Case Reading 3-6 Quiz

  1. The Miramar Company had the following information for the first quarter as follows:

     

    Planning Budget

    Income Statement

    Sales

    $250,000

    $280,000

    Variable Expenses

    200,000

    221,000

    Contribution Margin

    50,000

    59,000

    Fixed Expenses

    38,000

    41,000

    Net Income

    $12,000

    $18,000

         

    What amount of variable expenses should the company show on its performance budget?

    a. $200,000

    b. $224,000

    c. $218,000

    d. $221,000

     

  2. The Miramar Company had the following information for the first quarter as follows:

     

    Planning Budget

    Income Statement

    Sales

    $250,000

    $280,000

    Variable Expenses

    200,000

    221,000

    Contribution Margin

    50,000

    59,000

    Fixed Expenses

    38,000

    41,000

    Net Income

    $12,000

    $18,000

    What amount of fixed expenses should the company show on its performance budget?

    a. $38,000

    b. $41,000

    c. $42,560

    d. $39,628

     

  3. The Miramar Company had the following information for the first quarter as follows:

     

    Planning Budget

    Income Statement

    Sales

    $250,000

    $280,000

    Variable Expenses

    200,000

    221,000

    Contribution Margin

    50,000

    59,000

    Fixed Expenses

    38,000

    41,000

    Net Income

    $12,000

    $18,000

         

    What is the amount of the performance variance for sales?

    a. $30,000

    b. $6,000

    c. $0

    d. $9,000

     

  4. The Brock Company has provided you with the following information:

     

    Planning Budget

    Performance Budget

    Actual Results
    Sales

    $100,000

    $ 98,000

    $98,000

    Variable Expenses

    68,000

    66,640

    67,000

    Contribution Margin

    32,000

    31,360

    31,000

    Fixed Expenses

    26,000

    26,000

    26,500

    Net Income

    $6,000

    $ 5,360

    $ 4,500

    What is the amount of the variable expense performance variance for the Brock Company?

    a. $1,360 favorable

    b. $1,360 unfavorable

    c. $360 favorable

    d. $360 unfavorable

     

  5. The Brock Company has provided you with the following information:

     

    Planning Budget

    Performance Budget

    Actual Results
    Sales

    $100,000

    $ 98,000

    $98,000

    Variable Expenses

    68,000

    66,640

    67,000

    Contribution Margin

    32,000

    31,360

    31,000

    Fixed Expenses

    26,000

    26,000

    26,500

    Net Income

    $6,000

    $ 5,360

    $ 4,500

    What is the amount of the net income performance variance for the Brock Company?

    a. $860 favorable

    b. $860 unfavorable

    c. $640 favorable

    d. $640 unfavorable

     

  6. The Brock Company has provided you with the following information:

     

    Planning Budget

    Performance Budget

    Actual Results
    Sales

    $100,000

    $ 98,000

    $98,000

    Variable Expenses

    68,000

    66,640

    67,000

    Contribution Margin

    32,000

    31,360

    31,000

    Fixed Expenses

    26,000

    26,000

    26,500

    Net Income

    $6,000

    $ 5,360

    $ 4,500

    What is the amount of the contribution margin planning variance for the Brock Company?

    a. $360 favorable

    b. $360 unfavorable

    c. $640 favorable

    d. $640 unfavorable

     

  7. What is the primary cause of the planning variance, assuming a constant sales price?

    a. change in fixed expenses

    b. change in variable cost percentage

    c. change in net income

    d. change in sales volume

     

  8. Another name for the performance budget is the:

    a. flexible budget

    b. static budget

    c. planning budget

    d. control budget

     

  9. The Locke Company provided the following information relating to its fixed expenses.

     

    Performance Budget

    Actual

    Rent

    $ 3,200

    $ 3,350

    Depreciation

    1,800

    1,700

    Interest

    920

    1,000

    Salaries

    36,000

    37,000

    Total

    $ 41,920

    $ 43,050

     

    The manager of the company recognizes that the dollar amount of the variance is important but that the variance percentage is equally or even more important. Which fixed expense variance represents the largest percentage variation from its performance budget amount? (Hint: first calculate the variance for the individual fixed expense and then the variance as a percentage of the related performance budget amount)

    a. rent

    b. depreciation

    c. interest

    d. salaries

     

  10. The contribution margin performance variance is favorable when the dollar amount of the:

    a. planning budget contribution margin is larger than the performance budget contribution margin

    b. planning budget contribution margin is smaller than the performance budget contribution margin

    c. performance budget contribution margin is larger than the actual results contribution margin

    d. performance budget contribution margin is smaller than the actual results contribution margin

     

  11. Foodco sells food and beverages as follows:

 

Beverages

Food

Total
Sales

$ 18,000

$ 39,000

$ 57,000

Variable Expenses

12,600

23,400

36,000

Contribution Margin

$ 5,400

$ 15,600

21,000

Fixed Expenses

16,400

Net Income

$ 4,600

CMR

30.00%

40.00%

36.84%

If the company's total sales stayed at $57,000 but beverage sales increased by $5,000 and fixed expenses stayed the same, what conclusions can you draw, if any, about the revised breakeven point after the sales mix change.

a. the revised breakeven will be higher than the breakeven originally calculated.

b. the revised breakeven will be lower than the breakeven originally calculated.

c. breakeven sales will not change

d. Not enough information to predict what will happen.