QUESTION 1

1. ABC Tax Services planned in their master budget to process 12,000 tax returns. At this level of activity, ABC estimated it would require processing time of 16,000 hours at a cost of $25,000 + $12.50 per hour. Actual returns processed were 14,000 and required 20,000 hours. ABC considers direct labor hours to be the most accurate cost driver for flexible budgeting purposes. Actual processing cost was $270,000. What is the flexible budget variance for processing?

   		$5,000 unfavorable
   		$45,000 unfavorable
   		$5,000 favorable
   		$70,000 favorable

QUESTION 2

1. The following information is available for Learning R' Us and its two divisions: Books and Periodicals:

   	Company as a Whole	Books Division	Periodicals Division
   Net Sales	$100,000	$50,000	$50,000
   Fixed Costs:
   Controllable by division manager	16,500	12,500	4,000
   Controllable by others	8,000	5,000	3,000
   Variable Costs:
   Cost of merchandise sold	24,500	17,500	7,000
   Operating Expenses	16,400	10,000	6,400
   Common Costs	1,000

   What is the segment margin of the Periodicals Division?

   		$29,600
   		$36,600
   		$36,000
   		$32,600

QUESTION 3

1. Foreman Company's revenues are $300 on invested capital of $240. Expenses are currently 84% of sales. If Foreman can reduce its expenses to 75% of sales, return on investment will be:

   		20%
   		31.25%
   		16.0%
   		25.0%

QUESTION 4

1. The following information is available for the Copeland Company:

   Sales	$1,042,800
   Invested Capital	434,500
   ROI	14%

   Compute the Sales Margin Ratio:

   		14.00%
   		6.25%
   		17.143%
   		5.833%

QUESTION 5

1. ____________________ would not increase return on investment:

   		a decrease in inventories
   		an increase in sales volume
   		a decrease in expenses
   		All of these answers would increase ROI

QUESTION 6

1. The manager of Alpha Division projects the following for next year:

   Sales	$100,000
   Operating Income	$30,000
   Operating Assets	$200,000

   The manager can invest in an additional project that would require a $30,000 investment in additional assets and would generate $4,200 of additional operating income. The companyu's minimum rate of return is 12%. Which of the following statements is true?

   		if the manager invests in the additional project, ROI of the division will increase
   		the residual income of the project is less than the residual income of the division without the project, therefore the project will be rejected
   		average investment for Alpha Division will decrease if the project is accepted for investment
   		if the manager invests in the additional project, residual income of the division will increase

QUESTION 7

1. Using the following information, determine Residual Income:

   Operating income	$114,100
   Sales Margin	14%
   Capital Turnover	5.00
   Target rate of return	18%
   Residual Income	?

   		($32,600)
   		$84,760
   		$91,280
   		($19,560)

QUESTION 8

1. Sparky Company produces a perfume called Angel. The recipe for one bottle of perfume calls for 8 ounces of ingredients which have a standard cost of $6.80 per ounce. This past month, Sparky produced 2,400 bottles and had to pay $7.15 per ounce for materials. Sparky experienced a $3,400 unfavorable materials quantity variance. What was the DM Flexible Budget Variance for this past month?

   		$500 unvaforable
   		$10,120 unfavorable
   		$10,295 unfavorable
   		$19,700 favorable

QUESTION 9

1. Howelll Company budgeted to produce 2,800 units but actually produced 2,600 units. Each unit was budgeted to require 2 hours of direct labor at a cost of $12 per hour. Total actual labor cost was $60,484 for 4,750 actual hours worked. What is the direct labor efficiency variance?

   		$1,916 favorable
   		$5,730 unfavorable
   		$5,400 favorable
   		$6,716 unfavorable

QUESTION 10

1. The Worldwide Credit Card, Inc. uses standards to control the labor time involved in opening mail from card holders and recording the enclosed remittances. Incoming mail is gathered into batches, and a standard time is set for opeing and recording each batch. The labor standards relating to one batch are as follows:

   	Standard Hours	Standard Rate	Standard Cost/Batch
   Per Batch	2.5	$6.00	$15.00

   The time record showing the hours spent last week in onpening batches of mail has been misplaced. However, the batch supervisor recalls that 168 batches were received and opened during the week, and the controller recalls the following variance data relating to these batches:

   Total Direct Labor Flexible Variance: $330 U

   Labor Rate Variance: $150 F

   Determine the number of actual labor hours spent opening batches during the week:

   		445 hours
   		475 hours
   		500 hours
   		cannot be determined