Managerial Accounting Canadian 10th Edition by Garrison -Test Bank

1. Which of the following is the numerator in the calculation of the turnover component of ROI?

A. Invested capital.

B. Total assets.

C. Operating income.

D. Sales.

Accessibility: Keyboard Navigation
Blooms: Understand
CPA Competency: 3.6.2 Evaluates performance of responsibility centres.
Difficulty: Easy
Garrison – Chapter 11 #1
Learning Objective: 11-03 Analyze the return on investment.
Topic: 11-23 The Return on Investment (ROI) Formula.

2. What would be a good example of a common cost that normally could NOT be assigned to products on a segmented income statement except on an arbitrary basis?

A. Product advertising outlays.

B. Salary of a corporation president.

C. Direct materials.

D. The product manager’s salary.

Accessibility: Keyboard Navigation
Blooms: Remember
CPA Competency: 3.6.1 Evaluates performance using accepted frameworks.
Difficulty: Easy
Garrison – Chapter 11 #2
Learning Objective: 11-01 Prepare a segmented income statement using the contribution format; and explain the difference between traceable fixed costs and common fixed costs.
Topic: 11-06 Traceable and Common Fixed Costs.

3. All other things being equal, which of the following is a consequence of an increase in a division’s traceable fixed expenses?

A. The division’s contribution margin ratio will decrease.

B. The division’s segment margin ratio will remain the same.

C. The division’s segment margin will decrease.

D. The overall company operating income will remain the same.

Accessibility: Keyboard Navigation
Blooms: Understand
CPA Competency: 3.6.1 Evaluates performance using accepted frameworks.
Difficulty: Medium
Garrison – Chapter 11 #3
Learning Objective: 11-01 Prepare a segmented income statement using the contribution format; and explain the difference between traceable fixed costs and common fixed costs.
Topic: 11-02 Different levels of Segmented Statements.
Topic: 11-04 Sales and Contribution Margin

4. Lyons Company consists of two divisions: A and B. Lyons Company reported a contribution margin of $50,000 for Division A, and had a contribution margin ratio of 30% in Division B, when sales in Division B were $200,000. Operating income for the company was $25,000 and traceable fixed expenses were $40,000. What were Lyons Company’s common fixed expenses?

A. $40,000.

B. $45,000.

C. $70,000.

D. $85,000.
50,000 + 200,000 * .30 – 40,000 – 25,000 = $45,000.

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.6.1 Evaluates performance using accepted frameworks.
Difficulty: Hard
Garrison – Chapter 11 #4
Learning Objective: 11-01 Prepare a segmented income statement using the contribution format; and explain the difference between traceable fixed costs and common fixed costs.
Topic: 11-02 Different levels of Segmented Statements.
Topic: 11-06 Traceable and Common Fixed Costs.
Topic: 11-12 Segment Margin.

5. More Company has two divisions: L and M. During July, the contribution margin in Division L was $60,000. The contribution margin ratio in Division M was 40%, and its sales were $250,000. Division M’s segment margin was $60,000. The common fixed expenses were $50,000, and the company operating income was $20,000. What was the segment margin for Division L?

A. $0.

B. $10,000.

C. $50,000.

D. $60,000.
Total SM = 20,000 + 50,000 = 70,000. L’s SM = 70,000 – 60,000 = $10,000.

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.6.1 Evaluates performance using accepted frameworks.
Difficulty: Hard
Garrison – Chapter 11 #5
Learning Objective: 11-01 Prepare a segmented income statement using the contribution format; and explain the difference between traceable fixed costs and common fixed costs.
Topic: 11-02 Different levels of Segmented Statements.
Topic: 11-04 Sales and Contribution Margin
Topic: 11-06 Traceable and Common Fixed Costs.
Topic: 11-12 Segment Margin.

6. During April, Division D of Carney Company had a segment margin ratio of 15%, a variable expense ratio of 60% of sales, and traceable fixed expenses of $15,000. Division D’s sales were closest to which of the following?

A. $22,500.

B. $33,333.

C. $60,000.

D. $100,000.
using equation S – .6 S – 15,000 = .15S. Sales = 15,000/(1 – .6 – .15) = $60,000.

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.6.1 Evaluates performance using accepted frameworks.
Difficulty: Hard
Garrison – Chapter 11 #6
Learning Objective: 11-01 Prepare a segmented income statement using the contribution format; and explain the difference between traceable fixed costs and common fixed costs.
Topic: 11-02 Different levels of Segmented Statements.
Topic: 11-04 Sales and Contribution Margin
Topic: 11-06 Traceable and Common Fixed Costs.
Topic: 11-12 Segment Margin.

7. Divisions A and B of Denner Company reported the following results for October:

If common fixed expenses were $31,000, what were the total fixed expenses?

A. $31,000.

B. $52,000.

C. $62,000.

D. $93,000.
31,000 + (90,000 * (1 – .70) – 2,000) + (150,000 * (1 – .60) – 23,000) = $93,000.

Blooms: Apply
CPA Competency: 3.6.1 Evaluates performance using accepted frameworks.
Difficulty: Hard
Garrison – Chapter 11 #7
Learning Objective: 11-01 Prepare a segmented income statement using the contribution format; and explain the difference between traceable fixed costs and common fixed costs.
Topic: 11-02 Different levels of Segmented Statements.
Topic: 11-04 Sales and Contribution Margin
Topic: 11-06 Traceable and Common Fixed Costs.
Topic: 11-12 Segment Margin.

8. Johnson Company operates two plants: Plant A and Plant B. Johnson Company reported for the year just ended a contribution margin of $50,000 for Plant A. Plant B had sales of $200,000 and a contribution margin ratio of 30%. Net operating income for the company was $20,000 and traceable fixed costs for the two plants totalled $50,000. What were Johnson Company’s common fixed costs for last year?

A. $40,000.

B. $50,000.

C. $70,000.

D. $90,000.
50,000 + 200,000 * .30 – 50,000 – 20,000 = $40,000.

Accessibility: Keyboard Navigation
Blooms: Analyze
CPA Competency: 3.6.1 Evaluates performance using accepted frameworks.
Difficulty: Hard
Garrison – Chapter 11 #8
Learning Objective: 11-01 Prepare a segmented income statement using the contribution format; and explain the difference between traceable fixed costs and common fixed costs.
Topic: 11-02 Different levels of Segmented Statements.
Topic: 11-04 Sales and Contribution Margin
Topic: 11-06 Traceable and Common Fixed Costs.
Topic: 11-12 Segment Margin.

Ieso Company has two stores: J and K. During November, Ieso Company reported operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses were $60,000 in Store J, and $40,000 in Store K.

Garrison – Chapter 11

9. What were the total sales in Store J?

A. $100,000.

B. $150,000.

C. $250,000.

D. $400,000.
100,000/.40 = $250,000

Accessibility: Keyboard Navigation
Blooms: Apply
CPA Competency: 3.6.1 Evaluates performance using accepted frameworks.
Difficulty: Medium
Garrison – Chapter 11 #9
Learning Objective: 11-01 Prepare a segmented income statement using the contribution format; and explain the difference between traceable fixed costs and common fixed costs.
Topic: 11-02 Different levels of Segmented Statements.
Topic: 11-04 Sales and Contribution Margin
Topic: 11-06 Traceable and Common Fixed Costs.
Topic: 11-12 Segment Margin.

10. What were the total variable expenses in Store K?

A. $70,000.

B. $110,000.

C. $130,000.

D. $200,000.
CM for K = 30,000 + 40,000 = $70,000. Sales K = 450,000 – 250,000 = 200,000. VC for K = 200,000 – 70,000 = $130,000.