ACCT 2302 Exam #3

Question 1

Why does the unit selling price increase when expected volume is lower than budgeted volume?

a. Variable costs and fixed costs have to be spread over fewer units.
b. Fixed costs and desired ROI have to be spread over fewer units.
c. Variable costs and desired ROI have to be spread over fewer units.
d. Fixed costs only have to be spread over fewer units

Answer 1

b. Fixed costs and desired ROI have to be spread over fewer units

Question 2

The budget committee would not normally include the

a. research director.
b. treasurer.
c. sales manager.
d. external auditor.

Answer 2

d.external auditor.

Question 3

5. The starting point in preparing a master budget is the preparation of the

a. production budget.
b. sales budget.
c. purchasing budget.
d. personnel budget.

Answer 3

b.sales budget.

Question 4

6. Wasson Widget Company is contemplating the production and sale of a new widget. Projected sales are $300,000 (or 75,000 units) and desired profit is $36,000. What is the target cost per unit?

a. $4.00
b. $3.52
c. $4.48
d. $4.80

Answer 4

b.$3.52

Target cost (per unit) = Target cost ÷ Sales units

    = (Projected Sales - Desired profit) ÷ Sales units

    = ($300,000 - $36,000) ÷ 75,000 units

   = $3.52 per unit

Thus, the per unit target cost is $3.52.

Question 5

2. The desired ROI per unit is calculated by

a. multiplying the ROI by the investment and dividing by the estimated volume.
b. multiplying the unit selling price by the ROI.
c. dividing the total cost by the estimated volume and multiplying by the ROI.
d. dividing the ROI by the estimated volume and subtracting the result from the unitcost.

Answer 5

a.multiplying the ROI by the investment and dividing by the estimated volume.