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  3.4   Apply the CVP model in decision making and explain how sensitivity analysis can help managers both identify and manage risk.   1) Sensitivity analysis may be used to determine how a result will change if the original data are changed or if the original results are not achieved.   2) Margin of safety measures the difference between budgeted revenues and break-even revenues.   3) Sensitivity analysis is a “what-if” technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes. 4) A probability distribution […]

  7) John wants to identify the total cost for computing the corporate tax return he prepared for his client. Labour is the only direct cost at $50 per hour. Indirect costs are $60 per labour hour. What is the total direct cost, indirect cost, and job cost, respectively, if 15 hours are spent preparing the tax return? A) $700, $850, $1,550 B) $750, $800, $1,550 C) $750, $900, $1,650 D) $800, $640, $1,440 E) $800, $900, $1,440   8) Larry's Appliance Shop operates retail stores that sell appliances. The cost objects are the individual sales of a given type […]

  Use the information below to answer the following question(s).   A transportation company provides bussing, limo and taxi service. The company charges: $350 per day for bussing service; $2.00 per kilometre for taxi service; and, $3.50 per kilometre for limo service. Two individual clients, the school board and the city government offices use the majority of the limo service on a contract agreement. Bussing services are used exclusively by the school board, and the taxi service is used almost exclusively by the general public, although the school board uses the taxi services when individual students have to be transported […]

  31) Assume the transfer price for a pair of soles is 180% of total costs of the Sole Division and 40,000 of soles are produced and transferred to the Assembly Division. The Sole Division's operating income is: A) $320,000 B) $360,000 C) $248,000 D) $440,000 E) $400,000 32) If the Assembly Division sells 100,000 pairs of shoes at a price of $60 a pair to customers, what is the operating income of both divisions together? A) $4,400,000 B) $3,400,000 C) $3,000,000 D) $2,600,000 E) $2,400,000   Answer the following question(s) using the information below.   Cool Air Ltd. manufactures […]

  52) Johnson's Mini Mart is considering the purchase of a new electronic bar code scanner that will keep detailed records of every sale transaction. The scanner is likely to have little effect on operating revenues and expenses. Its acquisition is primarily for increasing management information about sales. The scanner costs $4,600 and would be included in Class 10 for tax purposes. Johnson's accountant has stated that due to the fast write-off of Class 10 assets (30% CCA rate), its real cost is less than $4,600. Due to technological obsolescence, it would have zero salvage value.   Required: a.Since the […]