Question

1. A division in XYZ Co. had the following financial data for 2019: sales $500,000, average operating assets $200,000, margin (or profit margin) 4%, minimum required rate of return 8%. What was the return on investment for the division?

   	A.	10%.
   	B.	20%.
   	C.	16%.
   	D.	12%.

2. Patricia’s housekeeping company has the following data projected for June.

   Beginning cash balance	$24,500
   Cash collections from customers	36,200
   Cash disbursements	54,300

   Patricia wants to maintain a cash balance of $10,000 or more. Any amount below this can be borrowed from a local bank as needed in increments of $1,000. All borrowings are made at month end. In Patricia's cash budget for June, how much money will Patricia need to borrow at month end?

   	A.	$4,000
   	B.	$5,000
   	C.	$7,000
   	D.	$6,000

3. Lee Company's standards for the most recent period are given below. Fixed and variable manufacturing overhead costs are applied to products on the basis of machine hours. The denominator volume of machine hours is 9,000.

   	Standard Quantity or Hours per unit	Standard Price or Rate per unit	Standard Cost per unit
   Direct Materials	3 feet	$6 per foot	$18
   Direct Labor	1.5 direct labor hours	$10 per direct labor hour	$15
   Variable Overhead	2 machine hours	$12 per machine hour	$24
   Fixed Overhead	2 machine hours	$15 per machine hour	$30

   Actual costs for the most recent period, during which 5,000 units of output were actually produced and used 9,600 machine hours, are given below:

   Direct Materials	The firm purchased 16,000 feet at $6.30 per foot, but only used 14,500 feet in production.
   Direct Labor	The firm used 7,150 direct labor hours and paid $11 per direct labor hour.
   Variable Overhead	Actual variable overhead costs were $122,880.
   Fixed Overhead	Actual fixed overhead costs were $142,000.

   What was the company’s material price variance?

   	A.	$4,350 favorable
   	B.	$4,800 unfavorable
   	C.	$4,800 favorable
   	D.	$4,350 unfavorable

4. XYZ Co.’s expected sales for upcoming months are as follows:

              

   	Sales revenue
   June........................	$60,000
   July........................	$80,000
   August....................	$100,000

   All sales are on credit. Suppose XYZ collects 60% of credit sales in the month of sale, and collects 40% in the following month. How much cash the company can collect in July?

   	A.	$68,000
   	B.	$74,000
   	C.	$72,000
   	D.	$70,000

Answer 1

1.
Turnover = $500000 / 200000 = 2.5 times
ROI = Turnover x Profit Margin
= 2.5 x 4% = 10%

Answer is A. 10%

2.
Preliminary Ending Balance = $24500+36200-54300 = $6400
Minimum Cash Balance = $10000
Cash short = $10000-6400 = $3600, since it is in increments of 1000, borrowing will be $4000

Answer is A. $4000

3.
Material price variance = (Actual Price - Standard Price) x Actual Quantity purchased
= ($6.30-6) x 16000 = $4800 (U)

Answer is

B.	$4,800 unfavorable

4.
Cash collected in July = $80000 x 60% + 60000 x 40% = $72000

Answer is C. $72000