EXAM III PRACTICE QUESTIONSDISCLAIMER - PLEASE READ:These practice exam problems will serve as an excellent review for the actual exam. These questions shouldgive students a good idea of the format and rigor of problems to be encountered on the exams. The practiceexam questions; however, are NOT intended to be comprehensive in their coverage of the topics thatmay be included on the exam. Simply learning the concepts reflected in these sample questions willNOT be adequate for complete exam preparation. In order to be successful on the exam, studentsmust be comfortable with ALL concepts and problems covered in the online lectures.1. C. $2.10DM Price Variance = (AQ x AP) - (AQ x SP)2,500 = (25,000 x AP) - (25,000 x 2)2,500 = 25,000AP - 50,00025,000AP = 52,500AP = $2.102. A. the division’s segment margin will increase3. D. two of the above answer choices are correctboth (a) and (c) would result in an increase to the ROIUSE THE BUDGET BELOW TO ANSWER QUESTIONS 4 – 5.June July August SeptemberBudgeted sales in units 4,600 7,200 5,400 6,800Add: desired end inventory 720 540 680(7,200 x 10%) (5,400 x 10%) (6,800 x 10%)Less: beginning inventory <720> <680>(June end inven) (Aug. end inven)Units to be produced 7,0204. E. 680 units5. A. 7,020 units6. B. $3,600 profitvariable costs of special order = 13 + 8 + 2 = $23units of regular sales given up = 0minimum selling price of special order = $23profit earned on special order = (27 - 23) x 900 = $3,600 7. A. the total direct-labor variance is $200 favorable 8. B. the original cost of the old machine 9. B. $45,000ABC Company Division G Division HSales 250,000Variable costsContribution margin 125,000 50,000 75,000Traceable fixed costs 50,000Segment margin 75,000Common fixed costs 45,000Net income 30,00010. C. $520 unfavorableDM Quantity Variance = (AQ x SP) - (SQ x SP)(6,400 x 1.30) - [(1,000 x 6) x 1.30]8,320 - 7,800 = 520 unfavorable11. E. $144,000ROI = Margin x TurnoverYEAR 2  .36 = Margin x 3  Margin in Year 2 = 12%Year 2 Margin = 150% x Year 1 MarginYear 1 Margin = .12 ÷ 1.50 = 8%Margin = Net operating income ÷ SalesYEAR 1  .08 = Net operating income ÷ 1,800,000Net operating income in Year 1 = .08 x 1,800,000 = $144,00012. C. 1.5ROI = Margin x TurnoverYEAR 1  .12 = .08 x TurnoverTurnover in Year 1 = .12 ÷ .08 = 1.513. B. $2,250,000Margin = Net operating income ÷ SalesYEAR 2  .12 = 270,000 ÷ SalesSales in Year 2 = 270,000 ÷ .12 = $2,250,000 14. A. opportunity costs15. E. $398,000(.20 x 190,000) + (.50 x 420,000) + (.30 x 500,000) = $398,00016. E. $280,000Sales in Store P = 24,000 ÷ 0.30 = 80,000Sales in Store Q = 48,000 ÷ 0.60 = 80,000Sales in Store R = 84,000 ÷ 0.70 = 120,000Total sales = 80,000 + 80,000 + 120,000 = $280,00017. B. decrease by $3,000Avoidable fixed costs = 6,000Lost contribution margin = 9,000If Product C is discontinued, net income would decrease by $3,00018 A.19. A. $201,60020,000 x 1.2 x $8.40 = $201,60020. A. 16,000 units161,280 = Units x 1.2 x $8.40 Units = 16,0008,700 units completed x $54.63 = $475,28121. C. 18,500 unitsVariable Overhead SpendingVariance = Actual Variable Overhead - (AH x SR)-30,000 = 210,000 - (AH x 4)AH = 60,000Variable Overhead Efficiency Variance = (AH x SR) - (SH x SR)18,000 = (60,000 x 4) - [(Units x 3) x 4]18,000 = 240,000 - 12UnitsUnits = 18,50022. A. $30,000 increaseSales value from further processing 315,000 ($6.30 x 50,000 units) Additional processing costs <125,000> ($2.50 x 50,000 units)Profit from further processing 190,000Sales value at the split-off point 160,000 ($3.20 x 50,000 units)If product N is processed further and then sold the company makes $190,000. If product N is sold at thesplit-off point, the company makes $160,000. Thus, processing product N further and then selling it willresult in a $30,000 increase to net income.23. C. $258,000From question 30, we know product N should be processed further and then sold at it result in a profitof $190,000. For product M: Sales value from further processing 204,000 ($5.10 x 40,000 units) Additional processing costs <42,000> ($1.05 x 40,000 units)Profit from further processing 162,000Sales value at the split-off point 168,000 ($4.20 x 40,000 units)Product M should be sold at the split-off point where the company makes $168,000.Profit from product M 168,000Profit from product N 190,000Joint costs <100,000> Net income 258,00024. B. 114,600 poundsQ-2 Q-3 Q-4Units to be produced 38,000 34,000 48,000x # of pounds per unit 3 3 3 Production needs 114,000 102,000 144,000+ desired end. inventory 30,600 43,200(102,000 x 30%) (144,000 x 30%)- beginning inventory <30,600>(Q-2 end inv)Direct materials to be purchased in pounds 114,600USE THE SCHEDULE BELOW TO ANSWER QUESTIONS 25 – 26.XYZ Company Product R Product S Product TSales 800,000 150,000 450,000 200,000Variable costsContribution margin 256,000 63,500 112,500 80,000Traceable fixed costs 120,000 25,000 60,000 35,000Segment margin 136,000 38,500 52,500 45,000Common fixed costs 90,000Net income 46,00025. B. $63,50026. E. $45,00027. D. $170,000 decreaseAvoidable fixed costs = 392,000 - 260,000 = 132,000Opportunity cost = 50,000 (additional sales of other products)Avoid. fixed costs + opp. costs = 132,000 + 50,000 = 182,000Lost contribution margin = 352,000If the gospel music records product line is discontinued, net income would decrease by $170,000(352,000 in lost contribution margin - 182,000 in avoided fixed costs)28. D. $140DM Price Variance = (AQ x AP) - (AQ x SP)(1,400 x 1.10) - (1,400 x 1.00) = 140 unfavorable29. D. turnover = decrease; margin = decrease30. A. production budget31. A. 3.125%ROI = Net operating income ÷ Average operating assets.10 = Net operating income ÷ 312,500  Net operating income = 31,250Margin = Net operating income ÷ Sales31,250 ÷ 1,000,000 = 3.125%32. B. 0 units of carpet-kleen and 20,000 units of floor deodorizermachine hours used per unit: carpet-kleen (5,000 ÷ 5,000 = 1); floor deodorizer (2,000 ÷