BUS-A 437 Advanced Managerial Accounting
BUS-A 437 – ADVANCED MANAGERIAL ACCOUNTING |
VERIFIED EXAM QUESTIONS AND ANSWERS - LATEST
VERSION
BUS-A 437 Advanced Managerial Accounting
1. A cost that stays the same in total within the relevant range but changes on
a per-unit basis as activity changes is best described as a:
a) Step-variable cost
b) Fixed cost
c) Mixed cost
d) Variable cost
b) Fixed cost
Fixed costs remain constant in total, so the cost per unit falls as volume rises
and climbs as volume drops.
2. Halvorsen Fabrication recorded maintenance costs of $58,000 at 4,000
machine hours (lowest activity) and $93,000 at 9,000 machine hours
(highest activity). Using the high-low method, the variable cost per
machine hour is:
a) $14.50
b) $10.33
c) $7.00
d) $6.50
c) $7.00
($93,000 − $58,000) ÷ (9,000 − 4,000) = $35,000 ÷ 5,000 = $7.00 per
machine hour.
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, BUS-A 437 Advanced Managerial Accounting
3. Using the Halvorsen Fabrication data ($58,000 at 4,000 hours; $93,000 at
9,000 hours), the estimated monthly fixed maintenance cost is:
a) $30,000
b) $35,000
c) $63,000
d) $28,000
a) $30,000
Fixed cost = $58,000 − (4,000 × $7.00) = $30,000. The same result comes
from the high point: $93,000 − $63,000.
4. In a simple linear regression used for cost estimation, the coefficient of
determination (R-squared) measures:
a) The probability that the slope coefficient equals zero
b) The variable cost per unit of the cost driver
c) The fixed cost component of the cost function
d) The proportion of the variation in the cost that is explained by the cost
driver
d) The proportion of the variation in the cost that is explained by the
cost driver
R-squared ranges from 0 to 1 and shows how much of the change in the
dependent variable is explained by the independent variable.
5. The most significant limitation of the high-low method of cost estimation is
that it:
a) Cannot separate a mixed cost into fixed and variable elements
b) Uses every data point, including outliers, equally
c) Requires sophisticated statistical software
d) Relies on only two observations, which may not represent typical cost
behavior
d) Relies on only two observations, which may not represent typical
cost behavior
Because only the highest and lowest activity points are used, an unusual
month can distort the whole cost equation.
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, BUS-A 437 Advanced Managerial Accounting
6. Kestrel Audio sells speakers for $80 each with variable costs of $52 per
unit. Annual fixed costs are $210,000. Break-even sales in dollars are:
a) $600,000
b) $403,846
c) $735,000
d) $323,077
a) $600,000
CM ratio = ($80 − $52) ÷ $80 = 35%. Break-even sales = $210,000 ÷ 0.35 =
$600,000.
7. Using the Kestrel Audio data (price $80, variable cost $52, fixed costs
$210,000), how many units must be sold to earn a pre-tax operating income
of $84,000?
a) 11,308 units
b) 3,000 units
c) 10,500 units
d) 7,500 units
c) 10,500 units
Required units = ($210,000 + $84,000) ÷ $28 = 10,500 units.
8. Pinecrest Tools sells a product for $50 with variable costs of $30 per unit
and fixed costs of $240,000. The tax rate is 30%. How many units must be
sold to earn an after-tax income of $84,000?
a) 16,200 units
b) 21,000 units
c) 18,000 units
d) 12,000 units
c) 18,000 units
Pre-tax income needed = $84,000 ÷ (1 − 0.30) = $120,000. Units =
($240,000 + $120,000) ÷ $20 = 18,000.
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, BUS-A 437 Advanced Managerial Accounting
9. A company has budgeted sales of $900,000 and break-even sales of
$600,000. Its margin of safety percentage is:
a) 40.0%
b) 33.3%
c) 66.7%
d) 50.0%
b) 33.3%
Margin of safety = ($900,000 − $600,000) ÷ $900,000 = 33.3% of budgeted
sales.
10. A division reports a contribution margin of $400,000 and operating
income of $100,000. If sales increase by 10%, operating income should
increase by:
a) 25%
b) 4%
c) 40%
d) 10%
c) 40%
Degree of operating leverage = $400,000 ÷ $100,000 = 4. A 10% sales
increase yields a 4 × 10% = 40% rise in operating income.
11. Ridgeline Outfitters sells Product A and Product B in a 3:2 sales mix.
Product A has a unit contribution margin of $20 and Product B has $35.
Fixed costs are $520,000. How many units of Product B must be sold to
break even?
a) 4,000 units
b) 8,000 units
c) 10,400 units
d) 12,000 units
b) 8,000 units
CM per composite unit = (3 × $20) + (2 × $35) = $130. Break-even =
$520,000 ÷ $130 = 4,000 composites, so B = 4,000 × 2 = 8,000 units.
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BUS-A 437 – ADVANCED MANAGERIAL ACCOUNTING |
VERIFIED EXAM QUESTIONS AND ANSWERS - LATEST
VERSION
BUS-A 437 Advanced Managerial Accounting
1. A cost that stays the same in total within the relevant range but changes on
a per-unit basis as activity changes is best described as a:
a) Step-variable cost
b) Fixed cost
c) Mixed cost
d) Variable cost
b) Fixed cost
Fixed costs remain constant in total, so the cost per unit falls as volume rises
and climbs as volume drops.
2. Halvorsen Fabrication recorded maintenance costs of $58,000 at 4,000
machine hours (lowest activity) and $93,000 at 9,000 machine hours
(highest activity). Using the high-low method, the variable cost per
machine hour is:
a) $14.50
b) $10.33
c) $7.00
d) $6.50
c) $7.00
($93,000 − $58,000) ÷ (9,000 − 4,000) = $35,000 ÷ 5,000 = $7.00 per
machine hour.
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, BUS-A 437 Advanced Managerial Accounting
3. Using the Halvorsen Fabrication data ($58,000 at 4,000 hours; $93,000 at
9,000 hours), the estimated monthly fixed maintenance cost is:
a) $30,000
b) $35,000
c) $63,000
d) $28,000
a) $30,000
Fixed cost = $58,000 − (4,000 × $7.00) = $30,000. The same result comes
from the high point: $93,000 − $63,000.
4. In a simple linear regression used for cost estimation, the coefficient of
determination (R-squared) measures:
a) The probability that the slope coefficient equals zero
b) The variable cost per unit of the cost driver
c) The fixed cost component of the cost function
d) The proportion of the variation in the cost that is explained by the cost
driver
d) The proportion of the variation in the cost that is explained by the
cost driver
R-squared ranges from 0 to 1 and shows how much of the change in the
dependent variable is explained by the independent variable.
5. The most significant limitation of the high-low method of cost estimation is
that it:
a) Cannot separate a mixed cost into fixed and variable elements
b) Uses every data point, including outliers, equally
c) Requires sophisticated statistical software
d) Relies on only two observations, which may not represent typical cost
behavior
d) Relies on only two observations, which may not represent typical
cost behavior
Because only the highest and lowest activity points are used, an unusual
month can distort the whole cost equation.
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, BUS-A 437 Advanced Managerial Accounting
6. Kestrel Audio sells speakers for $80 each with variable costs of $52 per
unit. Annual fixed costs are $210,000. Break-even sales in dollars are:
a) $600,000
b) $403,846
c) $735,000
d) $323,077
a) $600,000
CM ratio = ($80 − $52) ÷ $80 = 35%. Break-even sales = $210,000 ÷ 0.35 =
$600,000.
7. Using the Kestrel Audio data (price $80, variable cost $52, fixed costs
$210,000), how many units must be sold to earn a pre-tax operating income
of $84,000?
a) 11,308 units
b) 3,000 units
c) 10,500 units
d) 7,500 units
c) 10,500 units
Required units = ($210,000 + $84,000) ÷ $28 = 10,500 units.
8. Pinecrest Tools sells a product for $50 with variable costs of $30 per unit
and fixed costs of $240,000. The tax rate is 30%. How many units must be
sold to earn an after-tax income of $84,000?
a) 16,200 units
b) 21,000 units
c) 18,000 units
d) 12,000 units
c) 18,000 units
Pre-tax income needed = $84,000 ÷ (1 − 0.30) = $120,000. Units =
($240,000 + $120,000) ÷ $20 = 18,000.
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, BUS-A 437 Advanced Managerial Accounting
9. A company has budgeted sales of $900,000 and break-even sales of
$600,000. Its margin of safety percentage is:
a) 40.0%
b) 33.3%
c) 66.7%
d) 50.0%
b) 33.3%
Margin of safety = ($900,000 − $600,000) ÷ $900,000 = 33.3% of budgeted
sales.
10. A division reports a contribution margin of $400,000 and operating
income of $100,000. If sales increase by 10%, operating income should
increase by:
a) 25%
b) 4%
c) 40%
d) 10%
c) 40%
Degree of operating leverage = $400,000 ÷ $100,000 = 4. A 10% sales
increase yields a 4 × 10% = 40% rise in operating income.
11. Ridgeline Outfitters sells Product A and Product B in a 3:2 sales mix.
Product A has a unit contribution margin of $20 and Product B has $35.
Fixed costs are $520,000. How many units of Product B must be sold to
break even?
a) 4,000 units
b) 8,000 units
c) 10,400 units
d) 12,000 units
b) 8,000 units
CM per composite unit = (3 × $20) + (2 × $35) = $130. Break-even =
$520,000 ÷ $130 = 4,000 composites, so B = 4,000 × 2 = 8,000 units.
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