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1. Managerial accounting test 10-12 | Accounting homework help
1)Management by ________ is the practice that directs executive attention to large budget
variances. A.control B.exception C.objective D.analysis2) The maintenance department that
focuses on efficiency at Continental Airlines may be classified as a(n) A.cost
center. B.investment center. C.profit center. D.revenue center.3) Which type of variance
causes operating income to be greater than the budgeted operating income? A.Reverse
variance B.Favorable variance C.Unfavorable variance D.Neutral variance4) A manager can
increase return on investment (ROI) by doing which of the following? A.Increase operating
expenses B.Decrease operating expenses C.Decrease sales D.Increase operating
assets5) Assume the Hiking Shoes division of the All About Shoes Corporation had the
following results last year (in thousands). Management’s target rate of return is 15% and
the weighted average cost of capital is 20%. Its effective tax rate is 35
%. Sales$5,000,000 Operating income$2,250,000 Total assets$1,500,000 Current liabilit
ies$810,000What is the division’s Return on Investment (ROI)? A.150.00% B.33.33
% C.54.00% D.45.00%6) The following data relates to Haven Corporation and its Northern
Division. Light Bulb Division sales$6,500,000 Light Bulb Division operating
income$780,000 Light Bulb Division total assets $3,250,000 Light Bulb Division current
liabilities$530,000 Corporate target rate of return19% Corporate weighted average cost
of capital10%What is the Northern Division’s Residual Income
(RI)? A.$780,000 B.$617,500 C.$162,500 D.$325,0007) With regard to a static budget
instead of a flexible budget, which of the following is true? A.A static budget is adjusted for
changes in the level of sales activity. B.A static budget is prepared for only one level of sales
activity. C.A static budget is also known as a fixed budget. D.A static budget is a budget that
stays the same from one period to the next.8) The number of new services offered during
the period may be an example of measuring which perspective of the balanced
scorecard? A.Financial B.Customer C.Internal business D.Learning and growth9) The type of
standard that provides allowances for normal amounts of waste and inefficiency in the
production process is referred to as a(n) A.practical standard. B.ideal standard. C.realistic
standard. D.perfection standard.10)Piper Corporation, which manufactures dog toys, is
developing direct labor standards. The basic direct labor rate is $15.70 per hour. Payroll
taxes are 8% of the basic direct labor rate, while fringe benefits such as vacation and health
care insurance, are $4.30 per hour. What is the standard rate per direct labor
hour? A.$16.96 B.$20.00 C.$21.26 D.$15.7011)Which variance is directly impacted if a
worker drops the raw material during production and the raw material must be

2. discarded? A.Direct labor efficiency variance B.Direct materials price variance C.Direct
materials quantity variance D.Direct labor rate variance12)A favorable direct materials
price variance indicates which of the following? A.The Actual Quantity (AQ) of materials
used was less than the standard quantity of materials used for actual production. B.The
standard cost of materials purchased was greater than the actual cost of materials
purchased. C.The actual cost of materials purchased was greater than the standard cost of
materials purchased. D.The standard cost of materials purchased was less than the actual
cost of materials purchased.13)Which variance is directly impacted if the employees who
build the product go on strike and temporary workers who are slower and not as skilled are
hired? A.Direct materials quantity variance B.Direct labor efficiency variance C.Direct labor
rate variance D.Direct materials price variance14) A favorable direct labor efficiency
variance and an unfavorable direct labor rate variance might indicate which of the
following? A.Unskilled workers using more actual hours than standard, paid at a higher rate
per hour than the standard rate B.Unskilled workers using less actual hours than standard,
paid a lesser rate per hour than the standard rate C.Skilled workers using less actual hours
than standard, paid at a higher rate per hour than the standard rate D.Skilled workers using
more actual hours than standard, paid at a higher rate per hour than the standard
rate15) The following information describes a company’s usage of direct labor in a recent
period: Actual direct labor hours used33,000 Actual rate per hour$24.00 Standard rate
per hour$13.75 Standard hours for units produced27,500How much is the direct labor
rate
variance? A.$338,250 unfavorable B.$338,250 favorable C.$281,875 unfavorable D.$281,87
5 favorable16) Which of the following is an advantages of using standard costs and
variances? A.The timeliness that occurs when computing standards
monthly. B.Maintaining updated standards is inexpensive. C.Standard costs are
benchmarks that managers use to judge actual costs. D.Price and efficiency variances
motivate frontminus−line employees more than operational performance measures.
17) The Stallard Corporation manufactures Product X that consumes a large amount of
overhead. For the month of October Stallard produced 15,850 units of Product X and
incurred actual overhead costs of $211,000. The standard costs developed for Product X by
Stallard follow: Standard direct labor hours per unit33 Standard direct labor rate per
hour$15.00 Standard overhead hours per unit8 Standard overhead rate per
hour$6.60What was the total variable overhead variance for Product X in
October? A.$625,880 unfavorable B.$625,880 favorable C.$106,390 unfavorable D.$106,39
0 favorable18) Which of the following examples may lead directly to a favorable fixed
overhead volume variance? A.Producing more units than anticipated B.A decrease in wages
paid to factory maintenance workers C.Receiving a volume discount on indirect materials
purchased D.A decrease in county property taxes for the factory19)Redwood Corporation is
considering two alternative investment proposals with the following data: Proposal
XProposal Y Investment$820,000$481,000 Useful life7 years7 years Estimated annual
netcash inflows for 77 years$135,000$89,000 Residual value$43,000$-
Depreciation methodStraight-LineTraight-Line Required rate of return18%11%How
long is the payback period for Proposal

3. X? A.6.07 years B.5.4 years C.9.21 years D.19.07 years20)Redwood Corporation is
considering two alternative investment proposals with the following data: Proposal
XProposal Y Investment$880,000$ 496 $496,000 Useful life10 years10 years Estimated
annual netcash inflows for 10 10years$ $100,000$86,000 Residual value$14,000$-
Depreciation methodStraight-Line Straight-Line Required rate of return10%9%What is
the accounting rate of return for Proposal X? (Round any intermediary calculations to the
nearest dollar, and round your final answer to the nearest hundredth of a percent,
X.XX%.) A.1.36% B.7.34% C.1.52% D.11.36%21) On a whim you purchased
a scratchminus−off lottery ticket at the gas station. It must have been your lucky day
because you won $2,500,000. Being logical and rational you decide to invest the money at 2
% for 12 years until you are ready to start a family. At the end of 12 years, how much will
your investment be worth? (Click the icon to view the future value of $1 table.)LOADING…
(Click the icon to view the future value of annuity of $1
table.) A.1,970,000 B.$33,530,000 C.$3,170,000 D.$3,235,00022) What will happen to the
net present value (NPV) of a project if the discount rate is increased from 8% to
10%? A.NPV will always decrease. B.NPV will always increase. C.The discount rate change
will not affect NPV. D.We cannot determine the direction of the effect on NPV from the
information provided.23) Coyne Corporation is evaluating a capital investment opportunity.
This project would require an initial investment of $40,000 to purchase equipment. The
equipment will have a residual value at the end of its life of $1,000. The useful life of the
equipment is 5 years. The new project is expected to generate additional net cash inflows of
$23,000 per year for each of the five years. Coyne’s required rate of return is 12%. The net
present value of this project is closest to:(Click the icon to view the present value of $1
table.)LOADING…(Click the icon to view the present value of annuity of $1
table.) A.$43,482. B.$13,002. C.$42,915. D.$60,802.24) Glassworks Inc. is considering the
purchase of a special blowminus−molding machine that would cost $53,854 and would have
a useful life of 6 years. The machine would generate $13,100 of net annual cash inflows per
year for each of the 6 years of its life. The internal rate of return on the machine would be
closest to:(Click the icon to view the present value of $1 table.)LOADING…(Click the icon to
view the present value of annuity of $1 table.) A.10%. B.12%. C.14%. D.8%.25) In what
ways are the Net Present Value and Internal Rate of Return methods of capital budgeting
alike? A.They both compute the project’s unique rate of return. B.They both factor in
the time value of money. C.They both focus on GAAP. D.They both measure the
profitability index.26) Results from Super Corporation’s most recent year of operations are
presented in the following table.(Click the icon to view the
information.)Requirements 1.Calculate the sales margin, capital turnover, and return on
investment (ROI). 2.Calculate the residual income (RI).Requirement 1. Calculate the sales
margin, capital turnover, and return on investment (ROI).First enter the formula, then
calculate the sales margin. Next enter the formula, then calculate the capital
turnover. (Round your answer to two decimal places.) Now enter the formula, then
calculate the ROI. Requirement 2. Calculate the residual income (RI).Enter the formula,
then calculate the residual income. 28) Awning manufactures awnings and uses
a standard cost system. The company allocates overhead based on the number of direct

4. labor hours. The following are the company’s cost and standards data:(Click the icon to
view the standards.)Actual cost and operating data from the most recent month are as
follows:LOADING…(Click the icon to view the actual results.)All manufacturing overhead is
allocated on the basis of direct labor hours. 1.Calculate the standard cost of one
awning. 2.Calculate the following variances: a. The direct material variances. b. The direct
labor variances. c. The variable manufacturing overhead variances. d. The fixed
manufacturing overhead variances. 3.Explain what each of the variances you calculated
means and give at least one possible explanation for each of those variances. Are any of the
variances likely to be interrelated?Requirement 1. Calculate the standard cost of one
awning. Requirement 2a. Calculate the direct material variances. (Enter the variances as
positive numbers. Enter currency amounts to the nearest cent and your answers to the
nearest whole dollar. Label the variance as favorable (F) or unfavorable (U). Abbreviations
used: DM = Direct materials.)First determine the formula for the price variance, then
compute the price variance for direct materials. Determine the formula for the quantity
variance, then compute the quantity variance for direct materials. Requirement 2b.
Calculate the direct labor variances. (Enter the variances as positive numbers. Enter
currency amounts to the nearest cent and your answers to the nearest whole dollar. Label
the variance as favorable (F) or unfavorable (U). Abbreviations used: DL = Direct
labor.)First determine the formula for the rate variance, then compute the rate variance for
direct labor. First determine the formula for the efficiency variance, then compute the
efficiency variance for direct labor. Requirement 2c. Calculate the variable manufacturing
overhead variances. (Enter the variances as positive numbers. Enter currency amounts to
the nearest cent and your answers to the nearest whole dollar. Label the variance as
favorable (F) or unfavorable (U).)First determine the formula for the rate variance, then
compute the rate variance for variable manufacturing overhead. (Round interim
calculations to the nearest cent.) Now compute the variable manufacturing overhead
efficiency variance. First determine the formula for the efficiency variance, then compute
the efficiency variance for variable manufacturing overhead. Requirement 2d. Calculate the
fixed manufacturing overhead variances. (Enter the variance as a positive number. Label the
variance as favorable (F) or unfavorable(U).)Begin by computing the fixed manufacturing
overhead budget variance. First determine the formula for the budget variance, then
compute the budget variance for fixed manufacturing overhead. Fixed MOH Actual fixed
overhead–Budgeted fixed overhead=budget variance 57200–51200=6000UNow
compute the fixed manufacturing overhead volume variance. First determine the formula
for the volume variance, then compute the volume variance for fixed manufacturing
overhead. Requirement 3. Explain what each of the variances you calculated means
and give at least one possible explanation for each of those variances..28)Scenario
1. AdamAdam just hit the jackpot in Las Vegas and won $50,000! If he invests it now at a
10% interest rate, how much will it be worth in 20 years? (Round your answer to the
nearest whole dollar.) Future value = $336350Scenario 2. Roderick would like to have
$3,000,000 saved by the time he retires in 30 years. How much does he need to invest now
at a 10% interest rate to fund his retirement goal? (Round your answer to the nearest whole
dollar.) Present value= $171000Scenario 3. Assume that Vivian accumulates savings of $

5. 2million by the time she retires. If she invests this savings at 8%, how much money will she
be able to withdraw at the end of each year for 20 years? (Round your answer to the nearest
whole dollar and enter as a positive amount.)Scenario 4. Jessica plans to invest $4,500 at the
end of each year for the next eight years. Assuming a 14% interest rate, what will her
investment be worth eight years from now? (Round your answer to the nearest whole
dollar.)Scenario 5. Assuming a 6% interest rate, how much would Amanda have to invest
now to be able to withdraw $10,000 at the end of every year for the next ten years? (Round
your answer to the nearest whole dollar.) Present value= $Scenario 6. Chuckie is
considering a capital investment that costs $520,000 and will provide net cash inflows for
three years. Using a hurdle rate of 10%, find the NPV of the investment. (Round your
answer to the nearest whole dollar. Use parentheses or a minus sign to represent a negative
NPV.) Net Present Value (NPV)Scenario 7. What is the IRR of the capital investment
described in Question 6? The IRR is the interest rate at which the investment NPV = 0. We
tried 10% in question 6, now we’ll try 12% and calculate the NPV. (Round your answer to
the nearest whole dollar. Use parentheses or a minus sign to represent a negative NPV.)The
IRR for the project is between 10% and 12%between 8% and 10%between 10% and
12%between 12% and 14%between 14% and 16%.29)is considering purchasing a water
park in Newark comma New JerseyNewark, New Jersey, for $2,050,000. The new facility
will generate annual net cash inflows of $520,000 for eight years. Engineers estimate that
the facility will remain useful for eight years and have no residual value. The company uses
straight-line depreciation. Its owners want payback in less than five years and an ARR of 10
% or more. Management uses a 12% hurdle rate on investments of this nature.Requirement
1. Compute the payback period, the ARR, the NPV, and the approximate IRR of this
investment. (If you use the tables to compute the IRR, answer with the closest interest rate
shown in the tables.) (Round the payback period to one decimal place.) The payback period
is(Round the percentage to the nearest tenth percent.) The ARR (accounting rate of return)
is(Round your answer to the nearest whole dollar.) Net present value $The IRR (internal
rate of return) is between 18% and 20%16% and 18%20% and 22%22% and 24%18% and
20%.Requirement 2. Recommend whether the company should invest in this project.
Recommendation: Invest in the new facility.Do not invest in the new facility.Invest in the
new facility.