Saylor BUS105 Practice Test Questions Answers

Comprehensive and Detailed Explanation:

Management by Exception is a management style that focuses attention and resources on areas where actual results deviate significantly from expected results.

According to Saylor Academy BUS105:

“Management by exception is a principle where managers focus only on significant variances between actual and budgeted results.”

Only Option D reflects a significant unfavorable variance that exceeds a predefined threshold—this is exactly the kind of situation where management by exception would trigger action.

Answer: D

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.

Formula for Materials Quantity Variance (MQV):

MQV = (Actual Quantity Used – Standard Quantity Allowed) × Standard Price

Given:

Actual quantity used = 1,580,000 lbs

Actual output = 800,000 boxes

Standard quantity per unit = 2 lbs/box→ Standard quantity allowed = 800,000 × 2 = 1,600,000 lbs

Standard price = $3.00/lb

MQV = (1,580,000 – 1,600,000) × $3.00

= (–20,000) × $3.00 = –$60,000 → Favorable

Favorable because actual usage was less than expected.

Answer: A

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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