ACCT 2302 Exam 2 Practice Test #1

Question 1

If sales increase by $30,000 and the VE ratio is 60%, what will be the impact on NOI
Increase by 18,000
Increase by 30,000
Increase by 12,000
None of the above

Answer 1

c. Increase by 12,000

Change in NOI = Change in CM – Change in FE = (30,000*0.4) - 0 = $12,000 (increase)

Question 2

Which of the following will not increase the Margin of Safety (assume no other factors change)?
Decrease breakeven point
Increase contribution margin
Increase selling price
Increase fixed expenses

Answer 2

Increase fixed expenses

Question 3

Assume CM was 10,000 and FE were 5,000 originally. What is the percent change in NOI with a 5% increase in sales?
a. 5%
b.10%
c. 15%
d. 20%

Answer 3

10%

DOL = CM/NOI = 10,000/5,000 = 2
% change in NOI = DOL * % change in sales = 2 * 5% = 10%

Question 4

Assuming that sales increase by $400,000, how much will NOI increase (CMR is 25%)
50,000
100,000
200,000
400,000

Answer 4

100,000

CMR = CM / Sales 🡪 CM = CMR * Sales = 0.25 * 400,000 = $100,000 inc. CM = $100,000 inc. NOI

Question 5

If sales increase by 8%, by what percentage will we expect NOI to increase
16%
24%
32%
40%

Answer 5

40%

% Change in NOI = DOL * % Change in Sales = 5 * 8% = 40%

Question 6

If I produced 2,000 units but only sold 1,500 units, will variable or absorption costing have a higher ending NOI
Variable Costing
Absorption Costing
They will be the same

Answer 6

Absorption Costing

Produced > Sold 🡪 Absorption NOI Higher
Produced < Sold 🡪 Variable NOI Higher

Find FMOH/unit produced: $10,000 /2,000 = $5/unit
FMOH Expensed: FMOH/unit * units sold = 51,600 = $8,000
FMOH Deferred to Inventory: 5(2000-1600) = $2,000

Absorption spent 2000 less on FE, so NOI will be 2000 higher