A200 - Managerial Exam Questions With Complete
Solutions
(Contribution margin approach) Calculation for Contribution
MARGIN PER UNIT Correct Answers selling price per unit -
variable cost per unit = contribution margin per unit
(Contribution margin approach) calculation for TOTAL
contribution margin Correct Answers TOTAL revenue -
TOTAL variable costs = TOTAL contribution margin
calculation for margin of safety: Correct Answers budgeted
sales - break even sales = margin of safety in dollars
calculation for: cost of goods manufactured Correct Answers
Beg WIP inventory
+DM used
+DL
+Manufacturing OH assigned
=Total manufacturing costs
-End WIP
=COGM
calculation for: cost of goods sold Correct Answers FINISH
calculation for: current period manufacturing costs Correct
Answers RM used + DL used + MOH costs assigned = total
manufacturing costs
calculation for: ending inventory balances Correct Answers
Beg WIP inventory
,+DM used
+DL
+Manufacturing OH assigned
=Total manufacturing costs
- COGM
=Ending WIP
calculation for: gross margin Correct Answers (FINISH)
Contribution Margin Format Correct Answers Revenue -
variable costs = Contribution Margin - fixed costs = operating
income
def of differential/relevant costs Correct Answers
def of differential/relevant costs Correct Answers def: the
costs that are different between two options. many of these costs
are also avoidable.
def of differential/relevant revenue Correct Answers
def of differential/relevant revenue Correct Answers def: costs
that can be either fixed or variable/period or product costs that
are independent from the concept of cost behavior and duffers
among alternatives
ex: if IU is considering eliminating one of their varsity sports
that generates $100,000 in ticket revenue --> this ticket revenue
is differential (relevant) revenue because IU's total athletic
revenue would be different if the sport was eliminated
, def of non-relevant costs (and avoidable v. unavoidable costs)
Correct Answers def of avoidable: the costs managers can
eliminate, or reduce, by making specific choice. *they are a
subset of relevant costs
def of unavoidable/non-relevant: the cost of the director of the
athletic program is not avoidable thus it is not relevant to the
elimination decisions
definition of opportunity cost and example Correct Answers
def: the sacrifice (something given up) that is incurred to choose
an alternative opportunity. think of an opportunity cost as more
of "lost" revenue, not an actual "cost"
ex: if the university could rent out the practice facility used by
the sport, the amount of rent is an opportunity cost of keeping
the sport (ie: lost revenue)
Definition of sunk cost w/ example Correct Answers def: a
cost incurred (spent) in a past transaction and cannot be
changed. Sunk costs are not relevant for making current
decisions.
ex: the cost of equipment already purchased and used in the
sport
GAAP Format: Correct Answers revenue - COGS = GM -
operating expenses = Operating Income +/- Other Items =
operating Income
Solutions
(Contribution margin approach) Calculation for Contribution
MARGIN PER UNIT Correct Answers selling price per unit -
variable cost per unit = contribution margin per unit
(Contribution margin approach) calculation for TOTAL
contribution margin Correct Answers TOTAL revenue -
TOTAL variable costs = TOTAL contribution margin
calculation for margin of safety: Correct Answers budgeted
sales - break even sales = margin of safety in dollars
calculation for: cost of goods manufactured Correct Answers
Beg WIP inventory
+DM used
+DL
+Manufacturing OH assigned
=Total manufacturing costs
-End WIP
=COGM
calculation for: cost of goods sold Correct Answers FINISH
calculation for: current period manufacturing costs Correct
Answers RM used + DL used + MOH costs assigned = total
manufacturing costs
calculation for: ending inventory balances Correct Answers
Beg WIP inventory
,+DM used
+DL
+Manufacturing OH assigned
=Total manufacturing costs
- COGM
=Ending WIP
calculation for: gross margin Correct Answers (FINISH)
Contribution Margin Format Correct Answers Revenue -
variable costs = Contribution Margin - fixed costs = operating
income
def of differential/relevant costs Correct Answers
def of differential/relevant costs Correct Answers def: the
costs that are different between two options. many of these costs
are also avoidable.
def of differential/relevant revenue Correct Answers
def of differential/relevant revenue Correct Answers def: costs
that can be either fixed or variable/period or product costs that
are independent from the concept of cost behavior and duffers
among alternatives
ex: if IU is considering eliminating one of their varsity sports
that generates $100,000 in ticket revenue --> this ticket revenue
is differential (relevant) revenue because IU's total athletic
revenue would be different if the sport was eliminated
, def of non-relevant costs (and avoidable v. unavoidable costs)
Correct Answers def of avoidable: the costs managers can
eliminate, or reduce, by making specific choice. *they are a
subset of relevant costs
def of unavoidable/non-relevant: the cost of the director of the
athletic program is not avoidable thus it is not relevant to the
elimination decisions
definition of opportunity cost and example Correct Answers
def: the sacrifice (something given up) that is incurred to choose
an alternative opportunity. think of an opportunity cost as more
of "lost" revenue, not an actual "cost"
ex: if the university could rent out the practice facility used by
the sport, the amount of rent is an opportunity cost of keeping
the sport (ie: lost revenue)
Definition of sunk cost w/ example Correct Answers def: a
cost incurred (spent) in a past transaction and cannot be
changed. Sunk costs are not relevant for making current
decisions.
ex: the cost of equipment already purchased and used in the
sport
GAAP Format: Correct Answers revenue - COGS = GM -
operating expenses = Operating Income +/- Other Items =
operating Income
