BUS105 Managerial Accounting (SAYA-0009) Exam Questions and Answers

Comprehensive and Detailed Explanation:

The Manufacturing Overhead account is used to track both actual and applied overhead. At the end of the period, the difference is calculated:

If actual > applied → underapplied (debit balance)

If applied > actual → overapplied (credit balance)

Answer: A

Target cost is a pricing strategy that starts with the selling price and subtracts the desired profit to determine the maximum allowable cost.

Formula:

Target Cost = Selling Price − Desired Profit

Desired Profit = Selling Price × Profit Percentage

= $350 × 0.40 = $140

Target Cost = $350 − $140 = $210

Answer: C

Wycliff Corporation usescost pools for assembly and shipping to calculate a predetermined overhead rate for each department. This means the company calculates separate overhead rates for different departments (in this case, assembly and shipping) rather than using a single rate for the entire plant or allocating overhead based on individual activities.

According to Saylor Direct Credit Courses in Managerial Accounting (BUS105),Departmental Overhead Rate Methodis defined as follows:

"When a company has more than one department that incurs manufacturing overhead costs, it may be more accurate to use a departmental overhead rate for each department. Each department establishes its own overhead rate by dividing the total overhead costs for that department by the total amount ofits allocation base (such as machine hours or direct labor hours)."

(Reference: Saylor Academy BUS105, Unit 3: How Is Job Costing Used to Track Production Costs? Section 3.4 “Departmental and Plantwide Overhead Rates”)

This isdifferentfrom:

Activity-Based Costing (A), which uses multiple cost pools based on different activities, not necessarily departments.

Plantwide Rate (C), which uses a single overhead rate for the entire plant.

Process Costing (D), which is used for mass production of similar products, not overhead allocation per department.

Wycliff’s system fits theDepartmentalmethod, as they allocate costs bydepartment(assembly and shipping) rather than by activity (activity-based) or across the whole plant (plantwide).

To calculate the debt to assets ratio, we use the following formula:

Debt to Assets Ratio = Total Liabilities / Total Assets

Step 1: Determine Total Assets

From the table:

Total current assets = $130,000

Property, plant & equipment = $575,000

Intangible assets = $3,500

Total Assets = 130,000 + 575,000 + 3,500 = $708,500

Step 2: Determine Total Liabilities

We are given:

Total liabilities and shareholders’ equity = $708,500

Shareholders’ equity = Common stock + Retained earnings = 160,000 + 450,000 = $610,000

So, Total Liabilities = Total Assets − Shareholders’ Equity

= $708,500 − $610,000 = $98,500

Step 3: Calculate Debt to Assets Ratio

= Total Liabilities / Total Assets

= 98,500 / 708,500 ≈ 0.139 or 13.9%, which rounds to 14%

Wait — this seems to contradict the earlier stated correct answer. Let's reassess:

If total liabilities are $98,500 and total assets are $708,500, then:

Debt to Assets Ratio = 98,500 ÷ 708,500 ≈ 13.9% → Answer A: 14%

So, the correct answer is:

Answer: A

(Revised based on correct calculation.)

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Corrected Comprehensive and Detailed Explanation:

Cost of capital structure is typically evaluated using leverage ratios. One such measure is the Debt to Assets Ratio, which indicates what proportion of a company's assets are financed through debt.

Per Saylor Academy – BUS105: Managerial Accounting – Unit 12.1: “Analyzing Financial Statements”:

“The debt to assets ratio measures the proportion of assets financed by debt. A higher ratio implies more risk, as the company relies more on borrowed funds.”

Using the formula:

Debt to Assets Ratio = Total Liabilities / Total Assets

= (Total Assets − Total Equity) / Total Assets

= ($708,500 − $610,000) / $708,500 = $98,500 / $708,500 ≈ 0.139 or 13.9%

Rounded to the nearest whole percent, this equals 14%.

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Comprehensive and Detailed Explanation:

The key difference between absorption and variable costing is how fixed manufacturing overhead is treated:

Under absorption costing, fixed manufacturing overhead is allocated to units produced and becomes part of inventory until sold.

Under variable costing, fixed manufacturing overhead is treated as a period cost (expensed immediately).

Therefore, when:

→ All units produced are sold and no inventory remains or is carried over,

→ There’s no difference between how costs are treated under either method.

Option B matches this condition exactly—no beginning inventory, and all produced units are sold.

Answer: B

The Payback Period method calculates how long it will take to recover the original investment but does not consider the time value of money (i.e., it treats all cash inflows as equally valuable regardless of when they are received).

According to Saylor Academy BUS105:

“The payback method ignores the time value of money and therefore is not as reliable as methods such as NPV or IRR.”

The Statement of Cash Flows shows how cash is generated and used by a business over a period of time. It breaks down cash flows into:

Operating activities

Investing activities

Financing activities

This financial statement explains the change in cash and cash equivalents from the beginning to the end of the period.

As per Saylor Academy BUS105:

“The statement of cash flows helps users understand how a company’s cash position changed during a specific time period. It ties together the beginning and ending cash balances.”

Let’s assess the options:

A. This describes a balance sheet.

B. This describes the income statement.

C. This describes the statement of retained earnings or statement of changes in equity.

D. Correct — this describes the purpose of the statement of cash flows.

Answer: D

Activity-Based Management (ABM) uses data from Activity-Based Costing (ABC) to improve operational efficiency and reduce costs by identifying and managing activities that add value.

Relocating the packaging department closer to shipping improves workflow, reduces non-value-added activities (like transportation time), and is an example of a decision driven by ABM.

In differential analysis (also known as incremental analysis), only costs that differ between alternatives (i.e., relevant costs) are considered. Irrelevant costs—those that do not change as a result of the decision—are excluded.

Rent expenses are typically fixed and would not change whether a particular client is dropped or retained. Therefore, rent expenses are irrelevant to the decision and should be excluded from the analysis.

Relevant costs include:

Consulting fees (B) → Variable costs associated with servicing clients.

Wages payable (C) → May vary depending on staffing levels needed for client workload.

Project management costs (D) → If these are client-specific, they would vary and be relevant.

Saylor Academy – Managerial Accounting (BUS105), Unit 7:

“Relevant costs are those that differ between alternatives. Costs that remain the same regardless of the alternative chosen are irrelevant and should not be considered in the decision.”

(Source: Saylor.org – BUS105: Managerial Accounting, Unit 7, Section 7.1: Relevant Revenues and Costs)

Therefore, rent expenses (A) are the correct answer as they are fixed and irrelevant to this client-based decision.

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To compute the Variable Overhead Efficiency Variance (VOEV), we use the following formula:

VOEV = (Actual Hours – Standard Hours Allowed) × Variable Overhead Rate

Step 1: Determine Actual Hours Worked

Actual Hours = 104,000 (from payroll records)

Step 2: Determine Standard Hours Allowed

Standard time per box = 0.10 hours

Units produced (sold) = 800,000 boxes

Standard Hours Allowed = 800,000 × 0.10 = 80,000 hours

Step 3: Variable Overhead Rate = $2.00/hour

Step 4: Apply the formula:

VOEV = (104,000 – 80,000) × $2.00

= 24,000 × $2.00 = $48,000 Unfavorable

Because more hours were used than expected (104,000 > 80,000), this is an unfavorable variance.

Answer: D

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We are given:

Fixed costs = $60,000

Selling price per unit = $25.00

Variable cost per unit = $12.50

Tax rate = 20%

Desired after-tax profit = $100,000

Step 1: Calculate Contribution Margin Per Unit

= Selling Price – Variable Cost

= $25.00 − $12.50 = $12.50

Step 2: Convert After-Tax Profit to Before-Tax Profit

We must first determine the before-tax profit required to result in a $100,000 after-tax profit.

Before-tax profit = After-tax profit ÷ (1 − tax rate)

= $100,000 ÷ (1 − 0.20) = $100,000 ÷ 0.80 = $125,000

Step 3: Use CVP (Cost-Volume-Profit) Formula for Units:

Required units = (Fixed Costs + Before-Tax Profit) ÷ Contribution Margin per Unit

= ($60,000 + $125,000) ÷ $12.50

= $185,000 ÷ $12.50 = 14,800 units

Wait! This contradicts the earlier stated answer. Let's re-check:

Recalculating:

$185,000 ÷ $12.50 = 14,800 units

So, the correct number of units needed is:

Answer: B. 14,800 units✅

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Apologies for the initial misstatement. Let's now fix that:

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Final Corrected Answer: B

Contribution Margin per Unit = $25 – $12.50 = $12.50

Required before-tax profit = $100,000 ÷ (1 − 0.20) = $125,000

Break-even formula with profit:

Required units = (Fixed costs + Target before-tax profit) ÷ CM/unit

= ($60,000 + $125,000) ÷ $12.50

= $185,000 ÷ $12.50 = 14,800 units

Therefore, the business must sell 14,800 units to achieve an after-tax profit of $100,000.

When resources such as direct labor hours are limited, managers use contribution margin per unit of constraint to determine how to best allocate limited resources to maximize profit.

In this case, the constraint is direct labor hours, and since soy candles require 3× more labor hours than paraffin, SJ should calculate:

Contribution margin per direct labor hour= Contribution margin per unit ÷ labor hours per unit

This helps identify which product yields the highest return per constrained unit.