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    The document contains a practice test review for the CPA exam with multiple choice questions and explanations. It includes the following tasks: 1) A calculation to determine the product with the highest contribution margin from two products. Product D is determined to have the highest contribution margin. 2) A calculation to determine the product with the highest return on investment from two products. Product X is determined to have the highest contribution margin percentage and is selected. 3) Multiple choice questions related to metrics for evaluating product sales compared to competitors, calculating incremental cash inflow for a payback period, and calculating production units needed to cover total costs.

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    Cost Accou3

    Uploaded by

    suu
    12 views1 page
    The document contains a practice test review for the CPA exam with multiple choice questions and explanations. It includes the following tasks: 1) A calculation to determine the product with the highest contribution margin from two products. Product D is determined to have the highest contribution margin. 2) A calculation to determine the product with the highest return on investment from two products. Product X is determined to have the highest contribution margin percentage and is selected. 3) Multiple choice questions related to metrics for evaluating product sales compared to competitors, calculating incremental cash inflow for a payback period, and calculating production units needed to cover total costs.

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    The document contains a practice test review for the CPA exam with multiple choice questions and explanations. It includes the following tasks: 1) A calculation to determine the product with the highest contribution margin from two products. Product D is determined to have the highest contribution margin. 2) A calculation to determine the product with the highest return on investment from two products. Product X is determined to have the highest contribution margin percentage and is selected. 3) Multiple choice questions related to metrics for evaluating product sales compared to competitors, calculating incremental cash inflow for a payback period, and calculating production units needed to cover total costs.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    12 views1 page

    Cost Accou3

    Uploaded by

    suu
    The document contains a practice test review for the CPA exam with multiple choice questions and explanations. It includes the following tasks: 1) A calculation to determine the product with the highest contribution margin from two products. Product D is determined to have the highest contribution margin. 2) A calculation to determine the product with the highest return on investment from two products. Product X is determined to have the highest contribution margin percentage and is selected. 3) Multiple choice questions related to metrics for evaluating product sales compared to competitors, calculating incremental cash inflow for a payback period, and calculating production units needed to cover total costs.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 1

    23. 9. 6. 오후 7:51 Practice Test Review | CPA 23. 9. 6.

    오후 7:51 Practice Test Review | CPA

    Task 3:
    Task 1:
    Question: Which metric/approach should be used to evaluate Product Q with respect to
    comparable products sold by its competitors?
    Task 1 (Using Exhibit 1) Product A Product B
    Estimated sales (units) 19,000 22,000 Answer: Revenue market share.
    Selling price (S) $ 20.00 $ 16.50
    Explanation: The purpose of management's evaluation is to compare sales of their
    Direct labor (DL) $ 6.00 $ 5.00 product to sales of comparable products sold by competitors. Market share is a
    Direct materials (DM) $ 3.00 $ 2.00 metric used to evaluate a company's percentage portion of the overall market in
    which it sells. Product Q has generated $500,000 in sales relative to peer sales of
    Variable overhead (VOH) $ 1.00 $ 1.00 $2,000,000 for comparable products. This would imply that Product Q's market
    Fixed costs (FC) $ 1.00 $ 1.50 share (based on revenue) is 20 percent [$500,000 / ($500,000 + $2,000,000)].

    Contribution margin per unit (S - DL - DM - VOH) $ 10.00 $ 8.50


    Question: Management would need to calculate which figure when determining the time
    Contribution margin in dollars (Sales in units x CM per to pay back the initial cost of the project?
    $190,000.00 $187,000.00
    unit)
    Total revenue (Sales in units x S) $380,000.00 $363,000.00
    Answer: Incremental cash inflow

    Explanation: The payback method involves the calculation of the length of time
    The goal is to find the product with the highest contribution margin in dollars, with a needed to recover the initial cost of the project. The summation of each period's
    secondary goal of choosing the product with the highest revenue. The product with the
    incremental cash inflow is then compared with the initial project outflow in order to
    highest contribution margin in dollars is Product D ($208,000, per the table above). As calculate the payback period in years.
    such, Product D will meet the primary goal and the secondary goal does not need to be
    addressed.

    Task 2: Question: Calculate the number of units to produce in order to cover total production
    costs of the new facility under construction.

    Task 2 (Using Exhibit 2) Product W Product X


    Answer: 50,000
    Invested capital $ 400,000 $ 500,000
    Contribution margin percentage 15% 16% Explanation: The formula to calculate breakeven in units is equal to fixed costs
    divided by the contribution margin per unit. $500,000 / ($25 − $15) = 50,000 units
    EBITDA $ 105,000 $ 100,000
    Net income $ 40,000 $ 50,000

    Question: Calculate the amount of time, in years, necessary to recover the investment in
    Return on investment (Net income/Invested capital) 10.00% 10.00% the company's new production line.
    Contribution margin percentage (from above) 15% 16%
    Answer: 7 years

    The goal here is to find the product with the highest return on investment. Because both Explanation: The initial outflow of $280,000 includes the purchase of the line
    Products W and X have the same return on investment of 10.00 percent, the secondary ($180,000), the shipping costs ($40,000), and the assembly costs ($60,000). Savings
    goal of the highest contribution margin percentage must be addressed. Between of $40,000 annually implies that it will take 7 years to recover the investment. Note
    products W and X, the product with the highest contribution margin percentage (16 that because no tax rate is provided, the depreciation tax shield is not factored into
    percent) is Product X. the calculation.

    https://cpa.becker.com/section/B/V4.1/practiceTest/review?activeItemId=2111&activeItemType=TBS&attempt=12&filterId=f67771a0-4ca2-11ee-9b… 1/2 https://cpa.becker.com/section/B/V4.1/practiceTest/review?activeItemId=2111&activeItemType=TBS&attempt=12&filterId=f67771a0-4ca2-11ee-9b… 2/2

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