ACCN

Chapter 10 Standard Costs and Variances
1. Fixed costs should not be included in a performance report because fixed costs are not controllable. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !evel: Me*ium
2. A flexible budget can be used to determine what costs should have been at a given level of activit . TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !evel: -as.
!. "f activit is higher than expected# total variable costs should be higher than expected. "f activit is lower than expected# total variable costs should be lower than expected. TRUE
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&. 'hen a flexible budget is used in performance evaluation# actual costs are compared to what the costs should have been for the actual level of activit during the period rather than to the static planning budget. TRUE
%. An activit variance is due solel to the difference between the level of activit assumed in the planning budget and the actual level of activit used in the flexible budget. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !evel: -as.
(. )he activit variance for revenue is favorable if the actual level of activit for the period exceeds the planned level of activit . TRUE
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*. )he activit variance for revenue is unfavorable if the revenue in the flexible budget is less than the revenue in the static planning budget. TRUE
+. )he revenue and spending variances are the differences between the static planning budget and the actual results for the period. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !evel: Me*ium
,. A revenue variance is favorable if the revenue in the static planning budget exceeds the revenue in the flexible budget. FALSE
10. A spending variance is the difference between how much a cost should have been# given the actual level of activit # and the actual amount of the cost for the period. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !evel: -as.
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11. A favorable spending variance occurs when the actual cost exceeds the amount of that cost in the flexible budget. FALSE
12. A flexible budget performance report contains both activit variances and revenue and spending variances. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !evel: -as.
1!. 'hile fixed costs should not be affected b a change in the level of activit within the relevant range# the ma change for other reasons. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !evel: -as.
1&. Flexible budgets cannot be used when there is more than one cost driver -i.e.# measure of activit .. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: Me*ium
10$+
1%. /irectl comparing static budget costs to actual costs onl ma0es sense if the costs are fixed. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: %&'%3 4n*erstan* common errors ma*e in re aring erformance re orts #ase* on #u*gets an* actual results !evel: Me*ium
1(. "f the actual level of activit is &1 more than planned# then the variable costs in the static budget should be increased b &1 before comparing them to actual costs. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: %&'%3 4n*erstan* common errors ma*e in re aring erformance re orts #ase* on #u*gets an* actual results !evel: Me*ium
Multiple Choice Questions
1*. )he purpose of a flexible budget is to2 A. remove items from performance reports that are not controllable b managers. 3. permit managers to reduce the number of unfavorable variances that are reported. C. update the static planning budget to reflect the actual level of activit of the period. /. reduce the amount of conflict between departments when the master budget is prepared. 'hen a flexible budget is used in performance evaluation# actual costs are compared to what the costs shoul* have #een for the actual level of activit. *uring the erio* rather than to the static planning budget.
10$,
1+. A static budget2 A. should be compared to actual costs to assess how well costs were controlled. 3. should be compared to a flexible budget to assess how well costs were controlled. C. is valid for onl one level of activit . /. represents the best wa to set spending targets for managers. A planning budget is prepared before the period begins and is valid for onl the planned level of activit .
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !evel: Me*ium
1,. 'hich of the following comparisons best isolates the impact of a change in activit on performance4 A. static planning budget and flexible budget 3. static planning budget and actual results C. flexible budget and actual results /. master budget and static planning budget A lanning #u*get is re are* #efore the erio* #egins an* is vali* for onl. the lanne* level of activit.5 Fle)i#le #u*gets ta0e into account how changes in activit affect costs. A flexible budget is an estimate of what revenues and costs should have been# given the actual level of activit for the period.
10$10
20. 'hich of the following would not appear on a flexible budget performance report as shown in the text4 A. Variable costs. 3. 5ixed costs. C. A flexible budget ad6usted to the actual level of activit . D. )he previous ear7s actual costs. Flexible budget performance reports show onl current ear information.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !evel: Me*ium
10$11
21. Sal ers Famil "nn is a bed and brea0fast establishment in a converted 100$ ear$old mansion. )he "nn7s guests appreciate its gourmet brea0fasts and individuall decorated rooms. )he "nn7s overhead budget for the most recent month appears below
)he "nn7s variable overhead costs are driven b the number of guests. 'hat would be the total budgeted overhead cost for a month if the activit level is %! guests4 A. 8*#1%,.20 3. 8(#(+0.(0 C. 8*#1+&.+0 /. 82(#1%&.&0 Variable cost per guest for supplies 9 81&+.20 %* guests 9 82.(0 per guest Variable cost per guest for laundr 9 821(.(0 %* guests 9 8!.+0 per guest
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !evel: -as.
10$12
22. Stoc0 5anufacturing Corporation has prepared the following overhead budget for next month.
)he compan 7s variable overhead costs are driven b machine$hours. 'hat would be the total budgeted overhead cost for next month if the activit level is (#(00 machine$hours rather than (#,00 machine$hours4 A. 8+&#!21.00 3. 8+*#%,0.00 C. 8+&#+(0.00 /. 8+!#*+1.*& Variable cost per 5: for supplies 9 821#!,0 (#,00 5:s 9 8!.10 per 5: Variable cost per 5: for indirect labor 9 8&1#&00 (#,00 5:s 9 8(.00 per 5:
10$1!
10$1&
2!. ;ummer :ospital bases its budgets on patient$visits. )he hospital7s static budget for Februar appears below2
)he total overhead cost at an activit level of 10#+00 patient$visits per month should be2 A. 8!1*#%20 3. 8!0!#+10 C. 82,1#0(0 D. 8!02#+%0
10$1%
2&. Scarfo :otel bases its budgets on guest$da s. )he hotel7s static budget for /ecember appears below2
)he total overhead cost at an activit level of 2#,00 guest$da s per month should be2 A. 820#(+0 3. 81*#(&0 C. 82&#!(0 /. 820#+,0
10$1(
2%. 'adhams Snow <emoval7s cost formula for its vehicle operating cost is 81#,00 per month plus 8&!0 per snow$da . For the month of /ecember# the compan planned for activit of 1( snow$da s# but the actual level of activit was 21 snow$da s. )he actual vehicle operating cost for the month was 811#&*0. )he vehicle operating cost in the planning budget for /ecember would be closest to2 A. 810#,!0 3. 811#&*0 C. 8+#*!, D. 8+#*+0 Cost 9 Fixed cost = Variable cost per unit > 9 81#,00 = 8&!0 1( 9 8+#*+0
2(. ?etersheim Snow <emoval7s cost formula for its vehicle operating cost is 81#*%0 per month plus 8&+& per snow$da . For the month of @ovember# the compan planned for activit of 1% snow$da s# but the actual level of activit was 1& snow$da s. )he actual vehicle operating cost for the month was 8+#!(0. )he vehicle operating cost in the flexible budget for @ovember would be closest to2 A. 8+#%2( 3. 8+#&0, C. 8,#010 /. 8+#!(0 Cost 9 Fixed cost = Variable cost per unit > 9 81#*%0 = 8&+& 1& 9 8+#%2(
10$1*
2*. Ascarson 5idwifer 7s cost formula for its wages and salaries is 82#*20 per month plus 8!%1 per birth. For the month of September# the compan planned for activit of 121 births# but the actual level of activit was 11, births. )he actual wages and salaries for the month was 8&!#!+0. )he wages and salaries in the planning budget for September would be closest to2 A. 8&%#1,1 3. 8&!#!+0 C. 8&&#&+, /. 8&&#10, Cost 9 Fixed cost = Variable cost per unit > 9 82#*20 = 8!%1 121 9 8&%#1,1
2+. Clovis 5idwifer 7s cost formula for its wages and salaries is 82#(+0 per month plus 82&% per birth. For the month of September# the compan planned for activit of 11+ births# but the actual level of activit was 121 births. )he actual wages and salaries for the month was 8!!#2,0. )he wages and salaries in the flexible budget for September would be closest to2 A. 8!2#!,! 3. 8!1#%,0 C. 8!2#!2% /. 8!!#2,0 Cost 9 Fixed cost = Variable cost per unit > 9 82#(+0 = 82&% 121 9 8!2#!2%
10$1+
2,. ;radert Framing7s cost formula for its supplies cost is 81#%&0 per month plus 812 per frame. For the month of September# the compan planned for activit of ((+ frames# but the actual level of activit was ((( frames. )he actual supplies cost for the month was 8,#,+0. )he supplies cost in the planning budget for September would be closest to2 A. 810#010 3. 8,#%!2 C. 8,#%%( /. 8,#,+0 Cost 9 Fixed cost = Variable cost per unit > 9 81#%&0 = 812 ((+ 9 8,#%%(
!0. 3argas Framing7s cost formula for its supplies cost is 82#2&0 per month plus 8( per frame. For the month of 5a # the compan planned for activit of +0+ frames# but the actual level of activit was +10 frames. )he actual supplies cost for the month was 8*#0,0. )he supplies cost in the flexible budget for 5a would be closest to2 A. 8*#0++ 3. 8*#0,0 C. 8*#10( D. 8*#100 Cost 9 Fixed cost = Variable cost per unit > 9 82#2&0 = 8( +10 9 8*#100
10$1,
!1. Stuchli0 Catering uses two measures of activit # 6obs and meals# in the cost formulas in its budgets and performance reports. )he cost formula for catering supplies is 8&!0 per month plus 8+0 per 6ob plus 81& per meal. A t pical 6ob involves serving a number of meals to guests at a corporate function or at a host7s home. )he compan expected its activit in Banuar to be 20 6obs and 1,0 meals# but the actual activit was 21 6obs and 1,& meals. )he actual cost for catering supplies in Banuar was 8&#+%0. )he catering supplies in the planning budget for Banuar would be closest to2 A. 8&#+%0 3. 8&#(1, C. 8&#(,0 /. 8&#+2( Cost 9 Fixed cost = Variable cost per unit1 >1 = Variable cost per unit2 >2 9 8&!0 = 8+0 20 = 81& 1,0 9 8&#(,0
!2. 'hit Catering uses two measures of activit # 6obs and meals# in the cost formulas in its budgets and performance reports. )he cost formula for catering supplies is 8!+0 per month plus 8,& per 6ob plus 811 per meal. A t pical 6ob involves serving a number of meals to guests at a corporate function or at a host7s home. )he compan expected its activit in Actober to be 20 6obs and 21( meals# but the actual activit was 1, 6obs and 221 meals. )he actual cost for catering supplies in Actober was 8&#*,0. )he catering supplies in the flexible budget for Actober would be closest to2 A. 8&#&0& 3. 8&#*,0 C. 8&#(!( D. 8&#%,* Cost 9 Fixed cost = Variable cost per unit1 >1 = Variable cost per unit2 >2 9 8!+0 = 8,& 1, = 811 221 9 8&#%,*
10$20
!!. )homasson Air uses two measures of activit # flights and passengers# in the cost formulas in its budgets and performance reports. )he cost formula for plane operating costs is 8!(#1(0 per month plus 82#0!+ per flight plus 81 per passenger. )he compan expected its activit in April to be *! flights and 22! passengers# but the actual activit was *2 flights and 22+ passengers. )he actual cost for plane operating costs in April was 81*,#020. )he activit variance for plane operating costs in April would be closest to2 A. 8(#1!* C 3. 8(#1!* F C. 82#0!! C D. 82#0!! F
3ecause the flexible budget is less than the planning budget# the variance is favorable -F..
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: -as.
10$21
!&. Dara Catering uses two measures of activit # 6obs and meals# in the cost formulas in its budgets and performance reports. )he cost formula for catering supplies is 8!10 per month plus 8+& per 6ob plus 81* per meal. A t pical 6ob involves serving a number of meals to guests at a corporate function or at a host7s home. )he compan expected its activit in Bul to be 1% 6obs and 12* meals# but the actual activit was 1& 6obs and 12( meals. )he actual cost for catering supplies in Bul was 8!#(20. )he activit variance for catering supplies in Bul would be closest to2 A. 810, F 3. 810, C C. 8101 F /. 8101 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: -as.
10$22
!%. Arscheln Snow <emoval7s cost formula for its vehicle operating cost is 82#+00 per month plus 8!+1 per snow$da . For the month of Februar # the compan planned for activit of 1* snow$da s# but the actual level of activit was 1& snow$da s. )he actual vehicle operating cost for the month was 8*#,20. )he activit variance for vehicle operating cost in Februar would be closest to2 A. 81#!%* F 3. 81#!%* C C. 81#1&! F /. 81#1&! C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !evel: -as.
10$2!
!(. 3olic0 5idwifer 7s cost formula for its wages and salaries is 81#+00 per month plus 81%2 per birth. For the month of 5a # the compan planned for activit of 11, births# but the actual level of activit was 11& births. )he actual wages and salaries for the month was 81,#,+0. )he activit variance for wages and salaries in 5a would be closest to2 A. 8*(0 C 3. 8,2 C C. 8,2 F D. 8*(0 F
10$2&
!*. Schlic0 Framing7s cost formula for its supplies cost is 81#**0 per month plus 812 per frame. For the month of August# the compan planned for activit of (2+ frames# but the actual level of activit was (!1 frames. )he actual supplies cost for the month was 8,#*,0. )he activit variance for supplies cost in August would be closest to2 A. 8!( F 3. 8&+& F C. 8&+& C D. 8!( C
3ecause the flexible budget is greater than the planning budget# the variance is unfavorable -C..
10$2%
!+. Farver Air uses two measures of activit # flights and passengers# in the cost formulas in its budgets and performance reports. )he cost formula for plane operating costs is 8&&#&20 per month plus 82#00+ per flight plus 81 per passenger. )he compan expected its activit in 5a to be +0 flights and 2+1 passengers# but the actual activit was +1 flights and 2** passengers. )he actual cost for plane operating costs in 5a was 81,,#(%0. )he spending variance for plane operating costs in 5a would be closest to2 A. 8%#(,1 F 3. 8*#(,% C C. 8*#(,% F /. 8%#(,1 C
3ecause the actual expense is less than the flexible budget# the variance is favorable -F..
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: -as.
10$2(
!,. Sissac Catering uses two measures of activit # 6obs and meals# in the cost formulas in its budgets and performance reports. )he cost formula for catering supplies is 8&*0 per month plus 8101 per 6ob plus 82& per meal. A t pical 6ob involves serving a number of meals to guests at a corporate function or at a host7s home. )he compan expected its activit in 5a to be 12 6obs and 12! meals# but the actual activit was , 6obs and 12( meals. )he actual cost for catering supplies in 5a was 8&#2&0. )he spending variance for catering supplies in 5a would be closest to2 A. 8!,& C 3. 8!,& F C. 81(! F /. 81(! C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: -as.
10$2*
&0. At Bacobson Compan # indirect labor is a variable cost that varies with direct labor$hours. East month7s performance report showed that actual indirect labor cost totaled 8%#*+0 for the month and that the associated spending variance was 82&% F. "f 2&#100 direct labor$hours were actuall wor0ed last month# then the flexible budget cost formula for indirect labor must be -per direct labor$hour.2 A. 80.20 B. 80.2% C. 80.!0 /. 80.!% Spending variance 9 Flexible budget $ Actual results 82&% F 9 Variable cost per direct labor$hour 2&#100 direct labor$hours $ 8%#*+0 82&% 9 Variable cost per direct labor$hour 2&#100 direct labor$hours $ 8%#*+0 Variable cost per direct labor$hour 2&#100 direct labor$hours 9 8(#02% Variable cost per direct labor$hour 9 8(#02% 2&#100 direct labor$hours 9 80.2% per direct labor$hour
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !evel: 6ar*
10$2+
&1. Fussner 5edical Clinic measures its activit in terms of patient$visits. East month# the budgeted level of activit was 1#(10 patient$visits and the actual level of activit was 1#(*0 patient$visits. )he cost formula for administrative expenses is 8!.!0 per patient$visit plus 81*#,00 per month. )he actual administrative expense was 82&#(00. "n the clinic7s flexible budget performance report for last month# the spending variance for administrative expenses was2 A. 81#!+* C 3. 81,+ C C. 8(, C D. 81#1+, C
3ecause the actual expense is greater than the flexible budget# the variance is unfavorable -C..
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !evel: Me*ium
10$2,
&2. 3ra bo )ile "nstallation Corporation measures its activit in terms of s>uare feet of tile installed. East month# the budgeted level of activit was 1#!(0 s>uare feet and the actual level of activit was 1#!00 s>uare feet. )he compan 7s owner budgets for suppl costs# a variable cost# at 8!.,0 per s>uare foot. )he actual suppl cost last month was 8&#!00. "n the compan 7s flexible budget performance report for last month# what would have been the spending variance for suppl costs4 A. 8**0 F 3. 81#00& F C. 81,+ F /. 82!& F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !evel: -as.
10$!0
&!. Soehl @atural / ing Corporation measures its activit in terms of s0eins of arn d ed. East month# the budgeted level of activit was 1&#100 s0eins and the actual level of activit was 1!#*00 s0eins. )he compan 7s owner budgets for d e costs# a variable cost# at 80.&0 per s0ein. )he actual d e cost last month was 8&#%10. "n the compan 7s flexible budget performance report for last month# what would have been the spending variance for d e costs4 A. 8,*0 F 3. 81!2 F C. 81(0 F /. 81#1!0 F
10$!1
&&. @ewsom Footwear Corporation7s flexible budget cost formula for supplies# a variable cost# is 82.(1 per unit of output. )he compan 7s flexible budget performance report for last month showed a 8(#+&0 unfavorable spending variance for supplies. /uring that month# 1*#100 units were produced. 3udgeted activit for the month had been 1(#*00 units. )he actual cost per unit for indirect materials must have been closest to2 A. 8!.01 3. 8!.&, C. 8!.&1 /. 82.(1 F 9 actual cost per unit for indirect materials Spending variance 9 Actual results $ Flexible budget 8(#+&0 9 -1*#100 F. $ -1*#100 82.(1. 8(#+&0 9 1*#100F $ 8&&#(!1 1*#100F 9 8%1#&*1 F 9 8!.01
10$!2
&%. :amner Corporation7s flexible budget performance report for last month shows that actual indirect materials cost# a variable cost# was 8&%#2&0 and that the spending variance for indirect materials cost was 8!#&+0 unfavorable. /uring that month# the compan wor0ed 1*#&00 machine$hours. 3udgeted activit for the month had been 1*#000 machine$hours. )he cost formula per machine$hour for indirect materials cost must have been closest to2 A. 82.&( 3. 82.+* C. 82.&0 /. 82.+0 F 9 "ndirect materials cost per machine$hour Spending variance 9 Actual results $ Flexible budget 8!#&+0 9 8&%#2&0 $ -1*#&00 F. 8!#&+0 9 8&%#2&0 $ 1*#&00F 8&1#*(0 9 1*#&00F F 9 82.&0
10$!!
&(. Fudala Snow <emoval7s cost formula for its vehicle operating cost is 81#&+0 per month plus 8!0+ per snow$da . For the month of 5arch# the compan planned for activit of 11 snow$da s# but the actual level of activit was 1( snow$da s. )he actual vehicle operating cost for the month was 8(#1!0. )he spending variance for vehicle operating cost in 5arch would be closest to2 A. 81#2(2 C B. 82*+ F C. 82*+ C /. 81#2(2 F
10$!&
&*. Celius 5idwifer 7s cost formula for its wages and salaries is 82#&10 per month plus 82,2 per birth. For the month of 5arch# the compan planned for activit of 11! births# but the actual level of activit was 11( births. )he actual wages and salaries for the month was 8!%#!&0. )he spending variance for wages and salaries in 5arch would be closest to2 A. 8,&2 F 3. 8(( F C. 8(( C /. 8,&2 C
10$!%
&+. "ngrum Framing7s cost formula for its supplies cost is 81#120 per month plus 811 per frame. For the month of Bune# the compan planned for activit of (11 frames# but the actual level of activit was (0* frames. )he actual supplies cost for the month was 8+#1%0. )he spending variance for supplies cost in Bune would be closest to2 A. 8!%! F 3. 8!0, C C. 8!%! C /. 8!0, F
10$!(
&,. G l0a Air uses two measures of activit # flights and passengers# in the cost formulas in its budgets and performance reports. )he cost formula for plane operating costs is 8&*#&00 per month plus 82#!!* per flight plus 8! per passenger. )he compan expected its activit in April to be (* flights and 2(! passengers# but the actual activit was (2 flights and 2(* passengers. )he actual cost for plane operating costs in April was 81+,#*(0. )he plane operating costs in the planning budget for April would be closest to2 A. 81+,#*(0 3. 81,!#0,% C. 820&#*(+ /. 820%#0(! Cost 9 Fixed cost = Variable cost per unit1 >1 = Variable cost per unit2 >2 9 8&*#&00 = 82#!!* (* = 8! 2(! 9 820&#*(+
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: -as.
%0. Eantto Air uses two measures of activit # flights and passengers# in the cost formulas in its budgets and performance reports. )he cost formula for plane operating costs is 8!&#+10 per month plus 82#+%0 per flight plus 812 per passenger. )he compan expected its activit in Bune to be *0 flights and 2,2 passengers# but the actual activit was (, flights and 2,1 passengers. )he actual cost for plane operating costs in Bune was 82!(#%%0. )he plane operating costs in the flexible budget for Bune would be closest to2 A. 82!*#+1& B. 82!&#,%2 C. 82!(#%%0 /. 82!&#&1* Cost 9 Fixed cost = Variable cost per unit1 >1 = Variable cost per unit2 >2 9 8!&#+10 = 82#+%0 (, = 812 2,1 9 82!&#,%2
10$!*
3amba Corporation7s cost formula for its selling and administrative expense is 8&*#,00 per month plus 8%2 per unit. For the month of April# the compan planned for activit of (#000 units# but the actual level of activit was %#,(0 units. )he actual selling and administrative expense for the month was 8!(&#&,0.
%1. )he selling and administrative expense in the planning budget for April would be closest to2 A. 8!%*#+20 B. 8!%,#,00 C. 8!(&#&,0 /. 8!((#,!( Cost 9 Fixed cost = Variable cost per unit > 9 8&*#,00 = 8%2 (#000 9 8!%,#,00
%2. )he selling and administrative expense in the flexible budget for April would be closest to2 A. 8!%*#%01 3. 8!%,#,00 C. 8!%*#+20 /. 8!(&#&,0 Cost 9 Fixed cost = Variable cost per unit > 9 8&*#,00 = 8%2 %#,(0 9 8!%*#+20
10$!+
%!. )he activit variance for selling and administrative expense in April would be closest to2 A. 8&#%,0 F B. 82#0+0 F C. 82#0+0 C /. 8&#%,0 C
%&. )he spending variance for selling and administrative expense in April would be closest to2 A. 8&#%,0 F 3. 8(#(*0 F C. 8(#(*0 C /. 8&#%,0 C
10$!,
Fullagar Corporation7s cost formula for its manufacturing overhead is 81%#&00 per month plus 811 per machine$hour. For the month of 5a # the compan planned for activit of *#%00 machine$hours# but the actual level of activit was *#%&0 machine$hours. )he actual manufacturing overhead for the month was 8102#*10.
%%. )he manufacturing overhead in the planning budget for 5a would be closest to2 A. 8,+#!&0 B. 8,*#,00 C. 8102#*10 /. 8102#1(% Cost 9 Fixed cost per unit = Variable cost per unit > 9 81%#&00 = 811 *#%00 9 8,*#,00
%(. )he manufacturing overhead in the flexible budget for 5a would be closest to2 A. 8,*#,00 3. 8,+#&22 C. 8,+#!&0 /. 8102#*10 Cost 9 Fixed cost per unit = Variable cost per unit > 9 81%#&00 = 811 *#%&0 9 8,+#!&0
10$&0
%*. )he activit variance for manufacturing overhead in 5a would be closest to2 A. 8&&0 C 3. 8&&0 F C. 8&#+10 F /. 8&#+10 C
%+. )he spending variance for manufacturing overhead in 5a would be closest to2 A. 8&#!*0 C 3. 8&#+10 F C. 8&#+10 C /. 8&#!*0 F
10$&1
Cadavieco /etailing7s cost formula for its materials and supplies is 81#,,0 per month plus 8+ per vehicle. For the month of @ovember# the compan planned for activit of ,2 vehicles# but the actual level of activit was %2 vehicles. )he actual materials and supplies for the month was 82#&&0.
%,. )he materials and supplies in the planning budget for @ovember would be closest to2 A. 82#*2( 3. 82#&0( C. 8&#!1* /. 82#&&0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 81#,,0 = 8+ ,2 9 82#*2(
(0. )he materials and supplies in the flexible budget for @ovember would be closest to2 A. 82#&&0 3. 81#%&1 C. 82#*2( D. 82#&0( Cost 9 Fixed cost per unit = Variable cost per unit > 9 81#,,0 = 8+ %2 9 82#&0(
10$&2
(1. )he activit variance for materials and supplies in @ovember would be closest to2 A. 8!20 C 3. 82+( C C. 82+( F D. 8!20 F
(2. )he spending variance for materials and supplies in @ovember would be closest to2 A. 8!& F 3. 82+( F C. 8!& C /. 82+( C
10$&!
5c>uain 3oat 'ash7s cost formula for its cleaning e>uipment and supplies is 81#,%0 per month plus 820 per boat. For the month of Bune# the compan planned for activit of +% boats# but the actual level of activit was 12% boats. )he actual cleaning e>uipment and supplies for the month was 8&#!+0.
(!. )he cleaning e>uipment and supplies in the planning budget for Bune would be closest to2 A. 8!#(%0 3. 8&#&%0 C. 82#,*+ /. 8&#!+0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 81#,%0 = 820 +% 9 8!#(%0
(&. )he cleaning e>uipment and supplies in the flexible budget for Bune would be closest to2 A. 8&#&%0 3. 8&#!+0 C. 8%#!(+ /. 8!#(%0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 81#,%0 = 820 12% 9 8&#&%0
10$&&
(%. )he activit variance for cleaning e>uipment and supplies in Bune would be closest to2 A. 8+00 F 3. 8*!0 F C. 8*!0 C D. 8+00 C
((. )he spending variance for cleaning e>uipment and supplies in Bune would be closest to2 A. 8*!0 C 3. 8*0 C C. 8*0 F /. 8*!0 F
10$&%
Stivason Clinic uses client$visits as its measure of activit . /uring September# the clinic budgeted for !#!00 client$visits# but its actual level of activit was !#2,0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for September2 /ata used in budgeting2
Actual results for September2
10$&(
(*. )he activit variance for personnel expenses in September would be closest to2 A. 8(0% C 3. 8(0% F C. 8+% F /. 8+% C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !evel: Me*ium
(+. )he activit variance for administrative expenses in September would be closest to2 A. 8! F 3. 810! F C. 8! C /. 810! C
10$&*
(,. )he activit variance for net operating income in September would be closest to2 A. 81!& F 3. 8!0( C C. 8!0( F D. 81!& C
3ecause the flexible budget net operating income is less than the planning budget# the variance is unfavorable -C.
10$&+
;ourle Clinic uses client$visits as its measure of activit . /uring August# the clinic budgeted for !#200 client$visits# but its actual level of activit was !#1(0 client$visits. )he clinic has provided the following data concerning the formulas to be used in its budgeting2
*0. )he activit variance for personnel expenses in August would be closest to2 A. 8&2+ F 3. 82#+(+ C C. 82#+(+ F /. 8&2+ C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !evel: -as.
10$&,
*1. )he activit variance for administrative expenses in August would be closest to2 A. 8*2 F 3. 812 C C. 8*2 C D. 812 F
10$%0
*2. )he activit variance for net operating income in August would be closest to2 A. 8!0 F 3. 8*+0 F C. 8!0 C D. 8*+0 C
10$%1
Sn ders Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring Actober# the 0ennel budgeted for 2#(00 tenant$da s# but its actual level of activit was 2#(10 tenant$da s. )he 0ennel has provided the following data concerning the formulas to be used in its budgeting2
*!. )he activit variance for wages and salaries in Actober would be closest to2 A. 8%2 C 3. 8(%2 F C. 8%2 F /. 8(%2 C
10$%2
*&. )he activit variance for administrative expenses in Actober would be closest to2 A. 8! C 3. 82(! C C. 82(! F /. 8! F
10$%!
*%. )he activit variance for net operating income in Actober would be closest to2 A. 82#%+1 C B. 8,, F C. 82#%+1 F /. 8,, C
3ecause the flexible budget net operating income is greater than the planning budget# the variance is favorable -F.
10$%&
Albers Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring April# the compan budgeted for *#(00 units# but its actual level of activit was *#%*0 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for April2 /ata used in budgeting2
Actual results for April2
10$%%
*(. )he activit variance for direct labor in April would be closest to2 A. 81(2 F 3. 81(2 C C. 8,*+ C /. 8,*+ F
**. )he activit variance for selling and administrative expenses in April would be closest to2 A. 81% F 3. 8(&% F C. 81% C /. 8(&% C
10$%(
*+. )he activit variance for net operating income in April would be closest to2 A. 8!*2 C 3. 81!#,,+ C C. 81!#,,+ F /. 8!*2 F
10$%*
Duramoto Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring Bune# the compan budgeted for *#(00 units# but its actual level of activit was *#%(0 units. )he compan has provided the following data concerning the formulas to be used in its budgeting2
*,. )he activit variance for direct labor in Bune would be closest to2 A. 8!12 F 3. 8!12 C C. 81#%,2 C /. 81#%,2 F
10$%+
+0. )he activit variance for selling and administrative expenses in Bune would be closest to2 A. 81#2+( C 3. 8& C C. 81#2+( F D. 8& F
10$%,
+1. )he activit variance for net operating income in Bune would be closest to2 A. 8&+0 C 3. 81#&(0 C C. 8&+0 F /. 81#&(0 F
3ecause the flexible budget net operating income is less than the planning budget# the variance is unfavorable -C..
10$(0
@usse Clinic uses client$visits as its measure of activit . /uring 5a # the clinic budgeted for 2#100 client$visits# but its actual level of activit was 2#0%0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for 5a 2 /ata used in budgeting2
Actual results for 5a 2
10$(1
+2. )he revenue variance for 5a would be closest to2 A. 81#0&0 F 3. 81#0&0 C C. 8,(0 F /. 8,(0 C
3ecause the actual revenue is greater than the flexible budget# the variance is favorable -F..
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !evel: Me*ium
+!. )he spending variance for medical supplies in 5a would be closest to2 A. 8200 F B. 8200 C C. 81,% F /. 81,% C
10$(2
+&. )he spending variance for occupanc expenses in 5a would be closest to2 A. 81!% C 3. 81!% F C. 8+0 C D. 8+0 F
10$(!
+%. )he overall revenue and spending variance -i.e.# the variance for net operating income in the revenue and spending variance column on the flexible budget performance report. for 5a would be closest to2 A. 82!0 F 3. 81#200 C C. 81#200 F /. 82!0 C
3ecause the actual net operating income is greater than the flexible budget# the variance is favorable -F..
10$(&
<o e Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring September# the 0ennel budgeted for !#!00 tenant$da s# but its actual level of activit was !#!!0 tenant$da s. )he 0ennel has provided the following data concerning the formulas used in its budgeting and its actual results for September2 /ata used in budgeting2
Actual results for September2
10$(%
+(. )he revenue variance for September would be closest to2 A. 81#*+, C B. 82#+!0 C C. 82#+!0 F /. 81#*+, F
3ecause the actual revenue is less than the flexible budget# the variance is unfavorable -C..
+*. )he spending variance for expendables in September would be closest to2 A. 81#1+% F 3. 81#1+% C C. 8*%0 F D. 8*%0 C
10$((
++. )he spending variance for facilit expenses in September would be closest to2 A. 82,0 F 3. 81,1 C C. 82,0 C /. 81,1 F
10$(*
+,. )he overall revenue and spending variance -i.e.# the variance for net operating income in the revenue and spending variance column on the flexible budget performance report. for September would be closest to2 A. 8!#200 F 3. 8!#&*0 F C. 8!#200 C D. 8!#&*0 C
3ecause the actual net operating income is less than the flexible budget# the variance is unfavorable -C..
10$(+
5ac?hail Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring April# the compan budgeted for %#(00 units# but its actual level of activit was %#(%0 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for April2 /ata used in budgeting2
Actual results for April2
10$(,
,0. )he revenue variance for April would be closest to2 A. 81#(&% F 3. 81#(&% C C. 8!#+&0 C /. 8!#+&0 F
,1. )he spending variance for direct materials in April would be closest to2 A. 8!#21% C B. 82#2(0 C C. 82#2(0 F /. 8!#21% F
10$*0
,2. )he spending variance for manufacturing overhead in April would be closest to2 A. 8+*% F 3. 8,*0 C C. 8,*0 F /. 8+*% C
10$*1
,!. )he overall revenue and spending variance -i.e.# the variance for net operating income in the revenue and spending variance column on the flexible budget performance report. for April would be closest to2 A. 8&#++0 C 3. 8&#0,0 F C. 8&#0,0 C /. 8&#++0 F
10$*2
As0land Clinic uses client$visits as its measure of activit . /uring Actober# the clinic budgeted for !#100 client$visits# but its actual level of activit was !#1!0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for Actober2 /ata used in budgeting2
Actual results for Actober2
10$*!
,&. )he personnel expenses in the planning budget for Actober would be closest to2 A. 8&+#*(0 3. 8&(#(&* C. 8&,#01+ /. 8&*#0,+ Cost 9 Fixed cost per unit = Variable cost per unit > 9 822#100 = 8+.(0 !#100 9 8&+#*(0
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !evel: Me*ium
,%. )he medical supplies in the flexible budget for Actober would be closest to2 A. 81+#%1% 3. 81+#!%0 C. 81*#(%& /. 81*#,,+ Cost 9 Fixed cost per unit = Variable cost per unit > 9 81#!00 = 8%.%0 !#1!0 9 81+#%1%
10$*&
,(. )he activit variance for personnel expenses in Actober would be closest to2 A. 81#((2 F 3. 82%+ F C. 82%+ C /. 81#((2 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !evel: Me*ium
,*. )he revenue variance for Actober would be closest to2 A. 82#+2( F 3. 8!#(,0 F C. 82#+2( C D. 8!#(,0 C
10$*%
,+. )he spending variance for medical supplies in Actober would be closest to2 A. 8%2% C B. 8(,0 F C. 8(,0 C /. 8%2% F
10$*(
Eangner Clinic uses client$visits as its measure of activit . /uring Februar # the clinic budgeted for !#*00 client$visits# but its actual level of activit was !#*&0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for Februar 2 /ata used in budgeting2
Actual results for Februar 2
10$**
,,. )he administrative expenses in the planning budget for Februar would be closest to2 A. 8&#,*0 3. 8&#+(1 C. 8&#,1& /. 8&#,*& Cost 9 Fixed cost per unit = Variable cost per unit > 9 8&#(00 = 80.10 !#*00 9 8&#,*0
100. )he occupanc expenses in the flexible budget for Februar would be closest to2 A. 811#1+! 3. 811#&2( C. 811#2*0 D. 811#!1& Cost 9 Fixed cost per unit = Variable cost per unit > 9 8*#200 = 81.10 !#*&0 9 811#!1&
10$*+
101. )he activit variance for administrative expenses in Februar would be closest to2 A. 8& F 3. 8%( F C. 8& C /. 8%( C
102. )he spending variance for medical supplies in Februar would be closest to2 A. 8!,0 F 3. 82%0 C C. 82%0 F /. 8!,0 C
10$*,
EiIana Clinic uses client$visits as its measure of activit . /uring /ecember# the clinic budgeted for !#*00 client$visits# but its actual level of activit was !#(+0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for /ecember /ata used in budgeting2
Actual results for /ecember2
10$+0
10!. )he net operating income in the planning budget for /ecember would be closest to2 A. 810#12% 3. 810#01( C. 81&#,20 D. 81%#2%0
@et operating income 9 81(.%0 !#*00 $ 8&%#+00 9 81%#2%0

10&. )he net operating income in the flexible budget for /ecember would be closest to2 A. 81%#2%0 3. 810#12% C. 810#01( D. 81&#,20
@et operating income 9 81(.%0 !#(+0 $ 8&%#+00 9 81&#,20

10$+1
10%. )he activit variance for net operating income in /ecember would be closest to2 A. 8!!0 C 3. 8!!0 F C. 8%#1+0 C /. 8%#1+0 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !evel: Me*ium
10$+2
10(. )he overall revenue and spending variance -i.e.# the variance for net operating income in the revenue and spending variance column on the flexible budget performance report. for /ecember would be closest to2 A. 8&#+%0 F 3. 8%#1+0 C C. 8&#+%0 C /. 8%#1+0 F
10$+!
)uason Clinic uses client$visits as its measure of activit . /uring 5a # the clinic budgeted for 2#,00 client$visits# but its actual level of activit was 2#,!0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for 5a 2 /ata used in budgeting2
10*. )he personnel expenses in the planning budget for 5a would be closest to2 A. 8+(#&02 B. 8++#%+0 C. 8+,#12( /. 8+*#2,( Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!%#+00 = 81+.20 2#,00 9 8++#%+0
10$+&
10+. )he occupanc expenses in the flexible budget for 5a would be closest to2 A. 81*#*1+ B. 81+#(11 C. 81+#0+( /. 81+#%!0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 810#*00 = 82.*0 2#,!0 9 81+#(11
10,. )he activit variance for administrative expenses in 5a would be closest to2 A. 8!( C 3. 8( F C. 8( C /. 8!( F
10$+%
110. )he spending variance for occupanc expenses in 5a would be closest to2 A. 8*10 C B. 8*10 F C. 8(2, F /. 8(2, C
10$+(
;otthelf Clinic uses client$visits as its measure of activit . /uring /ecember# the clinic budgeted for 2#%00 client$visits# but its actual level of activit was 2#&+0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for /ecember2 /ata used in budgeting2
111. )he administrative expenses in the planning budget for /ecember would be closest to2 A. 8%#!,2 3. 8%#1*! C. 8%#&00 /. 8%#1!2 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8&#&00 = 80.&0 2#%00 9 8%#&00
10$+*
112. )he medical supplies in the flexible budget for /ecember would be closest to2 A. 82!#(,( 3. 822#(%0 C. 82!#!1+ D. 822#&*( Cost 9 Fixed cost per unit = Variable cost per unit > 9 8,00 = 8+.*0 2#&+0 9 822#&*(
11!. )he activit variance for personnel expenses in /ecember would be closest to2 A. 8!*& F 3. 81#*!( C C. 8!*& C /. 81#*!( F
10$++
11&. )he spending variance for medical supplies in /ecember would be closest to2 A. 8+%( C 3. 81#0!0 F C. 81#0!0 C /. 8+%( F
10$+,
;oodfriend Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring Bune# the 0ennel budgeted for 2#+00 tenant$da s# but its actual level of activit was 2#+&0 tenant$da s. )he 0ennel has provided the following data concerning the formulas used in its budgeting and its actual results for Bune2 /ata used in budgeting2
Actual results for Bune2
11%. )he wages and salaries in the planning budget for Bune would be closest to2 A. 822#21& 3. 821#,01 C. 822#1+0 /. 822#&(& Cost 9 Fixed cost per unit = Variable cost per unit > 9 82#!00 = 8*.10 2#+00 9 822#1+0
10$,0
11(. )he expendables in the flexible budget for Bune would be closest to2 A. 8&1#10, B. 8!,#1&0 C. 8!,#,%, /. 8!+#(00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8+00 = 81!.%0 2#+&0 9 8!,#1&0
11*. )he activit variance for wages and salaries in Bune would be closest to2 A. 8!& C 3. 8!& F C. 82+& C /. 82+& F
10$,1
11+. )he revenue variance for Bune would be closest to2 A. 8!#%%( C 3. 8&#,(0 F C. 8!#%%( F D. 8&#,(0 C
11,. )he spending variance for expendables in Bune would be closest to2 A. 81#!,0 F 3. 81#,!0 C C. 81#!,0 C /. 81#,!0 F
10$,2
5arsee Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring Bune# the 0ennel budgeted for 2#%00 tenant$da s# but its actual level of activit was 2#%10 tenant$da s. )he 0ennel has provided the following data concerning the formulas used in its budgeting and its actual results for Bune2 /ata used in budgeting2
10$,!
120. )he administrative expenses in the planning budget for Bune would be closest to2 A. 8*#++1 3. 8*#+%0 C. 8+#1%1 D. 8+#1%0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8*#,00 = 80.10 2#%00 9 8+#1%0
121. )he facilit expenses in the flexible budget for Bune would be closest to2 A. 81*#,!! 3. 81*#*,1 C. 81*#*!2 /. 81*#*00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8,#*00 = 8!.20 2#%10 9 81*#*!2
10$,&
122. )he activit variance for administrative expenses in Bune would be closest to2 A. 82(, F B. 81 C C. 82(, C /. 81 F
12!. )he spending variance for expendables in Bune would be closest to2 A. 8+,0 C 3. 8+,0 F C. 8,+, C /. 8,+, F
10$,%
;alante Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring 5a # the 0ennel budgeted for !#&00 tenant$ da s# but its actual level of activit was !#!+0 tenant$da s. )he 0ennel has provided the following data concerning the formulas used in its budgeting and its actual results for 5a 2 /ata used in budgeting2
10$,(
12&. )he net operating income in the planning budget for 5a would be closest to2 A. 810#!00 3. 81%#,2( C. 810#1!0 /. 81(#11%
@et operating income 9 8+.%0 !#&00 $ 81+#(00 9 810#!00

12%. )he net operating income in the flexible budget for 5a would be closest to2 A. 81(#11% 3. 81%#,2( C. 810#1!0 /. 810#!00
@et operating income 9 8+.%0 !#!+0 $ 81+#(00 9 810#1!0

10$,*
12(. )he activit variance for net operating income in 5a would be closest to2 A. 8%#*20 F B. 81*0 C C. 81*0 F /. 8%#*20 C
10$,+
12*. )he overall revenue and spending variance -i.e.# the variance for net operating income in the revenue and spending variance column on the flexible budget performance report. for 5a would be closest to2 A. 8%#+,0 F 3. 8%#+,0 C C. 8%#*20 C /. 8%#*20 F
3ecause the actual net operating income is greater than the flexible budget# the variance is favorable -F..
10$,,
Clore Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring 5arch# the 0ennel budgeted for 2#,00 tenant$ da s# but its actual level of activit was 2#,20 tenant$da s. )he 0ennel has provided the following data concerning the formulas used in its budgeting and its actual results for 5arch2 /ata used in budgeting2
Actual results for 5arch2
12+. )he wages and salaries in the planning budget for 5arch would be closest to2 A. 82!#(,1 3. 82!#2(& C. 82!#1!0 /. 82!#+%& Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!#*00 = 8(.*0 2#,00 9 82!#1!0
10$100
12,. )he facilit expenses in the flexible budget for 5arch would be closest to2 A. 82!#&0, B. 822#+&0 C. 822#*%0 /. 82!#*!! Cost 9 Fixed cost per unit = Variable cost per unit > 9 8,#*00 = 8&.%0 2#,20 9 822#+&0
1!0. )he activit variance for administrative expenses in 5arch would be closest to2 A. 8212 F B. 8+ C C. 8212 C /. 8+ F
10$101
1!1. )he spending variance for facilit expenses in 5arch would be closest to2 A. 8*!0 C 3. 8*!0 F C. 8+20 C /. 8+20 F
10$102
Ar0in Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring 5a # the 0ennel budgeted for !#100 tenant$da s# but its actual level of activit was !#0*0 tenant$da s. )he 0ennel has provided the following data concerning the formulas used in its budgeting and its actual results for 5a 2 /ata used in budgeting2
1!2. )he administrative expenses in the planning budget for 5a would be closest to2 A. 8*#22+ 3. 8*#01( C. 8(#,&+ D. 8*#2&0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8(#000 = 80.&0 !#100 9 8*#2&0
10$10!
1!!. )he expendables in the flexible budget for 5a would be closest to2 A. 8!%#0+& 3. 8!%#&20 C. 8!%#+%& /. 8!(#%%+ Cost 9 Fixed cost per unit = Variable cost per unit > 9 8*00 = 811.20 !#0*0 9 8!%#0+&
1!&. )he activit variance for wages and salaries in 5a would be closest to2 A. 8201 F 3. 8201 C C. 8(&1 C /. 8(&1 F
10$10&
1!%. )he spending variance for expendables in 5a would be closest to2 A. 8*+& C 3. 81#120 F C. 8*+& F D. 81#120 C
10$10%
/is0ind Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring Actober# the compan budgeted for (#*00 units# but its actual level of activit was (#(%0 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for Actober2 /ata used in budgeting2
10$10(
1!(. )he direct labor in the planning budget for Actober would be closest to2 A. 8!(#1%0 3. 8!%#++0 C. 8!%#,10 D. 8!(#1+0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 8%.&0 (#*00 9 8!(#1+0
1!*. )he direct materials in the flexible budget for Actober would be closest to2 A. 8,%#0,% 3. 8,*#+!% C. 8,%#+10 /. 8,(#!+0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 81&.!0 (#(%0 9 8,%#0,%
10$10*
1!+. )he activit variance for direct labor in Actober would be closest to2 A. 8!00 C 3. 82*0 C C. 8!00 F D. 82*0 F
1!,. )he revenue variance for Actober would be closest to2 A. 8(+0 F B. 81#0&0 F C. 81#0&0 C /. 8(+0 C
3ecause the actual revenue is greater than the flexible budget# the variance is favorable -F..
10$10+
1&0. )he spending variance for direct materials in Actober would be closest to2 A. 81#2,% F B. 82#010 C C. 82#010 F /. 81#2,% C
10$10,
3urau Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring Banuar # the compan budgeted for %#%00 units# but its actual level of activit was %#%10 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for Banuar 2 /ata used in budgeting2
Actual results for Banuar 2
10$110
1&1. )he selling and administrative expenses in the planning budget for Banuar would be closest to2 A. 82&#2,0 3. 82&#!!& C. 82!#%00 /. 82!#%0& Cost 9 Fixed cost per unit = Variable cost per unit > 821#!00 = 80.&0 %#%00 9 82!#%00
1&2. )he manufacturing overhead in the flexible budget for Banuar would be closest to2 A. 8&&#+12 3. 8&2#*&& C. 8&&#+00 /. 8&2#,00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!+#200 = 81.20 %#%10 9 8&&#+12
10$111
1&!. )he activit variance for selling and administrative expenses in Banuar would be closest to2 A. 8& F 3. 8+!& F C. 8& C /. 8+!& C
1&&. )he spending variance for direct materials in Banuar would be closest to2 A. 81#&!( C B. 81#%(0 F C. 81#%(0 C /. 81#&!( F
10$112
'ohner Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring August# the compan budgeted for %#000 units# but its actual level of activit was %#0%0 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for August2 /ata used in budgeting2
Actual results for August2
10$11!
1&%. )he net operating income in the planning budget for August would be closest to2 A. 81,#+!( 3. 81,#&&( C. 82(#*00 /. 82*#(20
@et operating income 9 81+.&0 %#000 $ 8(%#!00 9 82(#*00

1&(. )he net operating income in the flexible budget for August would be closest to2 A. 82(#*00 3. 81,#&&( C. 82*#(20 /. 81,#+!(
@et operating income 9 81+.&0 %#0%0 $ 8(%#!00 9 82*#(20

10$11&
1&*. )he activit variance for net operating income in August would be closest to2 A. 8,20 F 3. 8*#0(0 C C. 8*#0(0 F /. 8,20 C
3ecause the flexible budget net operating income is greater than the planning budget# the variance is favorable -F.
10$11%
1&+. )he overall revenue and spending variance -i.e.# the variance for net operating income in the revenue and spending variance column on the flexible budget performance report. for August would be closest to2 A. 8*#0(0 C 3. 8*#0(0 F C. 8*#,+0 C /. 8*#,+0 F
10$11(
5outon Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring Bul # the compan budgeted for *#!00 units# but its actual level of activit was *#!%0 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for Bul 2 /ata used in budgeting2
Actual results for Bul 2
1&,. )he direct labor in the planning budget for Bul would be closest to2 A. 8!2#!&0 3. 8!2#!*+ C. 8!2#120 /. 8!2#(00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 8&.&0 *#!00 9 8!2#120
10$11*
1%0. )he manufacturing overhead in the flexible budget for Bul would be closest to2 A. 8%2#(&0 3. 8%1#%,* C. 8%2#!0( D. 8%2#*!0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!,#%00 = 81.+0 *#!%0 9 8%2#*!0
1%1. )he activit variance for selling and administrative expenses in Bul would be closest to2 A. 820 C 3. 820 F C. 8*20 C /. 8*20 F
10$11+
1%2. )he spending variance for manufacturing overhead in Bul would be closest to2 A. 8*+0 F 3. 8(,0 C C. 8*+0 C /. 8(,0 F
10$11,
Figliola Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring Actober# the compan budgeted for (#*00 units# but its actual level of activit was (#(+0 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for Actober2 /ata used in budgeting2
10$120
1%!. )he selling and administrative expenses in the planning budget for Actober would be closest to2 A. 822#2&0 3. 822#,1& C. 822#+&( /. 822#2!( Cost 9 Fixed cost per unit = Variable cost per unit > 9 820#,00 = 80.20 (#*00 9 822#2&0
1%&. )he direct materials in the flexible budget for Actober would be closest to2 A. 8%%#0*0 3. 8%&#*&2 C. 8%&#,&0 D. 8%&#**( Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 8+.20 (#(+0 9 8%&#**(
10$121
1%%. )he activit variance for direct labor in Actober would be closest to2 A. 8110 C 3. 8++0 C C. 8++0 F D. 8110 F
1%(. )he spending variance for direct materials in Actober would be closest to2 A. 8!& C B. 81!0 C C. 8!& F /. 81!0 F
10$122
DarmaI n :ospital bases its budgets on patient$visits. )he hospital7s static budget for Actober appears below2
1%*. )he total variable cost at the activit level of ,#000 patient$visits per month should be2 A. 81%*#%!0 3. 820,#*00 C. 820*#!*0 D. 81%,#!00
10$12!
1%+. )he total fixed cost at the activit level of ,#!00 patient$visits per month should be2 A. 8!+1#!00 B. 820*#!*0 C. 821(#(,0 /. 8!(&#,00
10$12&
1%,. )he total cost at the activit level of ,#200 patient$visits per month should be2 A. 8!(&#,00 3. 8!**#200 C. 8!*0#**0 D. 8!*0#210
Jewston :otel bases its budgets on guest$da s. )he hotel7s static budget for April appears below2
10$12%
1(0. )he total variable cost at the activit level of !#200 guest$da s per month should be2 A. 8&0#,(0 3. 8&,#2+0 C. 82,#&&0 /. 8!%#&20
1(1. )he total fixed cost at the activit level of !#&00 guest$da s per month should be2 A. 8%2#!(0 B. 8!%#&20 C. 8,%#++0 /. 8(&#+(0
10$12(
1(2. )he total cost at the activit level of !#!00 guest$da s per month should be2 A. 8*+#%!0 3. 8,!#0(0 C. 8**#((0 /. 8(&#+(0
10$12*
5oc0 Clinic uses client$visits as its measure of activit . /uring August# the clinic budgeted for !#100 client$visits# but its actual level of activit was !#1%0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for August2 /ata used in budgeting2
Actual results for August2
1(!. )he personnel expenses in the planning budget for August would be closest to2 A. 8+1#1%% 3. 8+0#,+, C. 8+2#2,% D. 8+0#!*0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!1#*00 = 81%.*0 !#100 9 8+0#!*0
10$12+
1(&. )he administrative expenses in the planning budget for August would be closest to2 A. 8%#*&0 3. 8%#,!& C. 8(#0!0 /. 8%#*(0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8&#%00 = 80.&0 !#100 9 8%#*&0
1(%. )he net operating income in the planning budget for August would be closest to2 A. 8+#&0& 3. 81*#++0 C. 81(#+20 /. 8+#(*+
@et operating income 9 821.20 !#100 $ 8&+#,00 9 81(#+20

10$12,
Kdington Clinic uses client$visits as its measure of activit . /uring September# the clinic budgeted for 2#+00 client$visits# but its actual level of activit was 2#+%0 client$visits. )he clinic has provided the following data concerning the formulas to be used in its budgeting for September2
1((. )he personnel expenses in the planning budget for September would be closest to2 A. 8(2#,&( 3. 8(*#0&0 C. 8((#&20 /. 8(&#0*0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!1#*00 = 812.&0 2#+00 9 8((#&20
10$1!0
1(*. )he administrative expenses in the planning budget for September would be closest to2 A. 8(#&+0 3. 8(#&0% C. 8(#2,! /. 8(#&+% Cost 9 Fixed cost per unit = Variable cost per unit > 9 8(#200 = 80.10 2#+00 9 8(#&+0
1(+. )he net operating income in the planning budget for September would be closest to2 A. 81(#!+* B. 810#!00 C. 811#!00 /. 81(#,*+
@et operating income 9 820 2#+00 $ 8&%#*00 9 810#!00

10$1!1
/iiorio Clinic uses client$visits as its measure of activit . /uring Februar # the clinic budgeted for 2#*00 client$visits# but its actual level of activit was 2#*%0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for Februar 2 /ata used in budgeting2
Actual results for Februar 2
10$1!2
1(,. )he medical supplies in the flexible budget for Februar would be closest to2 A. 81,#!!2 3. 81,#%00 C. 820#0%% D. 81,#+%0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8(00 = 8* 2#*%0 9 81,#+%0
1*0. )he occupanc expenses in the flexible budget for Februar would be closest to2 A. 811#2%0 3. 811#1(0 C. 811#1+! /. 810#*+0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8(#!00 = 81.+0 2#*%0 9 811#2%0
10$1!!
1*1. )he net operating income in the flexible budget for Februar would be closest to2 A. 81%#++, 3. 81%#!1( C. 810#,20 D. 811#*%0
@et operating income 9 81(.(0 2#*%0 $ 8!!#,00 9 811#*%0

?arisi Clinic uses client$visits as its measure of activit . /uring 5arch# the clinic budgeted for 2#!00 client$visits# but its actual level of activit was 2#!%0 client$visits. )he clinic has provided the following data concerning the formulas to be used in its budgeting2
10$1!&
1*2. )he medical supplies in the flexible budget for 5arch would be closest to2 A. 81,#1&, B. 81,#!,% C. 81,#,,0 /. 81,#010 Cost 9 Fixed cost per unit = Variable cost per unit > 9 81#!00 = 8*.*0 2#!%0 9 81,#!,%
1*!. )he occupanc expenses in the flexible budget for 5arch would be closest to2 A. 81&#%10 3. 81%#!*0 C. 81%#1&* D. 81%#%1% Cost 9 Fixed cost per unit = Variable cost per unit > 9 8+#*00 = 82.,0 2#!%0 9 81%#%1%
10$1!%
1*&. )he net operating income in the flexible budget for 5arch would be closest to2 A. 811#100 3. 8,#,0% C. 810#!&0 D. 812#%00
@et operating income 9 82+ 2#!%0 $ 8%!#!00 9 812#%00

10$1!(
Caballes Clinic uses client$visits as its measure of activit . /uring @ovember# the clinic budgeted for !#100 client$visits# but its actual level of activit was !#0*0 client$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for @ovember2 /ata used in budgeting2
Actual results for @ovember2
10$1!*
1*%. )he personnel expenses in the planning budget for @ovember would be closest to2 A. 8(!#&00 B. 8((#(00 C. 8(&#020 /. 8((#!00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!%#(00 = 810 !#100 9 8((#(00
1*(. )he occupanc expenses in the flexible budget for @ovember would be closest to2 A. 812#+,+ 3. 81!#0,0 C. 81!#!&* /. 812#,&0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8+#(00 = 81.&0 !#0*0 9 812#+,+
10$1!+
1**. )he net operating income in the flexible budget for @ovember would be closest to2 A. 820#1*2 3. 81!#+*0 C. 81!#2&, /. 820#%(+
@et operating income 9 820.*0 !#0*0 $ 8%0#!00 9 81!#2&,

/oubleda Clinic uses client$visits as its measure of activit . /uring Bune# the clinic budgeted for !#200 client$visits# but its actual level of activit was !#1+0 client$visits. )he clinic has provided the following data concerning the formulas to be used in its budgeting for Bune2
10$1!,
1*+. )he administrative expenses in the planning budget for Bune would be closest to2 A. 8!#&2, 3. 8!#&0+ C. 8!#%20 /. 8!#%1+ Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!#200 = 80.10 !#200 9 8!#%20
1*,. )he net operating income in the planning budget for Bune would be closest to2 A. 812#&+( 3. 81%#%*! C. 812#+&0 /. 81%#!*,
@et operating income 9 81*.*0 !#200 $ 8&!#+00 9 812#+&0

10$1&0
1+0. )he medical supplies in the flexible budget for Bune would be closest to2 A. 81&#(!* B. 81%#0%( C. 81%#1&0 /. 81&#&%% Cost 9 Fixed cost per unit = Variable cost per unit > 9 81#*00 = 8&.20 !#1+0 9 81%#0%(
10$1&1
@a0hle Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring Actober# the 0ennel budgeted for !#000 tenant$ da s# but its actual level of activit was 2#,(0 tenant$da s. )he 0ennel has provided the following data concerning the formulas used in its budgeting and its actual results for Actober2 /ata used in budgeting2
10$1&2
1+1. )he wages and salaries in the planning budget for Actober would be closest to2 A. 822#,20 3. 822#(&& C. 822#(1& D. 822#,00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!#*00 = 8(.&0 !#000 9 822#,00
1+2. )he administrative expenses in the planning budget for Actober would be closest to2 A. 8*#&+& 3. 8*#2+& C. 8*#%+% D. 8*#!00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8(#100 = 80.&0 !#000 9 8*#!00
10$1&!
1+!. )he net operating income in the planning budget for Actober would be closest to2 A. 82#*%* 3. 8,#%00 C. 82#(+& D. 8,#,00
@et operating income 9 810 !#000 $ 820#100 9 8,#,00

Foxworth Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring Bul # the 0ennel budgeted for 2#000 tenant$ da s# but its actual level of activit was 2#0%0 tenant$da s. )he 0ennel has provided the following data concerning the formulas to be used in its budgeting2
10$1&&
1+&. )he wages and salaries in the planning budget for Bul would be closest to2 A. 81+#0*0 3. 81*#2!, C. 81*#*00 /. 81*#(*0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 82#,00 = 8*.&0 2#000 9 81*#*00
1+%. )he administrative expenses in the planning budget for Bul would be closest to2 A. 8+#220 B. 8+#200 C. 8+#!00 /. 8+#0,+ Cost 9 Fixed cost per unit = Variable cost per unit > 9 8*#&00 = 80.&0 2#000 9 8+#200
10$1&%
1+(. )he net operating income in the planning budget for Bul would be closest to2 A. 8(#(&% 3. 8&#1&1 C. 8&#!%1 D. 8(#000
@et operating income 9 812.,0 2#000 $ 81,#+00 9 8(#000

10$1&(
)olentino Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring @ovember# the 0ennel budgeted for 2#(00 tenant$da s# but its actual level of activit was 2#(20 tenant$da s. )he 0ennel has provided the following data concerning the formulas used in its budgeting and its actual results for @ovember2 /ata used in budgeting2
Actual results for @ovember2
10$1&*
1+*. )he expendables in the flexible budget for @ovember would be closest to2 A. 82*#%&+ 3. 82(#&&0 C. 82(#(!+ /. 82*#12, Cost 9 Fixed cost per unit = Variable cost per unit > 9 8*00 = 8,.,0 2#(20 9 82(#(!+
1++. )he facilit expenses in the flexible budget for @ovember would be closest to2 A. 821#0%2 3. 820#,22 C. 820#(0& /. 820#,(0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8,#000 = 8&.(0 2#(20 9 821#0%2
10$1&+
1+,. )he net operating income in the flexible budget for @ovember would be closest to2 A. 8,#(&0 B. 8,#+%+ C. 8(#2(0 /. 8(#!%*
@et operating income 9 810.,0 2#(20 $ 81+#*00 9 8,#+%+

5alisIews0i Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring 5arch# the 0ennel budgeted for !#&00 tenant$da s# but its actual level of activit was !#&10 tenant$da s. )he 0ennel has provided the following data concerning the formulas to be used in its budgeting2
10$1&,
1,0. )he expendables in the flexible budget for 5arch would be closest to2 A. 8!2#+00 3. 8!1#%,+ C. 8!2#+,% /. 8!1#&1! Cost 9 Fixed cost per unit = Variable cost per unit > 9 8%00 = 8,.%0 !#&10 9 8!2#+,%
1,1. )he facilit expenses in the flexible budget for 5arch would be closest to2 A. 81,#((& B. 81+#,12 C. 81+#++0 /. 81,#*+0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8+#000 = 8!.20 !#&10 9 81+#,12
10$1%0
1,2. )he net operating income in the flexible budget for 5arch would be closest to2 A. 81&#(2% 3. 811#!20 C. 811#&0+ /. 81&#*11
@et operating income 9 8+.+0 !#&10 $ 81+#(00 9 811#&0+

10$1%1
?ong Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring /ecember# the 0ennel budgeted for 2#000 tenant$da s# but its actual level of activit was 1#,+0 tenant$da s. )he 0ennel has provided the following data concerning the formulas used in its budgeting and its actual results for /ecember2 /ata used in budgeting2
10$1%2
1,!. )he wages and salaries in the planning budget for /ecember would be closest to2 A. 81&#&(0 3. 81&#(0( C. 81&#%00 /. 81&#!,0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!#%00 = 8%.%0 2#000 9 81&#%00
1,&. )he facilit expenses in the flexible budget for /ecember would be closest to2 A. 81&#(&0 3. 81&#1+* C. 81&#&*% /. 81&#*00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8+#*00 = 8! 1#,+0 9 81&#(&0
10$1%!
1,%. )he net operating income in the flexible budget for /ecember would be closest to2 A. 8+#001 3. 8(#!00 C. 8+#1(& D. 8(#0&2
@et operating income 9 812.,0 1#,+0 $ 81,#%00 9 8(#0&2

:amp Dennel uses tenant$da s as its measure of activit H an animal housed in the 0ennel for one da is counted as one tenant$da . /uring /ecember# the 0ennel budgeted for !#000 tenant$da s# but its actual level of activit was !#0%0 tenant$da s. )he 0ennel has provided the following data concerning the formulas to be used in its budgeting2
10$1%&
1,(. )he administrative expenses in the planning budget for /ecember would be closest to2 A. 8*#12( 3. 8*#2&% C. 8*#(0% D. 8*#(00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8*#!00 = 80.10 !#000 9 8*#(00
1,*. )he net operating income in the planning budget for /ecember would be closest to2 A. 81!#&20 3. 812#020 C. 812#,+& D. 811#%00
@et operating income 9 810.&0 !#000 $ 81,#*00 9 811#%00

10$1%%
1,+. )he expendables in the flexible budget for /ecember would be closest to2 A. 8!%#,00 3. 8!&#&(( C. 8!(#&,0 /. 8!%#(2& Cost 9 Fixed cost per unit = Variable cost per unit > 9 8%00 = 811.+0 !#0%0 9 8!(#&,0
10$1%(
3rothern Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring 5a # the compan budgeted for (#+00 units# but its actual level of activit was (#+20 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for 5a 2 /ata used in budgeting2
10$1%*
1,,. )he direct labor in the planning budget for 5a would be closest to2 A. 822#!%( 3. 822#%0( C. 822#&&0 /. 822#2,0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 8!.!0 (#+00 9 822#&&0
200. )he selling and administrative expenses in the planning budget for 5a would be closest to2 A. 8!0#,%( B. 8!0#,&0 C. 8!2#2+( /. 8!2#1,1 Cost 9 Fixed cost per unit = Variable cost per unit > 9 82%#%00 = 80.+0 (#+00 9 8!0#,&0
10$1%+
201. )he net operating income in the planning budget for 5a would be closest to2 A. 822#1&, 3. 822#2*, C. 82&#20& D. 82!#,(0
@et operating income 9 812.20 (#+00 $ 8%,#000 9 82!#,(0

10$1%,
201. )he net operating income in the planning budget for 5a would be closest to2 A. 822#1&, 3. 822#2*, C. 82&#20& D. 82!#,(0
202. )he net operating income in the planning budget for 5a would be closest to2 <efer )o2 0,$1,, A. 822#1&, 3. 822#2*, C. 82&#20& D. 82!#,(0
10$1(0
Amadon Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring Bul # the compan budgeted for *#,00 units# but its actual level of activit was *#,20 units. )he compan has provided the following data concerning the formulas to be used in its budgeting2
20!. )he direct labor in the planning budget for Bul would be closest to2 A. 8&1#+(+ B. 8&1#0+0 C. 8&1#1+& /. 8&1#,*& Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 8%.20 *#,00 9 8&1#0+0
10$1(1
20&. )he selling and administrative expenses in the planning budget for Bul would be closest to2 A. 82!#,(0 3. 82&#(,0 C. 82&#(2+ D. 82!#,%0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 820#000 = 80.%0 *#,00 9 82!#,%0
20%. )he net operating income in the planning budget for Bul would be closest to2 A. 822#!(0 B. 822#1%0 C. 81%#0+2 /. 81%#1%+
@et operating income 9 810.%0 *#,00 $ 8(0#+00 9 822#1%0

10$1(2
:erard Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring 5arch# the compan budgeted for *#,00 units# but its actual level of activit was *#+,0 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for 5arch2 /ata used in budgeting2
Actual results for 5arch2
10$1(!
20(. )he direct materials in the flexible budget for 5arch would be closest to2 A. 811*#+&* B. 811,#,2+ C. 811*#%&, /. 8120#0+0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 81%.20 *#+,0 9 811,#,2+
20*. )he manufacturing overhead in the flexible budget for 5arch would be closest to2 A. 8%0#*!0 3. 8%2#2+* C. 8%0#*1! /. 8%2#&1, Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!*#!00 = 81.*0 *#+,0 9 8%0#*1!
10$1(&
20+. )he net operating income in the flexible budget for 5arch would be closest to2 A. 81,#%,, 3. 82,#2&0 C. 82,#12& /. 81,#(&,
@et operating income 9 811.(0 *#+,0 $ 8(2#&00 9 82,#12&

:ane0amp Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring August# the compan budgeted for %#&00 units# but its actual level of activit was %#&&0 units. )he compan has provided the following data concerning the formulas to be used in its budgeting2
10$1(%
20,. )he direct materials in the flexible budget for August would be closest to2 A. 8%,#+&0 3. 8(0#(+( C. 8%,#*,* /. 8%,#&00 Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 811 %#&&0 9 8%,#+&0
210. )he manufacturing overhead in the flexible budget for August would be closest to2 A. 8!,#0&0 3. 8!,#1&0 C. 8!,#000 /. 8!,#*22 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!!#(00 = 81 %#&&0 9 8!,#0&0
10$1((
211. )he net operating income in the flexible budget for August would be closest to2 A. 81+#,&0 3. 81!#%%0 C. 81!#!%1 /. 81+#&00
@et operating income 9 81!.%0 %#&&0 $ 8%&#%00 9 81+#,&0

10$1(*
Friou Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring Bul # the compan budgeted for (#!00 units# but its actual level of activit was (#2%0 units. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for Bul 2 /ata used in budgeting2
212. )he direct labor in the planning budget for Bul would be closest to2 A. 82*#2,% B. 82+#!%0 C. 82+#12% /. 82*#%1! Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 8&.%0 (#!00 9 82+#!%0
10$1(+
21!. )he manufacturing overhead in the flexible budget for Bul would be closest to2 A. 8&2#%00 3. 8&!#(1( C. 8&2#,2* /. 8&2#%+0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 8!2#%00 = 81.(0 (#2%0 9 8&2#%00
21&. )he net operating income in the flexible budget for Bul would be closest to2 A. 81,#0%0 3. 82+#2*, C. 81+#&*% /. 82*#+!2
@et operating income 9 811.%0 (#2%0 $ 8%!#&00 9 81+#&*%

10$1(,
/u0eman Corporation manufactures and sells a single product. )he compan uses units as the measure of activit in its budgets and performance reports. /uring Februar # the compan budgeted for *#100 units# but its actual level of activit was *#0(0 units. )he compan has provided the following data concerning the formulas to be used in its budgeting2
21%. )he selling and administrative expenses in the planning budget for Februar would be closest to2 A. 82+#(%( 3. 82+#+1+ C. 82+#&!( D. 82+#&(0 Cost 9 Fixed cost per unit = Variable cost per unit > 9 82&#200 = 80.(0 *#100 9 82+#&(0
10$1*0
21(. )he net operating income in the planning budget for Februar would be closest to2 A. 81(#,!0 B. 81*#!%0 C. 81(#++% /. 81(#(,%
@et operating income 9 810.%0 *#100 $ 8%*#200 9 81*#!%0

21*. )he direct materials in the flexible budget for Februar would be closest to2 A. 8%+#12, B. 8%+#%,+ C. 8%+#,!0 /. 8%+#*+, Cost 9 Fixed cost per unit = Variable cost per unit > 9 80 = 8+.!0 *#0(0 9 8%+#%,+
10$1*1
<ushton :ospital bases its budgets on patient$visits. )he hospital7s static planning budget for 5a appears below2
Actual results for the month were2
21+. )he spending variance for supplies costs in the flexible budget performance report for the month is2 A. 8!#0!0 F B. 82#%20 C C. 8!#0!0 C /. 82#%20 F
10$1*2
21,. )he spending variance for laundr costs in the flexible budget performance report for the month is2 A. 8,(0 F 3. 81#((0 F C. 8,(0 C /. 81#((0 C
220. )he spending variance for occupanc costs in the flexible budget performance report for the month is2 A. 81#,+0 F 3. 81#,+0 C C. 82#+(0 C /. 82#+(0 F
10$1*!
Eotson Corporation bases its budgets on machine$hours. )he compan 7s static planning budget for 5a appears below2
Actual results for the month were2
221. )he spending variance for supplies costs in the flexible budget performance report for the month should be2 A. 8(00 C B. 8(00 F C. 82*0 F /. 82*0 C
10$1*&
222. )he spending variance for power costs in the flexible budget performance report for the month should be2 A. 81#%%0 F 3. 8&#1(0 F C. 81#%%0 C /. 8&#1(0 C
22!. )he spending variance for e>uipment depreciation in the flexible budget performance report for the month should be2 A. 8!20 F 3. 8!#!10 C C. 8!20 C /. 8!#!10 F
10$1*%
'a land Corporation7s static planning budget for April appears below. )he compan bases its budgets on machine$hours.
"n April# the actual number of machine$hours was (#(00# the actual supplies cost was 8(&#0&0# the actual power cost was 8*#0*0# the actual salaries cost was 8++#!00# and the actual e>uipment depreciation was 8*#&!0.
22&. )he spending variance for supplies cost in the flexible budget performance report for the month should be2 A. 8%#%&0 F B. 8&#(&0 C C. 8&#(&0 F /. 8%#%&0 C
10$1*(
22%. )he spending variance for power cost in the flexible budget performance report for the month should be2 A. 8%*0 F 3. 8&*0 F C. 8&*0 C /. 8%*0 C
22(. )he spending variance for e>uipment depreciation in the flexible budget performance report for the month should be2 A. 82+0 F 3. 81*0 C C. 82+0 C /. 81*0 F
10$1**
?rivitera ?rinting uses two measures of activit # press runs and boo0 set$ups# in the cost formulas in its budgets and performance reports. )he cost formula for wages and salaries is 8*#220 per month plus 8(%0 per press run plus 81#110 per boo0 set$up. )he compan expected its activit in Banuar to be 1++ press runs and 11* boo0 set$ups# but the actual activit was 1,1 press runs and 11& boo0 set$ups. )he actual cost for wages and salaries in Banuar was 82(,#2*0.
22*. )he wages and salaries in the planning budget for Banuar would be closest to2 A. 82%*#,10 B. 82%,#2,0 C. 82(%#0&1 /. 82(,#2*0 Cost 9 Fixed cost = Variable cost per unit1 >1 = Variable cost per unit2 >2 9 8*#220 = 8(%0 1++ = 81#110 11* 9 82%,#2,0
22+. )he wages and salaries in the flexible budget for Banuar would be closest to2 A. 82%,#2,0 3. 82(,#2*0 C. 82(!#&2+ D. 82%*#,10 Cost 9 Fixed cost = Variable cost per unit1 >1 = Variable cost per unit2 >2 9 8*#220 = 8(%0 1,1 = 81#110 11& 9 82%*#,10
10$1*+
22,. )he activit variance for wages and salaries in Banuar would be closest to2 A. 8,#,+0 F 3. 81#!+0 C C. 81#!+0 F /. 8,#,+0 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !evel: -as.
!0. )he spending variance for wages and salaries in Banuar would be closest to2 A. 811#!(0 F 3. 8,#,+0 C C. 8,#,+0 F D. 811#!(0 C
10$1*,
Sterr Air uses two measures of activit # flights and passengers# in the cost formulas in its budgets and performance reports. )he cost formula for plane operating costs is 8&,#!&0 per month plus 82#(!% per flight plus 82 per passenger. )he compan expected its activit in Banuar to be *! flights and 1,1 passengers# but the actual activit was *% flights and 1,! passengers. )he actual cost for plane operating costs in Banuar was 82&(#&&0.
2!1. )he plane operating costs in the planning budget for Banuar would be closest to2 A. 82&*#!%1 3. 82&(#&&0 C. 82!,#+(+ D. 82&2#0** Cost 9 Fixed cost = Variable cost per unit1 >1 = Variable cost per unit2 >2 9 8&,#!&0 = 82#(!% *! = 82 1,1 9 82&2#0**
2!2. )he plane operating costs in the flexible budget for Banuar would be closest to2 A. 82&(#&&0 B. 82&*#!%1 C. 82&+#*0, /. 82&2#0** Cost 9 Fixed cost = Variable cost per unit1 >1 = Variable cost per unit2 >2 9 8&,#!&0 = 82#(!% *% = 82 1,! 9 82&*#!%1
10$1+0
2!!. )he activit variance for plane operating costs in Banuar would be closest to2 A. 8%#2*& F 3. 8&#!(! C C. 8&#!(! F D. 8%#2*& C
2!&. )he spending variance for plane operating costs in Banuar would be closest to2 A. 8,11 C B. 8,11 F C. 8&#!(! F /. 8&#!(! C
Essay Questions
10$1+1
2!%. ;alligan Corporation bases its budgets on the activit measure customers served. /uring Bul # the compan planned to serve !0#000 customers. )he compan has provided the following data concerning the formulas it uses in its budgeting2
)he compan has also furnished its income statement for Bul 2
<e>uired2 ?repare a report showing the compan 7s activit variances for Bul . "ndicate in each case whether the variance is favorable -F. or unfavorable -C..
10$1+2
10$1+!
2!(. Vo te0 Corporation bases its budgets on the activit measure customers served. /uring Actober# the compan planned to serve !(#000 customers# but actuall served !&#000 customers. )he compan has provided the following data concerning the formulas it uses in its budgeting2
<e>uired2 ?repare a report showing the compan 7s activit variances for Actober. "ndicate in each case whether the variance is favorable -F. or unfavorable -C..
10$1+&
2!*. Gindell Corporation bases its budgets on the activit measure customers served. /uring /ecember# the compan planned to serve 21#000 customers# but actuall served 1,#000 customers. )he compan uses the following revenue and cost formulas in its budgeting# where > is the number of customers served2 <evenue2 8!.(0> 'ages and salaries2 821#!00 = 81.10> Supplies2 80.*0> "nsurance2 8(#&00 5iscellaneous2 8!#200 = 80.20> <e>uired2 ?repare a report showing the compan 7s activit variances for /ecember. "ndicate in each case whether the variance is favorable -F. or unfavorable -C..
10$1+%
2!+. 3randewie Corporation bases its budgets on the activit measure customers served. /uring 5a # the compan planned to serve !+#000 customers# but actuall served !!#000 customers. <evenue is 82.+0 per customer served. 'ages and salaries are 82+#+00 per month plus 80.+0 per customer served. Supplies are 80.%0 per customer served. "nsurance is 8(#+00 per month. 5iscellaneous expenses are 8%#+00 per month plus 80.!0 per customer served. <e>uired2 ?repare a report showing the compan 7s activit variances for 5a . "ndicate in each case whether the variance is favorable -F. or unfavorable -C..
10$1+(
2!,. Chapnic0 Clinic bases its budgets on the activit measure patient$visits. /uring September# the clinic planned for 2#+00 patient$visits. )he clinic has provided the following data concerning the formulas it uses in its budgeting2
)he clinic has also furnished its income statement for September2
<e>uired2 ?repare a report showing the clinic7s activit variances for September.
10$1+*
10$1++
2&0. Fil0ins Clinic bases its budgets on the activit measure patient$visits. /uring Februar # the clinic planned for !#,00 patient$visits# but the actual level of activit was &#100 patient$ visits. )he clinic has provided the following data concerning the formulas it uses in its budgeting2
<e>uired2 ?repare a report showing the clinic7s activit variances for Februar . "ndicate in each case whether the variance is favorable -F. or unfavorable -C..
10$1+,
2&1. Sroufe Clinic bases its budgets on the activit measure patient$visits. /uring Bul # the clinic planned for !#%00 patient$visits# but its actual level of activit was &#000 patient$visits. )he clinic has provided the following data concerning the formulas it uses in its budgeting2
<e>uired2 ?repare a report showing the clinic7s activit variances for Bul . "ndicate in each case whether the variance is favorable -F. or unfavorable -C..
10$1,0
2&2. FongeallaI Clinic bases its budgets on the activit measure patient$visits. /uring Banuar # the clinic planned for 2#!00 patient$visits# but its actual level of activit was 2#100 patient$visits. <evenue should be 8%2.%0 per patient$visit. ?ersonnel expenses should be 8!&#100 per month plus 81%.10 per patient$visit. 5edical supplies should be 81#(00 per month plus 8+.&0 per patient$visit. Accupanc expenses should be 8,#&00 per month plus 81.,0 per patient$visit. Administrative expenses should be 8!#%00 per month plus 80.10 per patient$visit. <e>uired2 ?repare a report showing the clinic7s activit variances for Banuar . "ndicate in each case whether the variance is favorable -F. or unfavorable -C..
10$1,1
2&!. Socha 5emorial /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for Banuar was based on !#&00 meals# but the diner actuall served !#+00 meals. )he diner7s director has provided the following cost formulas to use in budgets2
)he director has also provided the diner7s statement of actual expenses for the month2
<e>uired2 ?repare a report showing the activit variances for each of the expenses and for total expenses for Banuar . Eabel each variance as favorable -F. or unfavorable -C..
10$1,2
10$1,!
2&&. 5able 5emorial /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for April was based on !#000 meals# but the diner actuall served !#100 meals. )he diner7s director has provided the following cost formulas to use in budgets2
<e>uired2 ?repare a report showing the activit variances for each of the expenses and for total expenses for April. Eabel each variance as favorable -F. or unfavorable -C..
10$1,&
2&%. Guehl0e Crban /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for September was based on 2#+00 meals# but the diner actuall served !#000 meals. )he diner7s director has provided the following cost data to use in the budget2 groceries# 8!.+% per mealH 0itchen operations# 8&#%00 per month plus 81.(% per mealH administrative expenses# 8!#!00 per month plus 80.!0 per mealH and fundraising expenses# 81#200 per month. )he director has also provided the diner7s statement of actual expenses for the month2
<e>uired2 ?repare a report showing the activit variances for each of the expenses and for total expenses for September.
10$1,%
2&(. Aubuchon Crban /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for 5arch was based on !#&00 meals# but the diner actuall served !#100 meals. )he diner7s director has provided the following cost data to use in the budget2 groceries# 82.,0 per mealH 0itchen operations# 8&#,00 per month plus 81.0% per mealH administrative expenses# 8!#(00 per month plus 80.2% per mealH and fundraising expenses# 81#*00 per month. <e>uired2 ?repare a report showing the activit variances for each of the expenses and for total expenses for 5arch. Eabel each variance as favorable -F. or unfavorable -C..
10$1,(
2&*. Crovo Corporation uses customers served as its measure of activit . /uring /ecember# the compan budgeted for !+#000 customers# but actuall served &0#000 customers. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for /ecember2 /ata used in budgeting2
<e>uired2 ?repare a report showing the compan 7s revenue and spending variances for /ecember. Eabel each variance as favorable -F. or unfavorable -C..
10$1,*
10$1,+
2&+. :ertIler Corporation uses customers served as its measure of activit . /uring @ovember# the compan budgeted for !!#000 customers# but actuall served !&#000 customers. )he compan uses the following revenue and cost formulas in its budgeting# where > is the number of customers served2 <evenue2 8!.20> 'ages and salaries2 82(#(00 = 81.20> Supplies2 80.&0> "nsurance2 8*#,00 5iscellaneous2 8(#&00 = 80.10> )he compan reported the following actual results for @ovember2
<e>uired2 ?repare a report showing the compan 7s revenue and spending variances for @ovember. Eabel each variance as favorable -F. or unfavorable -C..
10$1,,
10$200
2&,. 'artenberg Corporation uses customers served as its measure of activit . )he compan bases its budgets on the following information2 <evenue should be 8!.+0 per customer served. 'ages and salaries should be 8!+#+00 per month plus 81.00 per customer served. Supplies should be 80.(0 per customer served. "nsurance should be 8*#100 per month. 5iscellaneous expenses should be 8%#100 per month plus 80.!0 per customer served. )he compan reported the following actual results for Banuar 2
<e>uired2 ?repare a report showing the compan 7s revenue and spending variances for Banuar . Eabel each variance as favorable -F. or unfavorable -C..
10$201
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !evel: -as.
10$202
2%0. Carlisle Clinic uses patient$visits as its measure of activit . /uring /ecember# the clinic budgeted for 2#%00 patient$visits# but its actual level of activit was 2#100 patient$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for /ecember2 /ata used in budgeting2
<e>uired2 ?repare a report showing the clinic7s revenue and spending variances for /ecember. Eabel each variance as favorable -F. or unfavorable -C..
10$20!
10$20&
2%1. Staile Clinic uses patient$visits as its measure of activit . /uring September# the clinic budgeted for !#200 patient$visits# but its actual level of activit was 2#+00 patient$visits. )he clinic uses the following revenue and cost formulas in its budgeting# where > is the number of patient$visits2 <evenue2 8!&.,0> ?ersonnel expenses2 82*#!00 = 810.!0> 5edical supplies2 81#&00 = 8(.%0> Accupanc expenses2 8(#000 = 81.+0> Administrative expenses2 8%#!00 = 80.&0> )he clinic reported the following actual results for September2
<e>uired2 ?repare a report showing the clinic7s revenue and spending variances for September. Eabel each variance as favorable -F. or unfavorable -C..
10$20%
10$20(
2%2. ;lasse Clinic uses patient$visits as its measure of activit . )he clinic bases its budgets on the following information2 <evenue should be 8&1.+0 per patient$visit. ?ersonnel expenses should be 8!%#&00 per month plus 810.(0 per patient$visit. 5edical supplies should be 8*00 per month plus 8*.,0 per patient$visit. Accupanc expenses should be 8+#+00 per month plus 81.!0 per patient$visit. Administrative expenses should be 8%#(00 per month plus 80.&0 per patient$visit. )he clinic reported the following actual results for Februar 2
<e>uired2 ?repare a report showing the clinic7s revenue and spending variances for Februar . Eabel each variance as favorable -F. or unfavorable -C..
10$20*
10$20+
2%!. ?inion 5emorial /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for August was based on 2#*00 meals. )he diner7s director has provided the following cost formulas to use in budgets2
<e>uired2 ?repare a report showing the spending variances for each of the expenses and for total expenses for August. Eabel each variance as favorable -F. or unfavorable -C..
10$20,
10$210
2%&. :ernande Crban /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for Actober was based on 2#+00 meals. )he diner7s director has provided the following cost data to use in the budget2 groceries# 82.&% per mealH 0itchen operations# 8%#200 per month plus 81.*0 per mealH administrative expenses# 82#(00 per month plus 80.(% per mealH and fundraising expenses# 81#100 per month. )he director has also provided the diner7s statement of actual expenses for the month2
<e>uired2 ?repare a report showing the diner7s spending variances for each of the expenses and for total expenses for Actober. Eabel each variance as favorable -F. or unfavorable -C..
10$211
2%%. )a6iri Corporation uses customers served as its measure of activit . )he following report compares the planning budget to the actual operating results for the month of 5a 2
<e>uired2 ?repare the compan 7s flexible budget performance report for 5a . Eabel each variance as favorable -F. or unfavorable -C..
10$212
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !earning "#$ective: %&'%3 4n*erstan* common errors ma*e in re aring erformance re orts #ase* on #u*gets an* actual results !evel: Me*ium
10$21!
2%(. Sammartino Clinic uses patient$visits as its measure of activit . )he following report compares the planning budget to the actual operating results for the month of @ovember2
<e>uired2 ?repare the clinic7s flexible budget performance report for @ovember. Eabel each variance as favorable -F. or unfavorable -C..
10$21&
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !earning "#$ective: %&'%3 4n*erstan* common errors ma*e in re aring erformance re orts #ase* on #u*gets an* actual results !evel: Me*ium
10$21%
2%*. :emphill Corporation uses customers served as its measure of activit . /uring Bune# the compan budgeted for 20#000 customers# but actuall served 1,#000 customers. )he compan has provided the following data concerning the formulas used in its budgeting and its actual results for Bune2 /ata used in budgeting2
<e>uired2 ?repare the compan 7s flexible budget performance report for Bune. Eabel each variance as favorable -F. or unfavorable -C..
10$21(
10$21*
2%+. Vie ra Corporation uses customers served as its measure of activit . /uring @ovember# the compan budgeted for !(#000 customers# but actuall served !,#000 customers. )he compan uses the following revenue and cost formulas in its budgeting# where > is the number of customers served2 <evenue2 82.%0> 'ages and salaries2 821#%00 = 80.*0> Supplies2 80.&0> "nsurance2 8(#100 5iscellaneous2 8!#*00 = 80.&0> )he compan reported the following actual results for @ovember2
<e>uired2 ?repare the compan 7s flexible budget performance report for @ovember. Eabel each variance as favorable -F. or unfavorable -C..
10$21+
10$21,
2%,. Schoeppner Corporation uses customers served as its measure of activit . /uring Actober# the compan budgeted for !,#000 customers# but actuall served &2#000 customers. )he compan bases its budgets on the following information2 <evenue should be 8!.10 per customer served. 'ages and salaries should be 8!+#100 per month plus 80.+0 per customer served. Supplies should be 80.&0 per customer served. "nsurance should be 8,#(00 per month. 5iscellaneous expenses should be 8!#&00 per month plus 80.&0 per customer served. )he compan reported the following actual results for Actober2
<e>uired2 ?repare the compan 7s flexible budget performance report for Actober. Eabel each variance as favorable -F. or unfavorable -C..
10$220
10$221
2(0. Ade emo Clinic uses patient$visits as its measure of activit . /uring Bul # the clinic budgeted for 2#%00 patient$visits# but its actual level of activit was 2#+00 patient$visits. )he clinic has provided the following data concerning the formulas used in its budgeting and its actual results for Bul 2 /ata used in budgeting2
<e>uired2 ?repare the clinic7s flexible budget performance report for Bul . Eabel each variance as favorable -F. or unfavorable -C..
10$222
10$22!
2(1. Ca ouette Clinic uses patient$visits as its measure of activit . /uring Februar # the clinic budgeted for 2#&00 patient$visits# but its actual level of activit was 2#*00 patient$visits. )he clinic uses the following revenue and cost formulas in its budgeting# where > is the number of patient$visits2 <evenue2 8%!.+0> ?ersonnel expenses2 8!2#000 = 81(.(0> 5edical supplies2 8*00 = 8+.+0> Accupanc expenses2 810#&00 = 81.,0> Administrative expenses2 8%#%00 = 80.20> )he clinic reported the following actual results for Februar 2
<e>uired2 ?repare the clinic7s flexible budget performance report for Februar . Eabel each variance as favorable -F. or unfavorable -C..
10$22&
10$22%
2(2. )sui Clinic uses patient$visits as its measure of activit . /uring @ovember# the clinic budgeted for !#&00 patient$visits# but its actual level of activit was 2#,00 patient$visits. )he clinic bases its budgets on the following information2 <evenue should be 8!0.00 per patient$ visit. ?ersonnel expenses should be 8!0#200 per month plus 8*.*0 per patient$visit. 5edical supplies should be 81#(00 per month plus 8%.20 per patient$visit. Accupanc expenses should be 8*#&00 per month plus 81.00 per patient$visit. Administrative expenses should be 8!#,00 per month plus 80.20 per patient$visit. )he clinic reported the following actual results for @ovember2
<e>uired2 ?repare the clinic7s flexible budget performance report for @ovember. Eabel each variance as favorable -F. or unfavorable -C..
10$22(
10$22*
2(!. /re fus 5emorial /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for April was based on 2#100 meals. )he diner7s director has provided the following cost formulas to use in budgets2
<e>uired2 ?repare a flexible budget performance report showing both the activit variances and the spending variances for each of the expenses and for total expenses for April. Eabel each variance as favorable -F. or unfavorable -C..
10$22+
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !evel: -as.
10$22,
2(&. A0es Crban /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for August was based on 2#200 meals. )he diner7s director has provided the following cost data to use in the budget2 groceries# 8!.(% per mealH 0itchen operations# 8%#&00 per month plus 81.+% per mealH administrative expenses# 82#,00 per month plus 80.%% per mealH and fundraising expenses# 81#*00 per month. )he director has also provided the diner7s statement of actual expenses for the month2
<e>uired2 ?repare a flexible budget performance report showing both the activit variances and the spending variances for each of the expenses and for total expenses for August. Eabel each variance as favorable -F. or unfavorable -C..
10$2!0
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%( Pre are a fle)i#le #u*get !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !evel: -as.
10$2!1
2(%. 3loc0mon :ospital bases its budgets on patient$visits. )he hospital7s static planning budget for @ovember appears below2
<e>uired2 ?repare a flexible budget for +#(00 patient$visits per month.
10$2!2
2((. Clines Corporation bases its budgets on machine$hours. )he compan 7s static planning budget for @ovember appears below2
<e>uired2 ?repare a flexible budget for ,#+00 machine$hours per month.
10$2!!
2(*. 5eares Corporation bases its budgets on the activit measure customers served. /uring 5a # the compan plans to serve 2*#000 customers. )he compan has provided the following data concerning the formulas it uses in its budgeting2
<e>uired2 ?repare the compan 7s planning budget for 5a .
10$2!&
2(+. /uring August# /iga Corporation plans to serve !%#000 customers. )he compan uses the following revenue and cost formulas in its budgeting# where > is the number of customers served2 <evenue2 8&.20> 'ages and salaries2 8!!#*00 = 81.%0> Supplies2 80.*0> "nsurance2 811#000 5iscellaneous2 8&#+00 = 80.&0> <e>uired2 ?repare the compan 7s planning budget for August.
10$2!%
2(,. /uring September# Docab Corporation plans to serve !*#000 customers. <evenue is 82.+0 per customer served. 'ages and salaries are 8!!#!00 per month plus 80.+0 per customer served. Supplies are 80.&0 per customer served. "nsurance is 8,#000 per month. 5iscellaneous expenses are 8%#!00 per month plus 80.20 per customer served. <e>uired2 ?repare the compan 7s planning budget for September.
10$2!(
2*0. Vera Corporation bases its budgets on the activit measure customers served. /uring September# the compan planned to serve 2+#000 customers# but actuall served 2*#000 customers. )he compan has provided the following data concerning the formulas it uses in its budgeting2
<e>uired2 ?repare the compan 7s flexible budget for September based on the actual level of activit for the month.
10$2!*
2*1. /uring 5a # :iles Corporation budgeted for !1#000 customers# but actuall served 2,#000 customers. )he compan uses the following revenue and cost formulas in its budgeting# where > is the number of customers served2 <evenue2 8&.&0> 'ages and salaries2 8!%#+00 = 81.*0> Supplies2 80.(0> "nsurance2 812#!00 5iscellaneous2 8%#%00 = 80.10> <e>uired2 ?repare the compan 7s flexible budget for 5a based on the actual level of activit for the month.
10$2!+
2*2. /uring Februar # ?oet0er Corporation budgeted for 2,#000 customers# but actuall served 2+#000 customers. <evenue should be 8&.*0 per customer served. 'ages and salaries should be 8!1#*00 per month plus 81.%0 per customer served. Supplies should be 80.+0 per customer served. "nsurance should be 8+#&00 per month. 5iscellaneous expenses should be 8*#&00 per month plus 80.&0 per customer served. <e>uired2 ?repare the compan 7s flexible budget for Februar based on the actual level of activit for the month.
10$2!,
2*!. 5ish Clinic bases its budgets on patient$visits. /uring @ovember# the clinic plans for a level of activit of !#200 patient$visits. )he clinic has provided the following data concerning the formulas it uses in its budgeting2
<e>uired2 ?repare the clinic7s planning budget for @ovember.
10$2&0
2*&. /uring Banuar # Agron Clinic plans for an activit level of 2#%00 patient$visits. )he clinic uses the following revenue and cost formulas in its budgeting# where > is the number of patient$visits2 <evenue2 8%1.%0> ?ersonnel expenses2 8!!#+00 = 81(.(0> 5edical supplies2 8*00 = 8*.&0> Accupanc expenses2 810#,00 = 82.10> Administrative expenses2 8&#!00 = 80.&0> <e>uired2 ?repare the clinic7s planning budget for Banuar .
10$2&1
2*%. /uring 5arch# Samorano Clinic plans for an activit level of 2#%00 patient$visits. <evenue is 8&2.10 per patient$visit. ?ersonnel expenses are 8!0#&00 per month plus 811.20 per patient$visit. 5edical supplies are 81#100 per month plus 8(.%0 per patient$visit. Accupanc expenses are 8(#%00 per month plus 81.,0 per patient$visit. Administrative expenses are 8%#200 per month plus 80.&0 per patient$visit. <e>uired2 ?repare the clinic7s planning budget for 5arch.
10$2&2
2*(. 5oss Clinic bases its budgets on the activit measure patient$visits. /uring August# the clinic planned for an activit level of 2#100 patient$visits# but the activit level was actuall 2#&00 patient$visits. )he clinic has provided the following data concerning the formulas it uses in its budgeting2
<e>uired2 ?repare the clinic7s flexible budget for August based on the actual level of activit for the month.
10$2&!
2**. /uring August# Cardenas Clinic budgeted for !#,00 patient$visits# but its actual level of activit was !#+00 patient$visits. )he clinic uses the following revenue and cost formulas in its budgeting# where > is the number of patient$visits2 <evenue2 82*.+0> ?ersonnel expenses2 82%#100 = 8*.+0> 5edical supplies2 81#100 = 8%.(0> Accupanc expenses2 8*#,00 = 81.20> Administrative expenses2 8!#200 = 80.10> <e>uired2 ?repare the clinic7s flexible budget for August based on the actual level of activit for the month.
10$2&&
2*+. /uring Actober# Deliihoomalu Clinic budgeted for 2#*00 patient$visits# but its actual level of activit was 2#200 patient$visits. <evenue should be 82*.!0 per patient$visit. ?ersonnel expenses should be 821#100 per month plus 8(.+0 per patient$visit. 5edical supplies should be 8%00 per month plus 8&.,0 per patient$visit. Accupanc expenses should be 8%#*00 per month plus 80.,0 per patient$visit. Administrative expenses should be 8!#*00 per month plus 80.&0 per patient$visit. <e>uired2 ?repare the clinic7s flexible budget for Actober based on the actual level of activit for the month.
10$2&%
2*,. ?och 5emorial /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for September is to be based on 2#*00 meals. )he diner7s director has provided the following cost formulas to use in the budget2
<e>uired2 ?repare the diner7s budget for the month of September. )he budget will onl contain the costs listed aboveH no revenues will be on the budget.
10$2&(
2+0. 3arona 5emorial /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for 5arch was based on 2#,00 meals# but the diner actuall served !#000 meals. )he diner7s director has provided the following cost formulas to use in budgets2
<e>uired2 ?repare the diner7s flexible budget for the actual number of meals served in 5arch. )he budget will onl contain the costs listed aboveH no revenues will be on the budget.
10$2&*
2+1. :ilario Crban /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for September is to be based on 2#(00 meals. )he diner7s director has provided the following cost data to use in the budget2 groceries# 82.10 per mealH 0itchen operations# 8%#(00 per month plus 81.+0 per mealH administrative expenses# 8!#*00 per month plus 80.%% per mealH and fundraising expenses# 81#&00 per month. <e>uired2 ?repare the diner7s budget for the month of September. )he budget will onl contain the costs listed aboveH no revenues will be on the budget.
10$2&+
2+2. 5archant Crban /iner is a charit supported b donations that provides free meals to the homeless. )he diner7s budget for Bune was based on 2#200 meals# but the diner actuall served 1#+00 meals. )he diner7s director has provided the following cost data to use in the budget2 groceries# 8!.+% per mealH 0itchen operations# 8&#!00 per month plus 81.*0 per mealH administrative expenses# 82#000 per month plus 80.&% per mealH and fundraising expenses# 81#100 per month. <e>uired2 ?repare the diner7s flexible budget for the actual number of meals served in Bune. )he budget will onl contain the costs listed aboveH no revenues will be on the budget.
10$2&,
2+!. Carnes )ech is a for$profit vocational school. )he school bases its budgets on two measures of activit -i.e.# cost drivers.# namel student and course. )he school uses the following data in its budgeting2
"n Februar # the school budgeted for 1#%*0 students and 1&! courses. )he actual activit for the month was 1#!*0 students and 1&% courses. <e>uired2 ?repare a report showing the school7s activit variances for Februar . Eabel each variance as favorable -F. or unfavorable -C..
10$2%0
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: Me*ium
10$2%1
2+&. :eit0amp )ech is a for$profit vocational school. )he school bases its budgets on two measures of activit -i.e.# cost drivers.# namel student and course. )he school uses the following data in its budgeting2
"n Bul # the school budgeted for 1#%!0 students and %+ courses. )he school7s income statement showing the actual results for the month appears below2
<e>uired2 ?repare a report showing the school7s activit variances for Bul . Eabel each variance as favorable -F. or unfavorable -C..
10$2%2
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: 6ar*
10$2%!
2+%. @ield Beep )ours operates 6eep tours in the heart of the Colorado <oc0ies. )he compan bases its budgets on two measures of activit -i.e.# cost drivers.# namel guests and 6eeps. Ane vehicle used in one tour on one da counts as a 6eep. Kach 6eep has one tour guide. )he compan uses the following data in its budgeting2
"n Bul # the compan budgeted for &!0 guests and 210 6eeps. )he actual activit for the month was &1% guests and 20% 6eeps. <e>uired2 ?repare a report showing the compan 7s activit variances for Bul . Eabel each variance as favorable -F. or unfavorable -C..
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: Me*ium
10$2%&
2+(. VelaI>ues Beep )ours operates 6eep tours in the heart of the Colorado <oc0ies. )he compan bases its budgets on two measures of activit -i.e.# cost drivers.# namel guests and 6eeps. Ane vehicle used in one tour on one da counts as a 6eep. Kach 6eep has one tour guide. )he compan uses the following data in its budgeting2
"n 5arch# the compan budgeted for !%( guests and 12, 6eeps. )he compan 7s income statement showing the actual results for the month appears below2
<e>uired2 ?repare a report showing the compan 7s activit variances for 5arch. Eabel each variance as favorable -F. or unfavorable -C..
10$2%%
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%/ Pre are a re ort sho,ing activit. variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: 6ar*
10$2%(
2+*. <iIIa )ech is a for$profit vocational school. )he school bases its budgets on two measures of activit -i.e.# cost drivers.# namel student and course. )he school uses the following data in its budgeting2
"n April# the school budgeted for 1#!%0 students and &% courses. )he school7s income statement showing the actual results for the month appears below2
<e>uired2 ?repare a report showing the school7s revenue and spending variances for April. Eabel each variance as favorable -F. or unfavorable -C..
10$2%*
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: 6ar*
10$2%+
2++. <ubidoux Beep )ours operates 6eep tours in the heart of the Colorado <oc0ies. )he compan bases its budgets on two measures of activit -i.e.# cost drivers.# namel guests and 6eeps. Ane vehicle used in one tour on one da counts as a 6eep. Kach 6eep has one tour guide. )he compan uses the following data in its budgeting2
"n September# the compan budgeted for &+! guests and 2&0 6eeps. )he compan 7s income statement showing the actual results for the month appears below2
<e>uired2 ?repare a report showing the compan 7s revenue and spending variances for September. Eabel each variance as favorable -F. or unfavorable -C..
10$2%,
<ubidoux Beep )ours <evenue and Spending Variances For the 5onth Knded September !0
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%0 Pre are a re ort sho,ing revenue an* s en*ing variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: 6ar*
10$2(0
2+,. <iggan )ech is a for$profit vocational school. )he school bases its budgets on two measures of activit -i.e.# cost drivers.# namel student and course. )he school uses the following data in its budgeting2
"n /ecember# the school budgeted for 1#,*0 students and 1(! courses. )he school7s income statement showing the actual results for the month appears below2
<e>uired2 ?repare a flexible budget performance report showing both the school7s activit variances and revenue and spending variances for /ecember. Eabel each variance as favorable -F. or unfavorable -C..
10$2(1
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: 6ar*
10$2(2
2,0. )ervo Beep )ours operates 6eep tours in the heart of the Colorado <oc0ies. )he compan bases its budgets on two measures of activit -i.e.# cost drivers.# namel guests and 6eeps. Ane vehicle used in one tour on one da counts as a 6eep. Kach 6eep has one tour guide. )he compan uses the following data in its budgeting2
"n 5arch# the compan budgeted for &,2 guests and 1(% 6eeps. )he compan 7s income statement showing the actual results for the month appears below2
<e>uired2 ?repare a flexible budget performance report showing both the compan 7s activit variances and revenue and spending variances for 5arch. Eabel each variance as favorable -F. or unfavorable -C..
10$2(!
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: 6ar*
10$2(&
2,1. Seard Clinic uses patient$visits as its measure of activit . )he clinic has provided the following report2
<e>uired2 ?repare the clinic7s flexible budget performance report for /ecember. Eabel each variance as favorable -F. or unfavorable -C..
10$2(%
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%1 Pre are a erformance re ort that com#ines activit. variances an* revenue an* s en*ing variances !earning "#$ective: %&'%3 4n*erstan* common errors ma*e in re aring erformance re orts #ase* on #u*gets an* actual results !evel: 6ar*
10$2((
2,2. Cecere )ech is a for$profit vocational school. )he school bases its budgets on two measures of activit -i.e.# cost drivers.# namel student and course. )he school uses the following data in its budgeting2
"n Februar # the school budgeted for 1#*&0 students and 1(0 courses. )he actual activit for the month was 1#%&0 students and 1(1 courses. <e>uired2 ?repare the school7s planning budget for Februar .
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: %&'%2 Pre are a fle)i#le #u*get ,ith more than one cost *river !evel: Me*ium
10$2(*
2,!. Anofre )ech is a for$profit vocational school. )he school bases its budgets on two measures of activit -i.e.# cost drivers.# namel student and course. )he school uses the following data in its budgeting2
"n Actober# the school budgeted for 1#&10 students and %+ courses. )he actual activit for the month was 1#!10 students and (2 courses. <e>uired2 ?repare the school7s flexible budget for the actual level of activit in Actober.
10$2(+
2,&. )urnner Beep )ours operates 6eep tours in the heart of the Colorado <oc0ies. )he compan bases its budgets on two measures of activit -i.e.# cost drivers.# namel guests and 6eeps. Ane vehicle used in one tour on one da counts as a 6eep. Kach 6eep has one tour guide. )he compan uses the following data in its budgeting2
"n April# the compan budgeted for !*& guests and 1(( 6eeps. )he actual activit for the month was !(& guests and 1(* 6eeps. <e>uired2 ?repare the compan 7s planning budget for April.
10$2(,
2,%. Khrler Beep )ours operates 6eep tours in the heart of the Colorado <oc0ies. )he compan bases its budgets on two measures of activit -i.e.# cost drivers.# namel guests and 6eeps. Ane vehicle used in one tour on one da counts as a 6eep. Kach 6eep has one tour guide. )he compan uses the following data in its budgeting2
"n 5arch# the compan budgeted for !2+ guests and 1&! 6eeps. )he actual activit for the month was !!+ guests and 1&* 6eeps. <e>uired2 ?repare the compan 7s flexible budget for the actual level of activit in 5arch.
10$2*0
Chapter 10 Standard Costs and Variances Answer De
True / False Questions
1. )he materials price variance is computed b multipl ing the difference between the actual price and the standard price b the actual >uantit of materials used in production. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: -as.
2. "n general# the purchasing agent is responsible for the materials price variance. TRUE
!. A materials price variance is favorable if the actual price exceeds the standard price. FALSE
10$2*1
&. ;enerall spea0ing# it is the responsibilit of the production department to see that material usage is 0ept in line with standards. TRUE
%. 'hen more hours of labor time are necessar to complete a 6ob than the standard allows# the labor rate variance is unfavorable. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: Me*ium
(. Standard costs should generall be based on the actual costs of prior periods. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (%'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: -as.
*. )he standard >uantit per unit for direct materials should not include an allowance for waste. FALSE
10$2*2
+. "deal standards should be used for forecasting and planning. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: Me*ium
,. )he standard cost per unit is computed b multipl ing the standard >uantit or hours b the standard price or rate. TRUE
10. Standard costs greatl increase the complexit of the boo00eeping process. FALSE
10$2*!
11. 'hen computing standard cost variances# the difference between actual and standard price multiplied b actual >uantit ields a-n.2 A. combined price and >uantit variance. 3. efficienc variance. C. price variance. /. >uantit variance. 5aterials price variance 9 AL -A? $ S?.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: -as. Source: CMA8 a*a te*
12. )he general model for calculating a price variance is2 A. actual >uantit of inputs -actual price $ standard price.. 3. standard price -actual >uantit of inputs $ standard >uantit allowed for output.. C. -actual >uantit of inputs at actual price. $ -standard >uantit allowed for output at standard price.. /. actual price -actual >uantit of inputs $ standard >uantit allowed for output.. 5aterials price variance 9 AL -A? $ S?.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: Me*ium
10$2*&
1!. )he purchasing agent of the Clampett Compan ordered materials of lower >ualit in an effort to economiIe on price and in response to the demands of the production manager due to a mista0e in production scheduling. )he materials were shipped b airfreight at a rate higher than that ordinaril charged for shipment b truc0# resulting in an unfavorable materials price variance. )he lower >ualit material proved to be unsuitable on the production line and resulted in excessive waste. "n this situation# who should be held responsible for the materials price and >uantit variances4
A. Aption A 3. Aption 3 C. Aption C /. Aption / )he materials price variance is the responsibilit of the production manager because the unfavorable variance was due to the demands made b the production manager. )he materials >uantit variance is the responsibilit of the purchasing agent because the purchasing agent was responsible for ordering the lower >ualit material.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: Me*ium
10$2*%
1&. )odco planned to produce !#000 units of its single product# )eragram# during @ovember. )he standard specifications for one unit of )eragram include six pounds of material at 80.!0 per pound. Actual production in @ovember was !#100 units of )eragram. )he accountant computed a favorable materials purchase price variance of 8!+0 and an unfavorable materials >uantit variance of 8120. 3ased on these variances# one could conclude that2 A. more materials were purchased than were used. 3. more materials were used than were purchased. C. the actual cost of materials was less than the standard cost. /. the actual usage of materials was less than the standard allowed. 5aterials price variance 9 AL -A? $ S?. A favorable materials price variance can onl occur if the actual price of materials was less than the standard price.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: Me*ium Source: CMA8 a*a te*
1%. )he materials >uantit variance should be computed2 A. when materials are purchased. B. based upon the amount of materials used in production. C. based upon the difference between the actual and standard prices per unit times the actual >uantit used. /. onl when there is a difference between standard and actual cost per unit for the materials. 5aterials >uantit variance 9 -AL $ SL.S?# where AL is the actual >uantit used
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: Me*ium
10$2*(
1(. 'hich department should usuall be held responsible for an unfavorable materials price variance4 A. ?roduction. 3. 5aterials :andling. C. Kngineering. D. ?urchasing. )he purchasing department should ordinaril be held responsible for an unfavorable materials price variance because that department ordinaril has most control over the price.
1*. )ower Compan planned to produce !#000 units of its single product# )itactium# during @ovember. )he standards for one unit of )itactium specif six pounds of materials at 80.!0 per pound. Actual production in @ovember was !#100 units of )itactium. )here was an unfavorable materials price variance of 8!+0 and a favorable materials >uantit variance of 8120. 3ased on these variances# one could conclude that2 A. more materials were purchased than were used. 3. more materials were used than were purchased. C. the actual cost per pound for materials was less than the standard cost per pound. D. the actual usage of materials was less than the standard allowed. 5aterials >uantit variance 9 -AL $ SL. S? A favorable materials >uantit variance occurs onl if the actual usage of materials was less than the standard allowed# i.e.# if AL M SL.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: Me*ium Source: CMA8 a*a te*
10$2**
1+. "f the labor efficienc variance is unfavorable# then A. actual hours exceeded standard hours allowed for the actual output. 3. standard hours allowed for the actual output exceeded actual hours. C. the standard rate exceeded the actual rate. /. the actual rate exceeded the standard rate. Eabor efficienc variance 9 -A: $ S:. S<. An unfavorable variance occurs if A: N S:.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: -as.
1,. A labor efficienc variance resulting from the use of poor >ualit materials should be charged to2 A. the production manager. B. the purchasing agent. C. manufacturing overhead. /. the industrial engineering department. )he purchasing manager is usuall responsible for the ac>uisition of poor >ualit materials.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: Me*ium
10$2*+
20. An unfavorable direct labor efficienc variance could be caused b 2 A. an unfavorable materials >uantit variance. 3. an unfavorable variable overhead rate variance. C. a favorable materials >uantit variance. /. a favorable variable overhead rate variance. An unfavorable >uantit variance could be caused b low >ualit materials# which in turn could cause an unfavorable labor efficienc variance.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: Me*ium Source: CMA8 a*a te*
21. Variable manufacturing overhead is applied to products on the basis of standard direct labor$hours. "f the direct labor efficienc variance is unfavorable# the variable overhead efficienc variance will be2 A. favorable. B. unfavorable. C. either favorable or unfavorable. /. Iero. Eabor efficienc variance 9 -A: $ S:. S< Variable overhead efficienc variance 9 -A: $ S:. S< "f the labor efficienc variance is unfavorable# A: N S:. "f A: N S:# the variable overhead efficienc variance must also be unfavorable.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (%'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: -as. Source: CMA8 a*a te*
10$2*,
22. 'hich of the following statements concerning ideal standards is incorrect4 A. "deal standards generall do not provide the best motivation for wor0ers. 3. "deal standards do not ma0e allowances for waste# spoilage# and machine brea0downs. C. "deal standards are better suited for cash budgeting than practical standards. /. "deal standards ma be better than practical standards when managers see0 continual improvement. ?ractical standards provide better forecasts of cash flows for cash budgeting than practical standards.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: Me*ium Source: CMA8 a*a te*
2!. )he ?orter Compan has a standard cost s stem. "n Bul the compan purchased and used 22#%00 pounds of direct material at an actual cost of 8%!#000H the materials >uantit variance was 81#+*% CnfavorableH and the standard >uantit of materials allowed for Bul production was 21#*%0 pounds. )he materials price variance for Bul was2 A. 82#*2% F 3. 82#*2% C C. 8!#2%0 F /. 8!#2%0 C 5aterials price variance 9 -AL A?. $ -AL S?. 9 8%!#000 $ -22#%00 pounds 82.%0 per pound. 9 8%!#000 $ 8%(#2%0 9 8!#2%0 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: 6ar*
10$2+0
2&. East month *%#000 pounds of direct material were purchased and *1#000 pounds were used. "f the actual purchase price per pound was 80.%0 more than the standard purchase price per pound# then the materials price variance was2 A. 82#000 F 3. 8!*#%00 F C. 8!*#%00 C /. 8!%#%00 C 5aterials price variance 9 -AL A?. $ -AL S?. 9 AL -A? $ S?. 9 *%#000 pounds 80.%0 per pound 9 8!*#%00 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: -as.
10$2+1
2%. )he following materials standards have been established for a particular product2
)he following data pertain to operations concerning the product for the last month2
'hat is the materials >uantit variance for the month4 A. 81,#&(0 F 3. 8,#*!0 C C. 810#11% C D. 820#2!0 F SL 9 *.! pounds per unit 1#000 units 9 *#!00 pounds 5aterials >uantit variance 9 -AL $ SL. S? 9 -%#,00 pounds $ *#!00 pounds. 81&.&% per pound 9 -$1#&00 pounds. 81&.&% per pound 9 820#2!0 F
10$2+2
2(. )he following materials standards have been established for a particular product2
'hat is the materials price variance for the month4 A. 81%#&0% F 3. 8%#**% C C. 8%#,2% C D. 81#(00 C AL A? 9 8(!#200 5aterials price variance 9 AL -A? $ S?. 9 AL A? $ AL S? 5aterials price variance 9 8(!#200 $ -!#200 feet 81,.2% per foot. 9 8(!#200 $ 8(1#(00 9 81#(00 C
10$2+!
2*. )he 'right Compan has a standard costing s stem. )he following data are available for September2
)he actual price per pound of direct materials purchased in September is2 A. 81.+% 3. 82.00 C. 82.10 /. 82.1% 5aterials price variance 9 AL -A? $ S?. 2%#000 pounds -A? $ 82 per pound. 9 82#%00 C 2%#000 pounds A? $ 8%0#000 9 82#%00 C 2%#000 pounds A? $ 8%0#000 9 82#%00 2%#000 pounds A? 9 8%2#%00 A? 9 8%2#%00 2%#000 pounds A? 9 82.10 per pound
10$2+&
2+. )he Cox Compan uses standard costing. )he following data are available for April2
)he standard >uantit of material allowed for April production is2 A. 1&#200 gallons 3. 12#*00 gallons C. 11#*00 gallons /. 10#200 gallons 5aterials >uantit variance 9 -AL $ SL. S? -12#200 gallons $ SL. 8& per gallon 9 82#000 C -8&+#+00 $ SL. 8& per gallon 9 82#000 C SL 8& per gallon 9 8&(#+00 SL 9 8&(#+00 8& per gallon SL 9 11#*00 gallons
10$2+%
2,. )he standard cost card for a product shows that the product should use & 0ilograms of material 3 per finished unit and that the standard price of material 3 is 8&.%0 per 0ilogram. /uring April# when the budgeted production level was 1#000 units# 1#0&0 units were actuall made. A total of &#100 0ilograms of material 3 were used in production and the inventories of material 3 were reduced b !00 0ilograms during April. )he total cost of material 3 purchased during April was 81&#&00. )he material variances for material 3 during April were2
A. Aption A B. Aption 3 C. Aption C /. Aption / 3eginning balance of raw materials = ?urchases of raw materials 9 5aterials used in production = Knding balance of raw materials ?urchases of raw materials 9 5aterials used in production = Knding balance of raw materials $ 3eginning balance of raw materials ?urchases of raw materials 9 5aterials used in production = -Knding balance of raw materials $ 3eginning balance of raw materials. 9 &#100 0ilograms = -$!00 0ilograms. 9 !#+00 0ilograms 5aterials price variance 9 AL -A? $ S?. 9 81&#&00 $ -!#+00 0ilograms 8&.%0 per 0ilogram. 9 81&#&00 $ 81*#100 9 82#*00 F 5aterials >uantit variance 9 -AL $ SL. S? 9 AL S?$ SL S? 9 81+#&%0 $ -1#0&0 units & 0ilograms per unit. 8&.%0 per 0ilogram 9 81+#&%0 $ 81+#*20 9 82*0 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: 6ar* Source: CMA8 a*a te*
10$2+(
!0. )he following labor standards have been established for a particular product2
'hat is the labor efficienc variance for the month4 A. 81!#+0% C B. 81!#%!0 C C. 81%#!0% C /. 81%#!0% F S: 9 1#%00 units & hours per unit 9 (#000 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -*#100 hours $ (#000 hours. 812.!0 per hour 9 -1#100 hours. 812.!0 per hour 9 81!#%!0 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: -as.
10$2+*
!1. )he following labor standards have been established for a particular product2
'hat is the labor rate variance for the month4 A. 81#!2% C 3. 81#*+0 F C. 8&!0 F /. 8&!0 C A: A< 9 8,&#!&0 Eabor rate variance 9 A: -A< $ S<. 9 A: A< $ A: S< 9 8,&#!&0 $ -%#!00 hours 81*.%% per hour. 9 81#!2% C
10$2++
!2. )he standards for direct labor for a product are 2.% hours at 8+ per hour. East month# ,#000 units of the product were made and the labor efficienc variance was 8+#000 F. )he actual number of hours wor0ed during the past period was2 A. 2!#%00 3. 22#%00 C. 20#%00 D. 21#%00 S: 9 ,#000 units 2.% hours per unit 9 22#%00 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -A: $ 22#%00 hours. 8+ per hour 9 $8+#000 A: 8+ per hour $ 81+0#000 9 $8+#000 A: 8+ per hour 9 81*2#000 A: 9 81*2#000 8+ per hour A: 9 21#%00 hours
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: 6ar*
10$2+,
!!. )he <eed Compan uses a standard costing s stem. )he following data are available for @ovember2
)he actual direct labor rate for @ovember is2 A. 8+.+0 3. 8+.,0 C. 8,.00 /. 8,.20 Eabor rate variance 9 A:-A< $ S<. %#+00 hours -A< $ 8, per hour. 9 $81#1(0 %#+00 hours A< $ 8%2#200 9 $81#1(0 %#+00 hours A< 9 8%1#0&0 A< 9 8%1#0&0 %#+00 hours A< 9 8+.+0 per hour
10$2,0
!&. 3orden Knterprises uses standard costing. For the month of April# the compan reported the following data2 Standard direct labor rate2 810 per hour Standard hours allowed for actual production2 +#000 hours Actual direct labor rate2 8,.%0 per hour Eabor efficienc variance2 8&#+00 Favorable )he labor rate variance for April is2 A. 8!#*(0 C B. 8!#*(0 F C. 82#+%0 F /. 82#+%0 C Eabor efficienc variance 9 -A: $ S:. S< 9 -A: $ +#000 hours. 810 per hour 9 $8&#+00 A: 810 per hour $ 8+0#000 9 $8&#+00 A: 810 per hour 9 8*%#200 A: 9 8*%#200 810 per hour A: 9 *#%20 Eabor rate variance 9 A:-A< $ S<. 9 *#%20 hours -8,.%0 per hour $ 810.00 per hour. 9 *#%20 hours -$80.%0 per hour. 9 8!#*(0 F
10$2,1
!%. Furson Corporation ma0es a single product. "n a recent period (#%00 units were made and there was an unfavorable labor efficienc variance of 82(#000. /irect labor wor0ers were paid 8+ per hour and total wages were 81+2#000. )he labor rate variance was Iero. )he standard labor$hours per unit of output is closest to2 A. !.0 3. !.% C. &.0 /. &.% A: 9 81+2#000 8+ per hour 9 22#*%0 hours Eabor rate variance 9 A:-A< $ S<. 80 9 22#*%0 hours -8+ per hour $ S<. S< 9 8+ per hour Eabor efficienc variance 9 -A: $ S:. S< 82(#000 9 -22#*%0 hours $ (#%00 units Standard hours per unit. 8+ per hour -22#*%0 hours $ (#%00 units Standard hours per unit. 9 82(#000 8+ per hour -22#*%0 hours $ (#%00 units Standard hours per unit. 9 !#2%0 hours (#%00 units Standard hours per unit 9 1,#%00 hours Standard hours per unit 9 1,#%00 hours (#%00 units Standard hours per unit 9 ! hours per unit
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: 6ar* Source: CMA8 a*a te*
10$2,2
!(. )he following standards for variable manufacturing overhead have been established for a compan that ma0es onl one product2
)he following data pertain to operations for the last month2
'hat is the variable overhead efficienc variance for the month4 A. 8,#21, C B. 810#1*, C C. 8,#+(* C /. 8(&+ C S: 9 (00 units 2.* hours per unit 9 1#(20 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2#&00 hours $ 1#(20 hours. 81!.0% per hour 9 -*+0 hours. 81!.0% per hour 9 810#1*, C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: -as.
10$2,!
!*. )he following standards for variable manufacturing overhead have been established for a compan that ma0es onl one product2
'hat is the variable overhead rate variance for the month4 A. 81#200 F 3. 8,#(2% F C. 8+#&2% F D. 8,,0 C Variable overhead rate variance 9 A: -A< $ S<. 9 A: A< $ A: S< 9 8&%#!*% $ -!#!00 hours 81!.&% per hour. 9 8&%#!*% $ 8&&#!+% 9 8,,0 C
10$2,&
!+. 5illonIi Corporation has a standard cost s stem in which it applies manufacturing overhead to products on the basis of standard machine$hours -5:s.. )he compan has provided the following data for the most recent month2
'hat was the variable overhead rate variance for the month4 A. 8&#!%0 favorable 3. 82#000 unfavorable C. 82#(%0 favorable /. 81#*00 favorable Variable overhead rate variance 9 A: -A< $ S<. 9 A: A< $ A: S< 9 8&2#&00 $ -%#!00 hours 8+.%0 per hour. 9 8&2#&00 $ 8&%#0%0 9 82#(%0 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: 6ar*
10$2,%
!,. Eafountaine 5anufacturing Corporation has a standard cost s stem in which it applies manufacturing overhead to products on the basis of standard machine$hours -5:s.. )he compan 7s cost formula for variable manufacturing overhead is 8&.*0 per 5:. /uring the month# the actual total variable manufacturing overhead was 820#210 and the actual level of activit for the period was &#*00 5:s. 'hat was the variable overhead rate variance for the month4 A. 8&00 unfavorable B. 81#++0 favorable C. 81#++0 unfavorable /. 8&00 favorable Variable overhead rate variance 9 A: -A< $ S<. 9 A: A< $ A: S< 9 820#210 $ -&#*00 hours 8&.*0 per hour. 9 820#210 $ 822#0,0 9 81#++0 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: Me*ium
10$2,(
&0. /owen Corporation applies manufacturing overhead to products on the basis of standard machine$hours. For the most recent month# the compan based its budget on &#&00 machine$ hours. 3udgeted and actual overhead costs for the month appear below2
)he compan actuall wor0ed &#&(0 machine$hours during the month. )he standard hours allowed for the actual output were &#!10 machine$hours for the month. 'hat was the overall variable overhead efficienc variance for the month4 A. 82#1,+ favorable B. 81#(,% unfavorable C. 81%0 unfavorable /. 8%0! favorable Variable overhead 9 821#%(0 = 82+#1(0 9 8&,#*20 S< 9 8&,#*20 &#&00 hours 9 811.!0 per hour Variable overhead efficienc variance 9 -A: $ S:. S< 9 -&#&(0 hours $ &#!10 hours. 811.!0 per hour 9 -1%0 hours. 811.!0 per hour 9 81#(,% C
10$2,*
&1. <uston Corporation applies manufacturing overhead to products on the basis of standard machine$hours. 3udgeted and actual overhead costs for the most recent month appear below2
)he original budget was based on &#%00 machine$hours. )he compan actuall wor0ed &#%,0 machine$hours during the month and the standard hours allowed for the actual output were &#*00 machine$hours. 'hat was the overall variable overhead efficienc variance for the month4 A. 8%0 unfavorable B. 8+(, favorable C. 8,(, unfavorable /. 8100 unfavorable S< 9 8!%#%%0 &#%00 hours 9 8*.,0 per hour Variable overhead efficienc variance 9 -A: $ S:. S< 9 -&#%,0 hours $ &#*00 hours. 8*.,0 per hour 9 -$110 hours. 8*.,0 per hour 9 8+(, F
10$2,+
&2. )avorn Corporation applies manufacturing overhead to products on the basis of standard machine$hours. )he compan 7s standard variable manufacturing overhead rate is 81.+0 per machine$hour. )he actual variable manufacturing overhead cost for the month was 81!#0+0. )he original budget for the month was based on *#100 machine$hours. )he compan actuall wor0ed *#210 machine$hours during the month. )he standard hours allowed for the actual output of the month totaled *#0*0 machine$hours. 'hat was the variable overhead efficienc variance for the month4 A. 8!%& unfavorable B. 82%2 unfavorable C. 8%& favorable /. 8102 unfavorable Variable overhead efficienc variance 9 -A: $ S:. S< 9 -*#210 hours $ *#0*0 hours. 81.+0 per hour 9 -1&0 hours. 81.+0 per hour 9 82%2 C
10$2,,
&!. Dornfeld Corporation produces metal telephone poles. "n the most recent month# the compan budgeted production of 2#+00 poles. Actual production was !#200 poles. According to standards# each pole re>uires 2.2 machine$hours. )he actual machine$hours for the month were (#+,0 machine$hours. )he standard variable manufacturing overhead rate is 8,.20 per machine$hour. )he actual variable manufacturing cost for the month was 8(*#020. )he variable overhead efficienc variance is2 A. 81#!+0 C B. 81#!+0 F C. 82#2%2 F /. 82#2%2 C S: 9 !#200 poles 2.2 hours per pole 9 *#0&0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -(#+,0 hours $ *#0&0 hours. 8,.20 per hour 9 -$1%0 hours. 8,.20 per hour 9 81#!+0 F
10$!00
&&. Acri Corporation produces large commercial doors for warehouses and other facilities. "n the most recent month# the compan budgeted production of (#,00 doors. Actual production was *#!00 doors. According to standards# each door re>uires %.( machine$hours. )he actual machine$hours for the month were &0#!(0 machine$hours. )he standard supplies cost# and element of variable manufacturing overhead# is 8&.20 per machine$hour. )he actual supplies cost for the month was 81(+#2%1. )he variable overhead efficienc variance for supplies cost is2 A. 8!#&&% C B. 82#1+& F C. 82#1+& C /. 8!#&&% F S: 9 *#!00 doors %.( hours per door 9 &0#++0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -&0#!(0 hours $ &0#++0 hours. 8&.20 per hour 9 -$%20 hours. 8&.20 per hour 9 82#1+& F
10$!01
&%. )he following data have been provided b Spraglin Corporation# a compan that produces for0lift truc0s2
Supplies cost is an element of variable manufacturing overhead. )he variable overhead efficienc variance for supplies cost is2 A. 8&+& C 3. 82#(&! C C. 8&+& F /. 82#(&! F S: 9 (#200 truc0s !.* hours per truc0 9 22#,&0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2!#1(0 hours $ 22#,&0 hours. 82.20 per hour 9 -220 hours. 82.20 per hour 9 8&+& C
10$!02
)he Eitton Compan has established standards as follows2 /irect material2 ! pounds per unit O 8& per pound 9 812 per unit /irect labor2 2 hours per unit O 8+ per hour 9 81( per unit Variable manufacturing overhead2 2 hours per unit O 8% per hour 9 810 per unit Actual production figures for the past ear are given below. )he compan records the materials price variance when materials are purchased.
)he compan applies variable manufacturing overhead to products on the basis of standard direct labor$hours.
&(. )he materials price variance is2 A. 8&00 C 3. 8&00 F C. 8(00 F /. 8(00 C 5aterials price variance 9 -AL A?. $ -AL S?. 811#&00 $ -!#000 pounds 8& per pound. 811#&00 $ 812#000 9 8(00 F
10$!0!
&*. )he materials >uantit variance is2 A. 8+00 C 3. 8&#000 C C. 8*(0 C /. 8*(0 F SL 9 ! pounds per unit (00 units 9 1#+00 pounds 5aterials >uantit variance 9 -AL $ SL. S? 9 -2#000 pounds $ 1#+00 pounds. 8& per pound 9 -200 pounds. 8& per pound 9 8+00 C
&+. )he labor rate variance is2 A. 8&+0 F 3. 8&+0 C C. 8&&0 F D. 8&&0 C Eabor rate variance 9 A: -A< $ S<. 9 A: A< $ A: S< 9 8,#2&0 $ -1#100 hours 8+ per hour. 9 8,#2&0 $ 8+#+00 9 8&&0 C
10$!0&
&,. )he labor efficienc variance is2 A. 8+00 F 3. 8+00 C C. 8+&0 F /. 8+&0 C S: 9 (00 units 2 hours per unit 9 1#200 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -1#100 hours $ 1#200 hours. 8+ per hour 9 -$100 hours. 8+ per hour 9 8+00 F
%0. )he variable overhead rate variance is2 A. 82&0 C B. 8220 C C. 8220 F /. 82&0 F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8%#*20 $ -1#100 hours 8%.00 per hour. 9 8%#*20 $ 8%#%00 9 8220 C
10$!0%
%1. )he variable overhead efficienc variance is2 A. 8%20 F 3. 8%20 C C. 8%00 C D. 8%00 F Variable overhead efficienc variance 9 -A: $ S:. S< 9 -1#100 hours $ 1#200 hours. 8%.00 per hour 9 -$100 hours. 8%.00 per hour 9 8%00 F
Cox Kngineering performs cement core tests in its laborator . )he following standards have been set for each core test performed2
/uring 5arch# the laborator performed 2#000 core tests. An 5arch 1 no direct materials -sand. were on hand. Variable manufacturing overhead is assigned to core tests on the basis of standard direct labor$hours. )he following events occurred during 5arch2 +#(00 pounds of sand were purchased at a cost of 8*#!10. *#200 pounds of sand were used for core tests. +&0 actual direct labor$hours were wor0ed at a cost of 8+#(10. Actual variable manufacturing overhead incurred was 8!#200.
10$!0(
%2. )he materials price variance for 5arch is2 A. 8+(0 unfavorable 3. 8+(0 favorable C. 82+1 unfavorable /. 82+1 favorable 5aterials price variance 9 AL -A? $ S?. 9 AL A? $ AL S? 9 8*#!10 $ -+#(00 pounds 80.*% per pound. 9 8*#!10 $ 8(#&%0 9 8+(0 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: Me*ium
%!. )he materials >uantit variance for 5arch is2 A. 8,00 favorable 3. 81#,%0 favorable C. 81#,%0 unfavorable D. 8,00 unfavorable SL 9 ! pounds per unit 2#000 units 9 (#000 pounds 5aterials >uantit variance 9 -AL $ SL. S? 9 -*#200 pounds $ (#000 pounds. 80.*% per pound 9 -1#200 pounds. 80.*% per pound 9 8,00 C
10$!0*
%&. )he labor rate variance for 5arch is2 A. 8&#%*+ unfavorable 3. 81#&*0 unfavorable C. 8&#%*+ favorable D. 81#&*0 favorable Eabor rate variance 9 A: -A< $ S<. 9 A: A< $ A: S< 9 8+#(10 $ -+&0 hours 812 per hour. 9 8+#(10 $ 810#0+0 9 81#&*0 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: Me*ium
%%. )he labor efficienc variance for 5arch is2 A. 8&+0 favorable B. 8&+0 unfavorable C. 81,2 favorable /. 81,2 unfavorable S: 9 2#000 tests 0.& hours per test 9 +00 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -+&0 hours $ +00 hours. 812 per hour 9 -&0 hours. 812 per hour 9 8&+0 C
10$!0+
%(. )he variable overhead efficienc variance for 5arch is2 A. 8!20 unfavorable 3. 8!20 favorable C. 8!(0 unfavorable /. 8!(0 favorable S: 9 2#000 tests 0.& hours per test 9 +00 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -+&0 hours $ +00 hours. 8, per hour 9 -&0 hours. 8, per hour 9 8!(0 C
:urren Corporation ma0es a product with the following standard costs2
)he compan reported the following results concerning this product in Bune.
)he compan applies variable overhead on the basis of direct labor$hours. )he direct materials purchases variance is computed when the materials are purchased.
10$!0,
%*. )he materials >uantit variance for Bune is2 A. 81#*(0 C 3. 81#*+2 F C. 81#*(0 F /. 81#*+2 C SL 9 (#%00 units &.& grams per unit 9 2+#(00 grams 5aterials >uantit variance 9 -AL $ SL. S? 9 -2+#!+0 grams $ 2+#(00 grams. 8+.00 per gram 9 -$220 grams. 8+.00 per gram 9 81#*(0 F
%+. )he materials price variance for Bune is2 A. 8!#1+0 C 3. 82#+(0 F C. 82#+(0 C /. 8!#1+0 F 5aterials price variance 9 AL -A? $ S?. 9 !1#+00 grams -8+.10 per gram $ 8+.00 per gram. 9 !1#+00 grams -80.10 per gram. 9 8!#1+0 C
10$!10
%,. )he labor efficienc variance for Bune is2 A. 8,,% C 3. 8,%0 C C. 8,,% F D. 8,%0 F S: 9 (#%00 units 0.* hours per unit 9 &#%%0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -&#%00 hours $ &#%%0 hours. 81, per hour 9 -$%0 hours. 81, per hour 9 8,%0 F
(0. )he labor rate variance for Bune is2 A. 8&#0,% F 3. 8&#0%0 F C. 8&#0,% C D. 8&#0%0 C Eabor rate variance 9 A:-A< $ S<. 9 &#%00 hours -81,.,0 per hour $ 81,.00 per hour. 9 &#%00 hours -80.,0 per hour. 9 8&#0%0 C
10$!11
(1. )he variable overhead efficienc variance for Bune is2 A. 81+% F 3. 8200 C C. 81+% C D. 8200 F S: 9 (#%00 units 0.* hours per unit 9 &#%%0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -&#%00 hours $ &#%%0 hours. 8& per hour 9 -$%0 hours. 8& per hour 9 8200 F
(2. )he variable overhead rate variance for Bune is2 A. 81#!(% C 3. 81#!(% F C. 81#!%0 F /. 81#!%0 C Variable overhead rate variance 9 A:-A< $ S<. 9 &#%00 hours -8!.*0 per hour $ 8&.00 per hour. 9 &#%00 hours -$80.!0 per hour. 9 81#!%0 F
10$!12
Snuggs Corporation ma0es a product with the following standard costs2
)he compan reported the following results concerning this product in Actober.
(!. )he materials >uantit variance for Actober is2 A. 81#*,+ C 3. 81#*,+ F C. 81#*&0 F /. 81#*&0 C SL 9 2.+ ounces per unit 1#100 units 9 !#0+0 ounces 5aterials >uantit variance 9 -AL $ SL. S? 9 -2#*,0 ounces $ !#0+0 ounces. 8(.00 per ounce 9 -$2,0 ounces. 8(.00 per ounce 9 81#*&0 F
10$!1!
(&. )he materials price variance for Actober is2 A. 8(20 F 3. 8(1( F C. 8(1( C D. 8(20 C 5aterials price variance 9 AL -A? $ S?. 9 !#100 ounces -8(.20 per ounce $ 8(.00 per ounce. 9 !#100 ounces -80.20 per ounce. 9 8(20 C
(%. )he labor efficienc variance for Actober is2 A. 8%10 C 3. 8&+0 F C. 8&+0 C /. 8%10 F S: 9 1#100 units 0.! hours per unit 9 !!0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -!%0 hours $ !!0 hours. 82&.00 per hour 9 -20 hours. 82&.00 per hour 9 8&+0 C
10$!1&
((. )he labor rate variance for Actober is2 A. 8&,% C 3. 8&,% F C. 8%2% C /. 8%2% F Eabor rate variance 9 A:-A< $ S<. 9 !%0 hours -82%.%0 per hour $ 82&.00 per hour. 9 !%0 hours -81.%0 per hour. 9 8%2% C
(*. )he variable overhead efficienc variance for Actober is2 A. 8+2 C B. 8+0 C C. 8+2 F /. 8+0 F S: 9 1#100 units 0.! hours per unit 9 !!0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -!%0 hours $ !!0 hours. 8&.00 per hour 9 -20 hours. 8&.00 per hour 9 8+0 C
10$!1%
(+. )he variable overhead rate variance for Actober is2 A. 8!! F B. 8!% C C. 8!% F /. 8!! C Variable overhead rate variance 9 A:-A< $ S<. 9 !%0 hours -8&.10 per hour $ 8&.00 per hour. 9 !%0 hours -80.10 per hour. 9 8!% C
Dibodeaux Corporation ma0es a product with the following standard costs2
)he compan budgeted for production of !#!00 units in Bune# but actual production was !#&00 units. )he compan used !!#2&0 liters of direct material and !20 direct labor$hours to produce this output. )he compan purchased !%#,00 liters of the direct material at 8&.,0 per liter. )he actual direct labor rate was 822.*0 per hour and the actual variable overhead rate was 82.*0 per hour. )he compan applies variable overhead on the basis of direct labor$hours. )he direct materials purchases variance is computed when the materials are purchased.
10$!1(
(,. )he materials >uantit variance for Bune is2 A. 8!,2 C 3. 8!,2 F C. 8&00 F /. 8&00 C SL 9 !#&00 units ,.+ liters per unit 9 !!#!20 liters 5aterials >uantit variance 9 -AL $ SL. S? 9 -!!#2&0 liters $ !!#!20 liters. 8%.00 per liter 9 -$+0 liters. 8%.00 per liter 9 8&00 F
*0. )he materials price variance for Bune is2 A. 8!#!!2 F 3. 8!#%,0 C C. 8!#!!2 C D. 8!#%,0 F 5aterials price variance 9 AL -A? $ S?. 9 !%#,00 liters -8&.,0 per liter $ 8%.00 per liter. 9 !%#,00 liters -$80.10 per liter. 9 8!#%,0 F
10$!1*
*1. )he labor efficienc variance for Bune is2 A. 8&%& F 3. 8&%& C C. 8&&0 F /. 8&&0 C S: 9 !#&00 units 0.1 hour per unit 9 !&0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -!20 hours $ !&0 hours. 822 per hour 9 -$20 hours. 822 per hour 9 8&&0 F
*2. )he labor rate variance for Bune is2 A. 82!+ C 3. 82!+ F C. 822& C /. 822& F Eabor rate variance 9 A:-A< $ S<. 9 !20 hours -822.*0 per hour $ 822.00 per hour. 9 !20 hours -80.*0 per hour. 9 822& C
10$!1+
*!. )he variable overhead efficienc variance for Bune is2 A. 8%& F 3. 8%& C C. 8(0 F /. 8(0 C S: 9 !#&00 units 0.1 hour per unit 9 !&0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -!20 hours $ !&0 hours. 8! per hour 9 -$20 hours. 8! per hour 9 8(0 F
*&. )he variable overhead rate variance for Bune is2 A. 8,( C 3. 8102 F C. 8,( F /. 8102 C Variable overhead rate variance 9 A:-A< $ S<. 9 !20 hours -82.*0 per hour $ 8!.00 per hour. 9 !20 hours -$80.!0 per hour. 9 8,( F
10$!1,
;entile Corporation ma0es a product with the following standard costs2
)he compan produced (#000 units in 5a using !(#,*0 0ilos of direct material and &#!&0 direct labor$hours. /uring the month# the compan purchased &0#&00 0ilos of the direct material at 8&.*0 per 0ilo. )he actual direct labor rate was 81!.*0 per hour and the actual variable overhead rate was 82.*0 per hour. )he compan applies variable overhead on the basis of direct labor$hours. )he direct materials purchases variance is computed when the materials are purchased.
*%. )he materials >uantit variance for 5a is2 A. 81!#1%0 F 3. 812#!(1 F C. 81!#1%0 C /. 812#!(1 C SL 9 (#000 units (.( 0ilos per unit 9 !,#(00 0ilos 5aterials >uantit variance 9 -AL $ SL. S? 9 -!(#,*0 0ilos $ !,#(00 0ilos. 8%.00 per 0ilo 9 -$2#(!0 0ilos. 8%.00 per 0ilo 9 81!#1%0 F
10$!20
*(. )he materials price variance for 5a is2 A. 811#++0 C 3. 811#++0 F C. 812#120 F /. 812#120 C 5aterials price variance 9 AL -A? $ S?. 9 &0#&00 0ilos -8&.*0 per 0ilo $ 8%.00 per 0ilo. 9 &0#&00 0ilos -$0.!0 per 0ilo. 9 812#120 F
**. )he labor efficienc variance for 5a is2 A. 8(#!02 C 3. 8(#&&0 C C. 8(#&&0 F /. 8(#!02 F S: 9 (#000 units 0.+ hour per unit 9 &#+00 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -&#!&0 hours $ &#+00 hours. 81& per hour 9 -$&(0 hours. 81& per hour 9 8(#&&0 F
10$!21
*+. )he labor rate variance for 5a is2 A. 81#!02 C 3. 81#&&0 C C. 81#&&0 F D. 81#!02 F Eabor rate variance 9 A:-A< $ S<. 9 &#!&0 hours -81!.*0 per hour $ 81&.00 per hour. 9 &#!&0 hours -$80.!0 per hour. 9 81#!02 F
*,. )he variable overhead efficienc variance for 5a is2 A. 81#!+0 F 3. 81#2&2 C C. 81#2&2 F /. 81#!+0 C S: 9 (#000 units 0.+ hour per unit 9 &#+00 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -&#!&0 hours $ &#+00 hours. 8!.00 per hour 9 -$&(0 hours. 8!.00 per hour 9 81#!+0 F
10$!22
+0. )he variable overhead rate variance for 5a is2 A. 81#&&0 C B. 81#!02 F C. 81#!02 C /. 81#&&0 F Variable overhead rate variance 9 A:-A< $ S<. 9 &#!&0 hours -82.*0 per hour $ 8!.00 per hour. 9 &#!&0 hours -$80.!0 per hour. 9 81#!02 F
)idd Corporation ma0es a product with the following standard costs2
)he compan reported the following results concerning this product in @ovember.
10$!2!
+1. )he materials >uantit variance for @ovember is2 A. 8*#%!0 C 3. 8*#02+ C C. 8*#%!0 F /. 8*#02+ F SL 9 ,#000 units &.* grams per unit 9 &2#!00 grams 5aterials >uantit variance 9 -AL $ SL. S? 9 -&&#+10 grams $ &2#!00 grams. 8!.00 per gram 9 -2#%10 grams. 8!.00 per gram 9 8*#%!0 C
+2. )he materials price variance for @ovember is2 A. 8+#&(0 F 3. 8+#&(0 C C. 8,#&(0 C D. 8,#&(0 F 5aterials price variance 9 -AL A?. $ -AL S?. 9 81!2#&&0 $ -&*#!00 grams 8!.00 per gram. 9 81!2#&&0 $ 81&1#,00 9 8,#&(0 F
10$!2&
+!. )he labor efficienc variance for @ovember is2 A. 810#*20 C 3. 810#*20 F C. 810#(%! C /. 810#(%! F S: 9 ,#000 units 0.+ hour per unit 9 *#200 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -*#+*0 hours $ *#200 hours. 81( per hour 9 -(*0 hours. 81( per hour 9 810#*20 C
+&. )he labor rate variance for @ovember is2 A. 8*+* C 3. 8*20 F C. 8*+* F /. 8*20 C Eabor rate variance 9 -A: A<. $ -A: S<. 9 812%#1!! $ -*#+*0 hours 81(.00 per hour. 9 812%#1!! $ 812%#,20 9 8*+* F
10$!2%
+%. )he variable overhead efficienc variance for @ovember is2 A. 82#(+0 F 3. 82#%&( F C. 82#(+0 C /. 82#%&( C S: 9 ,#000 units 0.+ hour per unit 9 *#200 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -*#+*0 hours $ *#200 hours. 8& per hour 9 -(*0 hours. 8& per hour 9 82#(+0 C
+(. )he variable overhead rate variance for @ovember is2 A. 81#%*& F 3. 81#&&0 C C. 81#%*& C /. 81#&&0 F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 82,#,0( $ -*#+*0 hour 8& per hour. 9 82,#,0( $ 8!1#&+0 9 81#%*& F
10$!2(
Ca>uias Corporation ma0es a product with the following standard costs2
)he compan reported the following results concerning this product in August.
+*. )he materials >uantit variance for August is2 A. 81#(20 F 3. 81#(*& F C. 81#(20 C /. 81#(*& C SL 9 2#100 units %.! 0ilos 9 11#1!0 0ilos 5aterials >uantit variance 9 -AL $ SL. S? 9 -10#+(0 0ilos $ 11#1!0 0ilos. 8(.00 per 0ilo 9 -$2*0 0ilos. 8(.00 per 0ilo 9 81#(20 F
10$!2*
++. )he materials price variance for August is2 A. 82#!(0 C 3. 82#!(0 F C. 82#22( C /. 82#22( F 5aterials price variance 9 -AL A?. $ -AL S?. 9 8*!#1(0 $ -11#+00 0ilos 8(.00 per 0ilo. 9 8*!#1(0 $ 8*0#+00 9 82#!(0 C
+,. )he labor efficienc variance for August is2 A. 8&+0 F B. 8%00 C C. 8%00 F /. 8&+0 C S: 9 2#100 units 0.% hour per unit 9 1#0%0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -1#100 hours $ 1#0%0 hours. 810.00 per hour 9 -%0 hours. 810.00 per hour 9 8%00 C
10$!2+
,0. )he labor rate variance for August is2 A. 8&&0 F 3. 8&&0 C C. 8&20 C /. 8&20 F Eabor rate variance 9 -A: A<. $ -A: S<. 9 810#%(0 $ -1#100 hours 810.00 per hour. 9 810#%(0 $ 811#000 9 8&&0 F
,1. )he variable overhead efficienc variance for August is2 A. 8200 F 3. 820% C C. 820% F D. 8200 C S: 9 2#100 units 0.% hour per unit 9 1#0%0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -1#100 hours $ 1#0%0 hours. 8&.00 per hour 9 -%0 hours. 8&.00 per hour 9 8200 C
10$!2,
,2. )he variable overhead rate variance for August is2 A. 810% F 3. 8110 F C. 810% C D. 8110 C Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8&#%10 $ -1#100 hours 8&.00 per hour. 9 8&#%10 $ 8&#&00 9 8110 C
Sande Corporation ma0es a product with the following standard costs2
"n @ovember the compan 7s budgeted production was 2#,00 units but the actual production was !#000 units. )he compan used 2*#(*0 grams of the direct material and 1#!,0 direct labor$hours to produce this output. /uring the month# the compan purchased !1#*00 grams of the direct material at a cost of 81,(#%&0. )he actual direct labor cost was 82,#(0* and the actual variable overhead cost was 82#%02. )he compan applies variable overhead on the basis of direct labor$hours. )he direct materials purchases variance is computed when the materials are purchased.
10$!!0
,!. )he materials >uantit variance for @ovember is2 A. 8&20 C 3. 8&!& F C. 8&20 F /. 8&!& C SL 9 !#000 units ,.2 grams per unit 9 2*#(00 grams 5aterials >uantit variance 9 -AL $ SL. S? 9 -2*#(*0 grams $ 2*#(00 grams. 8(.00 per gram 9 -*0 grams. 8(.00 per gram 9 8&20 C
,&. )he materials price variance for @ovember is2 A. 8%#%20 F 3. 8(#!&0 F C. 8%#%20 C D. 8(#!&0 C 5aterials price variance 9 -AL A?. $ -AL S?. 9 81,(#%&0 $ -!1#*00 grams 8(.00 per gram. 9 81,(#%&0 $ 81,0#200 9 8(#!&0 C
10$!!1
,%. )he labor efficienc variance for @ovember is2 A. 82#%!0 C B. 82#%!0 F C. 82#!&! F /. 82#!&! C S: 9 !#000 units 0.% hours per unit 9 1#%00 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -1#!,0 hours $ 1#%00 hours. 82!.00 per hour 9 -110 hours. 82!.00 per hour 9 82#%!0 F
,(. )he labor rate variance for @ovember is2 A. 82#!(! C 3. 82#%%0 F C. 82#%%0 C D. 82#!(! F Eabor rate variance 9 -A: A<. $ -A: S<. 9 82,#(0* $ -1#!,0 hours 82!.00 per hour. 9 82,#(0* $ 8!1#,*0 9 82#!(! F
10$!!2
,*. )he variable overhead efficienc variance for @ovember is2 A. 8220 C 3. 81,+ F C. 81,+ C D. 8220 F S: 9 !#000 units 0.% hours per unit 9 1#%00 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -1#!,0 hours $ 1#%00 hours. 82.00 per hour 9 -$110 hours. 82.00 per hour 9 8220 F
,+. )he variable overhead rate variance for @ovember is2 A. 8!00 C 3. 82*+ C C. 8!00 F D. 82*+ F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 82#%02 $ -1#!,0 hours 82.00 per hour. 9 82#%02 $ 82#*+0 9 82*+ F
10$!!!
Eandram Corporation ma0es a product with the following standard costs2
"n 5arch the compan produced &#*00 units using 10#2!0 0ilos of the direct material and 2#210 direct labor$hours. /uring the month# the compan purchased 10#+00 0ilos of the direct material at a cost of 8*(#(+0. )he actual direct labor cost was 8!+#2!! and the actual variable overhead cost was 811#,!&. )he compan applies variable overhead on the basis of direct labor$hours. )he direct materials purchases variance is computed when the materials are purchased.
,,. )he materials >uantit variance for 5arch is2 A. 8%#+10 F 3. 8%#+,! C C. 8%#+,! F D. 8%#+10 C SL 9 &#*00 units 2.0 0ilos per unit 9 ,#&00 0ilos 5aterials >uantit variance 9 -AL $ SL. S? 9 -10#2!0 0ilos $ ,#&00 0ilos. 8*.00 per 0ilo 9 -+!0 0ilos. 8*.00 per 0ilo 9 8%#+10 C
10$!!&
100. )he materials price variance for 5arch is2 A. 8,&0 F 3. 81#0+0 F C. 81#0+0 C /. 8,&0 C 5aterials price variance 9 -AL A?. $ -AL S?. 9 8*(#(+0 $ -10#+00 0ilos 8*.00 per 0ilo. 9 8*(#(+0 $ 8*%#(00 9 81#0+0 C
101. )he labor efficienc variance for 5arch is2 A. 82#((0 F 3. 82#&22 F C. 82#&22 C /. 82#((0 C S: 9 &#*00 units 0.% hour per unit 9 2#!%0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -2#210 hours $ 2#!%0 hours. 81,.00 per hour 9 -$1&0 hours. 81,.00 per hour 9 82#((0 F
10$!!%
102. )he labor rate variance for 5arch is2 A. 8!#*%* C B. 8!#*%* F C. 8!#,,% C /. 8!#,,% F Eabor rate variance 9 -A: A<. $ -A: S<. 9 8!+#2!! $ -2#210 hours 81,.00 per hour. 9 8!+#2!! $ 8&1#,,0 9 8!#*%* F
10!. )he variable overhead efficienc variance for 5arch is2 A. 8*%( C B. 8*00 F C. 8*%( F /. 8*00 C S: 9 &#*00 units 0.% hour per unit 9 2#!%0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2#210 hours $ 2#!%0 hours. 8%.00 per hour 9 -$1&0 hours. 8%.00 per hour 9 8*00 F
10$!!(
10&. )he variable overhead rate variance for 5arch is2 A. 8++& C 3. 8++& F C. 8,&0 C /. 8,&0 F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 811#,!& $ -2#210 hours 8%.00 per hour. 9 811#,!& $ 811#0%0 9 8++& C
Arrow "ndustries uses a standard cost s stem in which direct materials inventor is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product.
/uring 5a # Arrow purchased 1(0#000 pounds of direct material at a total cost of 8!0&#000. )he total direct labor wages for 5a were 8!*#+00. Arrow manufactured 1,#000 units of product during 5a using 1&2#%00 pounds of direct material and %#000 direct labor$hours.
10$!!*
10%. )he direct materials price variance for 5a is2 A. 81(#000 favorable B. 81(#000 unfavorable C. 81&#2%0 favorable /. 81&#2%0 unfavorable 5aterials price variance 9 -AL A?. $ -AL S?. 9 8!0&#000 $ -1(0#000 pounds 81.+0 per pound. 9 8!0&#000 $ 82++#000 9 81(#000 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: -as. Source: CMA8 a*a te*
10(. )he direct materials >uantit variance for 5a is2 A. 81&#&00 unfavorable 3. 81#100 favorable C. 81*#100 unfavorable D. 81*#100 favorable SL 9 1,#000 units + pounds per unit 9 1%2#000 pounds 5aterials >uantit variance 9 -AL $ SL. S? 9 -1&2#%00 pounds $ 1%2#000 pounds. 81.+0 per pound 9 -$,#%00 pounds. 81.+0 per pound 9 81*#100 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !evel: -as. Source: CMA8 a*a te*
10$!!+
10*. )he direct labor rate variance for 5a is2 A. 82#200 favorable 3. 81#,00 unfavorable C. 82#000 unfavorable /. 82#0,0 favorable Eabor rate variance 9 -AL A?. $ -AL S?. 9 8!*#+00 $ -%#000 hours 8+.00 per hour. 9 8!*#+00 $ 8&0#000 9 82#200 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: -as. Source: CMA8 a*a te*
10+. )he direct labor efficienc variance for 5a is2 A. 82#200 favorable 3. 82#000 favorable C. 82#000 unfavorable /. 81#+00 unfavorable S: 9 1,#000 units 0.2% hour per unit 9 &#*%0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -%#000 hours $ &#*%0 hours. 8+ per hour 9 -2%0 hours. 8+ per hour 9 82#000 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: -as. Source: CMA8 a*a te*
10$!!,
)he )hompson Compan uses standard costing and has established the following direct material and direct labor standards for each unit of Eept. /irect materials2 2 gallons at 8& per gallon /irect labor2 0.% hours at 8+ per hour /uring September# the compan made (#000 Eepts and incurred the following costs2 /irect materials purchased2 1!#&00 gallons at 8&.10 per gallon /irect materials used2 12#(00 gallons /irect labor used2 2#+00 hours at 8*.(% per hour
10,. )he materials price variance for September was2 A. 81#!&0 favorable 3. 81#2(0 favorable C. 81#2(0 unfavorable D. 81#!&0 unfavorable 5aterials price variance 9 AL -A? $ S?. 9 1!#&00 gallons -8&.10 per gallon $ 8&.00 per gallon. 9 1!#&00 gallons -80.10 per gallon. 9 81#!&0 C
10$!&0
110. )he materials >uantit variance for September was2 A. 82#&(0 unfavorable 3. 8%#(00 unfavorable C. 82#&00 unfavorable /. 8%#*&0 unfavorable SL 9 (#000 units 2 gallons per units 9 12#000 gallons 5aterials >uantit variance 9 -AL $ SL. S? 9 -12#(00 gallons $ 12#000 gallons. 8&.00 per gallon 9 -(00 gallons. 8&.00 per gallon 9 82#&00 C
111. )he labor rate variance for September was2 A. 81#%!0 unfavorable B. 8,+0 favorable C. 82+0 favorable /. 8,+0 unfavorable Eabor rate variance 9 A:-A< $ S<. 9 2#+00 hours -8*.(% per hour $ 8+.00 per hour. 9 2#+00 hours -$80.!% per hour. 9 8,+0 F
10$!&1
112. )he labor efficienc variance for September was2 A. 8!!#(00 favorable B. 81#(00 favorable C. 822#&00 favorable /. 8!#200 favorable S: 9 (#000 units 0.% hours per unit 9 !#000 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -2#+00 hours $ !#000 hours. 8+.00 per hour 9 -$200 hours. 8+.00 per hour 9 81#(00 F
)he ;eurtI Compan uses standard costing. )he compan ma0es and sells a single product called a <off. )he following data are for the month of August2 Actual cost of direct material purchased and used2 8(%#%(0 5aterial price variance2 8%#,(0 unfavorable )otal materials variance2 822#!(0 unfavorable Standard cost per pound of material2 8& Standard cost per direct labor$hour2 8% Actual direct labor$hours2 (#%00 hours Eabor efficienc variance2 8!#%00 favorable Standard number of direct labor$hours per unit of <off2 2 hours )otal labor variance2 8&00 unfavorable
10$!&2
11!. )he total number of units of <off produced during August was2 A. 10#+00 3. 1&#&00 C. !#(00 /. (#%00 Eabor efficienc variance 9 -A: S<. $ -S: S<. 9 -(#%00 hours 8% per hour. $ -2 hours per unit Actual units produced 8% per hour. 9 $ 8!#%00 8!2#%00 $ 810 per unit Actual units produced 9 $8!#%00 810 per unit Actual units produced 9 8!(#000 Actual units produced 9 8!(#000 810 per unit 9 !#(00 units
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: 6ar*
10$!&!
11&. )he standard material allowed to produce one unit of <off was2 A. 1 pound 3. & pounds C. ! pounds /. 2 pounds )he following anal sis onl wor0s if# as in this case# the materials purchased during the period are also used during the period. )otal materials variance 9 Actual materials cost $ Standard materials cost 822#!(0 9 8(%#%(0 $ Standard materials cost Standard materials cost 9 8&!#200 Standard materials cost 9 Standard cost per pound Standard pounds per unit Actual units produced 8&!#200 9 8& per pound Standard pounds per unit !#(00 unitsP Standard pounds per unit 9 8&!#200 -8& per pound !#(00 units. 9 2 pounds per unit P)o compute the actual units produced2 Eabor efficienc variance 9 -A: S<. $ -S: S<. 9 -(#%00 hours 8% per hour. $ -2 hours per unit Actual units produced 8% per hour. 9 $ 8!#%00 8!2#%00 $ 810 per unit Actual units produced 9 $8!#%00 810 per unit Actual units produced 9 8!(#000 Actual units produced 9 8!(#000 810 per unit 9 !#(00 units
10$!&&
11%. )he actual material cost per pound was2 A. 8&.00 3. 8!.(* C. 8!.!0 D. 8&.&0 )otal material variance 9 5aterial price variance = 5aterial >uantit variance 822#!(0 C 9 8%#,(0 C = 5aterial >uantit variance 5aterial >uantit variance 9 822#!(0 C $ 8%#,(0 C 5aterial >uantit variance 9 81(#&00 C 5aterial >uantit variance 9 S? -AL $ SL. 81(#&00 9 8& per pound -AL $ -!#(00 units ! pounds per unit.. 81(#&00 9 8& per pound AL $ 8&!#200 8%,#(00 9 8& per pound AL AL 9 8%,#(00 8& per pound AL 9 1&#,00 pounds Actual cost of materials 9 Actual price per pound AL 8(%#%(0 9 Actual price per pound 1&#,00 pounds Actual price per pound 9 8(%#%(0 1&#,00 pounds 9 8&.&0 per pound
10$!&%
11(. )he actual direct labor rate per hour was2 A. 8%.(0 3. 8%.00 C. 810.00 /. 8&.&0 )otal labor variance 9 Eabor rate variance = Eabor efficienc variance 8&00 C 9 Eabor rate variance = 8!#%00 F Eabor rate variance 9 8!#,00 C Eabor rate variance 9 -A: A<. $ -A: S<. 9 A: -A< $ S<. 8!#,00 9 (#%00 hours -A< $ 8% per hour. 8!#,00 9 (#%00 hours A< $ 8!2#%00 (#%00 hours A< 9 8!(#&00 A< 9 8!(#&00 (#%00 hours 9 8%.(0 per hour
11*. )he labor rate variance was2 A. 8!#,00 favorable B. 8!#,00 unfavorable C. 8!#100 unfavorable /. 8!#100 favorable )otal labor variance 9 Eabor rate variance = Eabor efficienc variance 8&00 C 9 Eabor rate variance = 8!#%00 F Eabor rate variance 9 8!#,00 C
10$!&(
)he following materials standards have been established for a particular product2
11+. 'hat is the materials price variance for the month4 A. 8((0 C 3. 8(00 C C. 8((0 F /. 8(00 F 5aterials price variance 9 -AL A?. $ -AL S?. 9 820#(+0 $ -1#100 feet 81,.&0 per foot. 9 820#(+0 $ 821#!&0 9 8((0 F
10$!&*
11,. 'hat is the materials >uantit variance for the month4 A. 81#++0 C B. 810#&*( C C. 81#,&0 C /. 810#1%2 C SL 9 100 units &.( feet per unit 9 &(0 feet 5aterials >uantit variance 9 -AL $ SL. S? 9 -1#000 feet $ &(0 feet. 81,.&0 per foot 9 -%&0 feet. 81,.&0 per foot 9 810#&*( C
Bohnn Corporation ma0es a product that uses a material with the following standards2
)he compan budgeted for production of ,#%00 units in April# but actual production was ,#(00 units. )he compan used +%#&00 0ilos of direct material to produce this output. )he compan purchased ,1#,00 0ilos of the direct material at 81.10 per 0ilo. )he direct materials purchases variance is computed when the materials are purchased.
10$!&+
120. )he materials >uantit variance for April is2 A. 8*#!&+ C B. 8(#(+0 C C. 8(#(+0 F /. 8*#!&+ F SL 9 ,#(00 units +.2 0ilos per unit 9 *+#*20 0ilos 5aterials >uantit variance 9 -AL $ SL. S? 9 -+%#&00 0ilos $ *+#*20 0ilos. 81.00 per 0ilo 9 -(#(+0 0ilos. 81.00 per 0ilo 9 8(#(+0 C
121. )he materials price variance for April is2 A. 8*#+*2 F B. 8,#1,0 C C. 8,#1,0 F /. 8*#+*2 C 5aterials price variance 9 AL -A? $ S?. 9 ,1#,00 0ilos -81.10 per 0ilo $ 81.00 per 0ilo. 9 ,1#,00 0ilos -80.10 per 0ilo. 9 8,#1,0 C
FraiIe Corporation ma0es a product that uses a material with the >uantit standard of ,.% 0ilos per unit of output and the price standard of 8&.00 per 0ilo. "n Bul the compan produced *#000 units using (+#+%0 0ilos of the direct material. /uring the month the compan purchased *!#(00 0ilos of the direct material at 8!.*0 per 0ilo. )he direct materials purchases variance is computed when the materials are purchased.
10$!&,
122. )he materials >uantit variance for Bul is2 A. 8,#&00 C 3. 8+#(,% C C. 8,#&00 F /. 8+#(,% F SL 9 *#000 units ,.% 0ilos per unit 9 ((#%00 0ilos 5aterials >uantit variance 9 -AL $ SL. S? 9 -(+#+%0 0ilos $ ((#%00 0ilos. 8&.00 per 0ilo 9 -2#!%0 0ilos. 8&.00 per 0ilo 9 8,#&00 C
12!. )he materials price variance for Bul is2 A. 822#0+0 C 3. 81,#,%0 C C. 822#0+0 F /. 81,#,%0 F 5aterials price variance 9 AL -A? $ S?. 9 *!#(00 0ilos -8!.*0 per 0ilo $ 8&.00 per 0ilo. 9 *!#(00 0ilos -$80.!0 per 0ilo. 9 822#0+0 F
10$!%0
Cuda Corporation ma0es a product that uses a material with the following standards2
)he compan budgeted for production of !#%00 units in @ovember# but actual production was !#!00 units. )he compan used 2!#0%0 pounds of direct material to produce this output. )he compan purchased 2(#000 pounds of the direct material at a total cost of 81%+#(00. )he direct materials purchases variance is computed when the materials are purchased.
12&. )he materials >uantit variance for @ovember is2 A. 8,#(00 C 3. 8,#*(0 C C. 8,#*(0 F /. 8,#(00 F SL 9 !#!00 units (.% pounds per unit 9 21#&%0 pounds 5aterials >uantit variance 9 -AL $ SL. S? 9 -2!#0%0 pounds $ 21#&%0 pounds. 8(.00 per pound 9 -1#(00 pounds. 8(.00 per pound 9 8,#(00 C
10$!%1
12%. )he materials price variance for @ovember is2 A. 82#1&% C 3. 82#1&% F C. 82#(00 C /. 82#(00 F 5aterials price variance 9 -AL A?. $ -AL S?. 9 81%+#(00 $ -2(#000 pounds 8(.00 per pound. 9 81%+#(00 $ 81%(#000 9 82#(00 C
Cars0adon Corporation ma0es a product that uses a material with the following direct material standards2
)he compan produced !#000 units in /ecember using (#2*0 pounds of the material. /uring the month# the compan purchased *#100 pounds of the direct material at a total cost of 81!#&,0. )he direct materials purchases variance is computed when the materials are purchased.
10$!%2
12(. )he materials >uantit variance for /ecember is2 A. 8((0 F 3. 8((0 C C. 8(2* F /. 8(2* C SL 9 !#000 units 2.2 pounds per unit 9 (#(00 pounds 5aterials >uantit variance 9 -AL $ SL. S? 9 -(#2*0 pounds $ (#(00 pounds. 82.00 per pound 9 -$!!0 pounds. 82.00 per pound 9 8((0 F
12*. )he materials price variance for /ecember is2 A. 8*10 F 3. 8*10 C C. 8((0 F /. 8((0 C 5aterials price variance 9 -AL A?. $ -AL S?. 9 81!#&,0 $ -*#100 pounds 82.00 per pound. 9 81!#&,0 $ 81&#200 9 8*10 F
)he auto repair shop of Kmpire 5otor Sales uses standards to control labor time and labor cost in the shop. )he standard time for a motor tune$up is 2.% hours. )he record showing time spent in the shop last wee0 on tune$ups has been misplacedH however# the shop supervisor recalls that %0 tune$ups were completed during the wee0 and the controller recalls that the labor rate variance on tune$ups was 8+*# favorable. )he shop has a set standard labor rate of 8, per hour for tune$up wor0. )he total labor variance for the wee0 on tune$up wor0 was 8,!# unfavorable.
10$!%!
12+. )he number of actual hours spent on tune$up wor0 last wee0 was2 A. 12% hours 3. 10% hours C. 1&% hours /. Cannot be computed without further information )otal labor variance 9 Eabor rate variance = Eabor efficienc variance 8,! C 9 8+* F = Eabor efficienc variance 8,! 9 $8+* = Eabor efficienc variance Eabor efficienc variance 9 81+0 Eabor efficienc variance 9 -A: S<. $ -S: S<. 9 -A:$ S:. S< 81+0 9 -A: $ -2.% hours per tune$up %0 tune$ups.. 8, per hour 81+0 9 8, per hour A: $ 81#12% 8, per hour A: 9 81#!0% A: 9 81#!0% 8, per hour 9 1&% hours
12,. )he actual hourl rate of pa for tune$up wor0 last wee0 was2 A. 8+.&0 per hour 3. 8,.00 per hour C. 8,.(0 per hour /. Cannot be computed without further information Eabor rate variance 9 A: -A< $ S<. $8+* 9 1&% hours -A< $ 8, per hour. $8+* 9 1&% hours A< $ 81#!0% 1&% hours A< 9 81#21+ A< 9 81#21+ 1&% hours 9 8+.&0 per hour
10$!%&
)he following labor standards have been established for a particular product2
1!0. 'hat is the labor rate variance for the month4 A. 8&00 F 3. 8+0 C C. 8+0 F D. 8&00 C Eabor rate variance 9 -A: A<. $ -A: S<. 9 810#(00 $ -1#000 hours 810.20 per hour. 9 810#(00 $ 810#200 9 8&00 C
10$!%%
1!1. 'hat is the labor efficienc variance for the month4 A. 8&1( F 3. 8&1( C C. 8+1( F /. 8+&+ F S: 9 200 units %.& hours per unit 9 1#0+0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -1#000 hours $ 1#0+0 hours. 810.20 per hour 9 -$+0 hours. 810.20 per hour 9 8+1( F
3onnot Corporation ma0es a product that has the following direct labor standards2
)he compan budgeted for production of 2#100 units in Actober# but actual production was 1#,00 units. )he compan used &10 direct labor$hours to produce this output. )he actual direct labor rate was 820.(0 per hour.
10$!%(
1!2. )he labor efficienc variance for Actober is2 A. 8(1+ C 3. 8(!0 F C. 8(1+ F D. 8(!0 C S: 9 1#,00 units 0.2 hours per unit 9 !+0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -&10 hours $ !+0 hours. 821.00 per hour 9 -!0 hours. 821.00 per hour 9 8(!0 C
1!!. )he labor rate variance for Actober is2 A. 81(& F 3. 81(& C C. 81%2 C /. 81%2 F Eabor rate variance 9 A:-A< $ S<. 9 &10 hours -820.(0 per hour $ 821.00 per hour. 9 &10 hours -$80.&0 per hour. 9 81(& F
10$!%*
/avidson Corporation ma0es a product that has the following direct labor standards2
"n September the compan produced &#,00 units using 2#210 direct labor$hours. )he actual direct labor rate was 822.&0 per hour.
1!&. )he labor efficienc variance for September is2 A. 8%#%20 F 3. 8%#!*( F C. 8%#%20 C /. 8%#!*( C S: 9 &#,00 units 0.% hours per unit 9 2#&%0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -2#210 hours $ 2#&%0 hours. 82!.00 per hour 9 -$2&0 hours. 82!.00 per hour 9 8%#%20 F
10$!%+
1!%. )he labor rate variance for September is2 A. 81#&*0 C 3. 81#!2( C C. 81#!2( F /. 81#&*0 F Eabor rate variance 9 A:-A< $ S<. 9 2#210 hours -822.&0 per hour $ 82!.00 per hour. 9 2#210 hours -$0.(0 per hour. 9 81#!2( F
?i0us Corporation ma0es a product that has the following direct labor standards2
"n Banuar the compan 7s budgeted production was !#&00 units# but the actual production was !#%00 units. )he compan used (&0 direct labor$hours to produce this output. )he actual direct labor cost was 8+#,(0.
10$!%,
1!(. )he labor efficienc variance for Banuar is2 A. 8+&0 C 3. 8,00 C C. 8+&0 F D. 8,00 F S: 9 !#%00 units 0.2 hours per unit 9 *00 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -(&0 hours $ *00 hours. 81%.00 per hour 9 -$(0 hours. 81%.00 per hour 9 8,00 F
1!*. )he labor rate variance for Banuar is2 A. 8*00 F 3. 8(&0 C C. 8(&0 F /. 8*00 C Eabor rate variance 9 -AL A?. $ -AL S?. 9 8+#,(0 $ -(&0 hours 81%.00 per hour. 9 8+#,(0 $ 8,#(00 9 8(&0 F
Fabiano Corporation ma0es a product whose direct labor standards are 0.% hours per unit and 82!.00 per hour. "n Februar the compan produced !#!00 units using 1#(&0 direct labor$ hours. )he actual direct labor cost was 8!+#%&0.
10$!(0
1!+. )he labor efficienc variance for Februar is2 A. 82!0 F 3. 82!% F C. 82!0 C /. 82!% C S: 9 !#!00 units 0.% hours per unit 9 1#(%0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -1#(&0 hours $ 1#(%0 hours. 82!.00 per hour 9 -$10 hours. 82!.00 per hour 9 82!0 F
1!,. )he labor rate variance for Februar is2 A. 8+2% C B. 8+20 C C. 8+20 F /. 8+2% F Eabor rate variance 9 -AL A?. $ -AL S?. 9 8!+#%&0 $ -1#(&0 hours 82!.00 per hour. 9 8!+#%&0 $ 8!*#*20 9 8+20 C
10$!(1
)he following standards for variable manufacturing overhead have been established for a compan that ma0es onl one product2
1&0. 'hat is the variable overhead rate variance for the month4 A. 8!#*21 F 3. 8!#*21 C C. 8!#&&0 F /. 8!#&&0 C Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8,%#+,0 $ -+#(00 actual hours 811.%% per hour. 9 8,%#+,0 $ 8,,#!!0 9 8!#&&0 F
10$!(2
1&1. 'hat is the variable overhead efficienc variance for the month4 A. 8!#1,2 C 3. 8(#,1! F C. 8*#1(1 C /. 8(#,1! C S: 9 1#,00 units &.2 hours per unit 9 *#,+0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -+#(00 hours $ *#,+0 hours. 811.%% per hour 9 -(20 hours. 811.%% per hour 9 8*#1(1 C
)he <ichie Compan uses a standard costing s stem in which variable manufacturing overhead is assigned to production on the basis of the number of machine setups. /ata for the month of Actober include the following2 Variable manufacturing overhead cost incurred2 8&2#*%0 )otal variable manufacturing overhead variance2 8%#&!0 favorable Standard machine setups allowed for actual production2 2#,20 setups Actual machine setups incurred2 2#+%0 setups
10$!(!
1&2. )he standard variable overhead rate per machine setup is2 A. 81(.,1 3. 812.*+ C. 81%.00 D. 81(.%0 )otal variable manufacturing overhead variance 9 Actual manufacturing overhead cost incurred $ Standard manufacturing overhead cost 8%#&!0 F 9 8&2#*%0 $ Standard manufacturing overhead cost $8%#&!0 9 8&2#*%0 $ Standard manufacturing overhead cost Standard manufacturing overhead cost 9 8&+#1+0 8&+#1+0 2#,20 setups 9 81(.%0 per setup
1&!. )he variable overhead rate variance is2 A. 8&#2*% favorable 3. 8&#2*% unfavorable C. 81#0%0 unfavorable /. 81#0%0 favorable Variable overhead rate variance 9 -A: A<. $ -A: S<. 8&2#*%0 $ -2#+%0 setups 81(.%0 per setup. 9 8&2#*%0 $ 8&*#02% 9 8&#2*% F
10$!(&
A manufacturing compan that has onl one product has established the following standards for its variable manufacturing overhead. )he compan bases its variable manufacturing overhead standards on machine$hours.
1&&. 'hat is the variable overhead rate variance for the month4 A. 81#220 C 3. 8%#++% F C. 81#220 F /. 8%#++% C Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8*!#%0% $ -(#100 machine$hours 812.2% per machine$hour. 9 8*!#%0% $ 8*&#*2% 9 81#220 F
10$!(%
1&%. 'hat is the variable overhead efficienc variance for the month4 A. 8*#10% C 3. 8(#,+, F C. 8(#,+, C /. 81#10& C S: 9 1#200 units &.( hours per unit 9 %#%20 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -(#100 hours $ %#%20 hours. 812.2% per hour 9 -%+0 hours. 812.2% per hour 9 8*#10% C
)he following data have been provided b Augustave Corporation2
"ndirect labor and power are both elements of variable manufacturing overhead.
10$!((
1&(. )he variable overhead rate variance for indirect labor is closest to2 A. 8*#&0* F B. 8&#!&* F C. 8&#!&* C /. 8!#0(0 F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 81,&#&1+ $ -&&#1*0 hours 8&.%0 per hour. 9 81,&#&1+ $ 81,+#*(% 9 8&#!&* F
1&*. )he variable overhead rate variance for power is closest to2 A. 81#&2+ F 3. 8%#01( F C. 8%#01( C D. 8!#%++ F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8+,#1(, $ -&&#1*0 hours 82.10 per hour. 9 8+,#1(, $ 8,2#*%* 9 8!#%++ F
10$!(*
)he following data have been provided b ?ollo Corporation2
Eubricants and supplies are both elements of variable manufacturing overhead.
1&+. )he variable overhead rate variance for lubricants is closest to2 A. 81#&2% C 3. 81!#&&+ C C. 812#02! C /. 812#02! F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 81(&#,2! $ -(1#1(0 hours 82.%0 per hour. 9 81(&#,2! $ 81%2#,00 9 812#02! C
10$!(+
1&,. )he variable overhead rate variance for supplies is closest to2 A. 82#*%* C 3. 82#*%* F C. 82#0*! C /. 8(+& C Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8*%#&(% $ -(1#1(0 hours 81.20 per hour. 9 8*%#&(% $ 8*!#!,2 9 82#0*! C
:ic0or Corporation# which produces commercial safes# has provided the following data2
Supplies cost is an element of variable manufacturing overhead.
10$!(,
1%0. )he variable overhead rate variance for supplies is closest to2 A. 8&*#2%1 F B. 8&2#,01 C C. 8&*#2%1 C /. 8&2#,01 F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8%&2#1%1 $ -,,#+%0 hours 8%.00 per hour. 9 8%&2#1%1 $ 8&,,#2%0 9 8&2#,01 C
1%1. )he variable overhead efficienc variance for supplies is closest to2 A. 8&*#2%1 C B. 8&#!%0 C C. 8&#!%0 F /. 8&*#2%1 F S: 9 10#100 units ,.+ hours per unit 9 ,+#,+0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -,,#+%0 hours $ ,+#,+0 hours. 8%.00 per hour 9 -+*0 hours. 8%.00 per hour 9 8&#!%0 C
10$!*0
Bardell Corporation ma0es a product with the following standards for labor and variable overhead2
)he compan budgeted for production of (#&00 units in Bune# but actual production was (#&00 units. )he compan used !#1+0 direct labor$hours to produce this output. )he actual variable overhead rate was 8&.,0 per hour. )he compan applies variable overhead on the basis of direct labor$hours.
1%2. )he variable overhead efficienc variance for Bune is2 A. 8100 F 3. 8,+ F C. 8100 C /. 8,+ C S: 9 (#&00 units 0.% hours per unit 9 !#200 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -!#1+0 hours $ !#200 hours. 8%.00 per hour 9 -$20 hours. 8%.00 per hour 9 8100 F
10$!*1
1%!. )he variable overhead rate variance for Bune is2 A. 8!1+ C 3. 8!20 F C. 8!1+ F /. 8!20 C Variable overhead rate variance 9 A:-A< $ S<. 9 !#1+0 hours -8&.,0 per hour $ 8%.00 per hour. 9 !#1+0 hours -$80.10 per hour. 9 8!1+ F
SchuetI Corporation ma0es a product whose variable overhead standards are based on direct labor$hours. )he >uantit standard is 0.& hours per unit. )he variable overhead rate standard is 8%.00 per hour. "n Bul the compan produced *#%00 units using 2#*&0 direct labor$hours. )he actual variable overhead rate was 8%.20 per hour.
1%&. )he variable overhead efficienc variance for Bul is2 A. 81#!%2 C 3. 81#!%2 F C. 81#!00 C D. 81#!00 F S: 9 *#%00 units 0.& hours 9 !#000 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2#*&0 hours $ !#000 hours. 8%.00 per hour 9 -$2(0 hours. 8%.00 per hour 9 81#!00 F
10$!*2
1%%. )he variable overhead rate variance for Bul is2 A. 8(00 F 3. 8(00 C C. 8%&+ F D. 8%&+ C Variable overhead rate variance 9 A:-A< $ S<. 9 2#*&0 hours -8%.20 per hour $ 8%.00 per hour. 9 2#*&0 hours -80.20 per hour. 9 8%&+ C
5aIIo Corporation ma0es a product with the following standards for direct labor and variable overhead2
"n Februar the compan 7s budgeted production was %#000 units# but the actual production was %#100 units. )he compan used 2#0,0 direct labor$hours to produce this output. )he actual variable overhead cost was 8(#(++. )he compan applies variable overhead on the basis of direct labor$hours.
10$!*!
1%(. )he variable overhead efficienc variance for Februar is2 A. 81%0 F 3. 81(0 F C. 81(0 C D. 81%0 C S: 9 %#100 units 0.& hours 9 2#0&0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2#0,0 hours $ 2#0&0 hours. 8!.00 per hour 9 -%0 hours. 8!.00 per hour 9 81%0 C
1%*. )he variable overhead rate variance for Februar is2 A. 8&0+ C 3. 8&1+ F C. 8&1+ C /. 8&0+ F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8(#(++ $ -2#0,0 hours 8!.00 per hour. 9 8(#(++ $ 8(#2*0 9 8&1+ C
10$!*&
5arten Corporation ma0es a product with the following standards for direct labor and variable overhead2
"n 5a the compan produced 2#+00 units using !00 direct labor$hours. )he actual variable overhead cost was 81#(20. )he compan applies variable overhead on the basis of direct labor$hours.
1%+. )he variable overhead efficienc variance for 5a is2 A. 8100 C 3. 810+ F C. 810+ C /. 8100 F S: 9 2#+00 units 0.1 hours per unit 9 2+0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -!00 hours $ 2+0 hours. 8%.00 per hour 9 -20 hours. 8%.00 per hour 9 8100 C
10$!*%
1%,. )he variable overhead rate variance for 5a is2 A. 8112 C 3. 8112 F C. 8120 F D. 8120 C Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 81#(20 $ -!00 hours 8%.00 per hour. 9 81#(20 $ 81#%00 9 8120 C
Essay Questions
10$!*(
1(0. )hompson Compan uses a standard cost s stem for its single product. )he following data are available2 Actual experience for the current ear2
Standards per unit of product2
<e>uired2 Compute the following variances for raw materials# direct labor# and variable overhead# assuming that the price variance for materials is recogniIed at point of purchase2 a. /irect materials price variance. b. /irect materials >uantit variance. c. /irect labor rate variance. d. /irect labor efficienc variance. e. Variable overhead rate variance. f. Variable overhead efficienc variance.
10$!**
a. Q b. <aw 5aterials2 5aterials price variance 9 AL -A? $ S?. 9 1%#000 ards -81!.00 per ard $ 81%.00 per ard. 9 1%#000 ards -$82.00 per ard. 9 8!0#000 F SL 9 12#(00 units 1.1 ards per unit 9 1!#+(0 ards 5aterials >uantit variance 9 -AL $ SL. S? 9 -12#000 ards $ 1!#+(0 ards. 81%.00 per ard 9 -$1#+(0 ards. 81%.00 per ard 9 82*#,00 F c. Q d. /irect Eabor2 Eabor rate variance 9 A:-A< $ S<. 9 10#200 hours -810.00 per hour $ 8,.%0 per hour. 9 10#200 hours -80.%0 per hour. 9 8%#100 C S: 9 12#(00 units 0.+ hour per unit 9 10#0+0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -10#200 hours $ 10#0+0 hours. 8,.%0 per hour 9 -120 hours. 8,.%0 per hour 9 81#1&0 C e. Q f. Variable Averhead2 Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8+&#1%0 $ -10#200 hours 8+ per hour. 9 8+&#1%0 $ 8+1#(00 9 82#%%0 C S: 9 12#(00 units 0.+ hours per unit 9 10#0+0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -10#200 hours $ 10#0+0 hours. 8+.00 per hour 9 -20 hours. 8+.00 per hour 9 8,(0 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !earning "#$ective: (%'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: Me*ium
10$!*+
1(1. Fastic Corporation ma0es a product with the following standard costs2
)he materials price variance is recogniIed when materials are purchased. Variable overhead is applied on the basis of direct labor$hours. <e>uired2 a. Compute the materials >uantit variance. b. Compute the materials price variance. c. Compute the labor efficienc variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficienc variance. f. Compute the variable overhead rate variance.
10$!*,
a. SL 9 +#&00 units (., liters per unit 9 %*#,(0 liters 5aterials >uantit variance 9 -AL $ SL. S? 9 -%+#!!0 liters $ %*#,(0 liters. 8%.00 per liter 9 -!*0 liters. 8%.00 per liter 9 81#+%0 C b. 5aterials price variance 9 AL -A? $ S?. 9 (2#%00 liters -8&.,0 per liter $ 8%.00 per liter. 9 (2#%00 liters -$80.10 per liter. 9 8(#2%0 F c. S: 9 +#&00 units 0.! hours 9 2#%20 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -2#!10 hours $ 2#%20 hours. 81*.00 per hour 9 -$210 hours. 81*.00 per hour 9 8!#%*0 F d. Eabor rate variance 9 A:-A< $ S<. 9 2#!10 hours -81*.10 per hour $ 81*.00 per hour. 9 2#!10 hours -80.10 per hour. 9 82!1 C e. S: 9 +#&00 units 0.! hours per unit 9 2#%20 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2#!10 hours $ 2#%20 hours. 8(.00 per hour 9 -$210 hours. 8(.00 per hour 9 81#2(0 F f. Variable overhead rate variance 9 A:-A< $ S<. 9 2#!10 hours -8%.%0 per hour $ 8(.00 per hour. 9 2#!10 hours -$80.%0 per hour. 9 81#1%% F
10$!+0
1(2. 3lomdahl Corporation ma0es a product with the following standard costs2
)he compan reported the following results concerning this product in Actober.
)he materials price variance is recogniIed when materials are purchased. Variable overhead is applied on the basis of direct labor$hours. <e>uired2 a. Compute the materials >uantit variance. b. Compute the materials price variance. c. Compute the labor efficienc variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficienc variance. f. Compute the variable overhead rate variance.
10$!+1
a. SL 9 +#100 units %.2 0ilos per unit 9 &2#120 0ilos 5aterials >uantit variance 9 -AL $ SL. S? 9 -&!#1!0 0ilos $ &2#120 0ilos. 8(.00 per 0ilo 9 -1#010 0ilos. 8(.00 per 0ilo 9 8(#0(0 C b. 5aterials price variance 9 AL -A? $ S?. 9 &(#*00 0ilos -8%.*0 per 0ilo $ 8(.00 per 0ilo. 9 &(#*00 0ilos -$80.!0 per 0ilo. 9 81&#010 F c. S: 9 +#100 units 0.! hours per unit 9 2#&!0 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -2#%*0 hours $ 2#&!0 hours. 822.00 per hour 9 -1&0 hours. 822.00 per hour 9 8!#0+0 C d. Eabor rate variance 9 A:-A< $ S<. 9 2#%*0 hours -82!.*0 per hour $ 822.00 per hour. 9 2#%*0 hours -81.*0 per hour. 9 8&#!(, C e. S: 9 +#100 units 0.! hours 9 2#&!0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2#%*0 hours $ 2#&!0 hours. 82.00 per hour 9 -1&0 hours. 82.00 per hour 9 82+0 C f. Variable overhead rate variance 9 A:-A< $ S<. 9 2#%*0 hours -81.+0 per hour $ 82.00 per hour. 9 2#%*0 hours -$80.20 per hour. 9 8%1& F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !earning "#$ective: (%'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: -as.
10$!+2
1(!. Silmon Corporation ma0es a product with the following standard costs2
"n Bune the compan produced &#200 units using 21#+!0 grams of the direct material and 2#%+0 direct labor$hours. /uring the month the compan purchased 2&#100 grams of the direct material at a price of 8(.+0 per gram. )he actual direct labor rate was 81&.(0 per hour and the actual variable overhead rate was 8!.,0 per hour. )he materials price variance is computed when materials are purchased. Variable overhead is applied on the basis of direct labor$hours. <e>uired2 a. Compute the materials >uantit variance. b. Compute the materials price variance. c. Compute the labor efficienc variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficienc variance. f. Compute the variable overhead rate variance.
10$!+!
a. S: 9 &#200 units &., grams per unit 9 20#%+0 grams 5aterials >uantit variance 9 -AL $ SL. S? 9 -21#+!0 grams $ 20#%+0 grams. 8*.00 per gram 9 -1#2%0 grams. 8*.00 per gram 9 8+#*%0 C b. 5aterials price variance 9 AL -A? $ S?. 9 2&#100 grams -8(.+0 per gram $ 8*.00 per gram. 9 2&#100 grams -$80.20 per gram. 9 8&#+20 F c. S: 9 &#200 units 0.( hours per unit 9 2#%20 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -2#%+0 hours $ 2#%20 hours. 81&.00 per hour 9 -(0 hours. 81&.00 per hour 9 8+&0 C d. Eabor rate variance 9 A:-A< $ S<. 9 2#%+0 hours -81&.(0 per hour $ 81&.00 per hour. 9 2#%+0 hours -80.(0 per hour. 9 81#%&+ C e. S: 9 &#200 units 0.( hours per unit 9 2#%20 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2#%+0 hours $ 2#%20 hours. 8&.00 per hour 9 -(0 hours. 8&.00 per hour 9 82&0 C f. Variable overhead rate variance 9 A:-A< $ S<. 9 2#%+0 hours -8!.,0 per hour $ 8&.00 per hour. 9 2#%+0 hours -$80.10 per hour. 9 82%+ F
10$!+&
1(&. "gel Corporation ma0es a product with the following standard costs2
)he compan reported the following results concerning this product in September.
)he compan applies variable overhead on the basis of direct labor$hours. )he direct materials purchases variance is computed when the materials are purchased. <e>uired2 a. Compute the materials >uantit variance. b. Compute the materials price variance. c. Compute the labor efficienc variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficienc variance. f. Compute the variable overhead rate variance.
10$!+%
a. S: 9 1#*00 units &.! pounds per unit 9 *#!10 pounds 5aterials >uantit variance 9 -AL $ SL. S? 9 -*#210 pounds $ *#!10 pounds. 8(.00 per pound 9 -$100 pounds. 8(.00 per pound 9 8(00 F b. 5aterials price variance 9 -AL A?. $ -AL S?. 9 8&!#!20 $ -*#(00 pounds 8( per pound. 9 8&!#!20 $ 8&%#(00 9 82#2+0 F c. S: 9 1#*00 units 0.* hours per unit 9 1#1,0 hours Eabor efficienc variance 9 S<-A: $ S:. 9 820 per hour -1#2(0 hours $ 1#1,0 hours. 9 820 per hour -*0 hours. 9 81#&00 C d. Eabor rate variance 9 -A: A<. $ -A: S<. 9 82%#%*+ $ -1#2(0 hours 820 per hour. 9 82%#%*+ $ 82%#200 9 8!*+ C e. S: 9 1#*00 units 0.* hours per unit 9 1#1,0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -1#2(0 hours $ 1#1,0 hours. 82 per hour 9 -*0 hours. 82 per hour 9 81&0 C f. Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 82#!,& $ -1#2(0 hours 82 per hour. 9 82#!,& $ 82#%20 9 812( F
10$!+(
1(%. Schlager Corporation ma0es a product with the following standard costs2
)he compan applies variable overhead on the basis of direct labor$hours. )he direct materials purchases variance is computed when the materials are purchased. <e>uired2 a. Compute the materials >uantit variance. b. Compute the materials price variance. c. Compute the labor efficienc variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficienc variance. f. Compute the variable overhead rate variance.
10$!+*
a. S: 9 +#%00 units *.+ 0ilos per unit 9 ((#!00 0ilos 5aterials >uantit variance 9 -AL $ SL. S? 9 -(%#%%0 0ilos $ ((#!00 0ilos. 81.00 per 0ilo 9 -$*%0 0ilos. 81.00 per 0ilo 9 8*%0 F b. 5aterials price variance 9 -AL A?. $ -AL S?. 9 8*%#,00 $ -(,#000 0ilos 81.00 per 0ilo. 9 8*%#,00 $ 8(,#000 9 8(#,00 C c. S: 9 +#%00 units 0.& hours per unit 9 !#&00 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -!#&10 hours $ !#&00 hours. 81+.00 per hour 9 -10 hours. 81+.00 per hour 9 81+0 C d. Eabor rate variance 9 -A: A<. $ -A: S<. 9 8((#&,% $ -!#&10 hours 81+.00 per hour. 9 8((#&,% $ 8(1#!+0 9 8%#11% C e. S: 9 +#%00 units 0.& hours per unit 9 !#&00 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -!#&10 hours $ !#&00 hours. 8!.00 per hour 9 -10 hours. 8!.00 per hour 9 8!0 C f. Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8,#++, $ -!#&10 hours 8!.00 per hour. 9 8,#++, $ 810#2!0 9 8!&1 F
10$!++
1((. Eeerar Corporation ma0es a product with the following standard costs2
"n /ecember the compan produced &#200 units using !&#+*0 ounces of the direct material and 1#,00 direct labor$hours. /uring the month# the compan purchased !,#*00 ounces of the direct material at a total cost of 8111#1(0. )he actual direct labor cost for the month was 8!%#%!0 and the actual variable overhead cost was 8!#,,0. )he compan applies variable overhead on the basis of direct labor$hours. )he direct materials purchases variance is computed when the materials are purchased. <e>uired2 a. Compute the materials >uantit variance. b. Compute the materials price variance. c. Compute the labor efficienc variance. d. Compute the direct labor rate variance. e. Compute the variable overhead efficienc variance. f. Compute the variable overhead rate variance.
10$!+,
a. SL 9 &#200 units +.1 ounces per unit 9 !&#020 ounces 5aterials >uantit variance 9 -AL $ SL. S? 9 -!&#+*0 ounces $ !&#020 ounces. 8!.00 per ounce 9 -+%0 ounces. 8!.00 per ounce 9 82#%%0 C b. 5aterials price variance 9 -AL A?. $ -AL S?. 9 8111#1(0 $ -!,#*00 ounces 8!.00 per ounce. 9 8111#1(0 $ 811,#100 9 8*#,&0 F c. S: 9 &#200 units 0.% hours per unit 9 2#100 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -1#,00 hours $ 2#100 hours. 81+.00 per hour 9 -$200 hours. 81+.00 per hour 9 8!#(00 F d. Eabor rate variance 9 -A: A<. $ -A: S<. 9 8!%#%!0 $ -1#,00 hours 81+.00 per hour. 9 8!%#%!0 $ 8!&#200 9 81#!!0 C e. S: 9 &#200 units 0.% hours per unit 9 2#100 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -1#,00 hours $ 2#100 hours. 82.00 per hour 9 -$200 hours. 82.00 per hour 9 8&00 F f. Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8!#,,0 $ -1#,00 hours 82.00 per hour. 9 8!#,,0 $ 8!#+00 9 81,0 C
10$!,0
1(*. /iamond Compan produces a single product. )he compan has set the following standards for materials and labor2
/uring the past month# the compan purchased *#000 pounds of direct materials at a cost of 81*#%00. All of this material was used in the production of 1#!00 units of product. /irect labor cost totaled 8!(#*%0 for the month. )he following variances have been computed2
<e>uired2 1. For direct materials2 a. Compute the standard price per pound of materials. b. Compute the standard >uantit allowed for materials for the month7s production. c. Compute the standard >uantit of materials allowed per unit of product. 2. For direct labor2 a. Compute the actual direct labor cost per hour for the month. b. Compute the labor rate variance.
10$!,1
1. a. 5aterials price variance 9 AL -A? $ S?. 81#*%0 FP 9 *#000 pounds -82.%0 per poundPP $ S?. $81#*%0 9 81*#%00 $ *#000 pounds S? *#000 pounds S? 9 81,#2%0 S? 9 82.*% per pound P 81#!*% C = 8!*% F 9 81#*%0 F PP 1*#%00 *#000 pounds 9 82.%0 per pound b. 5aterials >uantit variance 9 -AL $ SL. S? 81#!*% C 9 -*#000 pounds $ SL. 82.*% per pound 81#!*% 9 81,#2%0 $ SL 82.*% per pound SL 82.*% per pound 9 81*#+*% SL 9 81*#+*% 82.*% per pound SL 9 (#%00 pounds c. (#%00 pounds 1#!00 units 9 % pounds per unit. 2. a. Eabor efficienc variance 9 -A: $ S:. S< 8&#000 F 9 -A: $ !#,00 hoursP.810 per hour $8&#000 9 A: 810 per hour$ 8!,#000 A: 810 per hour 9 8!%#000 A: 9 8!%#000 810 per hour A: 9 !#%00 )herefore# 8!(#*%0 total labor cost !#%00 hours 9 810.%0 per hour. P 1#!00 units ! hours per unit 9 !#,00 hours. b. Eabor rate variance 9 A:-A< $ S<. 9 !#%00 hours -810.%0 per hour $ 810.00 per hour. 9 !#%00 hours -80.%0 per hour. 9 81#*%0 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%'%( Com ute the *irect materials 7uantit. an* rice variances an* e) lain their significance !earning "#$ective: (%'%/ Com ute the *irect la#or efficienc. an* rate variances an* e) lain their significance !evel: 6ar*
10$!,2
1(+. )he following materials standards have been established for a particular product2
<e>uired2 a. 'hat is the materials price variance for the month4 b. 'hat is the materials >uantit variance for the month4 a. 5aterials price variance 9 -AL A?. $ -AL S?. 9 8!&#1%% $ -2#*00 pounds 81! per pound. 9 8!&#1%% $ 8!%#100 9 8,&% F b. SL 9 %00 units !.+ pounds per unit 9 1#,00 pounds 5aterials >uantit variance 9 -AL $ SL. S? 9 -2#000 pounds $ 1#,00 pounds. 81! per pound 9 -100 pounds. 81! per pound 9 81#!00 C
10$!,!
1(,. )he following standards have been established for a raw material used to ma0e product ?(22
)he following data pertain to a recent month7s operations2
<e>uired2 a. 'hat is the materials price variance for the month4 b. 'hat is the materials >uantit variance for the month4 a. 5aterials price variance 9 -AL A?. $ -AL S?. 9 8100#%00 $ -(#*00 pounds 81%.%0 per pound. 9 8100#%00 $ 810!#+%0 9 8!#!%0 F b. SL 9 ,20 units (.! pounds per unit 9 %#*,( pounds 5aterials >uantit variance 9 -AL $ SL. S? 9 -(#&00 pounds $ %#*,( pounds. 81%.%0 per pound 9 -(0& pounds. 81%.%0 per pound 9 8,#!(2 C
10$!,&
1*0. )he standards for product C!1 call for *.1 liters of a raw material that costs 812.10 per liter. East month# 1#,00 liters of the raw material were purchased for 82!#1+0. )he actual output of the month was 200 units of product C!1. A total of 1#200 liters of the raw material were used to produce this output. <e>uired2 a. 'hat is the materials price variance for the month4 b. 'hat is the materials >uantit variance for the month4 a. 5aterials price variance 9 -AL A?. $ -AL S?. 9 82!#1+0 $ -1#,00 liters 812.10 per liter. 9 82!#1+0 $ 822#,,0 9 81,0 C b. SL 9 200 units *.1 liters per unit 9 1#&20 liters 5aterials >uantit variance 9 -AL $ SL. S? 9 -1#200 liters $ 1#&20 liters. 812.10 per liter 9 -$220 liters. 812.10 per liter 9 82#((2 F
10$!,%
1*1. )he following labor standards have been established for a particular product2
<e>uired2 a. 'hat is the labor rate variance for the month4 b. 'hat is the labor efficienc variance for the month4 a. Eabor rate variance 9 -A: A<. $ -A: S<. 9 81!0#,*% $ -(#%00 hours 81,.*0 per hour. 9 81!0#,*0 $ 812+#0%0 9 82#,2% C b. S: 9 1#&00 units &.% hours per unit 9 (#!00 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -(#%00 hours $ (#!00 hours. 81,.*0 per hour 9 -200 hours. 81,.*0 per hour 9 8!#,&0 C
10$!,(
1*2. )he following direct labor standards have been established for product K&%A2
)he following data pertain to last month7s operations2
<e>uired2 a. 'hat was the labor rate variance for the month4 b. 'hat was the labor efficienc variance for the month4 a. Eabor rate variance 9 -A: A<. $ -A: S<. 9 811%#!20 $ -,#!00 hours 81!.00 per hour. 9 811%#!20 $ 8120#,00 9 8%#%+0 F b. S: 9 1#120 units +.2 hours per unit 9 ,#1+& hours Eabor efficienc variance 9 -A: $ S:. S< 9 -,#!00 hours $ ,#1+& hours. 81!.00 per hour 9 -11( hours. 81!.00 per hour 9 81#%0+ C
10$!,*
1*!. )he standards for product C%&E specif &.% direct labor$hours per unit at 812.&0 per direct labor$hour. East month 1#%(0 units of product C%&E were produced using *#000 direct labor$hours at a total direct labor wage cost of 8+(#100. <e>uired2 a. 'hat was the labor rate variance for the month4 b. 'hat was the labor efficienc variance for the month4 a. Eabor rate variance 9 -A: A<. $ -A: S<. 9 8+(#100 $ -*#000 hours 812.&0 per hour. 9 8+(#100 $ 8+(#+00 9 8*00 F b. S: 9 1#%(0 units &.% hours per unit 9 *#020 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -*#000 hours $ *#020 hours. 812.&0 per hour 9 -$20 hours. 812.&0 per hour 9 82&+ F
10$!,+
1*&. )he following standards for variable overhead have been established for a compan that ma0es onl one product2
<e>uired2 a. 'hat is the variable overhead rate variance for the month4 b. 'hat is the variable overhead efficienc variance for the month4 a. Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 812%#120 $ -,#200 hours 81!.,% per hour. 9 812%#120 $ 812+#!&0 9 8!#220 F b. S: 9 1#(00 units %.* hours per unit 9 ,#120 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -,#200 hours $ ,#120 hours. 81!.,% per hour 9 -+0 hours. 81!.,% per hour 9 81#11( C
10$!,,
1*%. "mme Corporation7s variable overhead is applied on the basis of direct labor$hours. )he compan has established the following variable overhead standards for product "+1G2
)he following data pertain to the most recent month7s operations during which 1#!(0 units of product "+1G were made2
<e>uired2 a. 'hat was the variable overhead rate variance for the month4 b. 'hat was the variable overhead efficienc variance for the month4 a. Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8!+#(&0 $ -&#(00 hours 8*.(0 per hour. 9 8!+#(&0 $ 8!&#,(0 9 8!#(+0 C b. S: 9 1#!(0 units !.% hours per unit 9 &#*(0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -&#(00 hours $ &#*(0 hours. 8*.(0 per hour 9 -$1(0 hours. 8*.(0 per hour 9 81#21( F
10$&00
1*(. Stelluti Corporation7s variable overhead is applied on the basis of direct labor$hours. )he standard cost card for product :(*F specifies *.+ direct labor$hours per unit of :(*F. )he standard variable overhead rate is 8(.%0 per direct labor$hour. /uring the most recent month# &00 units of product :(*F were made and 2#,00 direct labor$hours were wor0ed. )he actual variable overhead incurred was 820#1%%. <e>uired2 a. 'hat was the variable overhead rate variance for the month4 b. 'hat was the variable overhead efficienc variance for the month4 a. Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 820#1%% $ -2#,00 hours 8(.%0 per hour. 9 820#1%% $ 81+#+%0 9 81#!0% C b. S: 9 &00 units *.+ hours per unit 9 !#120 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2#,00 hours $ !#120 hours. 8(.%0 per hour 9 -$220 hours. 8(.%0 per hour 9 81#&!0 F
10$&01
1**. )he following data for @ovember have been provided b <ic0enba0er Corporation# a producer of precision drills for oil exploration2
<e>uired2 Compute the variable overhead rate variances for indirect labor and for power for @ovember. "ndicate whether each of the variances is favorable -F. or unfavorable -C.. Show our wor0R "ndirect labor2 Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8!(2#*%( $ -!(#%!0 hours 8,.&0 per hour. 9 8!(2#*%( $ 8!&!#!+2 9 81,#!*& C ?ower2 Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8,*#(,! $ -!(#%!0 hours 82.,0 per hour. 9 8,*#(,! $ 810%#,!* 9 8+#2&& F
10$&02
1*+. )he following data have been provided b )iano Corporation2
<e>uired2 Compute the variable overhead rate variances for lubricants and for supplies. "ndicate whether each of the variances is favorable -F. or unfavorable -C.. Show our wor0R Eubricants2 Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8211#+01 $ -!+#2*0 hours 8%.10 per hour. 9 8211#+01 $ 81,%#1** 9 81(#(2& C Supplies2 Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 810*#%(( $ -!+#2*0 hours 82.,0 per hour. 9 810*#%(( $ 8110#,+! 9 8!#&1* F
10$&0!
1*,. 3uis Corporation# which ma0es landing gears# has provided the following data for a recent month2
<e>uired2 /etermine the rate and efficienc variances for the variable overhead item supplies and indicate whether those variables are favorable or unfavorable. Show our wor0R Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8&,#*&2 $ -*#,%0 hours 8(.%0 per hour. 9 8&,#*&2 $ 8%1#(*% 9 81#,!! F S: 9 1#!00 units %., hours per unit 9 *#(*0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -*#,%0 hours $ *#(*0 hours. 8(.%0 per hour 9 -2+0 hours. 8(.%0 per hour 9 81#+20 C
10$&0&
1+0. Vit0o Corporation ma0es automotive engines. For the most recent month# budgeted production was (#000 engines. )he standard power cost is 8+.+0 per machine$hour. )he compan 7s standards indicate that each engine re>uires (.1 machine$hours. Actual production was (#&00 engines. Actual machine$hours were !+#*!0 machine$hours. Actual power cost totaled 8!%0#(2+. <e>uired2 /etermine the rate and efficienc variances for the variable overhead item power cost and indicate whether those variances are unfavorable or favorable. Show our wor0R Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8!%0#(2+ $ -!+#*!0 hours 8+.+0 per hour. 9 8!%0#(2+ $ 8!&0#+2& 9 8,#+0& C S: 9 (.1 hours per unit (#&00 units 9 !,#0&0 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -!+#*!0 hours $ !,#0&0 hours. 8+.+0 per hour 9 -$!10 hours. 8+.+0 per hour 9 82#*2+ F
Chapter 10 Appendix A ?redetermined Averhead <ates and Averhead Anal sis in a Standard Costing S stem Answer De
10$&0%
1. "n a standard costing s stem# underapplied or overapplied fixed manufacturing overhead is e>ual to the sum of the fixed manufacturing overhead budget variance and the fixed manufacturing overhead volume variance. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: Me*ium
2. "n a standard costing s stem where the denominator activit for the predetermined overhead rate is labor$hours# overhead costs are applied to wor0 in process on the basis of actual hours wor0ed. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: 6ar*
10$&0(
!. A compan has a standard cost s stem in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor$hours. )he compan 7s choice of the denominator level of activit affects the Fixed component of the predetermined overhead rate. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: -as.
&. A compan has a standard cost s stem in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor$hours. )he compan 7s choice of the denominator level of activit affects the Variable component of the predetermined overhead rate. FALSE
10$&0*
%. A compan has a standard cost s stem in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor$hours. )he amount of overhead that the compan would appl to finished production would ordinaril be the standard hours allowed for the actual units of finished output times the predetermined overhead rate per direct labor$hour. TRUE
(. A volume variance and an efficienc variance are computed for fixed manufacturing overhead costs. FALSE
10$&0+
*. )he budget variance represents the difference between the actual fixed manufacturing overhead cost incurred during a period and the budgeted fixed manufacturing overhead cost. TRUE
+. )he fixed manufacturing overhead budget variance is not controllable b managers because fixed costs are not controllable. FALSE
,. "f the fixed manufacturing overhead volume variance is unfavorable# too much has been spent on fixed manufacturing overhead items. FALSE
10. An unfavorable volume variance means that a firm operated at an activit level that was above the activit level planned for the period. FALSE
10$&0,
11. )he fixed manufacturing overhead volume variance will be unfavorable if production volume is less than sales volume. FALSE
12. A compan has a standard cost s stem in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor$hours. A fixed manufacturing overhead volume variance will necessaril occur in a month in which there is a fixed manufacturing overhead budget variance. FALSE
1!. )he terms Sstandard >uantit allowedS or Sstandard hours allowedS means2 A. the actual output in units multiplied b the standard output allowed. 3. the actual input in units multiplied b the standard output allowed. C. the actual output in units multiplied b the standard input allowed. /. the standard output in units multiplied b the standard input allowed.
10$&10
1&. )he higher the denominator level of activit 2 A. the higher the cost per unit of product. B. the lower the cost per unit of product. C. the less li0el is the occurrence of a volume variance. /. the more profitable operations li0el will be.
1%. Averhead is applied to wor0 in process in a standard costing s stem b 2 A. multipl ing actual hours times the predetermined rate. B. multipl ing standard hours allowed for the output of the period times the predetermined rate. C. multipl ing actual hours times the actual rate. /. multipl ing standard hours allowed for the output of the period times the actual rate.
1(. "n a standard cost s stem# the volume variance will be unfavorable when2 A. actual hours are greater than the denominator hours. B. the standard hours allowed for the output of the period are less than the denominator hours. C. the standard hours allowed for the output of the period are greater than the actual hours incurred. /. actual hours are less than the denominator hours.
10$&11
1*. <ameriI Compan erred in selecting a denominator activit and chose a much higher level than was realistic. )his error would most li0el result in a large2 A. favorable variable overhead efficienc variance. 3. favorable fixed manufacturing overhead budget variance. C. unfavorable overhead volume variance. /. unfavorable fixed manufacturing overhead budget variance.
1+. )he economic impact of the inabilit to reach a target denominator level of activit would best be measured b 2 A. the amount of the volume variance. B. the contribution margin lost b failing to meet the target denominator level of activit . C. the amount of the fixed manufacturing overhead budget variance. /. the amount of the variable overhead efficienc variance.
10$&12
1,. /osier Corporation has a standard cost s stem in which it applies manufacturing overhead to products on the basis of standard machine$hours -5:s.. )he compan has provided the following data for the most recent month2
'hat was the fixed manufacturing overhead budget variance for the month4 A. 82#000 unfavorable B. 82#000 favorable C. 8(10 unfavorable /. 8(10 favorable
3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8(!#000 $ 8(%#000 9 82#000 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: 6ar*
10$&1!
20. 5oraleI Corporation has a standard cost s stem in which it applies manufacturing overhead to products on the basis of standard machine$hours -5:s.. )he compan has provided the following data for the most recent month2
'hat was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month4 A. 8!+0 unfavorable B. 81#(20 favorable C. 81#((0 unfavorable /. 8!#2+0 unfavorable
3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8*0#000 $ 8*1#000 9 81#000 F Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 82&#+00 $ -!#100 5:s 8+.20 per 5:. 9 82&#+00 $ 82%#&20 9 8(20 F )otal variance 9 81#000 F = 8(20 F 9 81#(20 F
10$&1&
21. Sommers Fabrication Corporation has a standard cost s stem in which it applies manufacturing overhead to products on the basis of standard machine$hours -5:s. at 8,.*0 per 5:. )he compan budgeted its fixed manufacturing overhead cost at 8(*#000 for the month. /uring the month# the actual total variable manufacturing overhead was 8((#((0 and the actual total fixed manufacturing overhead was 8*0#000. )he actual level of activit for the period was (#(00 5:s. 'hat was the total of the variable overhead rate and fixed manufacturing overhead budget variances for the month4 A. 82#(&0 unfavorable 3. 8%#(&0 favorable C. 82#(&0 favorable D. 8%#(&0 unfavorable
3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8*0#000 $ 8(*#000 9 8!#000 C Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8((#((0 $ -(#(00 5:s 8,.*0 per 5:. 9 8((#((0 $ 8(&#020 9 82#(&0 C )otal variance 9 8!#000 C = 82#(&0 C 9 8%#(&0 C
10$&1%
22. 5eister Klectronics Corporation has a standard cost s stem in which it applies manufacturing overhead to products on the basis of standard machine$hours -5:s.. )he compan had budgeted its fixed manufacturing overhead cost at 8(+#+00 for the month and its level of activit at 2#000 5:s. )he actual total fixed manufacturing overhead was 8*!#!00 for the month and the actual level of activit was 1#+00 5:s. 'hat was the fixed manufacturing overhead budget variance for the month to the nearest dollar4 A. 811#!+0 unfavorable B. 8&#%00 unfavorable C. 811#!+0 favorable /. 8&#%00 favorable
3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8*!#!00 $ 8(+#+00 9 8&#%00 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: Me*ium
10$&1(
2!. )he Ammon Compan uses a standard cost s stem in which manufacturing overhead is applied to units on the basis of standard machine$hours. /uring Bul # the compan budgeted 8!%0#000 in manufacturing overhead cost at a denominator activit of 2%#000 machine$hours. At standard# each unit of finished product re>uires % machine$hours. )he following cost and activit were recorded during Bul 2
)he amount of overhead cost that the compan applied to wor0 in process for Bul was2 A. 82,2#%00 B. 8!1%#000 C. 8!22#000 /. 8!2%#000 ?redetermined overhead rate 9 Kstimated total manufacturing overhead cost Kstimated total amount of the allocation base 9 8!%0#000 2%#000 machine$hours 9 81& per machine$hour Averhead applied 9 ?redetermined overhead rate Standard hours allowed for the actual output 9 81& per machine$hour % machine$hours per unit &#%00 units 9 8!1%#000
10$&1*
2&. At the end of the ear# actual manufacturing overhead costs were 8110#000 and applied manufacturing overhead costs were 811+#+00. "f the denominator activit for the ear was 20#000 machine$hours# and if 22#000 standard machine$hours were allowed for the ear7s production# the predetermined overhead rate per machine$hour was2 A. 8%.00 3. 8%.,& C. 8%.%0 D. 8%.&0 ?redetermined overhead rate 9 Kstimated total manufacturing overhead cost Kstimated total amount of the allocation base 9 811+#+00 22#000 machine$hours 9 8%.&0 per machine$hour
2%. <ub or Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of 810.*0 per machine$hour and fixed manufacturing overhead cost of 8+21#10& per period. "f the denominator level of activit is *#!00 machine$hours# the variable element in the predetermined overhead rate would be2 A. 8112.&+ 3. 812!.1+ C. 8121.(( D. 810.*0 As given 810.*0
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: -as.
10$&1+
2(. :eersin0 Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of 810.%0 per machine$hour and fixed manufacturing overhead cost of 810+#10+ per period. "f the denominator level of activit is 2#*00 machine$hours# the fixed element in the predetermined overhead rate would be2 A. 81#0%0.00 B. 8&0.0& C. 810.%0 /. 8%0.%& Fixed component of predetermined overhead rate 9 Kstimated total fixed manufacturing overhead cost Kstimated total amount of the allocation base 9 810+#10+ 2#*00 machine$hours 9 8&0.0& per machine$hour
2*. 5orise Corporation bases its predetermined overhead rate on variable manufacturing overhead cost of 8+.(0 per machine$hour and fixed manufacturing overhead cost of 8&%*#002 per period. "f the denominator level of activit is (#!00 machine$hours# the predetermined overhead rate would be2 A. 8+1.1& 3. 8+(0.00 C. 8*2.%& /. 8+.(0 Fixed component of predetermined overhead rate 9 Kstimated total fixed manufacturing overhead cost Kstimated total amount of the allocation base 9 8&%*#002 (#!00 machine$hours 9 8*2.%& per machine$hour ?redetermined overhead rate 9 8+.(0 per machine$hour = 8*2.%& per machine$hour 9 8+1.1& per machine$hour
10$&1,
2+. Baune Compan uses a standard cost s stem in which it applies manufacturing overhead to units of product on the basis of standard direct labor$hours -/E:s.. )he following data pertain to last month7s operations2
)he fixed manufacturing overhead budget variance is2 A. 8%00 C 3. 8%00 F C. 82#200 C /. 81#*00 C 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8%#%00 $ 8%#000 9 8%00 C
10$&20
2,. Ba Compan uses a standard cost s stem in which it applies manufacturing overhead to units of product on the basis of standard direct labor$hours -/E:s.. )he information below pertains to a recent month7s activit 2
)he volume variance would be2 A. 8!00 F 3. 8!00 C C. 81%0 F D. 81+0 F Volume variance 9 Fixed component of the predetermined overhead rate -/enominator hours $Standard hours allowed. 9 8! per /E: -!00 /E:s $ !(0 /E:s. 9 8! per /E: -$(0 /E:s. 9 81+0 F
10$&21
!0. Cos0e Corporation applies manufacturing overhead to products on the basis of standard machine$hours. 3udgeted and actual overhead costs for the month appear below2
)he compan based its original budget on !#,00 machine$hours. )he compan actuall wor0ed !#%+0 machine$hours during the month. )he standard hours allowed for the actual output of the month totaled !#**0 machine$hours. 'hat was the overall fixed manufacturing overhead budget variance for the month4 A. 81#2+0 favorable 3. 8!20 favorable C. 8!20 unfavorable /. 81#2+0 unfavorable
3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 82*#020 $ 82(#*00 9 8!20 C
10$&22
!1. SultIer Corporation applies manufacturing overhead to products on the basis of standard machine$hours. 3udgeted and actual overhead costs for the most recent month appear below2
)he compan based its original budget on !#000 machine$hours. )he compan actuall wor0ed 2#*!0 machine$hours during the month. )he standard hours allowed for the actual output of the month totaled 2#(,0 machine$hours. 'hat was the overall fixed manufacturing overhead budget variance for the month4 A. 8!#!1* favorable 3. 81(0 unfavorable C. 8!#!1* unfavorable D. 81(0 favorable 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8!1#,&0 $ 8!2#100 9 81(0 F
10$&2!
!2. :eroman Corporation applies manufacturing overhead to products on the basis of standard machine$hours. )he budgeted fixed manufacturing overhead cost for the most recent month was 82(#%%0 and the actual fixed manufacturing overhead cost for the month was 82(#%*0. )he compan based its original budget on %#,00 machine$hours. )he standard hours allowed for the actual output of the month totaled %#*%0 machine$hours. 'hat was the overall fixed manufacturing overhead budget variance for the month4 A. 820 unfavorable 3. 8(*% favorable C. 820 favorable /. 8(*% unfavorable 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 82(#%*0 $ 82(#%%0 9 820 C
10$&2&
!!. <ostad Corporation applies manufacturing overhead to products on the basis of standard machine$hours. 3udgeted and actual overhead costs for the most recent month appear below2
)he compan based its original budget on *#100 machine$hours. )he compan actuall wor0ed *#0(0 machine$hours during the month. )he standard hours allowed for the actual output of the month totaled (#,,0 machine$hours. 'hat was the overall fixed manufacturing overhead volume variance for the month4 A. 8%12 favorable 3. 8%12 unfavorable C. 81#&0+ favorable D. 81#&0+ unfavorable ?redetermined overhead rate 9 Kstimated total manufacturing overhead cost Kstimated total amount of the allocation base 9 8,0#++0 *#100 machine$hours 9 812.+0 per machine$hour Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 8,0#++0 $ -(#,,0 machine$hours 812.+0 per machine$hour. 9 8,0#++0 $ 8+,#&*2 9 81#&0+ C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: 6ar*
10$&2%
!&. 3ehring Corporation applies manufacturing overhead to products on the basis of standard machine$hours. 3udgeted and actual fixed manufacturing overhead costs for the most recent month appear below2
)he compan based its original budget on !#200 machine$hours. )he compan actuall wor0ed !#1*0 machine$hours during the month. )he standard hours allowed for the actual output of the month totaled !#2%0 machine$hours. 'hat was the overall fixed manufacturing overhead volume variance for the month4 A. 8&!% favorable 3. 82(1 unfavorable C. 8&!% unfavorable /. 82(1 favorable Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process Fixed component of predetermined overhead rate 9 Kstimated total fixed manufacturing overhead cost Kstimated total amount of the allocation base 9 82*#+&0 !#200 machine$ hours 9 8+.*0 per machine$hour 9 82*#+&0 $ -!#2%0 machine$hours 8+.*0 per machine$hour. 9 82*#+&0 $ 82+#2*% 9 8&!% F
10$&2(
!%. )recroci Corporation applies manufacturing overhead to products on the basis of standard machine$hours. )he compan bases its predetermined overhead rate on 2#%00 machine$hours. )he compan 7s total budgeted fixed manufacturing overhead is 8%#*%0. "n the most recent month# the total actual fixed manufacturing overhead was 8(#0!0. )he compan actuall wor0ed 2#(00 machine$hours during the month. )he standard hours allowed for the actual output of the month totaled 2#&,0 machine$hours. 'hat was the overall fixed manufacturing overhead volume variance for the month4 A. 82!0 favorable 3. 82+0 unfavorable C. 82! unfavorable /. 82!0 unfavorable Fixed component of predetermined overhead rate 9 Kstimated total fixed manufacturing overhead cost Kstimated total amount of the allocation base 9 8%#*%0 2#%00 machine$ hours 9 82.!0 per machine$hour Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 8%#*%0 $ -2#&,0 machine$hours 82.!0 per machine$hour. 9 8%#*%0 $ 8%#*2* 9 82! C
10$&2*
!(. )emores Corporation applies manufacturing overhead to products on the basis of standard machine$hours. )he compan 7s predetermined overhead rate for fixed manufacturing overhead is 81.%0 per machine$hour and the denominator level of activit is %#(00 machine$ hours. "n the most recent month# the total actual fixed manufacturing overhead was 8+#%10 and the compan actuall wor0ed %#+&0 machine$hours during the month. )he standard hours allowed for the actual output of the month totaled %#,+0 machine$hours. 'hat was the overall fixed manufacturing overhead volume variance for the month4 A. 8!(0 favorable 3. 8!(0 unfavorable C. 8%*0 favorable /. 8210 favorable Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 -%#(00 machine$hours 81.%0 per machine$hour. $ -%#,+0 machine$hours 81.%0 per machine$hour. 9 8+#&00 $ 8+#,*0 9 8%*0 F
Fran0lin ;lass 'or0s uses a standard cost s stem in which manufacturing overhead is applied on the basis of standard direct labor$hours. Kach unit re>uires two standard hours of direct labor for completion. )he denominator activit for the ear was based on budgeted production of 200#000 units. )otal overhead was budgeted at 8,00#000 for the ear# and the fixed manufacturing overhead rate was 81.%0 per direct labor$hour. )he actual data pertaining to the manufacturing overhead for the ear are presented below2
10$&2+
!*. )he standard hours allowed for actual production for the ear total2 A. 2&*#%00 B. !,(#000 C. &00#000 /. &,%#000 Standard hours allowed 9 Standard hours Actual production 9 2 hours per unit 1,+#000 units 9 !,(#000 hours
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: Me*ium Source: CMA8 a*a te*
!+. Fran0lin7s variable overhead efficienc variance for the ear is2 A. 8!!#000 unfavorable 3. 8!%#200 favorable C. 8!%#200 unfavorable /. 8!!#000 favorable ?redetermined overhead rate 9 Kstimated total manufacturing overhead at capacit Kstimated total amount of the allocation base at capacit 9 8,00#000 -200#000 units 2 hours per unit. 9 82.2% per hour ?redetermined overhead rate 9 Fixed component of predetermined overhead rate = Variable component of predetermined overhead rate 82.2% per hour 9 81.%0 per hour = Variable component of predetermined overhead rate Variable component of predetermined overhead rate 9 80.*% per hour 9 S< S: 9 1,+#000 units 2 hours per unit 9 !,(#000 hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -&&0#000 hours $ !,(#000 hours. 80.*% per hour 9 -&&#000 hours. 80.*% per hour 9 8!!#000 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: 6ar* Source: CMA8 a*a te*
10$&2,
!,. Fran0lin7s variable overhead rate variance for the ear is2 A. 820#000 unfavorable 3. 822#000 favorable C. 822#000 unfavorable /. 820#000 favorable ?redetermined overhead rate 9 Kstimated total manufacturing overhead at capacit Kstimated total amount of the allocation base at capacit 9 8,00#000 -200#000 units 2 hours per unit. 9 82.2% per hour ?redetermined overhead rate 9 Fixed component of predetermined overhead rate = Variable component of predetermined overhead rate 82.2% per hour 9 81.%0 per hour = Variable component of predetermined overhead rate Variable component of predetermined overhead rate 9 80.*% per hour 9 S< Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8!%2#000 $ -&&0#000 hours 80.*% per hour. 9 8!%2#000 $ 8!!0#000 9 822#000 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: 6ar* Source: CMA8 a*a te*
&0. Fran0lin7s fixed manufacturing overhead budget variance for the ear is2 A. 81,#000 favorable B. 82%#000 favorable C. 82%#000 unfavorable /. 81,#000 unfavorable 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8%*%#000 $ 8(00#000 9 82%#000 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: 6ar* Source: CMA8 a*a te*
10$&!0
&1. )he fixed manufacturing overhead applied to Fran0lin7s production for the ear is2 A. 8&+&#200 3. 8%*%#000 C. 8%,&#000 /. 8(00#000 5anufacturing overhead applied 9 ?redetermined overhead rate Standard hours allowed for the actual output 9 1,+#000 units 81.%0 per hour 2 hours per unit 9 8%,&#000
&2. Fran0lin7s fixed manufacturing overhead volume variance for the ear is2 A. 8(#000 unfavorable 3. 81,#000 favorable C. 82%#000 favorable /. 8%%#000 unfavorable Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 8(00#000 $ -1,+#000 units 2 hours per unit 81.%0 per hour. 9 8(00#000 $ 8%,&#000 9 8(#000 C
10$&!1
A manufacturing compan uses a standard costing s stem in which standard machine$hours -5:s. is the measure of activit . /ata from the compan 7s flexible budget for manufacturing overhead are given below2
)he following data pertain to operations for the most recent period2
&!. 'hat is the predetermined overhead rate to the nearest cent4 A. 81+.1* per 5: 3. 81+.!1 per 5: C. 81+.*0 per 5: /. 81+.+& per 5: Variable overhead = Fixed overhead 9 8!1#(20 = 8,%#%&0 ?redetermined overhead rate 9 Kstimated total manufacturing overhead Kstimated total amount of the allocation base 9 812*#1(0 (#+00 5:s 9 81+.*0 per 5:
10$&!2
&&. :ow much overhead was applied to products during the period to the nearest dollar4 A. 812+#1&0 B. 81!0#(01 C. 81!0#,00 /. 812*#1(0 Averhead applied 9 ?redetermined overhead rate Standard hours allowed for the actual output 9 81+.*0 per 5: (#,+& 5:s 9 81!0#(00.+0
&%. 'hat was the variable overhead rate variance for the period to the nearest dollar4 A. 81#*%0 C 3. 8+20 F C. 81#*%0 F /. 8+20 C S< 9 8!1#(20 (#+00 5:s 9 8&.(% per 5: Variable overhead rate variance 9 A:-A< $ S<. 9 8!0#+00 $ -*#000 5:s 8&.(% per 5:. 9 8!0#+00 $ 8!2#%%0 9 81#*%0 F
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !evel: Me*ium
10$&!!
&(. 'hat was the variable overhead efficienc variance for the period to the nearest dollar4 A. 81#*&( C 3. 8*0 C C. 8+20 F D. 8*& C Variable overhead efficienc variance 9 -A: S<. $ -S: S<. 9 8!2#%%0 $ -(#,+& 5:s 8&.(% per 5:. 9 8!2#%%0 $ 8!2#&*( 9 8*& C
&*. 'hat was the fixed manufacturing overhead budget variance for the period to the nearest dollar4 A. 81#+00 C 3. 8222 F C. 81#010 C /. 8*+% C 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8,*#!&0 $ 8,%#%&0 9 81#+00 C
10$&!&
&+. 'hat was the fixed manufacturing overhead volume variance for the period to the nearest dollar4 A. 82#%(% F 3. 82#+10 F C. 822% C D. 82#%+% F Fixed component of predetermined overhead rate 9 Kstimated total fixed manufacturing overhead cost Kstimated total amount of the allocation base 9 8,%#%&0 (#+00 5:s 9 81&.0% per 5: Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 8,%#%&0 $ -(#,+& 5: 81&.0% per 5:. 9 8,%#%&0 $ 8,+#12% 9 82#%+% F
10$&!%
)he Chase Compan uses a standard cost s stem in which manufacturing overhead costs are applied to products on the basis of standard machine$hours. For @ovember# the compan 7s flexible budget for manufacturing overhead showed the following total budgeted costs at the denominator activit level of &0#000 machine$hours2
/uring @ovember &2#000 machine$hours were used to complete 1!#200 units of product with the following actual overhead costs2
)he standard time allowed to complete one unit of product is !.( machine$hours.
&,. )he total predetermined overhead rate per machine$hour for @ovember was2 A. 81.*% B. 82.&0 C. 82.,* /. 81.&0 ?redetermined overhead rate 9 Kstimated total manufacturing overhead Kstimated total amount of the allocation base 9 -8!(#000 = 820#000 = 82&#000 = 81(#000. &0#000 machine$hours 9 8,(#000 &0#000 machine$hours 9 82.&0 per machine$hour
10$&!(
%0. )he total amount of overhead cost applied to 'or0 in ?rocess during @ovember was2 A. 8&*#%20 3. 8((#%2+ C. 810(#%2+ D. 811&#0&+ Averhead applied 9 ?redetermined overhead rate Standard hours allowed for the actual output 9 82.&0 per machine$hour -1!#200 units !.( machine$hours per unit. 9 82.&0 per machine$hour &*#%20 machine$hours 9 811&#0&+
%1. )he variable overhead efficienc variance for utilities cost for @ovember was2 A. 82#*(0 favorable 3. 8!#*(0 unfavorable C. 8!#*(0 favorable /. 81#000 favorable S: 9 1!#200 units !.( machine$hours per unit 9 &*#%20 machine$hours Variable overhead efficienc variance 9 -A: $ S:. S< 9 -&2#000 machine$hours $ &*#%20 machine$hours. 80.%0 per machine$hour 9 -$%#%20 machine$hours. 80.%0 per machine$hour 9 82#*(0 F
10$&!*
%2. )he variable overhead rate variance for maintenance cost for @ovember was2 A. 8*#&20 unfavorable 3. 82#&00 favorable C. 8,#+20 unfavorable D. 8%#(20 unfavorable Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8&!#&20 $ -&2#000 machine$hours 80.,0 per machine$hour. 9 8&!#&20 $ 8!*#+00 9 8%#(20 C
%!. )he fixed manufacturing overhead budget variance for @ovember was2 A. 82#,*0 unfavorable 3. 8&#%%0 favorable C. 8*#%20 favorable /. 822#,00 unfavorable 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8&2#,*0 $ 8&0#000 9 82#,*0 C
10$&!+
)he ?helps Compan applies overhead costs to products on the basis of standard direct labor$ hours. )he standard cost card shows that % direct labor$hours are re>uired per unit of product. ?helps Compan had the following budgeted and actual data for 5arch2
)he budgeted direct labor$hours is used as the denominator activit for the month.
%&. )he variable overhead rate variance for 5arch is2 A. 8*#000 unfavorable 3. 8,#000 unfavorable C. 81!#000 unfavorable /. 811#000 unfavorable Variable component of the predetermined overhead rate 9 Kstimated total variable manufacturing overhead Kstimated total amount of the allocation base 9 8+0#000 -20#000 units % hours per unit. 9 80.+0 per hour Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8,1#000 $ -10%#000 hours 80.+0 per hour. 9 8,1#000 $ 8+&#000 9 8*#000 C
10$&!,
%%. )he variable overhead efficienc variance for 5arch is2 A. 8+#000 favorable B. 8&#000 favorable C. 8+#000 unfavorable /. 8&#000 unfavorable S: 9 22#000 units % hours per unit 9 110#000 hours Variable overhead efficienc variance 9 -A: S<. $ -S: S<. 9 8+&#000 $ -110#000 hours 80.+0 per hour. 9 8+&#000 $ 8++#000 9 8&#000 F
%(. )he fixed manufacturing overhead budget variance for 5arch is2 A. 82#000 favorable 3. 8%00 favorable C. 82#000 unfavorable /. 82#%00 favorable 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8%2#000 $ 8%0#000 9 82#000 C
10$&&0
%*. )he fixed manufacturing overhead volume variance for 5arch is2 A. 81#000 favorable B. 8%#000 favorable C. 82#%00 unfavorable /. 8%#000 unfavorable Fixed component of predetermined overhead rate 9 Kstimated total fixed manufacturing overhead cost Kstimated total amount of the allocation base 9 8%0#000 -20#000 units % hours per unit. 9 80.%0 per /E: Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 8%0#000 $ -110#000 hours 80.%0 per hour. 9 8%0#000 $ 8%%000 9 8%#000 F
)he /odge Compan ma0es and sells a single product and uses a standard cost s stem in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor$hours. )he standard cost card shows that % direct labor$hours are re>uired per unit of product. )he /odge Compan had the following budgeted and actual data for the ear2
)he budgeted direct labor$hours is used as the denominator activit for the month.
10$&&1
%+. )he variable overhead rate variance was2 A. 8&#%00 C B. 810#%00 C C. 81!#%00 C /. 81(#%00 C S< 9 8120#000 -!0#000 units % hour per unit. 9 80.+0 per hour Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 81!(#%00 $ -1%*#%00 hours 80.+0 per hour. 9 81!(#%00 $ 812(#000 9 810#%00 C
%,. )he variable overhead efficienc variance was2 A. 8(#000 C B. 8(#000 F C. 812#000 C /. 812#000 F S: 9 !!#000 units % hours per unit 9 1(%#000 hours Variable overhead efficienc variance 9 -A: S<. $ -S: S<. 9 812(#000 $ -1(%#000 hours 80.+0 per hour. 9 812(#000 $ 81!2#000 9 8(#000 F
10$&&2
(0. )he fixed manufacturing overhead budget variance was2 A. 8*%0 F 3. 8!#*%0 F C. 8*#%00 F D. 8!#000 C 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8*+#000 $ 8*%#000 9 8!#000 C
(1. )he fixed manufacturing overhead volume variance as2 A. 8*#%00 F 3. 81#%00 F C. 8!#*%0 C /. 8*#%00 C Fixed component of predetermined overhead rate 9 Kstimated total fixed manufacturing overhead cost Kstimated total amount of the allocation base 9 8*%#000 -!0#000 units % hours per unit. 9 80.%0 per hour Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 8*%#000 $ -1(%#000 hours 80.%0 per /E:. 9 8*%#000 $ 8+2#%00 9 8*#%00 F
10$&&!
Able Control Compan # which manufactures electrical switches# uses a standard cost s stem in which manufacturing overhead costs are applied to units of product on the basis of standard direct labor$hours -/E:s.. )he standard overhead costs are shown below2
P3ased on !00#000 /E:s per month. )he following information is available for the month of Actober2 ?lans called for the production of (0#000 switches. %(#000 switches were actuall produced. 2*%#000 direct labor$hours were wor0ed at a total cost of 82#%%0#000. Actual variable manufacturing overhead costs were 82#!&0#000. Actual fixed manufacturing overhead costs were 8!#*%0#000.
(2. )he fixed manufacturing overhead budget variance for Actober was2 A. 8&+#000 Cnfavorable B. 81%0#000 Cnfavorable C. 8!00#000 Favorable /. 8!,0#000 Cnfavorable 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8!#*%0#000 $ -(0#000 units % hours per unit 812.00 per hour. 9 8!#*%0#000 $ 8!#(00#000 9 81%0#000 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: Me*ium Source: CMA8 a*a te*
10$&&&
(!. )he variable overhead rate variance for Actober was2 A. 8(0#000 Favorable 3. 8110#000 Cnfavorable C. 8100#000 Cnfavorable D. 81&0#000 Cnfavorable Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 82#!&0#000 $ -2*%#000 hours 8+.00 per hour. 9 82#!&0#000 $ 82#200#000 9 81&0#000 C
(&. )he variable overhead efficienc variance for Actober was2 A. 8&0#000 Favorable 3. 8(0#000 Favorable C. 81(0#000 Cnfavorable /. 8210#000 Cnfavorable A: 9 %(#000 units % hours per unit 9 2+0#000 hours Variable overhead efficienc variance 9 -A: S<. $ -S: S<. 9 82#200#000 $ -2+0#000 hours 8+.00 per hour. 9 82#200#000 $ 82#2&0#000 9 8&0#000 F
10$&&%
)he 5alcolm Compan uses a standard cost s stem in which manufacturing overhead costs are applied to products on the basis of standard direct labor$hours -/E:s.. )he standards call for ! hours of direct labor per unit produced. )he following data pertain to the compan 7s manufacturing overhead for the month of Bul 2
(%. )he Fixed component of the predetermined overhead rate for Bune is2 A. 8!.11 3. 8!.!, C. 8!.** D. 8!.00 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 8!#2%0 C 9 82+#&%0 $ 3udgeted fixed overhead cost 8!#2%0 9 82+#&%0 $ 3udgeted fixed overhead cost 3udgeted fixed overhead cost 9 82+#&%0 $ 8!#2%0 9 82%#200 Fixed component of predetermined overhead rate 9 Kstimated total fixed manufacturing overhead cost Kstimated total amount of the allocation base 9 82%#200 +#&00 hours 9 8!.00 per hour
10$&&(
((. )he volume variance for Bul is2 A. 81#1!1 F B. 8,00 F C. 81#1!1 C /. 8,00 C Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 82%#200 $ --2#,00 units ! hours per unit. 8!.00 per hour. 9 82%#200 $ -+#*00 hours 8!.00 per hour. 9 82%#200 $ 82(#100 9 8,00 F
)he :aw0ins Compan uses a standard costing s stem in which manufacturing overhead is applied on the basis of standard direct labor$hours -/E:s.. /uring Februar # the compan actuall used ,#200 direct labor$hours and made 2#,00 units of finished product. )he standard cost card for one unit of product includes the following2 Variable factor overhead2 ! /E:s O 8&.*% per /E: Fixed factor overhead2 ! /E:s O 8!.00 per /E: For Februar # the compan incurred 82+#&%0 in fixed manufacturing overhead costs and recorded a 8,00 favorable volume variance.
10$&&*
(*. )he amount of fixed manufacturing overhead cost contained in the compan 7s budget for Februar is2 A. 82*#000 3. 82*#%%0 C. 82%#200 /. 82,#!%0 Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 8,00 F 9 3udgeted fixed overhead cost $ -2#,00 units ! hours per unit 8! per hour. $8,00 9 3udgeted fixed overhead cost $ 82(#100 3udgeted fixed overhead cost 9 82(#100 $ 8,00 9 82%#200
(+. )he denominator activit level in direct labor$hours used b :aw0ins in setting the predetermined overhead rate for Februar is2 A. ,#!00 hours B. +#&00 hours C. ,#000 hours /. +#*00 hours Fixed component of predetermined overhead rate 9 Kstimated total fixed manufacturing overhead cost /enominator level of activit 8! per hour 9 82%#200 /enominator level of activit /enominator level of activit 9 82%#200 8! per hour 9 +#&00 hours
10$&&+
)he Steff Compan has the following flexible budget -in condensed form. for manufacturing overhead2
)he following data concerning production pertain to last ear7s operations2
(,. )he variable element of the predetermined overhead rate was -per /E:.2 A. 8&.1% 3. 8!.00 C. 82.00 D. 81.1% Variable component of the predetermined overhead rate 9 3udgeted total variable overhead cost /enominator level of activit 9 811#%00 10#000 hours 9 81.1% per hour
10$&&,
*0. )he fixed element of the predetermined overhead rate was -per /E:.2 A. 8&.1% 3. 8!.00 C. 82.00 /. 81.1% Fixed component of the predetermined overhead rate 9 3udgeted fixed overhead cost /enominator level of activit 9 8!0#000 1%#000 hours 9 82.00 per hour
*1. )he fixed manufacturing overhead cost applied to wor0 in process was2 A. 82*#&00 3. 8!0#000 C. 8!0#+%0 /. 81!#*00 Fixed manufacturing overhead cost applied to wor0 in process 9 82 per hour 2 hours per unit (#+%0 units 9 82*#&00
10$&%0
*2. )he fixed manufacturing overhead budget variance was2 A. 8!#&%0 unfavorable 3. 8!#&%0 favorable C. 8+%0 unfavorable /. 81#200 favorable 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8!0#+%0 $ 8!0#000 9 8+%0 C
*!. )he volume variance was2 A. 82#000 favorable B. 82#(00 unfavorable C. 81#000 favorable /. 8+00 favorable Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 8!0#000 $ -82 per hour (#+%0 units 2 hours per unit. 9 8!0#000 $ -82 per hour 1!#*00 hours. 9 8!0#000 $ 82*#&00 9 82#(00 C
10$&%1
A furniture manufacturer has a standard costing s stem based on standard direct labor$hours -/E:s. as the measure of activit . /ata from the compan 7s flexible budget for manufacturing overhead are given below2
*&. 'hat is the predetermined overhead rate to the nearest cent4 A. 81!.&0 3. 81!.(1 C. 81!.+1 D. 81!.20 ?redetermined overhead rate 9 3udgeted total overhead /enominator level of activit 9 -82!#&(0 = 8((#!00. (#+00 hours 9 8+,#*(0 (#+00 hours 9 81!.20 per hour
10$&%2
*%. :ow much overhead was applied to products during the period to the nearest dollar4 A. 8+(#!,& 3. 8++#&&0 C. 8+,#*(0 /. 8,2#%%% Averhead applied 9 ?redetermined overhead rate Standards hours allowed for the actual output 9 81!.20 per hour (#%&% hours 9 8+(#!,&
*(. 'hat was the fixed manufacturing overhead budget variance for the period to the nearest dollar4 A. 8&#2+( F B. 81#+00 C C. 82#**% F /. 81#%*% F 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8(+#100 $ 8((#!00 9 81#+00 C
10$&%!
**. 'hat was the fixed manufacturing overhead volume variance for the period to the nearest dollar4 A. 82#&+( C 3. 81#%11 C C. 8,*% C /. 82#(%! C Fixed component of the predetermined overhead rate 9 8((#!00 (#+00 hours 9 8,.*% per hour Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 8((#!00 $ -(#%&% hours 8,.*% per hour. 9 8((#!00 $ 8(!#+1& 9 82#&+( C
A manufacturer of pla ground e>uipment uses a standard costing s stem in which standard machine$hours -5:s. is the measure of activit . /ata from the compan 7s flexible budget for manufacturing overhead are given below2
10$&%&
*+. 'hat is the predetermined fixed manufacturing overhead rate to the nearest cent4 A. 811.0% per 5: 3. 811.1, per 5: C. 811.00 per 5: /. 810.+( per 5: ?redetermined overhead rate 9 3udgeted total overhead /enominator level of activit 9 8+(#1,0 *#+00 5:s 9 811.0% per 5:
*,. :ow much fixed manufacturing overhead was applied to products during the period to the nearest dollar4 A. 8+%#%*1 3. 8+&#(,0 C. 8+(#1,0 /. 8+%#0+% Fixed manufacturing overhead applied 9 ?redetermined overhead rate Standard hours allowed for the actual output 9 811.0% per 5: *#*&& 5:s 9 8+%#%*1
10$&%%
+0. 'hat was the fixed manufacturing overhead budget variance for the period to the nearest dollar4 A. 8++1 C 3. 8&+& C C. 8!,% C D. 81#%00 F 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8+&#(,0 $ 8+(#1,0 9 81#%00 F
+1. 'hat was the fixed manufacturing overhead volume variance for the period to the nearest dollar4 A. 8&+( F 3. 81#10% C C. 8(1, C /. 8(12 C Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 8+(#1,0 $ -*#*&& 5:s 811.0% per 5:. 9 8+(#1,0 $ 8+%#%*1 9 8(1, C
10$&%(
)he Chase Compan has a standard cost s stem in which manufacturing overhead is applied on the basis of standard direct labor$hours -/E:s.. )he compan recorded the following activit and cost data relating to manufacturing overhead for Actober2
+2. )he amount of fixed manufacturing overhead cost that was estimated for September was2 A. 8&%#,00 3. 8%&#*(+ C. 8&,#,20 /. 8&*#*0! Fixed component of the predetermined overhead rate 9 3udgeted fixed overhead /enominator level of activit 80.+% per /E: 9 3udgeted fixed overhead cost %&#000 /E:s 3udgeted fixed overhead cost 9 80.+% per /E: %&#000 /E:s 9 8&%#,00
10$&%*
+!. )he amount of fixed manufacturing overhead cost applied to wor0 in process during September was2 A. 8&*#+!2 3. 82(#%20 C. 8&2#&!2 /. 8&!#(0% Volume variance 9 3udgeted fixed overhead $ Fixed overhead applied to wor0 in process 8!#&(+ C 9 8&%#,00 $ Fixed overhead applied to wor0 in process 8!#&(+ 9 8&%#,00 $ Fixed overhead applied to wor0 in process Fixed overhead applied to wor0 in process 9 8&%#,00 $ 8!#&(+ 9 8&2#&!2
+&. )he fixed manufacturing overhead budget variance for September was2 A. 82#*00 favorable 3. 82#*00 unfavorable C. 8%#&00 favorable D. 8%#&00 unfavorable 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8%1#!00 $ 8&%#,00 9 8%#&00 C
10$&%+
A manufacturer of industrial e>uipment has a standard costing s stem based on standard direct labor$hours -/E:s. as the measure of activit . /ata from the compan 7s flexible budget for manufacturing overhead are given below2
+%. 'hat is the predetermined overhead rate to the nearest cent4 A. 81(.,* B. 81*.2% C. 81(.%, /. 81*.(% ?redetermined overhead rate 9 Kstimated total manufacturing overhead /enominator level of activit 9 -8+#%00 = 8!&#(2%. 2#%00 /E:s 9 8&!#12% 2#%00 /E:s 9 81*.2% per /E:
10$&%,
+(. :ow much overhead was applied to products during the period to the nearest dollar4 A. 8&&#*12 3. 8&&#12% C. 8&!#12% /. 8&&#+%0 Averhead applied 9 ?redetermined overhead rate Standard hours allowed for the actual output 9 81*.2% per /E: 2#%,2 /E:s 9 8&&#*12
Favreau Corporation estimates that its variable manufacturing overhead is 8(.10 per machine$hour and its fixed manufacturing overhead is 8!%2#%,0 per period.
+*. "f the denominator level of activit is (#,00 machine$hours# the variable element in the predetermined overhead rate would be2 A. 8(.10 3. 8%1.10 C. 8%*.20 /. 8%(.&* 8(.10 per machine$hour -given.
10$&(0
++. "f the denominator level of activit is (#,00 machine$hours# the fixed element in the predetermined overhead rate would be2 A. 8(10.00 3. 8(.10 C. 8%*.20 D. 8%1.10 Fixed element of the predetermined overhead rate 9 Kstimated fixed overhead /enominator level of activit 9 8!%2#%,0 (#,00 machine$hours 9 8%1.10 per machine$hour
+,. "f the denominator level of activit is *#000 machine$hours# the predetermined overhead rate would be2 A. 8%0.!* B. 8%(.&* C. 8(10.00 /. 8(.10 ?redetermined overhead rate 9 Kstimated total manufacturing overhead /enominator level of activit 9 -8!%2#%,0 = 8(.10 per machine$hour *#000 machine$hours. *#000 machine$hours 9 8!,%#2,0 *#000 machine$hours 9 8%(.&* per machine$hour
Sero0a Corporation estimates that its variable manufacturing overhead is 8(.,0 per machine$ hour and its fixed manufacturing overhead is 8*&%#2,0 per period.
10$&(1
,0. "f the denominator level of activit is ,#000 machine$hours# the variable element in the predetermined overhead rate would be2 A. 8++.+0 3. 8+2.+1 C. 8+,.*1 D. 8(.,0 8(.,0 per machine$hour -given.
,1. "f the denominator level of activit is ,#000 machine$hours# the fixed element in the predetermined overhead rate would be2 A. 8(.,0 3. 8+,.*1 C. 8(,0.00 D. 8+2.+1 Fixed element of the predetermined overhead rate 9 Kstimated total fixed manufacturing overhead /enominator level of activit 9 8*&%#2,0 ,#000 machine$hours 9 8+2.+1 per machine$hour
10$&(2
,2. "f the denominator level of activit is ,#100 machine$hours# the predetermined overhead rate would be2 A. 8++.+0 3. 8(,0.00 C. 8(.,0 /. 8+1.,0 ?redetermined overhead rate 9 Kstimated total manufacturing overhead /enominator level of activit 9 -8*&%#2,0 = 8(.,0 per machine$hour ,#100 machine$hours. ,#100 machine$hours 9 8+0+#0+0 ,#100 machine$hours 9 8++.+0 per machine$hour
An outdoor barbecue grill manufacturer has a standard costing s stem based on standard direct labor$hours -/E:s. as the measure of activit . /ata from the compan 7s flexible budget for manufacturing overhead are given below2
10$&(!
,!. 'hat was the fixed manufacturing overhead budget variance for the period to the nearest dollar4 A. 82#*%0 C 3. 82#%*0 C C. 81#+%0 F /. 81(1 F 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 82!#!%0 $ 82%#200 9 81#+%0 F
,&. 'hat was the fixed manufacturing overhead volume variance for the period to the nearest dollar4 A. 8,00 F 3. 8(&, F C. 81+0 C D. 8*20 F Fixed component of the predetermined overhead rate 9 82%#200 2#+00 hours 9 8, per /E: Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 82%#200 $ -2#++0 /E:s 8, per /E:. 9 82%#200 $ 82%#,20 9 8*20 F
10$&(&
3uell Corporation has provided the following data for Bune.
,%. )he budget variance for Bune is2 A. 8%#*&0 F 3. 8!#(10 F C. 8!#(10 C D. 8%#*&0 C 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 81%*#!(0 $ 81%1#(20 9 8%#*&0 C
10$&(%
,(. )he volume variance for Bune is2 A. 810#+!0 F 3. 810#+!0 C C. 8!#(10 C /. 8!#(10 F Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 81%1#(20 $ -&#%00 /E:s 8!(.10 per /E:. 9 81%1#(20 $ 81(2#&%0 9 810#+!0 F
)he following data for April has been provided b 5ittler Corporation.
10$&((
,*. )he budget variance for April is2 A. 8%#((0 C 3. 8+#120 F C. 8+#120 C D. 8%#((0 F 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 81*2#,+0 $ 81*+#(&0 9 8%#((0 F
,+. )he volume variance for April is2 A. 810#1%0 C 3. 8+#120 C C. 8+#120 F D. 810#1%0 F Fixed component of the predetermined overhead rate 9 81*+#(&0 +#+00 hours 9 820.!0 per hour Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 81*+#(&0 $ -,#!00 hours 820.!0 per hour. 9 81*+#(&0 $ 81++#*,0 9 810#1%0 F
Essay Questions
10$&(*
,,. )he Cla ton Compan uses a standard cost s stem in which manufacturing overhead costs are applied to units of the compan 7s single product on the basis of standard direct labor$hours -/E:s.. )he standard cost card for the product follows2
)he following data pertain to last ear7s activities2
<e>uired2 a. Compute the direct materials price and >uantit variances for the ear. b. Compute the direct labor rate and efficienc variances for the ear. c. Compute the variable overhead rate and efficienc variances for the ear. d. Compute the fixed manufacturing overhead budget and volume variances for the ear.
10$&(+
a. /irect materials price and >uantit variances2 5aterials price variance 9 AL -A? $ S?. 9 *0#200 ards -8!.*% per ard $ 8!.%0 per ard. 9 82(!#2%0 $ 82&%#*00 9 81*#%%0 C SL 9 1+#000 units & ards per unit 9 *2#000 ards 5aterials >uantit variance 9 -AL $ SL. S? 9 -*0#200 ards $ *2#000 ards. 8!.%0 per ard 9 -$1#+00 ards. 8!.%0 per ard 9 8(#!00 F b. /irect labor rate and efficienc variances2 Eabor rate variance 9 A:-A< $ S<. 9 2,#2%0 hours -8*.+0 per hour $ 8+.00 per hour. 9 2,#2%0 hours -$80.20per hour. 9 8%#+%0 F SL 9 1+#000 units 1.% hours per unit 9 2*#000 hours Eabor efficienc variance 9 -A: $ S:. S< 9 -2,#2%0 hours $ 2*#000 hours. 8+.00 per hour 9 -2#2%0 hours. 8+.00 per hour 9 81+#000 C c. Variable overhead variances2 Variable overhead rate variance 9 -A: A<. $ -A: S<. 9 8(1#&2% $ -2,#2%0 hours 82.00 per hour. 9 8(1#&2% $ 8%+#%00 9 82#,2% C Variable overhead efficienc variance 9 -A: $ S:. S< 9 -2,#2%0 hours $ 2*#000 hours. 82.00 per hour 9 8%+#%00 $ 8%&#000 9 8&#%00 C d. Fixed manufacturing overhead variances 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 81!!#200 $ 81!%#000 9 81#+00 F Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 81!%#000 $ -2*#000 hours 8( per hour. 9 81!%#000 $ 81(2#000 9 82*#000 F
10$&(,
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%( Com !earning "#$ective: (%A'%/ Com !earning "#$ective: (%A'%0 Com !earning "#$ective: (%A'%1 Com !evel: Me*ium
ute the *irect materials 7uantit. an* rice variances an* e) lain their significance ute the *irect la#or efficienc. an* rate variances an* e) lain their significance ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance ute an* inter ret the fi)e* overhea* volume an* #u*get variances
10$&*0
100. 5ountain 5anufacturing uses a standard cost s stem in which manufacturing overhead is applied to units of product on the basis of standard machine$hours. At standard# each unit of product re>uires one machine$hour to complete. )he standard variable overhead is 81.*% per machine$hour and 3udgeted Fixed 5anufacturing Costs are 8!00#000 per ear. )he denominator level of activit is 1%0#000 machine$hours# or 1%0#000 units. Actual data for the ear were as follows2
<e>uired2 a. 'hat are the predetermined variable and fixed manufacturing overhead rates for the ear4 b. Compute the variable overhead rate and efficienc variances for the ear. c. Compute the fixed manufacturing overhead budget and volume variances for the ear. a. ?redetermined variable overhead rate 9 81.*% per 5: -given. ?redetermined fixed overhead rate 9 8!00#000 1%0#000 5:s 9 82.00 per 5: b. A< 9 8211#(+0 12(#000 hours 9 81.(+ per hour Variable overhead rate variance 9 A: -A< $ S<. 9 12(#000 -81.(+ per hour $ 81.*% per hour. 9 8211#(+0 $ 8220#%00 9 8+#+20 F Variable overhead efficienc variance 9 -A: $ S:. S< 9 -12(#000 hours $ 120#000 hours. 81.*% per hour 9 8220#%00 $ 8210#000 9 810#%00 C c. 3udget variance 9 Actual fixed overhead $ 3udgeted fixed overhead cost 9 8!1%#000 $ 8!00#000 9 81%#000 C Volume variance 9 3udgeted fixed overhead cost $ Fixed overhead applied to wor0 in process 9 82.00 per hour -1%0#000 hours $ 120#000 hours. 9 8!00#000 $ 82&0#000 9 8(0#000 C
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (%A'%0 Com ute the varia#le manufacturing overhea* efficienc. an* rate variances an* e) lain their significance !earning "#$ective: (%A'%1 Com ute an* inter ret the fi)e* overhea* volume an* #u*get variances !evel: Me*ium
10$&*1
101. 'al0enhorst Corporation7s manufacturing overhead includes 8*.+0 per machine$hour for suppliesH 8*.!0 per machine$hour for indirect laborH 821#210 per period for salariesH and 81,#,%0 per period for depreciation. <e>uired2 /etermine the predetermined overhead rate if the denominator level of activit is 1#%00 machine$hours. Show our wor0R Kstimated total manufacturing overhead cost 9 -8*.+0 = 8*.!0. 1#%00 = -821#210 = 81,#,%0. 9 8(!#+10 ?redetermined overhead rate 9 Kstimated total manufacturing overhead cost Kstimated total amount of the allocation base 9 8(!#+10 1#%00 machine$hours 9 8&2.%& per machine$hour
102. Drouse Corporation7s manufacturing overhead includes 81&.*0 per machine$hour for variable manufacturing overhead and 81,1#%+0 per period for fixed manufacturing overhead. <e>uired2 /etermine the predetermined overhead rate for the denominator level of activit of !#100 machine$hours. ?redetermined overhead rate 9 Kstimated total manufacturing overhead /enominator level of activit 9 -81&.*0 !#100 = 81,1#%+0. !#100 machine$hours 9 82!*#1%0 !#100 machine$hours 9 8*(.%0 per machine$hour
10$&*2
10!. 3ahr Corporation has provided the following data for Februar .
<e>uired2 a. Compute the budget variance for Februar . Show our wor0R b. Compute the volume variance for Februar . Show our wor0R a. 3udget variance 9 Actual fixed manufacturing overhead $ 3udgeted fixed manufacturing overhead 9 8++#*%0 $ 8,1#+%0 9 8!#100 F b. Volume variance 9 Fixed component of the predetermined overhead rate -/enominator hours $ Standard hours allowed. 9 81(.*0 per hour -%#%00 hours $ %#(00 hours. 9 81#(*0 F
10$&*!
10&. :ereford Corporation has provided the following data for Februar .
<e>uired2 a. Compute the budget variance for Februar . Show our wor0R b. Compute the volume variance for Februar . Show our wor0R a. 3udget variance 9 Actual fixed manufacturing overhead cost $ 3udgeted fixed manufacturing overhead cost 9 810&#&*0 $ 810*#!(0 9 82#+,0 F b. Fixed component of the predetermined overhead rate 9 810*#!(0 &#&00 machine$hours 9 82&.&0 per machine$hour Volume variance 9 Fixed component of the predetermined overhead rate -/enominator hours $ Standard hours allowed. 9 82&.&0 -&#&00 $ &#200. 9 8&#++0 C
10$&*&
10%. /ull Corporation applies overhead to products based on machine$hours. )he denominator level of activit is +#(00 machine$hours. )he budgeted fixed manufacturing overhead costs are 82+(#!+0. "n Actober# the actual fixed manufacturing overhead costs were 82*&#!!0 and the standard machine$hours allowed for the actual output were +#&00 machine$ hours. <e>uired2 a. Compute the budget variance for Actober. Show our wor0R b. Compute the volume variance for Actober. Show our wor0R a. 3udget variance 9 Actual fixed manufacturing overhead cost $ 3udgeted fixed manufacturing overhead cost 9 82*&#!!0 $ 82+(#!+0 9 812#0%0 F b. Fixed component of the predetermined overhead rate 9 82+(#!+0 +#(00 machine$hours 9 8!!.!0 per machine$hour Volume variance 9 Fixed component of the predetermined overhead rate -/enominator hours $ Standard hours allowed. 9 8!!.!0 -+#(00 $ +#&00. 9 8(#((0 C
1. <esidual income is superior to return on investment as a means of measuring performance because it encourages managers to ma0e investment decisions that are more consistent with the interests of the compan as a whole. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: -as.
10$&*%
2. <esidual income e>uals average operating assets multiplied b the difference between the return on investment and the minimum re>uired rate of return. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: 6ar*
!. Consider a compan that has onl variable costs. All other things the same# an increase in unit sales will result in no change in the return on investment. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !evel: Me*ium
10$&*(
&. )he use of return on investment as a performance measure ma lead managers to ma0e decisions that are not in the best interests of the compan as a whole. TRUE
%. <esidual income is the net operating income that an investment center earns above the minimum re>uired return on the investment in operating assets. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: -as.
(. <esidual income should not be used to evaluate a cost center. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: Me*ium
*. )he performance measures on a balanced scorecard tend to fall into four groups2 financial measures# customer measures# internal business process measures# and external business process measures. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (('%1 4n*erstan* ho, to construct an* use a #alance* scorecar* !evel: Me*ium
10$&**
+. A balanced scorecard should contain ever performance measure that can be expected to influence a compan 7s profits. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (('%1 4n*erstan* ho, to construct an* use a #alance* scorecar* !evel: Me*ium
,. )he performance measures on an individual7s scorecard should not be overl influenced b actions ta0en b others in the compan or b events that are outside of the individual7s control. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (('%1 4n*erstan* ho, to construct an* use a #alance* scorecar* !evel: -as.
10. 5anagers of cost centers are evaluated according to the profits which their departments are able to generate. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: "ther to ics !evel: -as.
11. "f expenses exceed revenues in a department# then it would be considered a cost center. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: "ther to ics !evel: Me*ium
10$&*+
12. <esidual income is a better measure for performance evaluation of an investment center manager than return on investment because2 A. the problems associated with measuring the asset base are eliminated. B. desirable investment decisions will not be re6ected b divisions that alread have a high <A". C. onl the gross boo0 value of assets needs to be calculated. /. returns do not increase as assets are depreciated.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: Me*ium Source: CMA8 a*a te*
1!. )urnover is computed b dividing average operating assets into2 A. invested capital. 3. total assets. C. net operating income. D. sales.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !evel: -as.
10$&*,
1&. 'hich of the following statements provide-s. an argument in favor of including onl a plant7s net boo0 value rather than gross boo0 value as part of operating assets in the <A" computation4 ". @et boo0 value is consistent with how plant and e>uipment items are reported on a balance sheet. "". @et boo0 value is consistent with the computation of net operating income# which includes depreciation as an operating expense. """. @et boo0 value allows <A" to decrease over time as assets get older. A. Anl ". 3. Anl """. C. Anl " and "". /. Anl " and """.
1%. "n computing the margin in a <A" anal sis# which of the following is used4 A. Sales in the denominator 3. @et operating income in the denominator C. Average operating assets in the denominator /. <esidual income in the denominator
10$&+0
1(. 'hich of the following is not an operating asset4 A. Cash 3. "nventor C. ?lant e>uipment D. Common stoc0
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !evel: -as.
1*. "n determining the dollar amount to use for operating assets in the return on investment -<A". calculation# companies will generall use either net boo0 value or gross cost of the assets. 'hich of the following is an argument for the use of gross cost rather than net boo0 value4 A. "t is consistent with how assets are reported on the balance sheet. 3. "t eliminates the depreciation method as a factor in <A" calculations. C. "t encourages the replacement of old# worn$out e>uipment. /. all of the above.
1+. 'hich of the following will not result in an increase in the residual income# assuming other factors remain constant4 A. An increase in sales. B. An increase in the minimum re>uired rate of return. C. A decrease in expenses. /. A decrease in operating assets.
10$&+1
1,. All other things the same# which of the following would increase residual income4 A. "ncrease in average operating assets. B. /ecrease in average operating assets. C. "ncrease in minimum re>uired return. /. /ecrease in net operating income.
20. 'hich of the following three statements are correct4 ". A profit center has control over both cost and revenue. "". An investment center has control over invested funds# but not over costs and revenue. """. A cost center has no control over sales. A. Anl " 3. Anl "" C. Anl " and """ /. Anl " and ""
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: "ther to ics !evel: Me*ium
21. )he purpose of the /ata ?rocessing /epartment of Falena Corporation is to assist the various departments of the corporation with their information needs free of charge. )he /ata ?rocessing /epartment would best be evaluated as a2 A. cost center. 3. revenue center. C. profit center. /. investment center.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: "ther to ics !evel: -as.
10$&+2
22. Average operating assets are 8110#000 and net operating income is 82!#100. )he compan invests 82%#000 in new assets for a pro6ect that will increase net operating income b 8&#*%0. 'hat is the return on investment -<A". of the new pro6ect4 A. 211 B. 1,1 C. 1+.%1 /. 201 <A" 9 @et operating income Average operating assets 9 8&#*%0 82%#000 9 1,1
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !evel: Me*ium
2!. East ear a compan had stoc0holder7s e>uit of 81(0#000# net operating income of 81(#000 and sales of 8100#000. )he turnover was 0.%. )he return on investment -<A". was2 A. 101 3. ,1 C. +1 /. *1 5argin 9 @et operating income Sales 9 81(#000 8100#000 9 1(1 <A" 9 5argin )urnover 9 1(1 0.% 9 +1
10$&+!
2&. Sales and average operating assets for Compan ? and Compan L are given below2
'hat is the margin that each compan will have to earn in order to generate a return on investment of 2014 A. 121 and 1(1 3. %01 and 1001 C. +1 and &1 /. 2.%1 and %1 Compan ?2 )urnover 9 Sales Average operating assets 9 820#000 8+#000 9 2.% <A" )urnover 9 5argin 9 201 2.% 9 +1 Compan L2 )urnover 9 Sales Average operating assets 9 8%0#000 810#000 9 % <A" )urnover 9 5argin 9 201 % 9 &1
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !evel: 6ar*
10$&+&
2%. <eed Compan 7s sales last ear totaled 81%0#000 and its return on investment -<A". was 121. "f the compan 7s turnover was !# then its net operating income for the ear must have been2 A. 8(#000 3. 82#000 C. 81+#000 /. it is impossible to determine from the data given. <A" 9 5argin )urnover 5argin 9 <A" )urnover 9 121 ! 9 &1 5argin 9 @et operating income Sales @et operating income 9 5argin Sales 9 &1 81%0#000 9 8(#000
2(. A compan 7s current net operating income is 81(#+00 and its average operating assets are 8+0#000. )he compan 7s re>uired rate of return is 1+1. A new pro6ect being considered would re>uire an investment of 81%#000 and would generate annual net operating income of 8!#000. 'hat is the residual income of the new pro6ect4 A. 20.+1 3. 201 C. -81%0. D. 8!00
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: -as.
10$&+%
2*. Soder>uist Corporation uses residual income to evaluate the performance of its divisions. )he compan 7s minimum re>uired rate of return is 111. "n April# the Commercial ?roducts /ivision had average operating assets of 8100#000 and net operating income of 8,#&00. 'hat was the Commercial ?roducts /ivision7s residual income in April4 A. $81#(00 3. 81#(00 C. 81#0!& /. $81#0!&
2+. "n August# the Cniversal Solutions /ivision of Bugan Corporation had average operating assets of 8(*0#000 and net operating income of 8**#%00. )he compan uses residual income# with a minimum re>uired rate of return of 121# to evaluate the performance of its divisions. 'hat was the Cniversal Solutions /ivision7s residual income in August4 A. 82#,00 B. $82#,00 C. $8,#!00 /. 8,#!00
10$&+(
2,. /ivision 3 had an <A" last ear of 1%1. )he division7s minimum re>uired rate of return is 101. "f the division7s average operating assets last ear were 8&%0#000# then the division7s residual income for last ear was2 A. 8(*#%00 B. 822#%00 C. 8!*#%00 /. 8&%#000 <A" 9 @et operating income Average operating assets @et operating income 9 <A" Average operating assets 9 1%1 8&%0#000 9 8(*#%00
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: 6ar*
10$&+*
!0. ;arnic0 Corporation 0eeps careful trac0 of the time re>uired to fill orders. )he times recorded for a particular order appear below2
)he deliver c cle time was2 A. !.% hours 3. +.* hours C. !&., hours D. !(.1 hours )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 0., hours = 0.! hours = !.% hours = %.2 hours 9 ,., hours /eliver c cle time 9 'ait time = )hroughput time 9 2(.2 hours = ,., hours 9 !(.1 hours
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%0 Com ute *eliver. c.cle time; through ut time; an* manufacturing c.cle efficienc. 9MC-: !evel: -as.
10$&++
!1. ;alanis Corporation 0eeps careful trac0 of the time re>uired to fill orders. /ata concerning a particular order appear below2
)he throughput time was2 A. !+.+ hours 3. !!.& hours C. 1&.1 hours /. %.& hours )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1.& hours = 0.& hours = !.( hours = +.* hours 9 1&.1 hours
10$&+,
!2. :oster Corporation 0eeps careful trac0 of the time re>uired to fill orders. )he times recorded for a particular order appear below2
)he throughput time was2 A. +., hours 3. 1+ hours C. &.% hours /. 22.% hours )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1.2 hours = 0.& hours = 2., hours = &.& hours 9 +., hours
10$&,0
!!. 3otelho Corporation 0eeps careful trac0 of the time re>uired to fill orders. /ata concerning a particular order appear below2
)he deliver c cle time was2 A. !!.1 hours 3. !.* hours C. 12.( hours /. !0., hours )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1., hours = 0.! hours = !.* hours = +., hours 9 1&.+ hours /eliver c cle time 9 'ait time = )hroughput time 9 1+.! hours = 1&.+ hours 9 !!.1 hours
10$&,1
!&. @iemiec Corporation 0eeps careful trac0 of the time re>uired to fill orders. )he times recorded for a particular order appear below2
)he manufacturing c cle efficienc -5CK. was closest to2 A. 0.20 3. 0.0( C. 0.12 /. 0.,( )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1.% hours = 0.2 hours = 2.( hours = +.% hours 9 12.+ hours 5CK 9 Value$added time -?rocess time. )hroughput -manufacturing c cle. time 9 1.% hours 12.+ hours 9 0.12
10$&,2
!%. 5ordue Corporation 0eeps careful trac0 of the time re>uired to fill orders. /ata concerning a particular order appear below2
)he manufacturing c cle efficienc -5CK. was closest to2 A. 0.1% 3. 0.%! C. 0.0% D. 0.1( )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1.* hours = 0.1 hours = 2.& hours = (.* hours 9 10., hours 5CK 9 Value$added time -?rocess time. )hroughput -manufacturing c cle. time 9 1.* hours 10., hours 9 0.1(
Aide "ndustries is a division of a ma6or corporation. /ata concerning the most recent ear appears below2
10$&,!
!(. )he division7s margin is closest to2 A. 21.+1 B. %.01 C. 2!.01 /. 2+.01 5argin 9 @et operating income Sales 9 8+*0#000 81*#&00#000 9 %.01
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !evel: -as.
!*. )he division7s turnover is closest to2 A. 20.00 B. &.!% C. 0.22 /. !.%* )urnover 9 Sales Average operating assets 9 81*#&00#000 8&#000#000 9 &.!%
10$&,&
!+. )he division7s return on investment -<A". is closest to2 A. &.11 B. 21.*%1 C. 1*.,1 /. 1.11 <A" 9 @et operating income Average operating assets 9 8+*0#000 8&#000#000 9 21.*%1
)he <eed /ivision reports the following operating data for the past two ears2
)he return on investment at <eed was exactl the same in Jear 1 and Jear 2.
10$&,%
!,. )he margin in Jear 2 was2 A. &+1 3. !21 C. 201 /. 101 <A" in Jear 12 <A" 9 5argin )urnover 9 1(1 2.% 9 &01 3 assumption# the <A" is the same in Jear 2 as in Jear 1. )herefore# in Jear 22 <A" 9 5argin )urnover &01 9 5argin 2 5argin 9 &01 2 9 201
&0. Sales in Jear 2 amounted to2 A. 82%0#000 B. 8!00#000 C. 8!2%#000 /. 8!%0#000 <A" in Jear 12 <A" 9 5argin )urnover 9 1(1 2.% 9 &01 3 assumption# the <A" is the same in Jear 2 as in Jear 1. )herefore# in Jear 22 @et operating income 9 <A" Average operating assets 9 &01 81%0#000 9 8(0#000 5argin 9 @et operating income Sales Sales 9 @et operating income 5argin 9 8(0#000 201 9 8!00#000
10$&,(
&1. Average operating assets in Jear 1 were2 A. 81(0#000 3. 81%0#000 C. 812%#000 D. 8100#000 5argin 9 @et operating income Sales Sales 9 @et operating income 5argin 9 8&0#000 1(1 9 82%0#000 )urnover 9 Sales Average operating assets Average operating assets 9 Sales )urnover 9 82%0#000 2.% 9 8100#000
&2. @et operating income in Jear 2 amounted to2 A. 8(0#000 3. 8%0#000 C. 8&0#000 /. 8!%#000 <A" in Jear 12 <A" 9 5argin )urnover 9 1(1 2.% 9 &01 3 assumption# the <A" is the same in Jear 2 as in Jear 1. )herefore# in Jear 22 @et operating income 9 <A" Average operating assets 9 &01 81%0#000 9 8(0#000
3eall "ndustries is a division of a ma6or corporation. East ear the division had total sales of 820#1(0#000# net operating income of 81#%,2#(&0# and average operating assets of 8+#000#000.
10$&,*
&!. )he division7s margin is closest to2 A. !,.*1 3. &*.(1 C. *.,1 /. 1,.,1 5argin9 @et operating income Sales 9 81#%,2#(&0 820#1(0#000 9 *.,1
&&. )he division7s turnover is closest to2 A. 2.%2 3. 2.10 C. 0.20 /. 12.(( )urnover 9 Sales Average operating assets 9 820#1(0#000 8+#000#000 9 2.%2
10$&,+
&%. )he division7s return on investment -<A". is closest to2 A. 1,.,1 3. 1(.(1 C. 1.(1 /. %.*1 <A" 9 @et operating income Average operating assets 9 81#%,2#(&0 8+#000#000 9 1,.,1
)he 'est /ivision of She0archi Corporation had average operating assets of 8(20#000 and net operating income of 8+0#100 in 5arch. )he minimum re>uired rate of return for performance evaluation purposes is 1&1.
&(. 'hat was the 'est /ivision7s minimum re>uired return in 5arch4 A. 8+0#100 B. 8+(#+00 C. 811#21& /. 8,+#01& 5inimum re>uired return 9 Average operating assets 5inimum re>uired rate of return 9 8(20#000 1&1 9 8+(#+00
10$&,,
&*. 'hat was the 'est /ivision7s residual income in 5arch4 A. $8(#*00 3. 8(#*00 C. $811#21& /. 811#21&
)he Consumer ?roducts /ivision of 'eiter Corporation had average operating assets of 8%*0#000 and net operating income of 8(%#100 in 5arch. )he minimum re>uired rate of return for performance evaluation purposes is 121.
&+. 'hat was the Consumer ?roducts /ivision7s minimum re>uired return in 5arch4 A. 8*#+12 3. 8*(#212 C. 8(+#&00 /. 8(%#100 5inimum re>uired return 9 Average operating assets 5inimum re>uired rate of return 9 8%*0#000 121 9 8(+#&00
10$%00
&,. 'hat was the Consumer ?roducts /ivision7s residual income in 5arch4 A. $8!#!00 3. 8!#!00 C. $8*#+12 /. 8*#+12
Kstes Compan has assembled the following data for its divisions for the past ear2
10$%01
%0. /ivision A7s sales are2 A. 8&00#000 B. 8(2%#000 C. 812%#000 /. 8200#000 )urnover 9 Sales Average operating assets Sales 9 Average operating assets )urnover 9 8%00#000 1.2% 9 8(2%#000
%1. /ivision A7s residual income is2 A. 820#000 B. 8!0#000 C. 8!%#000 /. 8&%#000
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: Me*ium
10$%02
%2. /ivision 37s average operating assets is2 A. 8+1#200 3. 82#0+0#000 C. 81#!!!#!!! D. 81!0#000 )urnover 9 Sales Average operating assets Average operating assets 9 Sales )urnover 9 8%20#000 & 9 81!0#000
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: Me*ium
Aperating data from )indall Compan for last ear follows2
10$%0!
%!. )he average operating assets amounted to2 A. 8(00#000 3. 8&00#000 C. 8%00#000 /. 8+00#000 )urnover 9 Sales Average operating assets Average operating assets 9 Sales )urnover 9 8,00#000 1.% 9 8(00#000
%&. )he residual income was2 A. 81+#000 3. 810#000 C. 812#000 /. 81(#000 )urnover 9 Sales Average operating assets Average operating assets 9 Sales )urnover 9 8,00#000 1.% 9 8(00#000 <A" 9 @et operating income Average operating assets @et operating income 9 <A" Average operating assets 9 121 8(00#000 9 8*2#000
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: 6ar*
10$%0&
%%. )he margin used in <A" calculations was closest to2 A. 1+.001 B. +.001 C. (.(*1 /. 1%.001 <A" 9 5argin )urnover 5argin 9 <A" )urnover 9 121 1.% 9 +1
)he 3ail /ivision recorded operating data as follows for the past two ears2
3ail /ivision7s turnover was exactl the same in both Jear 1 and Jear 2.
10$%0%
%(. Sales in Jear 1 amounted to2 A. 8&00#000 B. 8,00#000 C. 8*%0#000 /. 81#200#000 )urnover 9 <A" 5argin 9 22.%1 1%1 9 1.% )urnover 9 Sales Average operating assets Sales 9 Average operating assets )urnover 9 8(00#000 1.% 9 8,00#000
%*. )he net operating income in Jear 1 was2 A. 8,0#000 B. 81!%#000 C. 81&0#000 /. 81%0#000 )urnover 9 <A" 5argin 9 22.%1 1%1 9 1.% )urnover 9 Sales Average operating assets Sales 9 Average operating assets )urnover 9 8(00#000 1.% 9 8,00#000 5argin 9 @et operating income Sales @et operating income 9 Sales 5argin 9 8,00#000 1%1 9 81!%#000
10$%0(
%+. )he margin in Jear 2 was2 A. 1+.*%1 3. 2*.001 C. 22.%01 D. 12.001 )urnover in Jear 1 9 <A" in Jear 1 5argin in Jear 1 9 22.%1 1%1 9 1.% <A" 9 5argin )urnover 5argin in Jear 2 9 <A" in Jear 2 )urnover in Jear 2 9 <A" in Jear 2 )urnover in Jear 1 9 1+1 1.% 9 121
%,. )he average operating assets in Jear 2 were2 A. 8*20#000 3. 8*%0#000 C. 8+00#000 /. 8,00#000 )urnover in Jear1 9 <A" in Jear 1 5argin in Jear 1 9 22.%1 1%1 9 1.% )urnover in Jear 2 9 Sales in Jear 2 Average operating assets in Jear 2 Average operating assets in Jear 2 9 Sales in Jear 2 )urnover in Jear 2 9 Sales in Jear 2 )urnover in Jear 1 9 81#200#000 1.% 9 8+00#000
10$%0*
)he following data are available for the South /ivision of <edride ?roducts# "nc. and the single product it ma0es2
(0. :ow man units must South sell each ear to have an <A" of 1(14 A. 2&0#000 3. 1#!00#000 C. %2#000 D. (%#000 <A" 9 @et operating income Average operating assets @et operating income 9 <A" Average operating assets 9 1(1 81#%00#000 9 82&0#000 Cnit sales to attain a target profit 9 -)arget profit = Fixed expenses. Cnit C5 9 -82&0#000 = 82+0#000. -820 per unit $ 812 per unit. 9 8%20#000 8+ per unit 9 (%#000 units
10$%0+
(1. "f South wants a residual income of 8%0#000 and the minimum re>uired rate of return is 101# the annual turnover will have to be2 A. 0.!2 B. 0.+0 C. 1.2% /. 1.%0 )urnover 9 Sales Average operating assets 'e need to determine the Sales that would generate a residual income of 8%0#000. <esidual income 9 @et operating income $ Average operating assets 5inimum re>uired rate of return 8%0#000 9 @et operating income $ -81#%00#000 101. @et operating income 9 8%0#000 = -81#%00#000 101. 9 8200#000 /ollar sales to attain a target profit 9 -)arget profit = Fixed expenses. C5 ratio 9 -8200#000 = 82+0#000. T-820 per unit $ 812 per unit.U820 per unitV 9 8&+0#000 -8+ per unitU820 per unit. 9 8&+0#000 0.&0 9 81#200#000 )urnover 9 Sales Average operating assets 9 81#200#000 81#%00#000 9 0.+
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: 6ar*
10$%0,
)he following data pertain to the 'halen /ivision of @orthern "ndustries.
)he margin at 'halen was exactl the same in Jear 2 as it was in Jear 1.
(2. )he average operating assets for Jear 2 amounted to2 A. 8&00#000 3. 8+00#000 C. 8(00#000 D. 8%00#000 )urnover 9 Sales Average operating assets Average operating assets 9 Sales )urnover 9 8(00#000 1.2 9 8%00#000
10$%10
(!. )he return on investment in Jear 1 was2 A. &+.001 3. !2.%01 C. *.%+1 /. 1.,21 <A" 9 5argin )urnover 5argin in Jear 2 9 <A" in Jear 2 )urnover in Jear 2 9 ,.(1 1.2 9 +1 <A" in Jear 1 9 5argin in Jear 1 )urnover in Jear 1 <A" in Jear 1 9 5argin in Jear 2 )urnover in Jear 1 9 +1 ( 9 &+1
10$%11
(&. )he minimum re>uired rate of return in Jear 1 was2 A. 1+1 3. 1*1 C. 1(1 /. 1%1 5argin 9 @et operating income Sales @et operating income 9 Sales 5argin 9 8!00#000 +1 9 82&#000 <A" 9 5argin )urnover 5argin in Jear 2 9 <A" in Jear 2 )urnover in Jear 2 9 ,.(1 1.2 9 +1 <A" in Jear 1 9 5argin in Jear 1 )urnover in Jear 1 <A" in Jear 1 9 5argin in Jear 2 )urnover in Jear 1 9 +1 ( 9 &+1 <A" 9 @et operating income Average operating assets &+1 9 82&#000 Average operating assets Average operating assets 9 82&#000 &+1 9 8%0#000 <esidual income 9 @et operating income $ Average operating assets 5inimum re>uired rate of return 81(#000 9 82&#000 $ 8%0#000 5inimum re>uired rate of return 8%0#000 5inimum re>uired rate of return 9 82&#000 $ 81(#000 5inimum re>uired rate of return 9 8+#000 8%0#000 9 1(1
10$%12
/ic0onson ?roducts is a division of a ma6or corporation. )he following data are for the last ear of operations2
(%. )he division7s margin is closest to2 A. 2(.&1 3. 10.01 C. 2.&1 /. 2&.01 5argin 9 @et operating income Sales 9 8!,,#!(0 81(#(&0#000 9 2.&1
((. )he division7s turnover is closest to2 A. !.*+ 3. &1.(* C. &.1( /. 0.10 )urnover 9 Sales Average operating assets 9 81(#(&0#000 8&#000#000 9 &.1(
10$%1!
(*. )he division7s return on investment -<A". is closest to2 A. 0.21 3. &1.(1 C. 10.01 /. 1.,1 <A" 9 @et operating income Average operating assets 9 8!,,#!(0 8&#000#000 9 ,.,+&1
(+. )he division7s residual income is closest to2 A. 8-!20#(&0. 3. 81#11,#!(0 C. 8!,,#!(0 /. 8-2#%,%#+&0.
Chace ?roducts is a division of a ma6or corporation. East ear the division had total sales of 821#!00#000# net operating income of 8%*%#100# and average operating assets of 8%#000#000. )he compan 7s minimum re>uired rate of return is 121.
10$%1&
(,. )he division7s margin is closest to2 A. 2(.21 3. 2!.%1 C. 2.*1 /. 11.%1 5argin 9 @et operating income Sales 9 8%*%#100 821#!00#000 9 2.*1
*0. )he division7s turnover is closest to2 A. !.+2 B. &.2( C. 0.12 /. !*.0& )urnover 9 Sales Average operating assets 9 821#!00#000 8%#000#000 9 &.2(
10$%1%
*1. )he division7s return on investment -<A". is closest to2 A. &,.01 B. 11.%1 C. 0.!1 /. 2.21 <A" 9 @et operating income Average operating assets 9 8%*%#100 8%#000#000 9 11.%021
*2. )he division7s residual income is closest to2 A. 8%*%#100 3. 81#1*%#100 C. 8-1#,+0#,00. D. 8-2&#,00.
10$%1(
/iorio Corporation 0eeps careful trac0 of the time re>uired to fill orders. )he times recorded for a particular order appear below2
*!. )he deliver c cle time was2 A. 2,.1 hours B. !0.( hours C. + hours /. 2.* hours )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1.& hours = 0.1 hours = 2.* hours = %.! hours 9 ,.% hours /eliver c cle time 9 'ait time = )hroughput time 9 21.1 hours = ,.% hours 9 !0.( hours
10$%1*
*&. )he throughput time was2 A. &.2 hours B. ,.% hours C. !0.( hours /. 2(.& hours )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1.& hours = 0.1 hours = 2.* hours = %.! hours 9 ,.% hours
*%. )he manufacturing c cle efficienc -5CK. was closest to2 A. 0.1% 3. 0.0% C. 0.&% /. 0.1+ )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1.& hours = 0.1 hours = 2.* hours = %.! hours 9 ,.% hours 5CK 9 Value$added time -?rocess time. )hroughput -manufacturing c cle. time 9 1.& hours ,.% hours 9 0.1%
:art 5anufacturing operates an automated steel fabrication process. For one operation# :art has found that &%1 of the total throughput -manufacturing c cle. time is spent on non$value$ added activities. /eliver c cle time is 12 hours# waiting time during the production process is ! hours# >ueue time prior to starting the production process is 2 hours# and inspection time is 1.2 hours.
10$%1+
*(. )he manufacturing c cle efficienc -5CK. for this operation is2 A. %%1 3. &%1 C. (.( hours /. %.& hours ?ercentage of time spent on non$value$added activities 9 1001 $ 5CK &%1 9 1001 $ 5CK 5CK 9 1001 $ &%1 9 %%1
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%0 Com ute *eliver. c.cle time; through ut time; an* manufacturing c.cle efficienc. 9MC-: !evel: Me*ium
10$%1,
**. 'hat is the move time recorded for the operation4 A. 1.% hours 3. (.% hours C. %.+ hours D. 0.+% hours /eliver c cle time 9 'ait time = )hroughput time 12 hours 9 ! hours = )hroughput time )hroughput time 9 12 hours $ ! hours 9 , hours ?ercentage of time spent on non$value$added activities 9 1001 $ 5CK &%1 9 1001 $ 5CK 5CK 9 1001 $ &%1 9 %%1 5CK 9 Value$added time -?rocess time. )hroughput -manufacturing c cle. time %%1 9 ?rocess time , hours ?rocess time 9 , hours %%1 9 &.,% hours )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time ,.00 hours 9 &.,% hours = 1.20 hours = 5ove time = 2.00 hours 5ove time 9 ,.00 hours $ -&.,% hours = 1.20 hours = 2.00 hours. 9 ,.00 hours $ +.1% hours 9 0.+% hours
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%0 Com ute *eliver. c.cle time; through ut time; an* manufacturing c.cle efficienc. 9MC-: !evel: 6ar*
10$%20
*+. 'hat is the throughput -manufacturing c cle. time for the operation4 A. 12.0 hours B. ,.0 hours C. 10.0 hours /. %.+ hours /eliver c cle time 9 'ait time = )hroughput time 12 hours 9 ! hours = )hroughput time )hroughput time 9 12 hours $ ! hours 9 , hours
Saffer Corporation 0eeps careful trac0 of the time re>uired to fill orders. /ata concerning a particular order appear below2
*,. )he throughput time was2 A. ,.! hours 3. &., hours C. !0., hours /. 2( hours )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1.( hours = 0.2 hours = !.1 hours = &.& hours 9 ,.! hours
10$%21
+0. )he manufacturing c cle efficienc -5CK. was closest to2 A. 0.1* 3. 0.0% C. 0.&! /. 0.1, 5CK 9 Value$added time -?rocess time. )hroughput -manufacturing c cle. time 9 1.( hours ,.! hours 9 0.1*
+1. )he deliver c cle time was2 A. *.% hours 3. 2,.1 hours C. !0., hours /. !.1 hours /eliver c cle time 9 'ait time = )hroughput time 9 21.( hours = ,.! hours 9 !0., hours
Essay Questions
10$%22
+2. :eave Fabrication is a division of a ma6or corporation. East ear the division had total sales of 821#120#000# net operating income of 82#00(#&00# and average operating assets of 8(#000#000. )he compan 7s minimum re>uired rate of return is 121. <e>uired2 'hat is the division7s return on investment -<A".4 <A" 9 @et operating income Average operating assets 9 82#00(#&00 8(#000#000 9 !!.&1
+!. ;ilde "ndustries is a division of a ma6or corporation. East ear the division had total sales of 82!#!+0#000# net operating income of 82#+2+#,+0# and average operating assets of 8*#000#000. )he compan 7s minimum re>uired rate of return is 121. <e>uired2 a. 'hat is the division7s margin4 b. 'hat is the division7s turnover4 c. 'hat is the division7s return on investment -<A".4 a. 5argin 9 @et operating income Sales 9 82#+2+#,+0 82!#!+0#000 9 12.11 b. )urnover 9 Sales Average operating assets 9 82!#!+0#000 8*#000#000 9 !.! c. <A" 9 @et operating income Average operating assets 9 82#+2+#,+0 8*#000#000 9 &0.&1
10$%2!
+&. Ferris 'ares is a division of a ma6or corporation. )he following data are for the latest ear of operations2
<e>uired2 a. 'hat is the division7s return on investment -<A".4 b. 'hat is the division7s residual income4 a. <A" 9 @et operating income Average operating assets 9 81#0%&#100 8%#000#000 9 21.11 b. <esidual income 9 @et operating income $ Average operating assets 5inimum re>uired rate of return 9 81#0%&#100 $ 8%#000#000 1(1 9 81#0%&#100 $ 8+00#000 9 82%&#100
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: -as.
10$%2&
+%. Financial data for 'indsor# "nc. for last ear appear below2
)he compan paid dividends of 810&#000 last ear. )he S"nvestment in ?ine Compan S on the statement of financial position represents an investment in the stoc0 of another compan . <e>uired2 a. Compute the compan 7s margin# turnover# and return on investment for last ear. b. )he 3oard of /irectors of 'indsor# "nc. has set a minimum re>uired return of 2%1. 'hat was the compan 7s residual income last ear4
10$%2%
a. Aperating assets do not include investments in other companies or in undeveloped land.
Average operating assets 9 -81#020#000 = 8,+0#000. 2 9 81#000#000 5argin 9 @et operating income Sales 9 82+0#000 81#*%0#000 9 1(1 )urnover 9 Sales Average operating assets 9 81#*%0#000 81#000#000 9 1.*% <A" 9 5argin )urnover 9 1(1 1.*% 9 2+1 b. <esidual income 9 @et operating income $ Average operating assets 5inimum re>uired rate of return 9 82+0#000 $ -81#000#000 2%1. 9 82+0#000 $ 82%0#000 9 8!0#000
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: Me*ium
10$%2(
+(. Kc0els 'ares is a division of a ma6or corporation. )he following data are for the latest ear of operations2
<e>uired2 a. 'hat is the division7s margin4 b. 'hat is the division7s turnover4 c. 'hat is the division7s return on investment -<A".4 d. 'hat is the division7s residual income4 a. 5argin 9 @et operating income Sales 9 81#!1,#*00 82&#,00#000 9 %.!1 b. )urnover 9 Sales Average operating assets 9 82&#,00#000 8(#000#000 9 &.2 c. <A" 9 @et operating income Average operating assets 9 81#!1,#*00 8(#000#000 9 22.01 d. <esidual income 9 @et operating income $ Average operating assets 5inimum re>uired rate of return 9 81#!1,#*00 $ 8(#000#000 121 9 81#!1,#*00 $ 8*20#000 9 8%,,#*00
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%( Com ute return on investment 9R"I: an* sho, ho, changes in sales; e) enses; an* assets affect R"I !earning "#$ective: (('%/ Com ute resi*ual income an* un*erstan* its strengths an* ,eaknesses !evel: -as.
10$%2*
+*. "les "ndustries is a division of a ma6or corporation. )he following data are for the latest ear of operations2
<e>uired2 'hat is the division7s residual income4 <esidual income 9 @et operating income $ Average operating assets 5inimum re>uired rate of return 9 82#%%!#&+0 $ 8(#000#000 1(1 9 82#%%!#&+0 $ 8,(0#000 9 81#%,!#&+0
++. )he Cas0et /ivision of <osencranI Corporation had average operating assets of 81%0#000 and net operating income of 82*#+00 in 5arch. )he compan uses residual income to evaluate the performance of its divisions# with a minimum re>uired rate of return of 1*1. <e>uired2 'hat was the Cas0et /ivision7s residual income in 5arch4
10$%2+
+,. 5adraIo Corporation uses residual income to evaluate the performance of its divisions. )he minimum re>uired rate of return for performance evaluation purposes is 1,1. )he ;ames /ivision had average operating assets of 8&10#000 and net operating income of 8+(#000 in Bune. <e>uired2 'hat was the ;ames /ivision7s residual income in Bune4
10$%2,
,0. Baster Corporation7s management 0eeps trac0 of the time it ta0es to process orders. /uring the most recent month# the following average times were recorded per order2
<e>uired2 a. Compute the throughput time. b. Compute the manufacturing c cle efficienc -5CK.. c. 'hat percentage of the production time is spent in non$value$added activities4 d. Compute the deliver c cle time. a. )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 2.( da s = 0.2 da s = 0.( da s = !.2 da s 9 (.( da s b. 5CK 9 Value$added time -?rocess time. )hroughput time 9 2.( da s (.( da s 9 0.!, c. ?ercentage of time spent on non$value$added activities 9 1001 $ 5CK1 9 1001 $ !,1 9 (11 d. /eliver c cle time 9 'ait time = )hroughput time 9 10.( da s = (.( da s 9 1*.2 da s
10$%!0
,1. /uring the most recent month at Coggan Corporation# >ueue time was %.! da s# inspection time was 0.% da # process time was 1., da s# wait time was &.% da s# and move time was 0.% da . <e>uired2 a. Compute the throughput time. b. Compute the manufacturing c cle efficienc -5CK.. c. 'hat percentage of the production time is spent in non$value$added activities4 d. Compute the deliver c cle time. a. )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 1., da s = 0.% da s = 0.% da s = %.! da s 9 +.2 da s b. 5CK 9 Value$added time -?rocess time. )hroughput time 9 1., da s +.2 da s 9 0.2! c. ?ercentage of time spent on non$value$added activities 9 1001 $ 5CK1 9 1001 $ 2!1 9 **1 d. /eliver c cle time 9 'ait time = )hroughput time 9 &.% da s = +.2 da s 9 12.* da s
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (('%0 Com ute *eliver. c.cle time; through ut time; an* manufacturing c.cle efficienc. 9MC-: !evel: Me*ium
10$%!1
,2. /ur0ee Corporation 0eeps careful trac0 of the time re>uired to fill orders. )he times re>uired for a particular order appear below2
<e>uired2 a. /etermine the throughput time. Show our wor0R b. /etermine the manufacturing c cle efficienc -5CK.. Show our wor0R c. /etermine the deliver c cle time. Show our wor0R a. )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time 9 0., hours = 0.& hours = 2.! hours = &.% hours 9 +.1 hours b. 5CK 9 Value$added timeU)hroughput time 9 0., hours +.1 hours 9 0.11 c. /eliver c cle time 9 'ait time = )hroughput time 9 10.* hours = +.1 hours 9 1+.+ hours
10$%!2
,!. 'altner Corporation7s management reports that its average deliver c cle time is 20.0 da s# its average throughput time is *.% da s# its manufacturing c cle efficienc -5CK. is 0.!2# its average move time is 0.2 da # and its average >ueue time is &.0 da s. <e>uired2 a. 'hat is the wait time4 b. 'hat is the process time4 c. 'hat is the inspection time4 a. /eliver c cle time 9 'ait time = )hroughput time 20.0 da s 9 'ait time = *.% da s 'ait time 9 20.0 da s $ *.% da s 9 12.% da s b. 5CK 9 ?rocess time )hroughput time 0.!2 9 ?rocess time *.% da s ?rocess time 9 0.!2 *.% da s 9 2.& da s c. )hroughput time 9 ?rocess time = "nspection time = 5ove time = Lueue time *.% da s 9 2.& da s = "nspection time = 0.2 da s = &.0 da s "nspection time 9 *.% da s $ 2.& da s $ 0.2 da s $ &.0 da s 9 0., da s
Chapter 11 Appendix A )ransfer ?ricing Answer De
10$%!!
1. 'hen a division is operating at full capacit # the transfer price to other divisions should include opportunit costs. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: ((A'%2 <etermine the range; if an.; ,ithin ,hich a negotiate* transfer rice shoul* fall !evel: Me*ium
2. 'hen an intermediate mar0et price for a transferred item exists# it represents a lower limit on the charge that should be made on transfers between divisions. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: ((A'%2 <etermine the range; if an.; ,ithin ,hich a negotiate* transfer rice shoul* fall !evel: 6ar*
!. A transfer price is the price charged when one segment of a compan provides goods or services to another segment of the compan . TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: ((A'%2 <etermine the range; if an.; ,ithin ,hich a negotiate* transfer rice shoul* fall !evel: -as.
10$%!&
&. 'hen the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred# then the lowest acceptable transfer price as far as the selling division is concerned is2 A. variable cost of producing a unit of product. 3. the full absorption cost of producing a unit of product. C. the mar0et price charged to outside customers# less costs saved b transferring internall . /. the amount that the purchasing division would have to pa an outside seller to ac>uire a similar product for its use.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: ((A'%2 <etermine the range; if an.; ,ithin ,hich a negotiate* transfer rice shoul* fall !evel: Me*ium
%. /ivision F ma0es a part that it sells to customers outside of the compan . /ata concerning this part appear below2
/ivision J of the same compan would li0e to use the part manufactured b /ivision F in one of its products. /ivision J currentl purchases a similar part made b an outside compan for 8*0 per unit and would substitute the part made b /ivision F. /ivision J re>uires %#000 units of the part each period. /ivision F can alread sell all of the units it can produce on the outside mar0et. 'hat should be the lowest acceptable transfer price from the perspective of /ivision F4 A. 8*% 3. 8(( C. 81( /. 8%0 3ecause there is no opportunit cost# the selling division should not accept an transfer price less than its variable cost of 8*% per unit.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: ((A'%2 <etermine the range; if an.; ,ithin ,hich a negotiate* transfer rice shoul* fall !evel: Me*ium
10$%!%
(. ?art 'J& costs the Kastern /ivision of ) ble Corporation 82( to ma0e$direct materials are 810# direct labor is 8&# variable manufacturing overhead is 8,# and fixed manufacturing overhead is 8!. Kastern /ivision sells ?art 'J& to other companies for 8!0. )he 'estern /ivision of ) ble Corporation can use ?art 'J& in one of its products. )he Kastern /ivision has enough idle capacit to produce all of the units of ?art 'J& that the 'estern /ivision would re>uire. 'hat is the lowest transfer price at which the Kastern /ivision should be willing to sell ?art 'J& to the Central /ivision4 A. 8!0 3. 82( C. 82! /. 82* 3ecause the selling division has ample idle capacit there is no opportunit cost and therefore the lowest price the part should be sold for is the total amount of variable costs that would be incurred# which is 82! per unit -9 810 per unit = 8& per unit = 8, per unit..
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: ((A'%2 <etermine the range; if an.; ,ithin ,hich a negotiate* transfer rice shoul* fall !evel: -as.
10$%!(
*. /ivision ? of )urbo Corporation has the capacit for ma0ing *%#000 wheel sets per ear and regularl sells (0#000 each ear on the outside mar0et. )he regular sales price is 8100 per wheel set# and the variable production cost per unit is 8(%. /ivision L of )urbo Corporation currentl bu s !0#000 wheel sets -of the 0ind made b /ivision ?. earl from an outside supplier at a price of 8,0 per wheel set. "f /ivision L were to bu the !0#000 wheel sets it needs annuall from /ivision ? at 8+* per wheel set# the change in annual net operating income for the compan as a whole# compared to what it is currentl # would be2 A. 8(00#000 B. 822%#000 C. 8*%0#000 /. 81!%#000
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: ((A'%2 <etermine the range; if an.; ,ithin ,hich a negotiate* transfer rice shoul* fall !evel: 6ar*
10$%!*
+. /ivision F ma0es a part that it sells to customers outside of the compan . /ata concerning this part appear below2
/ivision J of the same compan would li0e to use the part manufactured b /ivision F in one of its products. /ivision J currentl purchases a similar part made b an outside compan for 8&, per unit and would substitute the part made b /ivision F. /ivision J re>uires %#000 units of the part each period. /ivision F has ample excess capacit to handle all of /ivision J7s needs without an increase in fixed costs and without cutting into outside sales. According to the formula in the text# what is the lowest acceptable transfer price from the standpoint of the selling division4 A. 8%0 3. 8&, C. 8&( D. 8!0 Since /ivision F has ample excess capacit and conse>uentl there is no opportunit cost# the lowest price the part should be sold for is the variable cost of 8!0 per unit.
10$%!+
,. /ivision A ma0es a part that it sells to customers outside of the compan . /ata concerning this part appear below2
/ivision 3 of the same compan would li0e to use the part manufactured b /ivision A in one of its products. /ivision 3 currentl purchases a similar part made b an outside compan for 8!+ per unit and would substitute the part made b /ivision A. /ivision 3 re>uires %#000 units of the part each period. /ivision A has ample capacit to produce the units for /ivision 3 without an increase in fixed costs and without cutting into sales to outside customers. "f /ivision A sells to /ivision 3 rather than to outside customers# the variable cost be unit would be 81 lower. 'hat should be the lowest acceptable transfer price from the perspective of /ivision A4 A. 8&0 3. 8!+ C. 8!0 D. 82, Since /ivision F has ample excess capacit and conse>uentl there is no opportunit cost# the lowest price the part should be sold for is the variable cost that would be incurred or 82, per unit -9 8!0 per unit $ 81 per unit..
10$%!,
)he 5il0 Chocolate /ivision of 5mmm Foods# "nc. had the following operating results last ear2
5il0 Chocolate expects identical operating results this ear. )he 5il0 Chocolate /ivision has the abilit to produce and sell 200#000 pounds of chocolate annuall .
10. Assume that the ?eanut 3utter /ivision of 5mmm Foods wants to purchase an additional 20#000 pounds of chocolate from the 5il0 Chocolate /ivision. 5il0 Chocolate will be able to increase its profit b accepting an transfer price above2 A. 80.&0 per pound 3. 80.0+ per pound C. 80.1% per pound D. 80.2% per pound 3ecause the 5il0 Chocolate /ivision has ample excess capacit and conse>uentl there is no opportunit cost# the profit of the division would be increased b an transfer price in excess of its variable cost of 80.2% per pound -9 8!*#%00 1%0#000 pounds..
10$%&0
11. Assume that the 5il0 Chocolate /ivision is currentl operating at its capacit of 200#000 pounds of chocolate. Also assume again that the ?eanut 3utter /ivision wants to purchase an additional 20#000 pounds of chocolate from 5il0 Chocolate. Cnder these conditions# what amount per pound of chocolate would 5il0 Chocolate have to charge ?eanut 3utter in order to maintain its current profit4 A. 80.&0 per pound 3. 80.0+ per pound C. 80.1% per pound /. 80.2% per pound Since the 5il0 Chocolate /ivision is alread operating at capacit # it would have to charge the ?eanut 3utter /ivision its current selling price on the outside mar0et of 80.&0 per pound to maintain its current profit.
/ivision F ma0es a part with the following characteristics2
/ivision J of the same compan would li0e to purchase 10#000 units each period from /ivision F. /ivision J now purchases the part from an outside supplier at a price of 81* each.
10$%&1
12. Suppose /ivision F has ample excess capacit to handle all of /ivision J7s needs without an increase in fixed costs and without cutting into sales to outside customers. "f /ivision F refuses to accept the 81* price internall and /ivision J continues to bu from the outside supplier# the compan as a whole will be2 A. worse off b 8*0#000 each period. 3. better off b 810#000 each period. C. worse off b 8(0#000 each period. /. worse off b 820#000 each period. "nstead of incurring a cost of 811 per unit# the compan would have to incur a cost of 81* per unit to purchase from an outside supplier. )herefore# the compan would be worse off b 8(0#000 per period 9 -81* per unit $ 811 per unit. 10#000 units per period.
1!. Suppose that /ivision F is operating at capacit and can sell all of its output to outside customers. "f /ivision F sells the parts to /ivision J at 81* per unit# the compan as a whole will be2 A. better off b 810#000 each period. 3. worse off b 820#000 each period. C. worse off b 810#000 each period. /. )here will be no change in the status of the compan as a whole. "nstead of being able to sell the units for 81+ per unit on the outside mar0et# the compan would save 81* per unit transferring them internall . )he net effect is a reduction of 810#000 per period 9 -81+ per unit $ 81* per unit. 10#000 units per period.
10$%&2
/ivision A produces a part with the following characteristics2
/ivision 3# another division in the compan # would li0e to bu this part from /ivision A. /ivision 3 is presentl purchasing the part from an outside source at 82+ per unit. "f /ivision A sells to /ivision 3# 81 in variable costs can be avoided.
1&. Suppose /ivision A is currentl operating at capacit and can sell all of the units it produces on the outside mar0et for its usual selling price. From the point of view of /ivision A# an sales to /ivision 3 should be priced no lower than2 A. 82* B. 82, C. 820 /. 82+ 3ecause /ivision A is alread operating at capacit # it would have to charge /ivision 3 at least 82, per unit -8!0 per unit less the 81 per unit in variable cost that can be avoided b transferring internall rather than selling on the external mar0et..
10$%&!
1%. Suppose that /ivision A has ample idle capacit to handle all of /ivision 37s needs without an increase in fixed costs and without cutting into its sales to outside customers. From the point of view of /ivision A# an sales to /ivision 3 should be priced no lower than2 A. 82, 3. 8!0 C. 81+ D. 81* 3ecause /ivision A has excess operating capacit # the opportunit cost is Iero. :ence# /ivision A would ma0e mone charging /ivision 3 an thing more than 81* per unit -81+ variable cost per unit less the 81 in variable cost that can be avoided b transferring internall rather than selling on the outside mar0et..
)he ?ost /ivision of the 5.). 'oodhead Compan produces basic posts which can be sold to outside customers or sold to the Eamp /ivision of the 5.). 'oodhead Compan . East ear the Eamp /ivision bought all of its 2%#000 posts from ?ost at 81.%0 each. )he following data are available for last ear7s activities of the ?ost /ivision2
)he total fixed costs would be the same for all the alternatives considered below.
10$%&&
1(. Suppose there is ample capacit so that transfers of the posts to the Eamp /ivision do not cut into sales to outside customers. 'hat is the lowest transfer price that would not reduce the profits of the ?ost /ivision4 A. 80.,0 3. 81.!% C. 81.&1 /. 81.*% Since the ?ost /ivision has excess operating capacit # the opportunit cost is Iero. )herefore# the ?ost /ivision7s profits would not be reduced if the transfer price is at least the variable cost of 80.,0 per unit.
1*. Suppose the transfers of posts to the Eamp /ivision cut into sales to outside customers b 1%#000 units. 'hat is the lowest transfer price that would not reduce the profits of the ?ost /ivision4 A. 80.,0 3. 81.!% C. 81.&1 /. 81.*% )otal contribution margin on lost sales 9 -81.*% per unit $ 80.,0 per unit. 1%#000 units 9 80.+% per unit 1%#000 units 9 812#*%0 Apportunit cost 9 )otal contribution margin on lost sales @umber of units transferred 9 812#*%0 2%#000 units 9 80.%1 per unit )ransfer price N Variable cost per unit = Apportunit cost per unit 9 80.,0 per unit = 80.%1 per unit 9 81.&1 per unit
10$%&%
1+. Suppose the transfers of posts to the Eamp /ivision cut into sales to outside customers b 1%#000 units. Further suppose that an outside supplier is willing to provide the Eamp /ivision with basic posts at 81.&% each. "f the Eamp /ivision had chosen to bu all of its posts from the outside supplier instead of the ?ost /ivision# the change in net operating income for the compan as a whole would have been2 A. 81#2%0 decrease 3. 810#2%0 increase C. 81#000 decrease /. 81!#*%0 decrease
)he incremental change in net operating income to the compan as a whole would be 2%#000 units O 80.0& per unit# for a total of 81#000 in decreased profits.
10$%&(
)he ?ole /ivision of :ill ard Compan produces poles which can be sold to outside customers or transferred to the Flag /ivision of :ill ard Compan . East ear the Flag /ivision bought %0#000 poles from ?ole at 82.%0 each. )he following data are available for last ear7s activities in the ?ole /ivision2
"n order to sell %0#000 poles to the Flag /ivision# the ?ole /ivision must give up sales of !0#000 poles to outside customers. )hat is# the ?ole /ivision could sell !+0#000 poles each ear to outside customers -rather than onl !%0#000 poles as shown above. if it were not ma0ing sales to the Flag /ivision.
1,. According to the formula in the text# what is the lowest acceptable transfer price from the viewpoint of the selling division4 A. 82.%0 3. 82.00 C. 82.(0 /. 8!.00 From the perspective of the selling division# profits would increase as a result of the transfer if and onl if2 )ransfer price N Variable cost per unit = Apportunit cost per unit where Apportunit cost per unit 9 )otal contribution margin on lost sales @umber of units transferred )otal contribution margin on lost sales 9 -8! per unit $ 82 per unit. !0#000 units 9 8!0#000 Apportunit cost per unit 9 )otal contribution margin on lost sales @umber of units transferred 9 8!0#000 %0#000 units 9 80.(0 per unit
10$%&*
20. Suppose that last ear an outside supplier would have been willing to provide the Flag /ivision with the basic poles at 82.10 each. "f Flag had chosen to bu all of its poles from the outside supplier instead of the ?ole /ivision# the change in net operating income for the compan as a whole would have been2 A. 8&%#000 increase 3. 820#000 decrease C. 820#000 increase D. 82%#000 increase
)he cost would be lower b 82%#000 if the poles were purchased from the outside supplier. :ence# the net operating income would be higher b 82%#000.
Essay Questions
10$%&+
21. /ivision F has as0ed /ivision D of the same compan to suppl it with %#000 units of part E&!! this ear to use in one of its products. /ivision F has received a bid from an outside supplier for the parts at a price of 82(.00 per unit. /ivision D has the capacit to produce !0#000 units of part E&!! per ear. /ivision D expects to sell 2(#000 units of part E&!! to outside customers this ear at a price of 8!0.00 per unit. )o fill the order from /ivision F# /ivision D would have to cut bac0 its sales to outside customers. /ivision D produces part E&!! at a variable cost of 821.00 per unit. )he cost of pac0ing and shipping the parts for outside customers is 82.00 per unit. )hese pac0ing and shipping costs would not have to be incurred on sales of the parts to /ivision F. <e>uired2 a. 'hat is the range of transfer prices within which both the /ivisions7 profits would increase as a result of agreeing to the transfer of %#000 parts this ear from /ivision F to /ivision D4 b. "s it in the best interests of the overall compan for this transfer to ta0e place4 Kxplain. -@ote2 /ue limitations in fonts and word processing software# N and M signs must be used in this solution rather than Sgreater than or e>ual toS and Sless than or e>ual toS signs.. a. From the perspective of /ivision F# profits would increase as a result of the transfer if and onl if2 )ransfer price N Variable cost = Apportunit cost )he opportunit cost is the contribution margin on the lost sales# divided b the number of units transferred2 Apportunit cost 9 T-8!0.00 per unit $ 821.00 per unit $ 82.00 per unit. 1#000 unitsPVU%#000 units 9 81.&0 per unit
)herefore# )ransfer price N 821.00 per unit = 81.&0 per unit 9 822.&0 per unit. From the viewpoint of /ivision D# the transfer price must be less than the cost of bu ing the units from the outside supplier. )herefore# )ransfer price M 82(.00. Combining the two re>uirements# we get the following range of transfer prices2 822.&0 M )ransfer price M 82(.00. b. Jes# the transfer should ta0e place. From the viewpoint of the entire compan # the cost of transferring the units within the compan is 822.&0# but the cost of purchasing them from the outside supplier is 82(.00. )herefore# the compan 7s profits increase on average b 8!.(0 for each of the special parts that is transferred within the compan .
10$%&,
10$%%0
22. Eeontif Corporation has a ?arts /ivision that does wor0 for other /ivisions in the compan as well as for outside customers. )he compan 7s K>uipment /ivision has as0ed the ?arts /ivision to provide it with 2#000 special parts each ear. )he special parts would re>uire 81*.00 per unit in variable production costs. )he K>uipment /ivision has a bid from an outside supplier for the special parts at 82+.00 per unit. "n order to have time and space to produce the special part# the ?arts /ivision would have to cut bac0 production of another part$the B*+, that it presentl is producing. )he B*+, sells for 8!&.00 per unit# and re>uires 822.00 per unit in variable production costs. ?ac0aging and shipping costs of the B*+, are 8&.00 per unit. ?ac0aging and shipping costs for the new special part would be onl 80.%0 per unit. )he ?arts /ivision is now producing and selling 10#000 units of the B*+, each ear. ?roduction and sales of the B*+, would drop b 101 if the new special part is produced for the K>uipment /ivision. <e>uired2 a. 'hat is the range of transfer prices within which both the /ivisions7 profits would increase as a result of agreeing to the transfer of 2#000 special parts per ear from the ?arts /ivision to the K>uipment /ivision4 b. "s it in the best interests of Eeontif Corporation for this transfer to ta0e place4 Kxplain. -@ote2 /ue limitations in fonts and word processing software# N and M signs must be used in this solution rather than Sgreater than or e>ual toS and Sless than or e>ual toS signs.. a. From the perspective of the ?arts /ivision# profits would increase as a result of the transfer if and onl if2 )ransfer price N Variable cost = Apportunit cost )he opportunit cost is the contribution margin on the lost sales# divided b the number of units transferred2 Apportunit cost 9 T-8!&.00 per unit $ 822.00 per unit $ 8&.00 per unit. 1#000 unitsPVU2#000 units 9 8&.00 per unit P 10110#000 units 9 1#000 units )herefore# )ransfer price N -81*.00 per unit = 80.%0 per unit. = 8&.00 per unit 9 821.%0 per unit. From the viewpoint of the K>uipment /ivision# the transfer price must be less than the cost of bu ing the units from the outside supplier. )herefore# )ransfer price M 82+.00. Combining the two re>uirements# we get the following range of transfer prices2 821.%0 M )ransfer price M 82+.00. b. Jes# the transfer should ta0e place. From the viewpoint of the entire compan # the cost of transferring the units within the compan is 821.%0# but the cost of purchasing the special parts from the outside supplier is 82+.00. )herefore# the compan 7s profits increase on average b 8(.%0 for each of the special parts that is transferred within the compan # even though this would cut into production and sales of another product.
10$%%1
Chapter 11 Appendix 3 Service /epartment Charges Answer De
1. For performance evaluation purposes# budgeted service department costs# instead of actual service department costs# should be charged to the operating departments. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: ((B'%3 Charge o erating *e artments for services rovi*e* #. service *e artments !evel: Me*ium
2. For performance evaluation purposes# the best wa to charge the fixed costs of a service department to operating departments is with an allocation base such as direct labor$hours that reflects the actual level of activit for the period. FALSE
10$%%2
!. Eump$sum charges for service department fixed costs should usuall be based on budgeted activit for the forthcoming period. FALSE
10$%%!
&. Since service departments do not engage in production# there can be no variances in service department costs. FALSE
%. )he variable costs of service departments should t picall be charged to operating departments on the basis of the number of units produced in the operating departments. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: ((B'%3 Charge o erating *e artments for services rovi*e* #. service *e artments !evel: 6ar*
(. All of a service department7s actual costs should be allocated or charged to operating departments to ensure that the are full recovered. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: ((B'%3 Charge o erating *e artments for services rovi*e* #. service *e artments !evel: 6ar*
10$%%&
*. For performance evaluation purposes# variable costs of service departments should be charged to operating departments at the end of the period on the basis of2 A. the actual rate based on pea0$period service needed. 3. the budgeted rate based on pea0$period service needed. C. the actual rate based on actual service provided. D. the budgeted rate based on actual service provided.
+. Fixed service department costs should be charged to operating departments at the end of the period according to which one of the following the formulas4 A. 3udgeted rate x 3udgeted activit . 3. 3udgeted rate x Actual activit . C. Actual rate x Actual activit . D. 3udgeted total cost x ?ercentage of pea0$period capacit re>uired.
,. ?iedmont Compan has one service department and three operating departments. /uring a particular ear# a substantial variance developed between the actual costs and the budgeted costs of the service department. For performance evaluation purposes# the variance should be2 A. allocated to the operating departments on the basis of usage. 3. allocated to operating departments# but on some basis other than usage. C. 0ept in the service department# and not charged to the operating departments at all. /. shared e>uitabl among all departments.
10$%%%
10. 5atrix Compan has a 5aintenance /epartment that maintains the machines in departments A and 3. @ext ear /epartment A is budgeted to have (#000 machine$hours of activit and /epartment 3 is budgeted to have 2&#000 machine$hours. Fixed costs in the 5aintenance /epartment are budgeted at 8(0#000 per ear and are incurred in order to support pea0 period activit . /epartment A re>uires 2%1 of the pea0 period capacit and /epartment 3 re>uires *%1 of the pea0 period capacit . :ow much of the fixed cost of the 5aintenance /epartment should be charged to /epartment 34 A. 8&%#000 3. 8!0#000 C. 8&+#000 /. 8(0#000 Allocation of 5aintenance /epartment fixed costs to /epartment 3 9 *%1 8(0#000 9 8&%#000
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: ((B'%3 Charge o erating *e artments for services rovi*e* #. service *e artments !evel: Me*ium
10$%%(
11. @orgaard Corporation has two operating divisions2 a Consumer /ivision and a Commercial /ivision. )he compan 7s Customer Service /epartment provides services to both divisions. )he variable costs of the Customer Service /epartment are budgeted at 8*0 per order. )he Customer Service /epartment7s fixed costs are budgeted at 82&%#000 for the ear. )he fixed costs of the Customer Service /epartment are determined based on the pea0 period orders.
At the end of the ear# actual Customer Service /epartment variable costs totaled 8!&+#,20 and fixed costs totaled 82%,#*,0. )he Consumer /ivision had a total of 1#%20 orders and the Commercial /ivision had a total of !#!(0 orders for the ear. For performance evaluation purposes# how much actual Customer Service /epartment cost should @A) be charged to the operating divisions at the end of the ear4 A. 81&#*,0 B. 822#110 C. 8*#!20 /. 80
)otal spending variance not charged to the operating divisions 9 8*#!20 = 81&#*,0 9 822#110
10$%%*
12. Fairview :ospital has a Food Services department that provides food for patients in all other departments of the hospital. For 5a # variable food costs were budgeted at 8! per meal# based on 1%#000 meals served during the month. At the end of the month# it was determined that 1(#000 meals had been served at a total cost of 8%&#000. :ow much food cost should be charged to the other departments at the end of the month4 A. 8&%#000 3. 8%1#200 C. 8&+#000 /. 8%0#(2% )otal variable cost charged to the operating departments 9 8! per meal 1(#000 meals 9 8&+#000
10$%%+
1!. :ilbun Corporation has two operating divisions$an Atlantic /ivision and a ?acific /ivision. )he compan 7s Eogistics /epartment services both divisions. )he variable costs of the Eogistics /epartment are budgeted at 8!& per shipment. )he Eogistics /epartment7s fixed costs are budgeted at 8!*1#*00 for the ear. )he fixed costs of the Eogistics /epartment are determined based on pea0$period demand.
:ow much Eogistics /epartment cost should be charged to the Atlantic /ivision at the end of the ear for performance evaluation purposes4 A. 81+*#+,% 3. 81%+#100 C. 82,2#,%0 /. 820%#0(%
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: ((B'%3 Charge o erating *e artments for services rovi*e* #. service *e artments !evel: -as.
10$%%,
1&. Banner Corporation has two operating divisions$a Consumer /ivision and a Commercial /ivision. )he compan 7s Arder Fulfillment /epartment provides services to both divisions. )he variable costs of the Arder Fulfillment /epartment are budgeted at 8*, per order. )he Arder Fulfillment /epartment7s fixed costs are budgeted at 8!02#%00 for the ear. )he fixed costs of the Arder Fulfillment /epartment are determined based on the pea0 period orders.
At the end of the ear# actual Arder Fulfillment /epartment variable costs totaled 8&&(#01( and fixed costs totaled 8!20#,!0. )he Consumer /ivision had a total of 1#%&0 orders and the Commercial /ivision had a total of !#,+0 orders for the ear. For purposes of evaluation performance# how much Arder Fulfillment /epartment cost should be charged to the Commercial /ivision at the end of the ear4 A. 8%2(#1*0 3. 8%&(#2!% C. 8%!2#%2* /. 8%%2#,*,
10$%(0
1%. /un0le Corporation7s 5aintenance /epartment provides services to the compan 7s two operating divisions$the ?aints /ivision and the Stains /ivision. )he variable costs of the 5aintenance /epartment are budgeted based on the number of cases produced b the operating departments. )he fixed costs of the 5aintenance /epartment are budgeted based on the number of cases produced b the operating departments during the pea0 period. /ata appear below2
For performance evaluation purposes# how much 5aintenance /epartment cost should be charged to the ?aints /ivision at the end of the ear4 A. 82,+#+00 3. 8&,+#000 C. 82+,#000 /. 82&0#000
10$%(1
1(. )he fixed costs of 3axter Compan 7s personnel department are allocated to operating departments on the basis of direct labor$hours. )he following data have been provided2
)he fixed costs of the personnel department are budgeted at 8%(#000 per ear and are incurred in order to support long$run average re>uirements. :ow much of this fixed cost should be charged to Aperating /epartment F at the end of the ear for performance evaluation purposes4 A. 8!%#000 B. 8!!#(00 C. 8%2#%00 /. 822#&00 ?ercentage of long$run average re>uirements for Aperating /epartment F 9 1%#000 /E:sU-1%#000 /E:s = 10#000 /E:s. 9 (01 Fixed cost of personnel department allocated to Aperating /epartment F 9 (01 8%(#000 9 8!!#(00
10$%(2
1*. ?ea0e Corporation7s 5aintenance /epartment provides services to the compan 7s two operating divisions$the ?aints /ivision and the Stains /ivision. )he variable costs of the 5aintenance /epartment are budgeted based on the number of cases produced b the operating departments. )he fixed costs of the 5aintenance /epartment are budgeted based on the number of cases produced b the operating departments during the pea0 period. /ata appear below2
For performance evaluation purposes# how much 5aintenance /epartment cost should be charged to the Stains /ivision at the end of the ear4 A. 8((,#(2! 3. 8(!*#!!, C. 8(2%#%00 /. 8(%*#%+&
10$%(!
1+. 'ilson Compan maintains a cafeteria for its emplo ees. For Bune# variable food costs were budgeted at 8&% per emplo ee based on a budgeted level of 200 emplo ees in other departments. /uring the month# an average of 1,0 emplo ees wor0ed in other departments and actual food costs totaled 8,#2%0. :ow much food cost should be charged to the other departments at the end of the month for performance evaluation purposes4 A. 8,#000 3. 8,#2%0 C. 8+#%%0 /. 8,#*!* )otal variable food costs allocated to other departments 9 1,0 emplo ees 8&% per emplo ee 9 8+#%%0
10$%(&
1,. Ameara Corporation has two operating divisions$an Atlantic /ivision and a ?acific /ivision. )he compan 7s Eogistics /epartment services both divisions. )he variable costs of the Eogistics /epartment are budgeted at 8&+ per shipment. )he Eogistics /epartment7s fixed costs are budgeted at 8&!1#(00 for the ear. )he fixed costs of the Eogistics /epartment are determined based on pea0$period demand.
At the end of the ear# actual Eogistics /epartment variable costs totaled 8%0%#,20 and fixed costs totaled 8&!+#0+0. )he Atlantic /ivision had a total of !#,00 shipments and the ?acific /ivision had a total of (#!00 shipments for the ear. :ow much Eogistics /epartment cost should be charged to the ?acific /ivision at the end of the ear for performance evaluation purposes4 A. 8%+!#0%, B. 8(2(#100 C. 8(&1#0&0 /. 8%(+#,*(
10$%(%
20. :erriott Corporation has two operating divisions$an Atlantic /ivision and a ?acific /ivision. )he compan 7s Eogistics /epartment services both divisions. )he variable costs of the Eogistics /epartment are budgeted at 8&! per shipment. )he Eogistics /epartment7s fixed costs are budgeted at 820,#000 for the ear. )he fixed costs of the Eogistics /epartment are determined based on pea0$period demand.
At the end of the ear# actual Eogistics /epartment variable costs totaled 82&(#,(0 and fixed costs totaled 821*#+*0. )he Atlantic /ivision had a total of !#000 shipments and the ?acific /ivision had a total of 2#(00 shipments for the ear. For performance evaluation purposes# how much actual Eogistics /epartment cost should @A) be charged to the operating divisions at the end of the ear4 A. 8+#+*0 B. 81%#0!0 C. 8(#1(0 /. 80
%#(00 actual shipments 8&! per shipment 9 82&0#+00
)otal spending variance not charged to the operating divisions 9 8(#1(0 = 8+#+*0 9 81%#0!0
10$%((
5araIIi Corporation has two operating divisions$an Kast /ivision and a 'est /ivision. )he compan 7s Eogistics /epartment services both divisions. )he variable costs of the Eogistics /epartment are budgeted at 8&* per shipment. )he Eogistics /epartment7s fixed costs are budgeted at 8!2+#(00 for the ear. )he fixed costs of the Eogistics /epartment are determined based on pea0$period demand.
At the end of the ear# actual Eogistics /epartment variable costs totaled 8!!!#2*0 and fixed costs totaled 8!&0#2&0. )he Kast /ivision had a total of 2#!00 shipments and the 'est /ivision had a total of &#(00 shipments for the ear.
21. :ow much Eogistics /epartment cost should be allocated to the 'est /ivision at the end of the ear4 A. 8&(2#(%0 3. 8&**#!(0 C. 8&!%#2(* /. 8&&,#00*
10$%(*
22. :ow much actual Eogistics /epartment cost should not be allocated to the operating divisions at the end of the ear4 A. 80 B. 820#(10 C. 811#(&0 /. 8+#,*0
(#,00 actual shipments 8&* per shipment 9 8!2&#!00
)otal spending variance not charged to the operating divisions 9 8+#,*0 = 811#(&0 9 820#(10
)he Buab Compan has a Freight /epartment that delivers scrap metal from salvage ards to its two fabricating facilities$$the Kmor ?lant and the Salina ?lant. Aperating data for the two plants for last ear follow2
3udgeted costs consist of 81%0#000 fixed costs and 80.%0 variable cost for each ton of scrap delivered to the plants. Actual costs incurred in the Freight /epartment were 8%2#+00 variable# and 81(%#000 fixed. Buab allocates variable and fixed service department costs separatel . )he level of budgeted fixed costs is determined b pea0$period needs. )he Kmor ?lant re>uires &01 of the pea0$period capacit and the Salina ?lant re>uires (01.
10$%(+
2!. :ow much fixed Freight /epartment costs should be charged to the Kmor ?lant at the end of the ear for performance evaluation purposes4 A. 8(0#000 3. 8(%#(2% C. 8((#000 /. 8%(#2%0
2&. :ow much variable Freight /epartment costs should be charged to the Salina ?lant at the end of the ear for performance evaluation purposes4 A. 8!0#000 3. 8!!#000 C. 82%#000 /. 822#%00
10$%(,
2%. :ow much of the actual Freight /epartment cost should not be charged to either plant at the end of the ear for performance evaluation purposes4 A. 80 3. 81%#000 C. 81*#+00 D. 82*#+00
+0#000 actual tons 80.%0 per ton 9 8&0#000
)otal spending variance not charged to either plant 9 812#+00 = 81%#000 9 82*#+00
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: ((B'%3 Charge o erating *e artments for services rovi*e* #. service *e artments !evel: 6ar*
Eindon :ospital has a Food Services /epartment that provides meals for all patients in the hospital. 3udgeted and actual meals served for Bune follow2
)he budgeted variable cost of meals for Bune was 8*%#000H the actual variable cost of meals for the month was 8,*#%00.
10$%*0
Chapter 12 /ifferential Anal sis2 )he De to /ecision 5a0ing Answer De
1. Future costs that do not differ among the alternatives are not relevant in a decision. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: -as.
2. Fixed costs are irrelevant in a decision. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: Me*ium
!. Sun0 costs are considered to be avoidable costs. FALSE
10$%*1
&. Avoidable costs are also called relevant costs. TRUE
%. An avoidable cost is a cost that can be eliminated -in whole or in part. as a result of choosing one alternative over another. TRUE
(. A sun0 cost is a cost that has alread been incurred and that cannot be avoided regardless of what action is chosen. TRUE
*. )he boo0 value of a machine# as shown on the balance sheet# is relevant in a decision concerning the replacement of that machine b another machine. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: Me*ium
10$%*2
+. "f b dropping a product a firm can avoid more in fixed costs than it loses in contribution margin# then the firm is better off economicall if the product is dropped. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (/'%/ Pre are an anal.sis sho,ing ,hether a ro*uct line or other #usiness segment shoul* #e a**e* or *ro e* !evel: -as.
10$%*!
,. ;enerall # a product line should be dropped when the fixed costs that can be avoided b dropping the product line are less than the contribution margin that will be lost. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (/'%/ Pre are an anal.sis sho,ing ,hether a ro*uct line or other #usiness segment shoul* #e a**e* or *ro e* !evel: Me*ium
10. )he cost of a resource that has no alternative use in a ma0e or bu decision problem has an opportunit cost of Iero. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (/'%0 Pre are a make or #u. anal.sis !evel: -as.
11. Vertical integration is the involvement b a compan in more than one of the steps from securing basic raw materials to the production and distribution of a finished product. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (/'%0 Pre are a make or #u. anal.sis !evel: -as.
10$%*&
12. /epreciation expense on existing factor e>uipment is generall relevant to a decision of whether to accept or re6ect a special offer for a compan 7s product. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (/'%1 Pre are an anal.sis sho,ing ,hether a s ecial or*er shoul* #e acce te* !evel: Me*ium
1!. 'hen a compan has a production constraint# the product with the highest contribution margin per unit of the constrained resource should be given highest priorit . TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !evel: -as.
1&. 5anagers should not authoriIe wor0ing overtime at a wor0 station that contains a bottlenec0. FALSE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (/'%3 <etermine the value of o#taining more of the constraine* resource !evel: Me*ium
1%. Boint costs are not relevant to the decision to sell a product at the split$off point or to process the product further. TRUE
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (/'%= Pre are an anal.sis sho,ing ,hether $oint ro*ucts shoul* #e sol* at the s lit'off oint or rocesse* further !evel: Me*ium
10$%*%
1(. Boint production costs are relevant costs in decisions about what to do with a product from the split$off point onward in the production process. FALSE
10$%*(
1*. Costs which are alwa s relevant in decision ma0ing are those costs which are2 A. variable. B. avoidable. C. sun0. /. fixed.
1+. A general rule in relevant cost anal sis is2 A. variable costs are alwa s relevant. 3. fixed costs are alwa s irrelevant. C. differential future costs and revenues are alwa s relevant. /. depreciation is alwa s irrelevant.
1,. )he opportunit cost of ma0ing a component part in a factor with no excess capacit is the2 A. variable manufacturing cost of the component. 3. fixed manufacturing cost of the component. C. total manufacturing cost of the component. D. net benefit foregone from the best alternative use of the capacit re>uired.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: Me*ium Source: CMA8 a*a te*
10$%**
20. Freestone Compan is considering renting 5achine J to replace 5achine F. "t is expected that J will waste less direct materials than does F. "f J is rented# F will be sold on the open mar0et. For this decision# which of the following factors is -are. relevant4 ". Cost of direct materials used "". <esale value of 5achine F A. Anl " 3. Anl "" C. 3oth " and "" /. @either " nor ""
21. 'hich of the following are valid reasons for eliminating a product line4 ". )he product line7s contribution margin is negative. "". )he product line7s traceable fixed costs plus its allocated common corporate costs are less than its contribution margin. A. Anl " 3. Anl "" C. 3oth " and "" /. @either " nor ""
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: +no,le*ge !earning "#$ective: (/'%/ Pre are an anal.sis sho,ing ,hether a ro*uct line or other #usiness segment shoul* #e a**e* or *ro e* !evel: -as.
10$%*+
22. 'hen there is a production constraint# a compan should emphasiIe the products with2 A. the highest unit contribution margins. 3. the highest contribution margin ratios. C. the highest contribution margin per unit of the constrained resource. /. the highest contribution margins and contribution margin ratios.
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: Com rehension !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !evel: Me*ium
2!. "n a sell or process further decision# which of the following costs are relevant4 ". A variable production cost incurred prior to the split$off point. "". An avoidable fixed production cost incurred after the split$off point. A. Anl ". B. Anl "". C. 3oth " and "". /. @either " nor "".
10$%*,
2&. Scherer Corporation is preparing a bid for a special order that would re>uire *20 liters of material C&+@. )he compan alread has %(0 liters of this raw material in stoc0 that originall cost 8(.!0 per liter. 5aterial C&+@ is used in the compan 7s main product and is replenished on a periodic basis. )he resale value of the existing stoc0 of the material is 8%.+0 per liter. @ew stoc0s of the material can be readil purchased for 8(.(% per liter. 'hat is the relevant cost of the *20 liters of the raw material when deciding how much to bid on the special order4 A. 8&#%,2 B. 8&#*++ C. 8&#&%( /. 8&#1*( )he relevant cost is the current mar0et cost which is *20 liters current mar0et 8(.(% per liter 9 8&#*++.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: 6ar* Source: CIMA8 a*a te*
10$%+0
2%. Cung "nc. has some material that originall cost 8(+#&00. )he material has a scrap value of 8!0#100 as is# but if rewor0ed at a cost of 81#&00# it could be sold for 8!0#+00. 'hat would be the incremental effect on the compan 7s overall profit of rewor0ing and selling the material rather than selling it as is as scrap4 A. $8(,#100 B. $8*00 C. 82,#&00 /. $8!,#000
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: Me*ium Source: CIMA8 a*a te*
10$%+1
2(. Eiffic0 Corporation is a specialt component manufacturer with idle capacit . 5anagement would li0e to use its extra capacit to generate additional profits. A potential customer has offered to bu (#200 units of component VF;. Kach unit of VF; re>uires + units of material C*, and ( units of material F*0. /ata concerning these two materials follow2
5aterial C*, is in use in man of the compan 7s products and is routinel replenished. 5aterial F*0 is no longer used b the compan in an of its normal products and existing stoc0s would not be replenished once the are used up. 'hat would be the relevant cost of the materials# in total# for purposes of determining a minimum acceptable price for the order for product VF;4 A. 8%2+#%%1 3. 8%2!#2+0 C. 8&*(#!%0 D. 8&+&#&%% 5aterials re>uirements for C*,2 (#200 units of VF; + units of C*, per unit of VF; 9 &,#(00 units of C*, 5aterials re>uirements for F*02 (#200 units of VF; ( units of F*0 per unit of VF; 9 !*#200 units of F*0
P !*#200 units $ !1#0(0 units 9 (#1&0 units
10$%+2
2*. Schemm "nc. regularl uses material F0&K and currentl has in stoc0 &(0 liters of the material for which it paid 82#(22 several wee0s ago. "f this were to be sold as is on the open mar0et as surplus material# it would fetch 8%.2% per liter. @ew stoc0s of the material can be purchased on the open mar0et for 8%.+% per liter# but it must be purchased in lots of 1#000 liters. Jou have been as0ed to determine the relevant cost of +00 liters of the material to be used in a 6ob for a customer. )he relevant cost of the +00 liters of material F0&K is2 A. 8%#+%0 3. 8&#200 C. 8&#&0& D. 8&#(+0 )he relevant cost is the current mar0et value2 +00 liters current mar0et 8%.+% per liter 9 8&#(+0
10$%+!
2+. Stamp0a Corporation is a specialt component manufacturer with idle capacit . 5anagement would li0e to use its extra capacit to generate additional profits. A potential customer has offered to bu &#200 units of component BBF. Kach unit of BBF re>uires ( units of material A!+ and , units of material ?%(. /ata concerning these two materials follow2
5aterial A!+ is in use in man of the compan 7s products and is routinel replenished. 5aterial ?%( is no longer used b the compan in an of its normal products and existing stoc0s would not be replenished once the are used up. 'hat would be the relevant cost of the materials# in total# for purposes of determining a minimum acceptable price for the order for product BBF4 A. 81&(#*,0 3. 81,,#0+0 C. 81%%#(10 /. 8212#!&0 5aterials re>uirements for A!+2 &#200 units of BBF ( units of A!+ per unit of BBF 9 2%#200 units of A!+ 5aterials re>uirements for ?%(2 &#200 units of BBF , units of ?%( per unit of BBF 9 !*#+00 units of ?%(
10$%+&
2,. Banus Corporation has in stoc0 &!#*00 0ilograms of material E that it bought five ears ago for 8(.10 per 0ilogram. )his raw material was purchased to use in a product line that has been discontinued. 5aterial E can be sold as is for scrap for 8!.2! per 0ilogram. An alternative would be to use material E in one of the compan 7s current products# K,,/# which currentl re>uires 2 0ilograms of a raw material that is available for 8,.&% per 0ilogram. 5aterial E can be modified at a cost of 80.(2 per 0ilogram so that it can be used as a substitute for this material in the production of product K,,/. :owever# after modification# ! 0ilograms of material E is re>uired for ever unit of product K,,/ that is produced. Banus Corporation has now received a re>uest from a compan that could use material E in its production process. Assuming that Banus Corporation could use all of its stoc0 of material E to ma0e product K,,/ or the compan could sell all of its stoc0 of the material at the current scrap price of 8!.2! per 0ilogram# what is the minimum acceptable selling price of material E to the compan that could use material E in its own production process4 A. 8!.2! B. 8%.(+ C. 8(.,2 /. 82.&%
)he value of using material E to produce K,,/ is greater than its scrap value# so the compan would be giving up benefits of 8%.(+ per 0ilogram if it were to sell material E. )herefore# the minimum acceptable price is 8%.(+ per 0ilogram.
10$%+%
!0. Eampshire "nc. is considering using stoc0s of an old raw material in a special pro6ect. )he special pro6ect would re>uire all 1(0 0ilograms of the raw material that are in stoc0 and that originall cost the compan 81#1!( in total. "f the compan were to bu new supplies of this raw material on the open mar0et# it would cost 8*.2% per 0ilogram. :owever# the compan has no other use for this raw material and would sell it at the discounted price of 8(.%0 per 0ilogram if it were not used in the special pro6ect. )he sale of the raw material would involve deliver to the purchaser at a total cost of 8*% for all 1(0 0ilograms. 'hat is the relevant cost of the 1(0 0ilograms of the raw material when deciding whether to proceed with the special pro6ect4 A. 81#0&0 B. 8,(% C. 81#1!( /. 81#1(0 )he compan 7s relevant cost in this case is how much it could earn b selling the 1(0 0ilograms at the discounted price of 8(.%0 per 0ilogram# less deliver costs of 8*% for all 1(0 0ilograms.
10$%+(
!1. A stud has been conducted to determine if ?roduct A should be dropped. Sales of the product total 8200#000 per earH variable expenses total 81&0#000 per ear. Fixed expenses charged to the product total 8,0#000 per ear. )he compan estimates that 8&0#000 of these fixed expenses will continue even if the product is dropped. )hese data indicate that if ?roduct A is dropped# the compan 7s overall net operating income would2 A. decrease b 820#000 per ear 3. increase b 820#000 per ear C. decrease b 810#000 per ear /. increase b 8!0#000 per ear
@et operating income would decline b 810#000 if ?roduct A were dropped.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%/ Pre are an anal.sis sho,ing ,hether a ro*uct line or other #usiness segment shoul* #e a**e* or *ro e* !evel: -as.
10$%+*
!2. )he Delsh Compan has two divisions$$@orth and South. )he divisions have the following revenues and expenses2
5anagement at Delsh is pondering the elimination of @orth /ivision. "f @orth /ivision were eliminated# its traceable fixed expenses could be avoided. )he total common corporate expenses would be unaffected. ;iven these data# the elimination of @orth /ivision would result in an overall compan net operating income of2 A. 8100#000 3. 81%0#000 C. 8-1&0#000. /. 8%0#000
)he compan currentl has a net operating income of 8%0#000Wthe combined effect of the apparent 8%0#000 loss in the @orth /ivision and the apparent 8100#000 profit in the South /ivision. /ropping the @orth /ivision would reduce net operating income b 81,0#000. )herefore# after dropping the @orth /ivision# the overall compan net operating loss would be 81&0#000 -9 8%0#000 $ 81,0#000..
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%/ Pre are an anal.sis sho,ing ,hether a ro*uct line or other #usiness segment shoul* #e a**e* or *ro e* !evel: Me*ium
10$%++
!!. ?ower S stems "nc. manufactures 6et engines for the Cnited States armed forces on a cost$ plus basis. )he production cost of a particular 6et engine is shown below2
"f production of this engine was discontinued# the production capacit would be idle# and the supervisor would be laid off. )he depreciation referred to above is for special e>uipment that would have no resale value and that does not wear out through use. 'hen as0ed to bid on the next contract for this engine# the minimum unit price that ?ower S stems should bid is2 A. 8&0+#000 3. 8!(%#000 C. 8!,*#000 D. 8!+%#000 )he relevant -avoidable. cost of producing an engine is2
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%/ Pre are an anal.sis sho,ing ,hether a ro*uct line or other #usiness segment shoul* #e a**e* or *ro e* !evel: Me*ium Source: CMA8 a*a te*
10$%+,
!&. )he management of :eider Corporation is considering dropping product B1&V. /ata from the compan 7s accounting s stem appear below2
"n the compan 7s accounting s stem all fixed expenses of the compan are full allocated to products. Further investigation has revealed that 8211#000 of the fixed manufacturing expenses and 81*2#000 of the fixed selling and administrative expenses are avoidable if product B1&V is discontinued. 'hat would be the effect on the compan 7s overall net operating income if product B1&V were dropped4 A. Averall net operating income would decrease b 8%%#000. 3. Averall net operating income would increase b 81(0#000. C. Averall net operating income would increase b 8%%#000. D. Averall net operating income would decrease b 81(0#000.
@et operating income would decline b 81(0#000 if ?roduct B1&V were dropped. )herefore# the product should not be dropped. Another wa of sa ing this is that the compan is actuall currentl ma0ing 81(0#000 on this product.
10$%,0
!%. ?roduct <1,@ has been considered a drag on profits at 3uIIeo Corporation for some time and management is considering discontinuing the product altogether. /ata from the compan 7s accounting s stem appear below2
"n the compan 7s accounting s stem all fixed expenses of the compan are full allocated to products. Further investigation has revealed that 8&,#000 of the fixed manufacturing expenses and 8!0#000 of the fixed selling and administrative expenses are avoidable if product <1,@ is discontinued. 'hat would be the effect on the compan 7s overall net operating income if product <1,@ were dropped4 A. Averall net operating income would decrease b 8%,#000. 3. Averall net operating income would decrease b 822#000. C. Averall net operating income would increase b 8%,#000. /. Averall net operating income would increase b 822#000.
@et operating income would decline b 8%,#000 if ?roduct <1,@ were dropped. )herefore# the product should not be dropped. Another wa of sa ing this is that the compan is actuall currentl ma0ing 8%,#000 on this product.
10$%,1
!(. Eus0 Compan produces and sells 1%#000 units of ?roduct A each month. )he selling price of ?roduct A is 820 per unit# and variable expenses are 81& per unit. A stud has been made concerning whether ?roduct A should be discontinued. )he stud shows that 8*0#000 of the 8100#000 in fixed expenses charged to ?roduct A would continue even if the product was discontinued. )hese data indicate that if ?roduct A is discontinued# the compan 7s overall net operating income would2 A. decrease b 8(0#000 per month 3. increase b 810#000 per month C. increase b 820#000 per month /. decrease b 820#000 per month
@et operating income would decline b 8(0#000 if ?roduct A were dropped. )herefore# the product should not be dropped. Another wa of sa ing this is that the compan is actuall ma0ing 8(0#000 on this product.
10$%,2
!*. ?eluso Compan # a manufacturer of snowmobiles# is operating at *01 of plant capacit . ?eluso7s plant manager is considering ma0ing the headlights now being purchased from an outside supplier for 811 each. )he ?eluso plant has idle e>uipment that could be used to manufacture the headlights. )he design engineer estimates that each headlight re>uires 8& of direct materials# 8! of direct labor# and 8(.00 of manufacturing overhead. Fort percent of the manufacturing overhead is a fixed cost that would be unaffected b this decision. A decision b ?eluso Compan to manufacture the headlights should result in a net gain -loss. for each headlight of2 A. 8-2.00. 3. 81.(0 C. 80.&0 /. 82.+0
"t would cost the compan 80.&0 less to ma0e the part than to bu it for 811.00.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%0 Pre are a make or #u. anal.sis !evel: Me*ium Source: CMA8 a*a te*
10$%,!
!+. ?art "%1 is used in one of ?ries Corporation7s products. )he compan ma0es 1+#000 units of this part each ear. )he compan 7s Accounting /epartment reports the following costs of producing the part at this level of activit 2
An outside supplier has offered to produce this part and sell it to the compan for 81%.+0 each. "f this offer is accepted# the supervisor7s salar and all of the variable costs# including direct labor# can be avoided. )he special e>uipment used to ma0e the part was purchased man ears ago and has no salvage value or other use. )he allocated general overhead represents fixed costs of the entire compan . "f the outside supplier7s offer were accepted# onl 82(#000 of these allocated general overhead costs would be avoided. "f management decides to bu part "%1 from the outside supplier rather than to continue ma0ing the part# what would be the annual impact on the compan 7s overall net operating income4 A. @et operating income would decline b 8+1#+00 per ear. 3. @et operating income would decline b 8%%#+00 per ear. C. @et operating income would decline b 811,#+00 per ear. /. @et operating income would decline b 82,#+00 per ear.
10$%,&
@et operating income would decline b 811,#+00 per ear if the part were purchased rather than made internall .
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%0 Pre are a make or #u. anal.sis !evel: -as.
10$%,%
!,. "wasa0i "nc. is considering whether to continue to ma0e a component or to bu it from an outside supplier. )he compan uses 1!#000 of the components each ear. )he unit product cost of the component according to the compan 7s cost accounting s stem is given as follows2
Assume that direct labor is a variable cost. Af the fixed manufacturing overhead# !01 is avoidable if the component were bought from the outside supplier. "n addition# ma0ing the component uses 1 minute on the machine that is the compan 7s current constraint. "f the component were bought# this machine time would be freed up for use on another product that re>uires 2 minutes on this machine and that has a contribution margin of 8%.20 per unit. 'hen deciding whether to ma0e or bu the component# what cost of ma0ing the component should be compared to the price of bu ing the component4 A. 822.&0 3. 81,.+0 C. 81*.2+ D. 81,.++
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%0 Pre are a make or #u. anal.sis !evel: 6ar* Source: CIMA8 a*a te*
10$%,(
&0. ?art @2, is used b Farman Corporation to ma0e one of its products. A total of 11#000 units of this part are produced and used ever ear. )he compan 7s Accounting /epartment reports the following costs of producing the part at this level of activit 2
An outside supplier has offered to ma0e the part and sell it to the compan for 821.20 each. "f this offer is accepted# the supervisor7s salar and all of the variable costs# including the direct labor# can be avoided. )he special e>uipment used to ma0e the part was purchased man ears ago and has no salvage value or other use. )he allocated general overhead represents fixed costs of the entire compan # none of which would be avoided if the part were purchased instead of produced internall . "n addition# the space used to ma0e part @2, could be used to ma0e more of one of the compan 7s other products# generating an additional segment margin of 82,#000 per ear for that product. 'hat would be the impact on the compan 7s overall net operating income of bu ing part @2, from the outside supplier4 A. @et operating income would decline b 8!+#,00 per ear. 3. @et operating income would increase b 82,#000 per ear. C. @et operating income would decline b 8!2#(00 per ear. /. @et operating income would increase b 81,#100 per ear.
@et operating income would decline b 8!2#(00 per ear if the part were purchased rather than made internall .
10$%,*
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%0 Pre are a make or #u. anal.sis !evel: Me*ium
10$%,+
&1. Fillip Corporation ma0es &#000 units of part C1! each ear. )his part is used in one of the compan 7s products. )he compan 7s Accounting /epartment reports the following costs of producing the part at this level of activit 2
An outside supplier has offered to ma0e and sell the part to the compan for 821.(0 each. "f this offer is accepted# the supervisor7s salar and all of the variable costs# including direct labor# can be avoided. )he special e>uipment used to ma0e the part was purchased man ears ago and has no salvage value or other use. )he allocated general overhead represents fixed costs of the entire compan . "f the outside supplier7s offer were accepted# onl 8!#000 of these allocated general overhead costs would be avoided. "n addition# the space used to produce part C1! would be used to ma0e more of one of the compan 7s other products# generating an additional segment margin of 81!#000 per ear for that product. 'hat would be the impact on the compan 7s overall net operating income of bu ing part C1! from the outside supplier4 A. @et operating income would increase b 81!#000 per ear. 3. @et operating income would decline b 8&2#(00 per ear. C. @et operating income would decline b 8(+#(00 per ear. D. @et operating income would increase b 8,#200 per ear.
10$%,,
@et operating income would increase b 8,#200 per ear if the part were bought from the outside supplier.
10$(00
&2. Kthridge Corporation is presentl ma0ing part :2% that is used in one of its products. A total of ,#000 units of this part are produced and used ever ear. )he compan 7s Accounting /epartment reports the following costs of producing the part at this level of activit 2
An outside supplier has offered to ma0e and sell the part to the compan for 81%.&0 each. "f this offer is accepted# the supervisor7s salar and all of the variable costs can be avoided. )he special e>uipment used to ma0e the part was purchased man ears ago and has no salvage value or other use. )he allocated general overhead represents fixed costs of the entire compan # none of which would be avoided if the part were purchased instead of produced internall . "f management decides to bu part :2% from the outside supplier rather than to continue ma0ing the part# what would be the annual impact on the compan 7s overall net operating income4 A. @et operating income would increase b 82&#!00 per ear. B. @et operating income would decline b 82&#!00 per ear. C. @et operating income would increase b 8%+#%00 per ear. /. @et operating income would decline b 8%+#%00 per ear.
@et operating income would decline b 82&#!00 per ear if the part were purchased from the outside supplier.
10$(01
&!. ?it0in Compan produces a part used in the manufacture of one of its products. )he unit product cost of the part is 8!!# computed as follows2
An outside supplier has offered to provide the annual re>uirement of 10#000 of the parts for onl 82* each. )he compan estimates that !01 of the fixed manufacturing overhead costs above will continue if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. 3ased on these data# the per unit dollar advantage or disadvantage of purchasing the parts from the outside supplier would be2 A. 8! advantage 3. 81 advantage C. 81 disadvantage /. 8& disadvantage
3ecause the part could be purchased from the outside supplier for 82*# but costs 8!0 to ma0e internall # purchasing the parts from the outside supplier would ield a 8! advantage.
10$(02
&&. A customer has re>uested that "nga Corporation fill a special order for 2#000 units of product D+1 for 82%.00 a unit. 'hile the product would be modified slightl for the special order# product D+17s normal unit product cost is 81,.,02
/irect labor is a variable cost. )he special order would have no effect on the compan 7s total fixed manufacturing overhead costs. )he customer would li0e modifications made to product D+1 that would increase the variable costs b 81.20 per unit and that would re>uire an investment of 810#000 in special molds that would have no salvage value. )his special order would have no effect on the compan 7s other sales. )he compan has ample spare capacit for producing the special order. "f the special order is accepted# the compan 7s overall net operating income would increase -decrease. b 2 A. 81!#000 3. 8-,#*00. C. 810#200 /. 8-2#200.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%1 Pre are an anal.sis sho,ing ,hether a s ecial or*er shoul* #e acce te* !evel: -as.
10$(0!
&%. <o6o Corporation has received a re>uest for a special order of +#000 units of product '(+ for 82*.20 each. ?roduct '(+7s unit product cost is 81+.%0# determined as follows2
/irect labor is a variable cost. )he special order would have no effect on the compan 7s total fixed manufacturing overhead costs. )he customer would li0e modifications made to product '(+ that would increase the variable costs b 8*.,0 per unit and that would re>uire an investment of 8!1#000 in special molds that would have no salvage value. )his special order would have no effect on the compan 7s other sales. )he compan has ample spare capacit for producing the special order. "f the special order is accepted# the compan 7s overall net operating income would increase -decrease. b 2 A. 8-&#&00. 3. 8(,#(00 C. 8!0#(00 /. 8-2&#(00.
10$(0&
&(. Kllis )elevision ma0es and sells portable televisions. Kach television regularl sells for 8210. )he following cost data per television is based on a full capacit of 10#000 televisions produced each period.
A special order has been received b Kllis for a sale of 2#000 televisions to an overseas customer. )he onl selling costs that would be incurred on this order would be 8( per television for shipping. Kllis is now selling (#000 televisions through regular channels each period. 'hat should be the minimum selling price per television in negotiating a price for this special order4 A. 81*& 3. 81(+ C. 8210 /. 81+0
)he selling price should at least cover the variable cost of 81*& per unit.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%1 Pre are an anal.sis sho,ing ,hether a s ecial or*er shoul* #e acce te* !evel: Me*ium
10$(0%
&*. An automated turning machine is the current constraint at @ai0 Corporation. )hree products use this constrained resource. /ata concerning those products appear below2
<an0 the products in order of their current profitabilit from most profitable to least profitable. "n other words# ran0 the products in the order in which the should be emphasiIed. A. A?# DC# JJ 3. JJ# A?# DC C. DC# JJ# A? D. JJ# DC# A?
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !evel: -as.
10$(0(
&+. ?appan Corporation ma0es three products that use compound '# the current constrained resource. /ata concerning those products appear below2
<an0 the products in order of their current profitabilit from most profitable to least profitable. "n other words# ran0 the products in the order in which the should be emphasiIed. A. <:# ;J# LF 3. ;J# <:# LF C. LF# ;J# <: D. <:# LF# ;J
10$(0*
&,. Consider the following production and cost data for two products# F and J2
)he compan has 1%#000 machine hours available each period# and there is unlimited demand for each product. 'hat is the largest possible total contribution margin that can be realiIed each period4 A. 8120#000 3. 812%#000 C. 81!%#000 /. 81%0#000
Since there is unlimited demand for each product# all of the available capacit should be used to produce ?roduct J. ?roduction of ?roduct J 9 1%#000 machine$hours 2 machine$hours per unit 9 *#%00 units )otal contribution margin 9 81+.00 per unit *#%00 units 9 81!%#000
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !evel: 6ar*
10$(0+
%0. )he constraint at 5cglather Corporation is time on a particular machine. )he compan ma0es three products that use this machine. /ata concerning those products appear below2
Assume that sufficient time is available on the constrained machine to satisf demand for all but the least profitable product. Cp to how much should the compan be willing to pa to ac>uire more of the constrained resource4 A. 8*%.2( per unit 3. 8!+.,& per unit C. 811.+0 per minute /. 81%.20 per minute
)he compan should be willing to pa up to 811.+0 per minute to produce more C<.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%3 <etermine the value of o#taining more of the constraine* resource !evel: Me*ium
10$(0,
%1. 'right Compan produces products "# B# and D from a single raw material input. 3udgeted data for the next month follows2
"f the cost of the raw material input is 8*+#000# which of the products should be processed be ond the split$off point4
A. Aption A B. Aption 3 C. Aption C /. Aption /
Anl ?roduct " and ?roduct D should be processed be ond the split$off point.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%= Pre are an anal.sis sho,ing ,hether $oint ro*ucts shoul* #e sol* at the s lit'off oint or rocesse* further !evel: Me*ium
10$(10
%2. )wo products# "F and <"# emerge from a 6oint process. ?roduct "F has been allocated 82%#!00 of the total 6oint costs of 8&(#000. A total of 2#000 units of product "F are produced from the 6oint process. ?roduct "F can be sold at the split$off point for 811 per unit# or it can be processed further for an additional total cost of 810#000 and then sold for 81! per unit. "f product "F is processed further and sold# what would be the effect on the overall profit of the compan compared with sale in its unprocessed form directl after the split$off point4 A. 8!1#!00 less profit B. 8(#000 less profit C. 81(#000 more profit /. 81,#!00 more profit
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%= Pre are an anal.sis sho,ing ,hether $oint ro*ucts shoul* #e sol* at the s lit'off oint or rocesse* further !evel: Me*ium Source: CIMA8 a*a te*
10$(11
%!. Coa0le 3eet ?rocessors# "nc.# processes sugar beets in batches. A batch of sugar beets costs 8&+ to bu from farmers and 810 to crush in the compan 7s plant. )wo intermediate products# beet fiber and beet 6uice# emerge from the crushing process. )he beet fiber can be sold as is for 82& or processed further for 81( to ma0e the end product industrial fiber that is sold for 8!(. )he beet 6uice can be sold as is for 8&& or processed further for 82+ to ma0e the end product refined sugar that is sold for 8*0. :ow much profit -loss. does the compan ma0e b processing the intermediate product beet 6uice into refined sugar rather than selling it as is4 A. 8-!1. 3. 8-(0. C. 8-2. /. 8-12.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%= Pre are an anal.sis sho,ing ,hether $oint ro*ucts shoul* #e sol* at the s lit'off oint or rocesse* further !evel: -as.
10$(12
%&. ;alluIIo Corporation processes sugar beets in batches. A batch of sugar beets costs 8%1 to bu from farmers and 81& to crush in the compan 7s plant. )wo intermediate products# beet fiber and beet 6uice# emerge from the crushing process. )he beet fiber can be sold as is for 820 or processed further for 81+ to ma0e the end product industrial fiber that is sold for 8&%. )he beet 6uice can be sold as is for 8&1 or processed further for 821 to ma0e the end product refined sugar that is sold for 8(2. :ow much profit -loss. does the compan ma0e b processing one batch of sugar beets into the end products industrial fiber and refined sugar4 A. 8-10&. 3. 8-&. C. 8* D. 8!
10$(1!
%%. 3eil0e Corporation processes sugar beets in batches that it purchases from farmers for 8%! a batch. A batch of sugar beets costs 812 to crush in the compan 7s plant. )wo intermediate products# beet fiber and beet 6uice# emerge from the crushing process. )he beet fiber can be sold as is for 820 or processed further for 810 to ma0e the end product industrial fiber that is sold for 82(. )he beet 6uice can be sold as is for 8!0 or processed further for 82, to ma0e the end product refined sugar that is sold for 8*,. 'hich of the intermediate products should be processed further4 A. beet fiber should be processed into industrial fiberH beet 6uice should be processed into refined sugar B. beet fiber should @A) be processed into industrial fiberH beet 6uice should be processed into refined sugar C. beet fiber should @A) be processed into industrial fiberH beet 6uice should @A) be processed into refined sugar /. beet fiber should be processed into industrial fiberH beet 6uice should @A) be processed into refined sugar
3eet fiber should not be processed into industrial fiberWit should be sold as is at the split$off point. 3eet 6uice should be processed into refined sugar.
10$(1&
%(. Gollars Cane ?roducts# "nc.# processes sugar cane in batches. )he compan bu s a batch of sugar cane from farmers for 8*0 which is then crushed in the compan 7s plant at a cost of 81,. )wo intermediate products# cane fiber and cane 6uice# emerge from the crushing process. )he cane fiber can be sold as is for 821 or processed further for 81! to ma0e the end product industrial fiber that is sold for 8&2. )he cane 6uice can be sold as is for 8&& or processed further for 82( to ma0e the end product molasses that is sold for 8++. :ow much profit -loss. does the compan ma0e b processing one batch of sugar cane into the end products industrial fiber and molasses4 A. 82( B. 82 C. 8-2&. /. 8-12+.
10$(1%
%*. Dempler Corporation processes sugar cane in batches. )he compan purchases a batch of sugar cane for 8!& from farmers and then crushes the cane in the compan 7s plant at the cost of 81%. )wo intermediate products# cane fiber and cane 6uice# emerge from the crushing process. )he cane fiber can be sold as is for 82( or processed further for 81* to ma0e the end product industrial fiber that is sold for 8&1. )he cane 6uice can be sold as is for 8!2 or processed further for 822 to ma0e the end product molasses that is sold for 8%1. 'hich of the intermediate products should be processed further4 A. Cane fiber should be processed into industrial fiberH Cane 6uice should be processed into molasses B. Cane fiber should @A) be processed into industrial fiberH Cane 6uice should @A) be processed into molasses C. Cane fiber should be processed into industrial fiberH Cane 6uice should @A) be processed into molasses /. Cane fiber should @A) be processed into industrial fiberH Cane 6uice should be processed into molasses
Cane fiber should @A) be processed into industrial fiber and cane 6uice should @A) be processed into molasses# both products should be sold as is without further processing.
)wo alternatives# code$named F and J# are under consideration at Afalava Corporation. Costs associated with the alternatives are listed below.
10$(1(
%+. Are the materials costs and processing costs relevant in the choice between alternatives F and J4 -"gnore the e>uipment rental and occupanc costs in this >uestion.. A. Anl materials costs are relevant B. Anl processing costs are relevant C. 3oth materials costs and processing costs are relevant /. @either materials costs nor processing costs are relevant )he materials costs are not relevant because the do not differ between the alternatives. )he processing costs are relevant because the do differ between the alternatives.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: -as.
%,. 'hat is the differential cost of Alternative J over Alternative F# including all of the relevant costs4 A. 810!#000 B. 8!,#000 C. 81&2#000 /. 8122#%00
10$(1*
Guras0 Corporation is considering two alternatives2 A and 3. Costs associated with the alternatives are listed below2
(0. Are the materials costs and processing costs relevant in the choice between alternatives A and 34 -"gnore the e>uipment rental and occupanc costs in this >uestion.. A. @either materials costs nor processing costs are relevant 3. Anl processing costs are relevant C. Anl materials costs are relevant /. 3oth materials costs and processing costs are relevant 5aterials costs are relevant because the differ between the alternatives. ?rocessing costs are not relevant because the do not differ between the alternatives.
10$(1+
(1. 'hat is the differential cost of Alternative 3 over Alternative A# including all of the relevant costs4 A. 8&&#000 3. 81&,#000 C. 810%#000 /. 812*#000
Austin 'ool ?roducts purchases raw wool and processes it into arn. )he spindles of arn can then be sold directl to stores or the can be used b Austin 'ool ?roducts to ma0e afghans. Kach afghan re>uires one spindle of arn. Current cost and revenue data for the spindles of arn and for the afghans are as follows2
Kach month &#000 spindles of arn are produced that can either be sold outright or processed into afghans.
10$(1,
(2. "f Austin chooses to produce &#000 afghans each month# the change in the monthl net operating income as compared to selling &#000 spindles of arn is2 A. 82&#000 decrease B. 82&#000 increase C. 81(#000 decrease /. 81(#000 increase
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: Me*ium
(!. 'hat is the lowest price Austin should be willing to accept for one afghan as long as it can sell spindles of arn to the outside mar0et for 812 each4 A. 8!2 3. 8!0 C. 82+ D. 82(
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: 6ar*
10$(20
)he )inge Compan has %00 obsolete microcomputers that are carried in inventor at a total cost of 8*20#000. "f these microcomputers are upgraded at a total cost of 8100#000# the can be sold for a total of 81(0#000. As an alternative# the microcomputers can be sold in their present condition for 8%0#000.
(&. )he sun0 cost in this situation is2 A. 8*20#000 3. 81(0#000 C. 8%0#000 /. 8100#000 )he value of the obsolete microcomputers in inventor # 8*20#000# is a sun0 cost.
(%. 'hat is the net advantage or disadvantage to the compan from upgrading the computers rather than selling them in their present condition4 A. 8110#000 advantage 3. 8((0#000 disadvantage C. 810#000 advantage /. 8(0#000 advantage
10$(21
((. Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the compan be as well off upgrading the computers as if it 6ust sold the computers in their present condition4 A. 8100 3. 8**0 C. 8!00 /. 8210 )he selling price of the upgraded computers would have to cover the opportunit cost of 8%0#000 for selling the computers as is as well as the 8100#000 cost of upgrading. )he point of indifference would be 81%0#000 %00 computers 9 8!00 per computer.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%( I*entif. relevant an* irrelevant costs an* #enefits in a *ecision !evel: Me*ium
)he management of Fries Corporation has been concerned for some time with the financial performance of its product <+,: and has considered discontinuing it on several occasions. /ata from the compan 7s accounting s stem appear below2
"n the compan 7s accounting s stem all fixed expenses of the compan are full allocated to products. Further investigation has revealed that 8!1#000 of the fixed manufacturing expenses and 8&(#000 of the fixed selling and administrative expenses are avoidable if product <+,: is discontinued.
10$(22
(*. According to the compan 7s accounting s stem# what is the net operating income earned b product <+,:4 A. 81&!#000 3. 8+#000 C. 8-+#000. /. 8-1&!#000.
10$(2!
(+. 'hat would be the effect on the compan 7s overall net operating income if product <+,: were dropped4 A. Averall net operating income would decrease b 8((#000. 3. Averall net operating income would decrease b 8+#000. C. Averall net operating income would increase b 8((#000. /. Averall net operating income would increase b 8+#000.
Averall net operating income would decrease b 8((#000.
)he management of Freshwater Corporation is considering dropping product C113. /ata from the compan 7s accounting s stem appear below2
All fixed expenses of the compan are full allocated to products in the compan 7s accounting s stem. Further investigation has revealed that 8211#000 of the fixed manufacturing expenses and 8122#000 of the fixed selling and administrative expenses are avoidable if product C113 is discontinued.
10$(2&
(,. According to the compan 7s accounting s stem# what is the net operating income earned b product C1134 A. 8*&#000 3. 8-%21#000. C. 8-*&#000. /. 8%21#000
10$(2%
*0. 'hat would be the effect on the compan 7s overall net operating income if product C113 were dropped4 A. Averall net operating income would decrease b 81++#000. 3. Averall net operating income would increase b 8*&#000. C. Averall net operating income would decrease b 8*&#000. /. Averall net operating income would increase b 81++#000.
Averall net operating income would decrease b 81++#000.
10$(2(
)he 'estern Compan is considering the addition of a new product to its current product lines. )he expected cost and revenue data for the new product are as follows2
"f the new product is added to the existing product line# then sales of existing products will decline. As a conse>uence# the contribution margin of the other existing product lines is expected to drop 8*+#000 per ear.
*1. "f the new product is added next ear# the increase in net operating income resulting from this decision would be2 A. 8!+*#000 3. 82(1#000 C. 81+!#000 /. 820*#000
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%/ Pre are an anal.sis sho,ing ,hether a ro*uct line or other #usiness segment shoul* #e a**e* or *ro e* !evel: 6ar*
10$(2*
*2. 'hat is the lowest selling price per unit among those listed below that could be charged for the new product and still ma0e it economicall desirable to add the new product4 A. 82&0 3. 8222 C. 82,1 D. 82&,
)he selling price would have to cover the total cost of 8*&&#000. An a per unit basis# this would be 8*&&#000 !#000 units 9 82&+ per unit. )he lowest selling price that is listed that is larger than 82&+ per unit is 82&, per unit.
10$(2+
Condensed monthl operating income data for Cosmo "nc. for @ovember is presented below. Additional information regarding Cosmo7s operations follows the statement.
)hree$>uarters of each store7s traceable fixed expenses are avoidable if the store were to be closed. Cosmo allocates common fixed expenses to each store on the basis of sales dollars. 5anagement estimates that closing the )own Store would result in a ten percent decrease in 5all Store sales# while closing the 5all Store would not affect )own Store sales. )he operating results for @ovember are representative of all months.
10$(2,
*!. A decision b Cosmo "nc. to close the )own Store would result in a monthl increase -decrease. in Cosmo7s operating income of2 A. 8&#000 B. 8-10#+00. C. 8-+00. /. 8-(#000.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%/ Pre are an anal.sis sho,ing ,hether a ro*uct line or other #usiness segment shoul* #e a**e* or *ro e* !evel: 6ar* Source: CMA8 a*a te*
10$(!0
*&. Cosmo is considering a promotional campaign at the )own Store that would not affect the 5all Store. "ncreasing annual promotional expenses at the )own Store b 8(0#000 in order to increase )own Store sales b ten percent would result in a monthl increase -decrease. in Cosmo7s operating income of2 A. 8-1(#+00. 3. 8!#&00 C. 8*#000 D. 8-1#&00.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%/ Pre are an anal.sis sho,ing ,hether a ro*uct line or other #usiness segment shoul* #e a**e* or *ro e* !evel: 6ar* Source: CMA8 a*a te*
)he Cabinet Shoppe is considering the addition of a new line of 0itchen cabinets to its current product lines. Kxpected cost and revenue data for the new cabinets are as follows2
"f the new cabinets are added# it is expected that the contribution margin of other product lines at the cabinet shop will drop b 820#000 per ear.
10$(!1
*%. "f the new cabinet product line is added next ear# the increase in net operating income resulting from this decision would be2 A. 8+0#000 3. 822%#000 C. 812%#000 D. 810%#000
10$(!2
*(. 'hat is the lowest selling price per unit that could be charged for the new cabinets from the following list and still ma0e it economicall desirable to add the new product line4 A. 81(0 3. 81(& C. 81*1 /. 81%1
)he selling price would have to cover all of the costs of 8*,%#000. An a per unit basis# the cost is 81%, per unit -9 8*,%#000 %#000 units.. )he lowest selling price on the list that covers the cost is 81(0 per unit.
10$(!!
Dnaac0 Corporation is presentl ma0ing part <20 that is used in one of its products. A total of 1+#000 units of this part are produced and used ever ear. )he compan 7s Accounting /epartment reports the following costs of producing the part at this level of activit 2
An outside supplier has offered to produce and sell the part to the compan for 82*.*0 each. "f this offer is accepted# the supervisor7s salar and all of the variable costs# including direct labor# can be avoided. )he special e>uipment used to ma0e the part was purchased man ears ago and has no salvage value or other use. )he allocated general overhead represents fixed costs of the entire compan # none of which would be avoided if the part were purchased instead of produced internall .
10$(!&
**. "f management decides to bu part <20 from the outside supplier rather than to continue ma0ing the part# what would be the annual impact on the compan 7s overall net operating income4 A. @et operating income would increase b 81(2#000 per ear. 3. @et operating income would increase b 8%0#&00 per ear. C. @et operating income would decline b 8%0#&00 per ear. /. @et operating income would decline b 81(2#000 per ear.
3ecause of the higher cost to purchase# net operating income would decline b 8%0#&00 per ear.
10$(!%
*+. "n addition to the facts given above# assume that the space used to produce part <20 could be used to ma0e more of one of the compan 7s other products# generating an additional segment margin of 82*#000 per ear for that product. 'hat would be the impact on the compan 7s overall net operating income of bu ing part <20 from the outside supplier and using the freed space to ma0e more of the other product4 A. @et operating income would increase b 82*#000 per ear. 3. @et operating income would decline b 81!%#000 per ear. C. @et operating income would decline b 82!#&00 per ear. /. @et operating income would decline b 81+,#000 per ear.
3ecause of the higher cost of purchasing# net operating income would decline b 82!#&00 per ear.
10$(!(
5eltIer Corporation is presentl ma0ing part A1! that is used in one of its products. A total of !#000 units of this part are produced and used ever ear. )he compan 7s Accounting /epartment reports the following costs of producing the part at this level of activit 2
An outside supplier has offered to produce and sell the part to the compan for 82*.00 each. "f this offer is accepted# the supervisor7s salar and all of the variable costs# including direct labor# can be avoided. )he special e>uipment used to ma0e the part was purchased man ears ago and has no salvage value or other use. )he allocated general overhead represents fixed costs of the entire compan . "f the outside supplier7s offer were accepted# onl 8!#000 of these allocated general overhead costs would be avoided.
10$(!*
*,. "f management decides to bu part A1! from the outside supplier rather than to continue ma0ing the part# what would be the annual impact on the compan 7s overall net operating income4 A. @et operating income would decline b 82!#100 per ear. 3. @et operating income would decline b 82(#100 per ear. C. @et operating income would decline b 820#100 per ear. D. @et operating income would decline b 8+#*00 per ear.
@et operating income would decline b 8+#*00 per ear.
10$(!+
+0. "n addition to the facts given above# assume that the space used to produce part A1! could be used to ma0e more of one of the compan 7s other products# generating an additional segment margin of 82(#000 per ear for that product. 'hat would be the impact on the compan 7s overall net operating income of bu ing part A1! from the outside supplier and using the freed space to ma0e more of the other product4 A. @et operating income would decline b 8&,#100 per ear. 3. @et operating income would increase b 82(#000 per ear. C. @et operating income would increase b 82#,00 per ear. D. @et operating income would increase b 81*#!00 per ear.
@et operating income would increase b 81*#!00 per ear.
10$(!,
Ahsan Compan ma0es (0#000 units per ear of a part it uses in the products it manufactures. )he unit product cost of this part is computed as follows2
An outside supplier has offered to sell the compan all of these parts it needs for 8&%.*0 a unit. "f the compan accepts this offer# the facilities now being used to ma0e the part could be used to ma0e more units of a product that is in high demand. )he additional contribution margin on this other product would be 8!1+#000 per ear. "f the part were purchased from the outside supplier# all of the direct labor cost of the part would be avoided. :owever# 8!.%0 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. )his fixed manufacturing overhead cost would be applied to the compan 7s remaining products.
+1. :ow much of the unit product cost of 8&0.%0 is relevant in the decision of whether to ma0e or bu the part4 A. 8&0.%0 3. 81%.20 C. 82*.,0 D. 8!*.00
10$(&0
+2. 'hat is the net total dollar advantage -disadvantage. of purchasing the part rather than ma0ing it4 A. 8!1+#000 3. 8-%22#000. C. 8-!12#000. D. 8-20&#000.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%0 Pre are a make or #u. anal.sis
10$(&1
+!. 'hat is the maximum amount the compan should be willing to pa an outside supplier per unit for the part if the supplier commits to suppl ing all (0#000 units re>uired each ear4 A. 8&0.%0 B. 8&2.!0 C. 8&%.+0 /. 8%.!0
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%0 Pre are a make or #u. anal.sis !evel: 6ar*
)alboe Compan ma0es wheels which it uses in the production of children7s wagons. )alboe7s costs to produce 200#000 wheels annuall are as follows2
An outside supplier has offered to sell )alboe similar wheels for 80.+0 per wheel. "f the wheels are purchased from the outside supplier# 82%#000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to ma0e the wheels would be rented to another compan for 8%%#000 per ear.
10$(&2
+&. "f )alboe chooses to bu the wheel from the outside supplier# then the change in annual net operating income is a2 A. 8%#000 decrease B. 8%0#000 increase C. 8*0#000 increase /. 8&0#000 increase
)he change in annual net operating income is a 8%0#000 increase.
10$(&!
+%. 'hat is the highest price that )alboe could pa the outside supplier for each wheel and still be economicall indifferent between ma0ing or bu ing the wheels4 A. 80.,% 3. 81.1% C. 81.00 D. 81.0%
)he compan could pa up to 81.0% per unit -8210#000 200#000 units..
)he <odgers Compan ma0es 2*#000 units of a certain component each ear for use in one of its products. )he cost per unit for the component at this level of activit is as follows2
<odgers has received an offer from an outside supplier who is willing to provide 2*#000 units of this component each ear at a price of 82% per component. Assume that direct labor is a variable cost. @one of the fixed manufacturing overhead would be avoidable if this component were purchased from the outside supplier.
10$(&&
+(. Assume that there is no other use for the capacit now being used to produce the component and the total fixed manufacturing overhead of the compan would be unaffected b this decision. "f <odgers Compan purchases the components rather than ma0ing them internall # what would be the impact on the compan 7s annual net operating income4 A. 8,&#%00 increase B. 8+1#000 decrease C. 82!*#(00 decrease /. 812&#000 increase
Kxpenses would increase b 8+1#000 -9 8(*%#000 $ 8%,&#000.# so annual net operating income would decrease b 8+1#000.
10$(&%
+*. Assume that if the component is purchased from the outside supplier# 8!%#100 of annual fixed manufacturing overhead would be avoided and the facilities now being used to ma0e the component would be rented to another compan for 8(&#+00 per ear. "f <odgers chooses to bu the component from the outside supplier under these circumstances# then the impact on annual net operating income due to accepting the offer would be2 A. 81+#,00 decrease B. 81+#,00 increase C. 821#&00 decrease /. 821#&00 increase
Kxpenses would decrease b 81+#,00 -9 8(2,#100 $ 8(10#200.# so annual net operating income would increase b 81+#,00.
10$(&(
5eacham Compan has traditionall made a subcomponent of its ma6or product. Annual production of 20#000 subcomponents results in the following costs2
5eacham has received an offer from an outside supplier who is willing to provide 20#000 units of this subcomponent each ear at a price of 82+ per subcomponent. 5eacham 0nows that the facilities now being used to ma0e the subcomponent would be rented to another compan for 8*%#000 per ear if the subcomponent were purchased from the outside supplier. Atherwise# the fixed overhead would be unaffected.
++. "f 5eacham decides to purchase the subcomponent from the outside supplier# how much higher or lower will net operating income be than if 5eacham continued to ma0e the subcomponent4 A. 8&%#000 higher 3. 8*0#000 higher C. 8!0#000 lower /. 8*0#000 lower
Kxpenses would decrease b 8&%#000 -9 8%!0#000 $ 8&+%#000.# so if 5eacham decides to purchase the subcomponent from the outside supplier# its net operating income would be 8&%#000 higher.
10$(&*
+,. Suppose the price for the subcomponent has not been set. At what price per unit charged b the outside supplier would 5eacham be economicall indifferent between ma0ing the subcomponent or bu ing it from the outside4 A. 8!0.2% 3. 82,.2% C. 82(.%0 /. 8!1.%0
)he purchase price at which the compan would be indifferent is 8!0.2% per unit -9 8(0%#000 20#000 units..
10$(&+
Klhard Compan produces a single product. )he cost of producing and selling a single unit of this product at the compan 7s normal activit level of &0#000 units per month is as follows2
)he normal selling price of the product is 8%1.10 per unit. An order has been received from an overseas customer for 2#000 units to be delivered this month at a special discounted price. )his order would have no effect on the compan 7s normal sales and would not change the total amount of the compan 7s fixed costs. )he variable selling and administrative expense would be 80.10 less per unit on this order than on normal sales. /irect labor is a variable cost in this compan .
10$(&,
,0. Suppose there is ample idle capacit to produce the units re>uired b the overseas customer and the special discounted price on the special order is 8&1.(0 per unit. 3 how much would this special order increase -decrease. the compan 7s net operating income for the month4 A. 82#000 B. 82%#200 C. 8-+#&00. /. 8-1+#+00.
10$(%0
,1. Suppose the compan is alread operating at capacit when the special order is received from the overseas customer. 'hat would be the opportunit cost of each unit delivered to the overseas customer4 A. 8%.&0 3. 8%.!0 C. 8,.%0 D. 822.00 )he opportunit cost is the contribution margin on normal sales.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%1 Pre are an anal.sis sho,ing ,hether a s ecial or*er shoul* #e acce te* !evel: 6ar*
10$(%1
,2. Suppose there is not enough idle capacit to produce all of the units for the overseas customer and accepting the special order would re>uire cutting bac0 on production of 200 units for regular customers. )he minimum acceptable price per unit for the special order is closest to2 A. 8!+.+0 B. 8!1.20 C. 8%1.10 /. 8&%.+0
10$(%2
5inimum acceptable price2
10$(%!
)he Varone Compan ma0es a single product called a :om. )he compan has the capacit to produce &0#000 :oms per ear. ?er unit costs to produce and sell one :om at that activit level are2
)he regular selling price for one :om is 8(0. A special order has been received at Varone from the Fairview Compan to purchase +#000 :oms next ear at 1%1 off the regular selling price. "f this special order were accepted# the variable selling expense would be reduced b 2%1. :owever# Varone would have to purchase a specialiIed machine to engrave the Fairview name on each :om in the special order. )his machine would cost 812#000 and it would have no use after the special order was filled. )he total fixed costs# both manufacturing and selling# are constant within the relevant range of !0#000 to &0#000 :oms per ear. Assume direct labor is a variable cost.
10$(%&
,!. "f Varone can expect to sell !2#000 :oms next ear through regular channels and the special order is accepted at 1%1 off the regular selling price# the effect on net operating income next ear due to accepting this order would be a2 A. 8%2#000 increase 3. 8+0#000 increase C. 82&#000 decrease D. 8(+#000 increase
P<egular selling price2 8(0 -1 $ 1%1. 9 8%1 PPVariable selling expense2 8+ -1 $ 2%1. 9 8(
10$(%%
,&. "f Varone can expect to sell !2#000 :oms next ear through regular channels# at what special order price from Fairview should Varone be economicall indifferent between either accepting or not accepting this special order4 A. 8%1.00 3. 8&+.20 C. 8&2.%0 /. 8!,.(0
PVariable selling expense2 8+ -1 $ 2%1. 9 8( Varone is economicall indifferent between either accepting or not accepting this special order at the point where revenue e>uals cost# so the selling price would have to be at least 8&2.%0 per unit -9 8!&0#000 +#000 units..
10$(%(
,%. "f Varone has an opportunit to sell !*#,(0 :oms next ear through regular channels and the special order is accepted for 1%1 off the regular selling price# the effect on net operating income next ear due to accepting this order would be a2 A. 8!!#!20 decrease 3. 8!!#!20 increase C. 8!%#&+0 decrease /. 8!%#&+0 increase
Since the special order would displace %#,(0 units of normal sales# the lost contribution margin would be 8101#!20 -9 81* per unit %#,(0 units..
P<egular selling price2 8(0 -1 $ 1%1. 9 8%1 PPVariable selling expense2 8+ -1 $ 2%1. 9 8( Conse>uentl # accepting the special order would generate incremental net operating income of 8(+#000# but would displace normal sales generating a contribution margin of 8101#!20#so the net effect would be a 8!!#!20 decrease -9 8101#!20 $ 8(+#000. in net operating income.
10$(%*
)he "mmanuel Compan has 6ust obtained a re>uest for a special order of (#000 6igs to be shipped at the end of the month at a selling price of 8* each. )he compan has a production capacit of ,0#000 6igs per month with total fixed production costs of 81&&#000. At present# the compan is selling +0#000 6igs per month through regular channels at a selling price of 811 each. For these regular sales# the cost for one 6ig is2
"f the special order is accepted# "mmanuel will not incur an selling expenseH however# it will incur shipping costs of 80.!0 per unit. )otal fixed production cost would not be affected b this order.
,(. "f "mmanuel accepts this special order# the change in monthl net operating income will be a2 A. 812#(00 increase 3. 81&#&00 increase C. 8!#(00 increase /. 81#+00 increase
10$(%+
,*. At what selling price per unit should "mmanuel be indifferent between accepting or re6ecting the special offer4 A. 8*.&0 3. 8*.*0 C. 8(.&0 D. 8&.,0
"mmanuel Compan is economicall indifferent between either accepting or not accepting this special order at the point where revenue e>uals costH this would occur when the selling price is 8&.,0 per unit -9 82,#&00 (#000 units..
10$(%,
,+. Suppose that regular sales of 6igs total +%#000 units per month. All other conditions remain the same. "f "mmanuel accepts the special order# the change in monthl net operating income will be2 A. 81&#&00 increase B. 8*#200 increase C. 8!#(00 decrease /. 8%#&00 decrease
)he special order would generate incremental net operating income of 812#(00# but would displace normal sales with a contribution margin of 8%#&00. )he net effect would be a 8*#200 increase -9 812#(00 $ 8%#&00. in net operating income.
10$((0
5c0erchie "nc. manufactures industrial components. Ane of its products# which is used in the construction of industrial air conditioners# is 0nown as ;(2. /ata concerning this product are given below2
)he above per unit data are based on annual production of ,#000 units of the component. /irect labor can be considered to be a variable cost.
,,. )he compan has received a special# one$time$onl order for !00 units of component ;(2. )here would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the compan would not be affected b the order. Assuming that 5c0erchie has excess capacit and can fill the order without cutting bac0 on the production of an product# what is the minimum price per unit on the special order below which the compan should not go4 A. 82( 3. 8(* C. 8%% /. 81(0 )he selling price for the special order would have to at least cover the variable cost per unit of 82(.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%1 Pre are an anal.sis sho,ing ,hether a s ecial or*er shoul* #e acce te* !evel: Me*ium Source: CMA8 a*a te*
10$((1
100. )he compan has received a special# one$time$onl order for !00 units of component ;(2. )here would be no variable selling expense on this special order and the total fixed manufacturing overhead and fixed selling and administrative expenses of the compan would not be affected b the order. :owever# assume that 5c0erchie has no excess capacit and this special order would re>uire %0 minutes of the constraining resource# which could be used instead to produce products with a total contribution margin of 8(#,00. 'hat is the minimum price per unit on the special order below which the compan should not go4 A. 8,0 3. 82! C. 8&, /. 8*+
)he selling price for the special order would have to cover both the 82( variable cost per unit and the opportunit cost of 8(#,00.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%1 Pre are an anal.sis sho,ing ,hether a s ecial or*er shoul* #e acce te* !evel: 6ar* Source: CMA8 a*a te*
10$((2
101. <efer to the original data in the problem. 'hat is the current contribution margin per unit for component ;(2 based on its selling price of 81(0 and its annual production of ,#000 units4 A. 82+ 3. 81!& C. 8,! D. 81!2
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%1 Pre are an anal.sis sho,ing ,hether a s ecial or*er shoul* #e acce te* !evel: -as. Source: CMA8 a*a te*
)he constraint at /albe Corporation is time on a particular machine. )he compan ma0es three products that use this machine. /ata concerning those products appear below2
10$((!
102. <an0 the products in order of their current profitabilit from most profitable to least profitable. "n other words# ran0 the products in the order in which the should be emphasiIed. A. '?# FK# 53 3. FK# '?# 53 C. FK# 53# '? /. 53# FK# '?
10$((&
10!. Assume that sufficient time is available on the constrained machine to satisf demand for all but the least profitable product. Cp to how much should the compan be willing to pa to ac>uire more of this constrained resource4 A. 812.%0 per minute 3. 82,.,( per unit C. 810.*0 per minute /. 8*1.,2 per unit
)he compan should be willing to pa up to the contribution margin per minute for the marginal 6ob# which is 810.*0 per minute for '?.
5arrin Corporation ma0es three products that use the current constraint$a particular t pe of machine. /ata concerning those products appear below2
10$((%
10&. <an0 the products in order of their current profitabilit from most profitable to least profitable. "n other words# ran0 the products in the order in which the should be emphasiIed. A. DG# F3# G? 3. G?# DG# F3 C. F3# G?# DG /. DG# G?# F3
10$(((
10%. Assume that sufficient constraint time is available to satisf demand for all but the least profitable product. Cp to how much should the compan be willing to pa to ac>uire more of the constrained resource4 A. 81&.!0 per minute 3. 81&.+0 per minute C. 8!!.+1 per unit /. 811+.(, per unit
)he compan should be willing to pa up to the contribution margin per minute for the marginal 6ob# which is 81&.!0 per minute for DG.
Cress Compan ma0es four products in a single facilit . /ata concerning these products appear below2
)he milling machines are potentiall the constraint in the production facilit . A total of 11#%00 minutes are available per month on these machines.
10$((*
10(. :ow man minutes of milling machine time would be re>uired to satisf demand for all four products4 A. 12#000 3. 10#+00 C. ,#000 /. 11#%00
10$((+
10*. 'hich product ma0es the EKAS) profitable use of the milling machines4 A. ?roduct A 3. ?roduct 3 C. ?roduct C /. ?roduct /
?roduct A ma0es the least profitable use of the milling machines.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !evel: Me*ium
10$((,
10+. 'hich product ma0es the 5AS) profitable use of the milling machines4 A. ?roduct A 3. ?roduct 3 C. ?roduct C D. ?roduct /
?roduct / ma0es the most profitable use of the milling machines.
10$(*0
10,. Cp to how much should the compan be willing to pa for one additional minute of milling machine time if the compan has made the best use of the existing milling machine capacit 4 -<ound off to the nearest whole cent.. A. 8*.&( 3. 81%.20 C. 81,.&0 /. 80.00
)he compan should be willing to pa up to the contribution margin per minute for the marginal 6ob# which is 8*.&( per minute for ?roduct A.
10$(*1
3roIe Compan ma0es four products in a single facilit . )hese products have the following unit product costs2
Additional data concerning these products are listed below.
)he grinding machines are potentiall the constraint in the production facilit . A total of %!#(00 minutes are available per month on these machines. /irect labor is a variable cost in this compan .
10$(*2
110. :ow man minutes of grinding machine time would be re>uired to satisf demand for all four products4 A. %(#100 3. &0#,00 C. %!#(00 /. 1!#000
10$(*!
111. 'hich product ma0es the EKAS) profitable use of the grinding machines4 A. ?roduct A 3. ?roduct 3 C. ?roduct C /. ?roduct /
?roduct C ma0es the least profitable use of the grinding machines.
10$(*&
112. 'hich product ma0es the 5AS) profitable use of the grinding machines4 A. ?roduct A 3. ?roduct 3 C. ?roduct C D. ?roduct /
?roduct / ma0es the 5AS) profitable use of the grinding machines.
10$(*%
11!. Cp to how much should the compan be willing to pa for one additional minute of grinding machine time if the compan has made the best use of the existing grinding machine capacit 4 -<ound off to the nearest whole cent.. A. 8!%.,0 3. 80.00 C. 8+.%+ /. 811.(0
)he compan should be willing to pa up to the contribution margin per minute for the marginal 6ob# which is 8+.%+ per minute for ?roduct C.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%3 <etermine the value of o#taining more of the constraine* resource !evel: 6ar*
10$(*(
/unford Compan produces three products with the following costs and selling prices2
11&. "f /unford has a limit of 20#000 direct labor hours but no limit on units sold or machine hours# then the ran0ing of the products from the most profitable to the least profitable use of the constrained resource is2 A. F# J# G B. J# G# F C. F# G# J /. G# J# F
10$(**
11%. "f /unford has a limit of !0#000 machine hours but no limit on units sold or direct labor hours# then the ran0ing of the products from the most profitable to the least profitable use of the constrained resource is2 A. J# G# F 3. F# J# G C. F# G# J D. G# F# J
Sohr Corporation processes sugar beets that it purchases from farmers. Sugar beets are processed in batches. A batch of sugar beets costs 8%0 to bu from farmers and 81% to crush in the compan 7s plant. )wo intermediate products# beet fiber and beet 6uice# emerge from the crushing process. )he beet fiber can be sold as is for 820 or processed further for 81, to ma0e the end product industrial fiber that is sold for 8%+. )he beet 6uice can be sold as is for 8&1 or processed further for 82! to ma0e the end product refined sugar that is sold for 8%+.
10$(*+
11(. :ow much profit -loss. does the compan ma0e b processing one batch of sugar beets into the end products industrial fiber and refined sugar4 A. 8-10*. 3. 8-&. C. 8, /. 81!
10$(*,
11*. :ow much profit -loss. does the compan ma0e b processing the intermediate product beet 6uice into refined sugar rather than selling it as is4 A. 8-*1. B. 8-(. C. 8-!,. /. 8-21.
)he compan incurs a loss of 8-(. a unit b processing the intermediate product beet 6uice into refined sugar rather than selling it as is.
10$(+0
11+. 'hich of the intermediate products should be processed further4 A. beet fiber should @A) be processed into industrial fiberH beet 6uice should be processed into refined sugar 3. beet fiber should @A) be processed into industrial fiberH beet 6uice should @A) be processed into refined sugar C. beet fiber should be processed into industrial fiberH beet 6uice should be processed into refined sugar D. beet fiber should be processed into industrial fiberH beet 6uice should @A) be processed into refined sugar
3eet fiber should be processed into industrial fiberH beet 6uice should @A) be processed into refined sugar.
<esendes <efiners# "nc.# processes sugar cane that it purchases from farmers. Sugar cane is processed in batches. A batch of sugar cane costs 8&+ to bu from farmers and 81( to crush in the compan 7s plant. )wo intermediate products# cane fiber and cane 6uice# emerge from the crushing process. )he cane fiber can be sold as is for 82& or processed further for 81* to ma0e the end product industrial fiber that is sold for 8!+. )he cane 6uice can be sold as is for 8!& or processed further for 82! to ma0e the end product molasses that is sold for 8*(.
10$(+1
11,. :ow much profit -loss. does the compan ma0e b processing one batch of sugar cane into the end products industrial fiber and molasses4 A. 81( 3. 8-10&. C. 8-(. D. 810
120. :ow much profit -loss. does the compan ma0e b processing the intermediate product cane 6uice into molasses rather than selling it as is4 A. 8! B. 81, C. 8-&%. /. 8-1!.
10$(+2
121. 'hich of the intermediate products should be processed further4 A. Cane fiber should @A) be processed into industrial fiberH Cane 6uice should be processed into molasses 3. Cane fiber should be processed into industrial fiberH Cane 6uice should be processed into molasses C. Cane fiber should @A) be processed into industrial fiberH Cane 6uice should @A) be processed into molasses /. Cane fiber should be processed into industrial fiberH Cane 6uice should @A) be processed into molasses
Cane fiber should @A) be processed into industrial fiberH Cane 6uice should be processed into molasses.
/odrill Compan ma0es two products from a common input. Boint processing costs up to the split$off point total 8&!#200 a ear. )he compan allocates these costs to the 6oint products on the basis of their total sales values at the split$off point. Kach product ma be sold at the split$ off point or processed further. /ata concerning these products appear below2
10$(+!
122. 'hat is the net monetar advantage -disadvantage. of processing ?roduct F be ond the split$off point4 A. 82(#+00 3. 8*#000 C. 8&#+00 /. 82,#000
12!. 'hat is the net monetar advantage -disadvantage. of processing ?roduct J be ond the split$off point4 A. 8-&#200. 3. 821#+00 C. 82&#&00 /. 8-1#(00.
10$(+&
12&. 'hat is the minimum amount the compan should accept for ?roduct F if it is to be sold at the split$off point4 A. 82(#+00 3. 81,#+00 C. 8%2#200 /. 8&%#200
)he minimum amount the compan should accept for ?roduct F if it is to be sold at the split$ off point is 82(#+00.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%= Pre are an anal.sis sho,ing ,hether $oint ro*ucts shoul* #e sol* at the s lit'off oint or rocesse* further !evel: 6ar*
?a ne Compan ma0es two products# 5 and @# in a 6oint process. At the split$off point# &0#000 units of 5 and %0#000 units of @ are available each month. 5onthl 6oint production costs are 82*0#000. ?roduct 5 can be sold at the split$off point for 8&.20 per unit. ?roduct @ can either be sold at the split$off point for 8!.20 per unit or it can be processed further and sold for 8(.!0 per unit. "f @ is processed further# additional processing costs of 82.%0 per unit will be incurred.
10$(+%
12%. "f @ is processed further and then sold# rather than being sold at the split$off point# the change in monthl operating income would be a2 A. 8!0#000 increase 3. 8!1%#000 increase C. 81%%#000 increase /. 812%#000 decrease
)otal profit 9 80.(0 per unit %0#000 units 9 8!0#000
10$(+(
12(. 'hat would the selling price per unit of product @ need to be after further processing in order for ?a ne Compan to be economicall indifferent between selling @ at the split$off point or processing @ further4 A. 8+.*0 3. 8(.*0 C. 8*.20 D. 8%.*0 ?rofit from further processing )he compan would be indifferent between selling ?roduct @ at the split$off point or processing ?roduct @ further when the sales value at the split$off point e>uals the incremental profit that the compan could earn b processing further. Sales value at split$off point 9 Final sales value after further processing $ Cost of further processing 8!.20 9 Final sales value after further processing $ 82.%0 Final sales value after further processing 9 8!.20 = 82.%0 9 8%.*0
Essay Questions
10$(+*
12*. 5arcell Corporation is considering two alternatives that are code$named 5 and @. Costs associated with the alternatives are listed below2
<e>uired2 a. 'hich costs are relevant and which are not relevant in the choice between these two alternatives4 b. 'hat is the differential cost between the two alternatives4
10$(++
12+. Costs associated with two alternatives# code$named L and <# being considered b Corniel Corporation are listed below2
<e>uired2 a. 'hich costs are relevant and which are not relevant in the choice between these two alternatives4 b. 'hat is the differential cost between the two alternatives4
10$(+,
12,. )he management of )herriault Corporation is considering dropping product C%1J. /ata from the compan 7s accounting s stem appear below2
All fixed expenses of the compan are full allocated to products in the compan 7s accounting s stem. Further investigation has revealed that 82+0#000 of the fixed manufacturing expenses and 81&0#000 of the fixed selling and administrative expenses are avoidable if product C%1J is discontinued. <e>uired2 'hat would be the effect on the compan 7s overall net operating income if product C%1J were dropped4 Should the product be dropped4 Show our wor0R
@et operating income would increase b 8+#000 if product C%1J were dropped. )herefore# the product should be dropped.
10$(,0
1!0. @utall Corporation is considering dropping product @2+F. /ata from the compan 7s accounting s stem appear below2
All fixed expenses of the compan are full allocated to products in the compan 7s accounting s stem. Further investigation has revealed that 81,,#000 of the fixed manufacturing expenses and 811&#000 of the fixed selling and administrative expenses are avoidable if product @2+F is discontinued. <e>uired2 a. According to the compan 7s accounting s stem# what is the net operating income earned b product @2+F4 Show our wor0R b. 'hat would be the effect on the compan 7s overall net operating income of dropping product @2+F4 Should the product be dropped4 Show our wor0R
a. According to the compan 7s accounting s stem# the product7s net operating loss is 8((#000. b. @et operating income would decline b 8+1#000 if product @2+F were dropped. )herefore# the product should not be dropped.
10$(,1
1!1. )he management of <odarmel Corporation is considering dropping product ;,1L. /ata from the compan 7s accounting s stem appear below2
All fixed expenses of the compan are full allocated to products in the compan 7s accounting s stem. Further investigation has revealed that 8%*#000 of the fixed manufacturing expenses and 8&0#000 of the fixed selling and administrative expenses are avoidable if product ;,1L is discontinued. <e>uired2 a. 'hat is the net operating income earned b product ;,1L according to the compan 7s accounting s stem4 Show our wor0R b. 'hat would be the effect on the compan 7s overall net operating income of dropping product ;,1L4 Should the product be dropped4 Show our wor0R
a. According to the compan 7s accounting s stem# the product7s net operating loss is 8*#000. b. @et operating income would decline b 810!#000 if product ;,1L were dropped. )herefore# the product should not be dropped.
10$(,2
1!2. 5r. Karl ?earl# accountant for 5argie Dnall Co.# "nc.# has prepared the following product$line income data2
)he following additional information is available2 P )he factor rent of 81#%00 assigned to ?roduct C is avoidable if the product were dropped. P )he compan 7s total depreciation would not be affected b dropping C. P Kliminating ?roduct C will reduce the monthl utilit bill from 81#%00 to 8+00. P All supervisors7 salaries are avoidable. P "f ?roduct C is discontinued# the maintenance department will be able to reduce monthl expenses from 8!#000 to 82#000. P Klimination of ?roduct C will ma0e it possible to cut two persons from the administrative staffH their combined salaries total 8!#000. <e>uired2 ?repare an anal sis showing whether ?roduct C should be eliminated.
10$(,!
Since there is a net 8+00 disadvantage to dropping ?roduct C# it should not be dropped.
10$(,&
1!!. )he :a es Compan manufactures and sells several products# one of which is called a slip differential. )he compan normall sells !0#000 units of the slip differential each month. At this activit level# unit costs are2
An outside supplier has offered to produce the slip differentials for the :a es Compan # and to ship them directl to the :a es Compan 7s customers. )his arrangement would permit the :a es Compan to reduce its variable selling expenses b one third -due to elimination of freight costs.. )he facilities now being used to produce the slip differentials would be idle and fixed manufacturing overhead would continue at (0 percent of its present level. )he total fixed selling expenses of the compan would be unaffected b this decision. <e>uired2 'hat is the maximum acceptable price >uotation for the slip differentials from the outside supplier4 )he total cost savings from purchasing the slip differentials is 8&20#000 as computed below2
)herefore# the compan would be willing to pa no more than 81& for each unit since the total purchase price would then be 8&20#000 -81& !0#000 9 8&20#000.# which is exactl the cost savings. 81& is the relevant cost figure. )o be acceptable# the >uotation received from the outside supplier must be less than 81&.
10$(,%
10$(,(
1!&. 3ad "nc. ma0es a range of products. )he compan 7s predetermined overhead rate is 81& per direct labor$hour# which was calculated using the following budgeted data2
Component 5! is used in one of the compan 7s products. )he unit cost of the component according to the compan 7s cost accounting s stem is determined as follows2
An outside supplier has offered to suppl component 5! for 810+ each. )he outside supplier is 0nown for >ualit and reliabilit . Assume that direct labor is a variable cost# variable manufacturing overhead is reall driven b direct labor$hours# and total fixed manufacturing overhead would not be affected b this decision. 3ad chronicall has idle capacit . <e>uired2 "s the offer from the outside supplier financiall attractive4 'h 4
10$(,*
/irect materials# direct labor# and variable manufacturing overhead are relevant in this decision. Fixed manufacturing overhead is not relevant since it would not be affected b the decision. )he variable portion of the manufacturing overhead rate is computed as follows2 Variable portion of the predetermined overhead rate 9 Variable manufacturing overhead /irect labor$hours 9 8100#000 2%#000 direct labor$hours 9 8&.00 per direct labor$hour )he direct$labor hours per unit for the special order can be determined as follows2
Conse>uentl # the variable manufacturing overhead for the special order would be2
?utting this all together2
3ecause the outside supplier has offered to sell the component for 810+.00 each# but it onl costs the compan 8,%.20 to ma0e the component internall # this is not a financiall attractive offer.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%0 Pre are a make or #u. anal.sis !evel: 6ar* Source: CIMA8 a*a te*
10$(,+
1!%. Dramer Compan ma0es &#000 units per ear of a part called an axial tap for use in one of its products. /ata concerning the unit production costs of the axial tap follow2
An outside supplier has offered to sell Dramer Compan all of the axial taps it re>uires. "f Dramer Compan decided to discontinue ma0ing the axial taps# &01 of the above fixed manufacturing overhead costs could be avoided. Assume that direct labor is a variable cost. <e>uired2 a. Assume Dramer Compan has no alternative use for the facilities presentl devoted to production of the axial taps. "f the outside supplier offers to sell the axial taps for 8(% each# should Dramer Compan accept the offer4 Full support our answer with appropriate calculations. b. Assume that Dramer Compan could use the facilities presentl devoted to production of the axial taps to expand production of another product that would ield an additional contribution margin of 8+0#000 annuall . 'hat is the maximum price Dramer Compan should be willing to pa the outside supplier for axial taps4
10$(,,
a. )he anal sis of the alternatives follows below2
)he compan should ma0e the part rather than bu it from the outside supplier since it costs 8& less under that alternative. b. )he maximum acceptable price is 8+1 since that is the cost to the compan of ma0ing the part itself when the opportunit cost is included2
10$*00
1!(. 5asse Corporation uses part ;1+ in one of its products. )he compan 7s Accounting /epartment reports the following costs of producing the 1(#000 units of the part that are needed ever ear.
An outside supplier has offered to ma0e the part and sell it to the compan for 82+.00 each. "f this offer is accepted# the supervisor7s salar and all of the variable costs# including direct labor# can be avoided. )he special e>uipment used to ma0e the part was purchased man ears ago and has no salvage value or other use. )he allocated general overhead represents fixed costs of the entire compan . "f the outside supplier7s offer were accepted# onl 822#000 of these allocated general overhead costs would be avoided. "n addition# the space used to produce part ;1+ could be used to ma0e more of one of the compan 7s other products# generating an additional segment margin of 822#000 per ear for that product. <e>uired2 a. ?repare a report that shows the effect on the compan 7s total net operating income of bu ing part ;1+ from the supplier rather than continuing to ma0e it inside the compan . b. 'hich alternative should the compan choose4
10$*01
b. )he total cost of the ma0e alternative is lower b 8*2#+00. )hus# net operating income would decline b 8*2#+00 if the offer from the supplier were accepted. )herefore# the compan should continue to ma0e the part itself.
10$*02
1!*. ?art K&! is used in one of <an Corporation7s products. )he compan 7s Accounting /epartment reports the following costs of producing the 12#000 units of the part that are needed ever ear.
An outside supplier has offered to ma0e the part and sell it to the compan for 81&.*0 each. "f this offer is accepted# the supervisor7s salar and all of the variable costs# including direct labor# can be avoided. )he special e>uipment used to ma0e the part was purchased man ears ago and has no salvage value or other use. )he allocated general overhead represents fixed costs of the entire compan . "f the outside supplier7s offer were accepted# onl 8%#000 of these allocated general overhead costs would be avoided. <e>uired2 a. ?repare a report that shows the effect on the compan 7s total net operating income of bu ing part K&! from the supplier rather than continuing to ma0e it inside the compan . b. 'hich alternative should the compan choose4
b. )he total cost of the ma0e alternative is lower b 8!&#(00. )hus# net operating income would decline b 8!&#(00 if the offer from the supplier were accepted. )herefore# the compan should continue to ma0e the part itself.
10$*0!
1!+. Foulds Compan ma0es 10#000 units per ear of a part it uses in the products it manufactures. )he unit product cost of this part is computed as follows2
An outside supplier has offered to sell the compan all of these parts it needs for 8&2.!0 a unit. "f the compan accepts this offer# the facilities now being used to ma0e the part could be used to ma0e more units of a product that is in high demand. )he additional contribution margin on this other product would be 8!,#000 per ear. "f the part were purchased from the outside supplier# all of the direct labor cost of the part would be avoided. :owever# 8(.&0 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. )his fixed manufacturing overhead cost would be applied to the compan 7s remaining products. <e>uired2 a. :ow much of the unit product cost of 8&*.,0 is relevant in the decision of whether to ma0e or bu the part4 b. 'hat is the net total dollar advantage -disadvantage. of purchasing the part rather than ma0ing it4 c. 'hat is the maximum amount the compan should be willing to pa an outside supplier per unit for the part if the supplier commits to suppl ing all 10#000 units re>uired each ear4
10$*0&
a. <elevant cost per unit2
b. @et advantage -disadvantage.2
c. 5aximum acceptable purchase price2
10$*0%
1!,. Berston Compan has an annual plant capacit of !#000 units. /ata concerning this product are given below2
)he compan has received a special order for %00 units at a selling price of 8&% each. <egular sales would not be affected# and sales commissions on the %00 units would be reduced b one$ third. )his special order would have no impact on total fixed costs. <e>uired2 /etermine whether the compan should accept the special order. Show all computations.
10$*0(
1&0. @owlan Co. manufactures and sells trophies for winners of athletic and other events. "ts manufacturing plant has the capacit to produce 11#000 trophies each monthH current monthl production is +#+00 trophies. )he compan normall charges 8+* per troph . Cost data for the current level of production are shown below2
)he compan has 6ust received a special one$time order for %00 trophies at 8%0 each. For this particular order# no variable selling and administrative costs would be incurred. )his order would also have no effect on fixed costs. <e>uired2 Should the compan accept this special order4 'h 4 Anl the direct materials and direct labor costs are relevant in this decision. )o ma0e the decision# we must compute the average direct materials and direct labor cost per unit.
Since the price on the special order is 8%0 per troph and the relevant cost is 8%*# the compan would suffer a loss of 8* per troph . )herefore# the special order should not be accepted.
10$*0*
1&1. :oltrop Corporation has received a re>uest for a special order of ,#000 units of product G*& for 8&(.%0 each. )he normal selling price of this product is 8%1.(0 each# but the units would need to be modified slightl for the customer. )he normal unit product cost of product G*& is computed as follows2
/irect labor is a variable cost. )he special order would have no effect on the compan 7s total fixed manufacturing overhead costs. )he customer would li0e some modifications made to product G*& that would increase the variable costs b 8(.20 per unit and that would re>uire a one$time investment of 8&(#000 in special molds that would have no salvage value. )his special order would have no effect on the compan 7s other sales. )he compan has ample spare capacit for producing the special order. <e>uired2 /etermine the effect on the compan 7s total net operating income of accepting the special order. Show our wor0R
10$*0+
1&2. <other Co. manufactures and sells medals for winners of athletic and other events. "ts manufacturing plant has the capacit to produce 1+#000 medals each monthH current monthl production is 1*#100 medals. )he compan normall charges 8++ per medal. Cost data for the current level of production are shown below2
)he compan has 6ust received a special one$time order for (00 medals at 8*! each. For this particular order# no variable selling and administrative costs would be incurred. )his order would also have no effect on fixed costs. <e>uired2 Should the compan accept this special order4 'h 4 Anl the direct materials and direct labor costs are relevant in this decision. )o ma0e the decision# we must compute the average direct materials and direct labor cost per unit.
Since the price on the special order is 8*! per medal and the relevant cost is onl 8&+# the compan would earn a profit of 82% per medal. )herefore# the special order should be accepted.
10$*0,
1&!. :umes Corporation ma0es a range of products. )he compan 7s predetermined overhead rate is 81( per direct labor$hour# which was calculated using the following budgeted data2
5anagement is considering a special order for *00 units of product B&%D at 8(& each. )he normal selling price of product B&%D is 8*% and the unit product cost is determined as follows2
"f the special order were accepted# normal sales of this and other products would not be affected. )he compan has ample excess capacit to produce the additional units. Assume that direct labor is a variable cost# variable manufacturing overhead is reall driven b direct labor$hours# and total fixed manufacturing overhead would not be affected b the special order. <e>uired2 "f the special order were accepted# what would be the impact on the compan 7s overall profit4
10$*10
/irect materials# direct labor# and variable manufacturing overhead are relevant in this decision. Fixed manufacturing overhead is not relevant since it would not be affected b the decision. )he variable portion of the manufacturing overhead rate is computed as follows2
)he direct$labor hours per unit for the special order can be determined as follows2
Conse>uentl # the variable manufacturing overhead for the special order would be2
?utting this all together2
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%1 Pre are an anal.sis sho,ing ,hether a s ecial or*er shoul* #e acce te* !evel: 6ar* Source: CIMA8 a*a te*
10$*11
1&&. A customer has as0ed )winer Corporation to suppl %#000 units of product /0%# with some modifications# for 8&0.20 each. )he normal selling price of this product is 8%2.+0 each. )he normal unit product cost of product /0% is computed as follows2
/irect labor is a variable cost. )he special order would have no effect on the compan 7s total fixed manufacturing overhead costs. )he customer would li0e some modifications made to product /0% that would increase the variable costs b 8!.%0 per unit and that would re>uire a one$time investment of 82!#000 in special molds that would have no salvage value. )his special order would have no effect on the compan 7s other sales. )he compan has ample spare capacit for producing the special order. <e>uired2 /etermine the effect on the compan 7s total net operating income of accepting the special order. Show our wor0R
10$*12
1&%. Bumonville Compan produces a single product. )he cost of producing and selling a single unit of this product at the compan 7s normal activit level of *0#000 units per month is as follows2
)he normal selling price of the product is 8%(.*0 per unit. An order has been received from an overseas customer for 2#000 units to be delivered this month at a special discounted price. )his order would have no effect on the compan 7s normal sales and would not change the total amount of the compan 7s fixed costs. )he variable selling and administrative expense would be 80.*0 less per unit on this order than on normal sales. /irect labor is a variable cost in this compan . <e>uired2 a. Suppose there is ample idle capacit to produce the units re>uired b the overseas customer and the special discounted price on the special order is 8%1.20 per unit. 3 how much would this special order increase -decrease. the compan 7s net operating income for the month4 b. Suppose the compan is alread operating at capacit when the special order is received from the overseas customer. 'hat would be the opportunit cost of each unit delivered to the overseas customer4 c. Suppose there is not enough idle capacit to produce all of the units for the overseas customer and accepting the special order would re>uire cutting bac0 on production of *00 units for regular customers. 'hat would be the minimum acceptable price per unit for the special order4
10$*1!
b. )he opportunit cost is 6ust the contribution margin on normal sales2
c. 5inimum acceptable price2
10$*1&
1&(. 3loc0 Corporation ma0es three products that use the current constraint# which is a particular t pe of machine. /ata concerning those products appear below2
<e>uired2 a. <an0 the products in order of their current profitabilit from the most profitable to the least profitable. "n other words# ran0 the products in the order in which the should be emphasiIed. Show our wor0R b. Assume that sufficient constraint time is available to satisf demand for all but the least profitable product. Cp to how much should the compan be willing to pa to ac>uire more of the constrained resource4
<esulting ran0ing of products2 FF# B<# GG b. )he compan should be willing to pa up to 81!.+0 per minute to obtain more of the constrained resource since this is the value to the compan of using this constrained resource to ma0e more of product GG. 3 assumption# the other products will alread have been produced up to demand.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !earning "#$ective: (/'%3 <etermine the value of o#taining more of the constraine* resource !evel: -as.
10$*1%
1&*. <edner# "nc. produces three products. /ata concerning the selling prices and unit costs of the three products appear below2
Fixed costs are applied to the products on the basis of direct labor hours. /emand for the three products exceeds the compan 7s productive capacit . )he grinding machine is the constraint# with onl 2#&00 minutes of grinding machine time available this wee0. <e>uired2 a. ;iven the grinding machine constraint# which product should be emphasiIed4 Support our answer with appropriate calculations. b. Assuming that there is still unfilled demand for the product that the compan should emphasiIe in part -a. above# up to how much should the compan be willing to pa for an additional hour of grinding machine time4 a. )he product to emphasiIe can be determined b computing the contribution margin per unit of the scarce resource# which in this case is grinding machine time.
?roduct E should be emphasiIed because it has the greatest contribution margin per unit of the scarce resource. b. "f additional grinding machine time would be used to produce more of ?roduct E# the time would be worth (0 minutes per hour 8% contribution margin per minute 9 8!00 per hour.
10$*1(
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !earning "#$ective: (/'%3 <etermine the value of o#taining more of the constraine* resource !evel: 6ar*
10$*1*
1&+. ;lunn Compan ma0es three products in a single facilit . )hese products have the following unit product costs2
Additional data concerning these products are listed below.
)he mixing machines are potentiall the constraint in the production facilit . A total of 2&#200 minutes are available per month on these machines. /irect labor is a variable cost in this compan . <e>uired2 a. :ow man minutes of mixing machine time would be re>uired to satisf demand for all three products4 b. :ow much of each product should be produced to maximiIe net operating income4 -<ound off to the nearest whole unit.. c. Cp to how much should the compan be willing to pa for one additional hour of mixing machine time if the compan has made the best use of the existing mixing machine capacit 4 -<ound off to the nearest whole cent..
10$*1+
a. /emand on the mixing machine2
)otal time re>uired for all products2 2+#+00 b. Aptimal production plan2
c. )he compan should be willing to pa up to the contribution margin per minute for the marginal 6ob# which is 8*.(2.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !earning "#$ective: (/'%3 <etermine the value of o#taining more of the constraine* resource !evel: 6ar*
10$*1,
1&,. :olve Compan ma0es three products in a single facilit . /ata concerning these products follow2
)he mixing machines are potentiall the constraint in the production facilit . A total of (#!00 minutes are available per month on these machines. /irect labor is a variable cost in this compan . <e>uired2 a. :ow man minutes of mixing machine time would be re>uired to satisf demand for all three products4 b. :ow much of each product should be produced to maximiIe net operating income4 -<ound off to the nearest whole unit.. c. Cp to how much should the compan be willing to pa for one additional hour of mixing machine time if the compan has made the best use of the existing mixing machine capacit 4 -<ound off to the nearest whole cent..
10$*20
a. /emand on the mixing machine2
b. Aptimal production plan2
c. )he compan should be willing to pa up to the contribution margin per minute for the marginal 6ob# which is 8,.(*.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !earning "#$ective: (/'%3 <etermine the value of o#taining more of the constraine* resource !evel: Me*ium
10$*21
1%0. )he constraint at Vrana "nc. is an expensive milling machine. )he three products listed below use this constrained resource.
<e>uired2 a. <an0 the products in order of their current profitabilit from the most profitable to the least profitable. "n other words# ran0 the products in the order in which the should be emphasiIed. Show our wor0R b. Assume that sufficient constraint time is available to satisf demand for all but the least profitable product. Cp to how much should the compan be willing to pa to ac>uire more of the constrained resource4
<esulting ran0ing of products2 ?D# EA# @' b. )he compan should be willing to pa up to 812.(0 per minute to obtain more of the constrained resource since this is the value to the compan of using this constrained resource to ma0e more of product @'. 3 assumption# enough of the other two products will alread have been produced to full satisf demand.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%2 <etermine the most rofita#le use of a constraine* resource !earning "#$ective: (/'%3 <etermine the value of o#taining more of the constraine* resource !evel: -as.
10$*22
1%1. ?revatte Corporation purchases potatoes from farmers. )he potatoes are then peeled# producing two intermediate products$peels and depeeled spuds. )he peels can then be processed further to ma0e a coc0tail of organic nutrients. And the depeeled spuds can be processed further to ma0e froIen french fries. A batch of potatoes costs 8&% to bu from farmers and 811 to peel in the compan 7s plant. )he peels produced from a batch can be sold as is for animal feed for 82* or processed further for 81( to ma0e the coc0tail of nutrients that are sold for 8&*. )he depeeled spuds can be sold as is for 8!+ or processed further for 82* to ma0e froIen french fries that are sold for 8%,. <e>uired2 a. Assuming that no other costs are involved in processing potatoes or in selling products# how much mone does the compan ma0e from processing one batch of potatoes into the coc0tail of organic nutrients and froIen french fries4 Show our wor0R b. Should each of the intermediate products# peels and depeeled spuds# be sold as is or processed further into an end product4 Kxplain. a. Anal sis of the profitabilit of the overall operation2
b. Anal sis of sell or process further2
)he coc0tail of organic nutrients should be processed further# but not the froIen french fries.
10$*2!
10$*2&
1%2. Spurrier Corporation produces two intermediate products# A and 3# from a common input. "ntermediate product A can be further processed into end product F. "ntermediate product 3 can be further processed into end product J. )he common input is purchased in batches that cost 8%0 each and the cost of processing a batch to produce intermediate products A and 3 is 81%. "ntermediate product A can be sold as is for 82+ or processed further for 81+ to ma0e end product F that is sold for 8&!. "ntermediate product 3 can be sold as is for 8!1 or processed further for 82& to ma0e end product J that is sold for 8(+. <e>uired2 a. Assuming that no other costs are involved in processing potatoes or in selling products# how much mone does the compan ma0e from processing one batch of the common input into the end products F and J4 Show our wor0R b. Should each of the intermediate products# A and 3# be sold as is or processed further into an end product4 Kxplain. a. Anal sis of the profitabilit of the overall operation2
b. Anal sis of sell or process further2
?rocess ?roduct J further# but not ?roduct F.
10$*2%
1%!. :arris Corp. manufactures three products from a common input in a 6oint processing operation. Boint processing costs up to the split$off point total 8200#000 per ear. )he compan allocates these costs to the 6oint products on the basis of their total sales value at the split$off point. Kach product ma be sold at the split$off point or processed further. )he additional processing costs and sales value after further processing for each product -on an annual basis. are2
)he SFurther ?rocessing CostsS consist of variable and avoidable fixed costs. <e>uired2 'hich product or products should be sold at the split$off point# and which product or products should be processed further4 Show computations.
?roduct D should be sold after further processing be ond the split$off point. ?roducts B and E should be sold at the split$off point without an further processing.
10$*2(
1%&. "au0ea Compan ma0es two products from a common input. Boint processing costs up to the split$off point total 8&,#(00 a ear. )he compan allocates these costs to the 6oint products on the basis of their total sales values at the split$off point. Kach product ma be sold at the split$off point or processed further. /ata concerning these products appear below2
<e>uired2 a. 'hat is the net monetar advantage -disadvantage. of processing ?roduct F be ond the split$off point4 b. 'hat is the net monetar advantage -disadvantage. of processing ?roduct J be ond the split$off point4 c. 'hat is the minimum amount the compan should accept for ?roduct F if it is to be sold at the split$off point4 d. 'hat is the minimum amount the compan should accept for ?roduct J if it is to be sold at the split$off point4 a. Q b.
c. Q d.
AACSB: Anal.tic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom's: A lication !earning "#$ective: (/'%= Pre are an anal.sis sho,ing ,hether $oint ro*ucts shoul* #e sol* at the s lit'off oint or rocesse* further !evel: 6ar*
10$*2*
10$*2+

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Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

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Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

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Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

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Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Actual results for 5a 2

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances

Chapter 10 Standard Costs and Variances