expenses # 900,000###Net operating income #$ 300,000##Residual income = Net operating income

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#A#I#C#P#A# #B#B#:# # #C#ritical Thinking AICPA FN:� � � � � ��Reporting LO:��2 Level:��Medium Source:��CPA; adapted� Solution: ROI = Net operating income Average operating assets� = $300,000 $500,000 = 60%�Use the following to answer questions 80-81:Edith Carolina is president of the Deed Corporation The company is decentralized, and leaves investment decisions

up to the discretion of the division managers Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past three years and expects the division to have the same return in the coming year Sanders has the opportunity to invest in a new line of cosmetics which is expected to have a return on investment of 12%

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80 Suppose Deed Corporation evaluates managerial performance using return on investment Edith Carolina, as president of the company, may view the opportunity for taking on the cosmetics line differently from Michael Sanders, manager of the Cosmetics Division What action would each of them prefer with respect to the decision of whether to take on the new cosmetics line?

#Carolina#Sanders##A)#accept#reject##B)#reject#accept##C)#accept#accept##D)#reject#reject## Ans:��A AACSB:��Analytic AICPA BB:� ��Critical Thinking �AICPA FN:� ��Decision Making; Reporting LO:� � ��2 Level:��Easy 81 If the Deed Corporation evaluates managerial performance using residual income based on the corporate minimum required rate of return of 8%, what decision would be preferred by Edith Carolina and Michael Sanders?

#Carolina#Sanders##A)#accept#reject##B)#reject#accept##C)#accept#accept##D)#reject#reject## Ans:��C AACSB:��Analytic AICPA BB:� ��Decision Making �AICPA FN:� ��Reporting LO:��3 Level:��EasyUse the following to answer questions 82-83:The following information relates to the Quilt Division of TDS Corporation for last year:#Sales #$200,000###Contribution margin

#$90,000###Net operating income #$65,000###Average operating assets

#$500,000###Minimum desired rate of return #10%##

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82 What was the Quilt Division's return on investment (ROI) for last

AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��2 Level:��Easy Solution: ROI = Net operating income �Average operating assets = $65,000 $500,000 = 13%� 83 Assume that Quilt was being evaluated solely on the basis of residual income Which of the following investment opportunities would Quilt want to invest in? #Aninvestment that generates a return of 12%#An investment that generates a return

of 16%##A)#Yes#Yes##B)#No#Yes##C)#Yes#No##D)#No#No## Ans:��A

AICPA FN:� ��Decision Making; Reporting LO:� � ��3 Level:��MediumUse the following to answer questions 84-87:Cecille Products is a division of a major corporation Last year the division had total sales of $7,940,000, net operatingincome of $254,080, and average operating assets of $2,000,000 The company's minimum required rate of return is 12%

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84 The division's margin is closest to: A) 3.2% B) 25.2% C)12.7% D) 28.4% Ans:��A AACSB:��Analytic

AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting Level:��Easy

Solution: Margin = Net operating income Sales = $254,080 � �

$7,940,000 = 3.2% 85 The division's turnover is closest to: A) 0.13 B)

AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��2 Level:��Easy Solution: Turnover = Sales Average �

operating assets = $7,940,000 $2,000,000 = 3.97� 86 The division's return

on investment (ROI) is closest to: A) 2.6% B) 12.7% C) 0.4% D)

50.4% Ans:��B AACSB:��Analytic

AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��2

Level:��Easy Solution: ROI = Net operating income Average �operating assets = $254,080 $2,000,000 = 12.7%�

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87 The division's residual income is closest to: A) $(698,720) B)

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#$1,145,200###Average operating assets #$7,000,000###The company s �minimum required rate of return #18%## 88 The division's margin is closest to: A) 4.0% B) 16.4% C) 24.4% D) 28.4%

Ans:��A AACSB:��Analytic AICPA BB:� ��Critical Thinking �

AICPA FN:� ��Reporting LO:��2 Level:��Easy Solution:

Margin = Net operating income Sales = $1,145,200 $28,630,000 = 4.0%� �

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89 The division's turnover is closest to: A) 4.09 B) 0.16 C)25.00 D) 3.51 Ans:��A AACSB:��Analytic

Level:��Easy Solution: Turnover = Sales Average operating �assets = $28,630,000 $7,000,000 = 4.09� 90 The division's return on

investment (ROI) is closest to: A) 16.4% B) 3.2% C) 67.1% D)

0.6% Ans:��A AACSB:��Analytic

Level:��Easy Solution: ROI = Net operating income Average �operating assets = $1,145,200 $7,000,000 = 16.4%� 91 The division's residual income is closest to: A) $(4,008,200) B) $2,405,200 C)

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#9#2#-#9#4#:###L#a#s#t# #y#e#a#r# #t#h#e# #U#p#t#o#w#n# #D#i#v#i#s#i#o#n# #o#f# Gorcen Enterprises had sales of $300,000 and a net operating income of $24,000 The average operating assets at Uptown last year amounted to $120,000 92

Last year at Uptown the return on investment was: A) 8% B) 12%C) 20% D) 40% Ans:��C AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��2

Level:��Easy Solution: ROI = Net operating income Average �operating assets = $24,000 $120,000 = 20%� 93 Last year at Uptown the margin amounted to: A) 8% B) 12% C) 20% D) 40%

Ans:��A AACSB:��Analytic AICPA BB:� ��Critical Thinking �AICPA FN:� ��Reporting LO:��2 Level:��Easy Solution:

Margin = Net operating income Sales = $24,000 $300,000 = 8%� �

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94 At Uptown the turnover last year was: A) 0.4 B) 2.5 C)3.2 D) 5.0 Ans:��B AACSB:��Analytic

Level:��Easy Solution: Turnover = Sales Average operating �assets = $300,000 $120,000 = 2.5Use the following to answer questions 95-97:�Ahartz Industries is a division of a major corporation Data concerning the mostrecent year appears below:#Sales #$7,820,000###Net operating income

#$445,740###Average operating assets #$2,000,000## 95 The division's margin is closest to: A) 22.3% B) 25.6% C) 5.7% D)

31.3% Ans:��C AACSB:��Analytic

Level:��Easy Solution: Margin = Net operating income Sales �

= $445,740 $7,820,000 = 5.7%�

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96 The division's turnover is closest to: A) 3.20 B) 17.54 C)0.22 D) 3.91 Ans:��D AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��2

Level:��Easy Solution: Turnover = Sales Average operating �assets = $7,820,000 $2,000,000 = 3.91� 97 The division's return on

investment (ROI) is closest to: A) 18.2% B) 4.5% C) 22.3% D)

Level:��Easy Solution: ROI = Net operating income Average �operating assets = $445,740 $2,000,000 = 22.3%Use the following to �answer questions 98-100:Beade Industries is a division of a major corporation Last year the division had total sales of $16,760,000, net operating income of

$770,960, and average operating assets of $4,000,000

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98 The division's margin is closest to: A) 28.5% B) 23.9% C)4.6% D) 19.3% Ans:��C AACSB:��Analytic

Level:��Easy Solution: Margin = Net operating income Sales �

= $770,960 $16,760,000 = 4.6%� 99 The division's turnover is closest to:

AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��2 Level:��Easy Solution: Turnover = Sales Average �

operating assets = $16,760,000 $4,000,000 = 4.19� 100 The division's return

on investment (ROI) is closest to: A) 16.1% B) 0.9% C) 19.3% D)

Level:��Easy Solution: ROI = Net operating income Average �operating assets = $770,960 $4,000,000 = 19.3%�

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Use the following to answer questions 101-102:The West Division of Cecchetti Corporation had average operating assets of $240,000 and net operating income of

$42,200 in August The minimum required rate of return for performance

evaluation purposes is 19% 101 What was the West Division's minimum

required return in August? A) $45,600 B) $42,200 C) $53,618

D) $8,018 Ans:��A AACSB:��Analytic

Level:��Easy Solution: Minimum required return = Minimum required rate of return Average operating assets = 19% $240,000 = $45,600� �

102 What was the West Division's residual income in August? A)

Ans:��C AACSB:��Analytic # # # #

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$3,400Use the following to answer questions 103-104:The Consumer Products

Division of Goich Corporation had average operating assets of $800,000 and net operating income of $81,300 in May The minimum required rate of return for performance evaluation purposes is 10%

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103 What was the Consumer Products Division's minimum required return inMay? A) $81,300 B) $8,130 C) $88,130 D) $80,000

Ans:��D AACSB:��Analytic AICPA BB:� ��Critical Thinking �AICPA FN:� ��Reporting LO:��3 Level:��Easy Solution:Minimum required return = Minimum required rate of return Average operating assets = �10% $800,000 = $80,000� 104 What was the Consumer Products Division's residual income in May? A) -$1,300 B) $8,130 C) $1,300 D)

-$8,130 Ans:��C AACSB:��Analytic

Level:��Easy Solution:

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#t#h#e# #N#y#e#r#s# #C#o#m#p#a#ny makes a part that can either be sold to

outside customers or transferred internally to Division Q for further

processing Annual data relating to this part are as follows:#Annual production capacity #80,000#units###Selling price of the item to outside customers

#$35####Variable cost per unit #$23####Fixed cost per unit #$5###Division Q of the Nyers Company requires 15,000 units per year and is currently paying an outside supplier $33 per unit Consider each part below independently

105 If outside customers demand only 50,000 units per year, then

according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division? A) $35 B) $33 C)

$28 D) $23 Ans:��D AACSB:��Analytic

AICPA BB:� ��Critical Thinking AICPA FN:� � ��Decision Making; Reporting � �LO:��4 Level:��Medium Solution: Transfer price

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in variable selling expense, then according to the formula in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division?

AICPA FN:� ��Decision Making; Reporting LO:� � ��4 Level:��Hard

Solution:

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## #1#0#8#.# #I#f# #o#u#t#s#i#d#e# #c#u#s#t#o#m#e#r#s# #d#e#m#a#n#d#

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#f#o#r#m#u#l#a# in the text, what is the lowest acceptable transfer price from the viewpoint of the selling division for each of the 15,000 units needed by Q?

AICPA FN:� ��Decision Making; Reporting LO:� � ��4 Level:��Hard

Solution:

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#(#8#0#,#0#0#0# ##" #7#0#,#0#0#0#)# #=# #1#5#,#0#0#0# ##" #1#0#,#0#0#0# #=# 5,000Use the following to answer questions 109-110:(Appendix 12A) Two of the decentralized divisions of Gamberi Electronics Corporation are the Plastics Division and the Components Division The Plastics Division sells molded parts

to both the Components Division and to customers outside the corporation

109 Assume that the Plastics Division is currently operating at full capacity Also assume that the Components Division wants to increase the number

of parts it purchases from Plastics In order to maintain its current level of profitability, the Plastics Division should not accept any transfer price on these additional parts that is below the: A) variable cost of the additional parts B) full (absorption) cost of the additional parts C) variable cost of the additional parts plus the lost contribution margin on all units thatcould no longer be sold to customers outside the corporation D) full (absorption) cost of the additional parts plus the lost contribution margin on all units that could no longer be sold to customers outside the corporation

Ans:��C AACSB:��Analytic AICPA BB:� ��Critical Thinking �AICPA FN:� ��Decision Making; Reporting LO:� � ��4 Level:��Medium

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110 Assume that the Plastics Division is currently operating with idle capacity Also assume that the Components Division wants to purchase from

Plastics all of the additional parts that could be made with this idle capacity

In order to increase its current level of profitability, the Plastics Division should accept any transfer price on these additional parts that is above the:

A) variable cost of the additional parts B) full (absorption) cost of the additional parts C) variable cost of the additional parts plus the lost contribution margin on all units that could no longer be sold to

customers outside the corporation D) full (absorption) cost of the

additional parts plus the lost contribution margin on all units that could no longer be sold to customers outside the corporation Ans:��A AACSB:��Analytic AICPA BB:� ��Critical Thinking �

AICPA FN:� ��Decision Making; Reporting LO:� � ��4 Level:��MediumUse the following to answer questions 111-112:(Appendix 12B) Ampulla Production Studios charges the Sound Effects Department's costs to two operating departments, Audioand Video Charges are made on the basis of labor-hours Information pertaining

to the labor-hours for the year follow:##Audio#Video###Budgeted labor-hours for the year #18,000#27,000###Actual labor-hours for the year

#14,700#27,300###Annual long-run average capacity in labor-hours

#15,000#25,000##The following costs pertain to the Sound Effects

Department:##Budgeted For Year#Actual For Year###Variable costs

#$315,000#$273,000###Fixed costs #$756,000#$819,000##

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111 How much of the Sound Effects Department's variable cost should be charged to the Video Department at year-end for performance evaluation purposes?

AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��5 Level:��Medium Solution: Fixed cost charged toAudio department= Audio s percent of total capacity Budgeted fixed costs= � �[15,000 (15,000 + 25,000)] $756,000 = (15,000 40,000) $756,000= 37.5% � � � � �

$756,000 = $283,500

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Use the following to answer questions 113-114:(Appendix 12B) Wollan Corporation has two operating divisions-an East Division and a West Division The company's Logistics Department services both divisions The variable costs of the

Logistics Department are budgeted at $44 per shipment The Logistics

Department's fixed costs are budgeted at $237,600 for the year The fixed costs

of the Logistics Department are determined based on peak-period demand

##Percentage of Peak Period Capacity Required#Budgeted Shipments###East Division

#40%#1,300###West Division #60%#3,100##At the end of the year, actual Logistics Department variable costs totaled $332,880 and fixed costs totaled

$253,960 The East Division had a total of 4,300 shipments and the West Divisionhad a total of 3,000 shipments for the year 113 How much Logistics

Department cost should be allocated to the West Division at the end of the year?

$132,000 + $142,560 = $274,560

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114 How much actual Logistics Department cost should not be allocated tothe operating divisions at the end of the year? A) $28,040 B) $0 C)

#L#o#g#i#s#t#i#c#s# #D#e#p#a#r#t#m#e#n#t# #c#o#s#t# #n#o#t# #a#l#l#o#c#a#t#e#d#

#t#o# #o#p#e#r#a#t#i#n#g# #d#i#v#i#s#i#o#n#s##=# #$#5#8#6#,#8#4#0# ##"

#$#5#5#8#,#8#0#0# #=# #$28,040Use the following to answer questions 115-116:(Appendix 12B) Azotea Corporation has two operating divisions-a Consumer

Division and a Commercial Division The company's Order Fulfillment Department provides services to both divisions The variable costs of the Order FulfillmentDepartment are budgeted at $56 per order The Order Fulfillment Department's fixed costs are budgeted at $233,700 for the year The fixed costs of the Order Fulfillment Department are budgeted based on the peak period orders.##Percentage

of Peak Period Capacity Required#Budgeted Orders###Consumer Division

#40%#1,200###Commercial Division #60%#2,900##At the end of the year, actual Order Fulfillment Department variable costs totaled $237,390 and fixed costs totaled $239,140 The Consumer Division had a total of 1,240 orders and the Commercial Division had a total of 2,860 orders for the year

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115 How much Order Fulfillment Department cost should be allocated to the Commercial Division at the end of the year? A) $300,380 B) $309,078

at the end of the year? A) $7,790 B) $5,440 C) $13,230 D)

$0 Ans:��C AACSB:��Analytic

Level:��Easy Solution: Actual cost = $237,390 + $239,140

= $476,530Cost allocated to operating divisions= [$56 per order (1,240 + 2,860�orders)] + $233,700= [$56 per order 4,100 orders] + $233,700= $229,600 + �

$233,700 = $463,300Actual Order Fulfillment cost not allocated to operating divisions

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of the Maintenance Department are budgeted based on the number of cases produced

by the operating departments The fixed costs of the Maintenance Department are determined by the number of cases produced by the operating departments during the peak period Data appear below:#Maintenance Department####Budgeted variable cost #$6 per case###Budgeted total fixed cost #$328,000###Actual total variablecost #$254,014###Actual total fixed cost #$331,940#######Paints

Division####Percentage of peak period capacity required #35%###Budgeted cases

#12,000###Actual cases #12,010#######Stains Division####Percentage of peak period capacity required #65%###Budgeted cases #29,000###Actual cases

#28,960## 117 How much Maintenance Department cost should be allocated

to the Stains Division at the end of the year? A) $395,313 B) $414,187

AACSB:��Analytic AICPA BB:� ��Critical Thinking AICPA FN:� � ��Reporting LO:��5 Level:��Easy Solution: Maintenance Department costallocated to Stains Division= ($6 per case 28,960 cases) + ($328,000 65%)= � �

$173,760 + $213,200 = $386,960

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