Cost Accounting Exam 2
In general, which of the following budgets is prepared first? A) sales budget B) production budget C) direct labor budget D) overhead budget
Answer: A
The contribution-margin format is used for ________. A) variable costing income statement B) mixed costing income statement C) absorption costing income statement D) job order costing income statement
Answer: A
The order to follow when preparing the operating budget is ________. A) revenues budget, production budget, direct manufacturing labor costs budget , and cost of goods sold B) revenues costs of goods sold budget, production budget, and cash budget C) revenues budget, manufacturing overhead costs budget, and production budget D) cash expenditures budget, revenues budget, and production budget
Answer: A
When variable overhead spending variance is unfavorable, it can be safely assumed that ________. A) actual rate per unit of cost-allocation base is higher than budgeted rate B) actual quantity of cost-allocation base used is higher than budgeted quantity C) actual rate per unit of cost-allocation base is lower than budgeted rate D) actual quantity of cost-allocation base used is lower than budgeted quantity
Answer: A
________ are subtracted from sales to calculate gross margin. A) Variable and fixed manufacturing costs B) Fixed administrative costs C) Variable administrative costs D) Fixed selling costs
Answer: A
________ is the usual starting point for budgeting. A) The revenues budget B) The estimated net income C) The production budget D) The cash budget
Answer: A
Bradford, Inc., expects to sell 9,000 ceramic vases for $21 each. Direct materials costs are $3, direct manufacturing labor is $12, and manufacturing overhead is $3 per vase. The following inventory levels apply to 2019: Beginning inventory Ending inventory Direct materials 3,000 units 3,000 units Work-in-process inventory 0 units 0 units Finished goods inventory 300 units 500 units What are the 2019 budgeted production costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively? A) $27,600; $110,400; $27,600 B) $27,000; $108,000; $27,000 C) $9,000; $36,000; $9,000 D) $9,000; $0; $10,500
Answer: A Explanation: Budgeted cost for direct materials = $27,600 [9,200 units × $3]. Budgeted cost for direct manufacturing labor = $110,400 [9,200 units × $12]. Budgeted manufacturing overhead = $27,600 [9,200 × $3].
Majestic Corporation manufactures wheel barrows and uses budgeted machine hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data: Budgeted output units 43,500 units Budgeted machine-hours 17,400 hours Budgeted variable manufacturing overhead costs for 43,500 units $382,800 Actual output units produced 45,500 units Actual machine-hours used 14,500 hours Actual variable manufacturing overhead costs $435,709 What is the flexible-budget variance for variable manufacturing overhead? A) $35,309 unfavorable B) $52,909 unfavorable C) $35,309 favorable D) $52,909 favorable
Answer: A Explanation: Budgeted machine hours per unit = 17,400 ÷ 43,500 = 0.4 Budgeted machine hours allowed for 45,500 units = 45,500 × 0.4 = 18,200 Budgeted variable overhead rate per machine hour = $382,800 ÷ 17,400 = $22.00 Flexible-budget amount = 18,200 × $22.00 = $400,400 Flexible-budget variance = $435,709 − $400,400 = $35,309 unfavorable
Mid City Products Inc. (MCP), developed standard costs for direct material and direct labor. In 2017, MCP estimated the following standard costs for one of their most popular products. Budgeted quantity Budgeted price Direct materials 4 pounds $7.25 per pound Direct labor 0.60 hours $17.00 per hour During September, MCP produced and sold 2,000 units using 8,200 pounds of direct materials at an average cost per pound of $7.00 and 1,160 direct labor hours at an average wage of $17.50 per hour. The direct labor efficiency variance during September is ________. A) $680 favorable B) $700 unfavorable C) $600 favorable D) $100 unfavorable
Answer: A Explanation: Direct labor efficiency variance = [1,160 dlh − (2,000 × 0.60)] × $17.00 = $680 F
Mid City Products Inc. (MCP), developed standard costs for direct material and direct labor. In 2017, MCP estimated the following standard costs for one of their most popular products. Budgeted quantity Budgeted price Direct materials 7 pounds $7.30 per pound Direct labor 0.50 hours $10.00 per hour During September, MCP produced and sold 2,000 units using 14,400 pounds of direct materials at an average cost per pound of $7.00 and 950 direct labor hours at an average wage of $10.40 per hour. The direct labor flexible-budget variance during September is ________. A) $120.00 favorable B) $120.00 unfavorable C) $520.00 favorable D) $520.00 unfavorable
Answer: A Explanation: Direct labor flexible-budget variance = (950 × $10.40) − (2,000 × 0.50 × $10.00) = $120.00 F
Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. Budgeted quantity Budgeted price Direct materials 0.30 pounds $50 per pound Direct labor 0.60 hours $12 per hour During July, GII produced and sold 4,000 containers using 1,350 pounds of direct materials at an average cost per pound of $48 and 2,450 direct manufacturing labor hours at an average wage of $12.25 per hour. July's direct material flexible-budget variance is ________. A) $4,800 unfavorable B) $7,500 favorable C) $9,900 unfavorable D) $0
Answer: A Explanation: Direct material flexible-budget variance = (1,350 × $48) − (4,000 × 0.30 × $50) = $4,800 U
Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container. Budgeted quantity Budgeted price Direct materials 0.70 pounds $70 per pound Direct labor 0.10 hours $35 per hour During June, Heavy Products produced and sold 25,000 containers using 23,000 pounds of direct materials at an average cost per pound of $75 and 17,500 direct manufacturing labor-hours at an average wage of $35.75 per hour. The direct material price variance during June is ________. A) $115,000 unfavorable B) $500,000 favorable C) $500,000 unfavorable D) $13,125 favorable
Answer: A Explanation: Direct material price variance = 23,000 × ($75 − $70) = $115,000 U
Hockey Accessories Corporation manufactured 23,000 duffle bags during March. The following fixed overhead data pertain to March: Actual Static Budget Production 23,000 units 23,500 units Machine-hours 13,100 hours 14,100 hours Fixed overhead cost for March $626,100 $634,500 What is the amount of fixed overhead allocated to production? A) $621,000 B) $634,500 C) $639,711 D) $612,779
Answer: A Explanation: Fixed overhead cost per machine hour = $634,500 ÷ 14,100 = $45 Machine hours per unit = 14,100 ÷ 23,500 = 0.6 Fixed overhead cost per unit = $45 × 0.6 = $27.00 Fixed overhead allocated = 23,000 × $27.00 = $621,000
) Swansea Finishing produces and sells a decorative pillow for $100.00 per unit. In the first month of operation, 2,000 units were produced and 1,800 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs $23.00 per unit Variable marketing costs $5.00 per unit Fixed manufacturing costs $13 per unit Administrative expenses, all fixed $19.50 per unit Ending inventories: Direct materials -0- WIP -0- Finished goods 200 units What is cost of goods sold using variable costing? A) $41,400 B) $73,800 C) $121,000 D) $56,000
Answer: A Explanation: The variable cost of goods sold = $23.00 × 1,800 units = $41,400
Russo Corporation manufactured 17,000 air conditioners during November. The overhead cost-allocation rate is $35.50 per machine-hour. The following variable overhead data pertain to November: Actual Budgeted Production 17,000 units 19,000 units Machine-hours 8,325 hours 9,500 hours Variable overhead cost per machine-hour: $35.00 $35.50 What is the variable overhead efficiency variance? A) $6,212.50 favorable B) $6,212.50 unfavorable C) $4,750.00 favorable D) $4,750.00 unfavorable
Answer: A Explanation: [8,325 - (17,000 × 9,500/19,000) mh] × $35.50 = $6,212.50 favorable
Zitrik Corporation manufactured 130,000 buckets during February. The variable overhead cost-allocation base is $5.30 per machine-hour. The following variable overhead data pertain to February: Actual Budgeted Production 130,000 units 130,000 units Machine-hours 9,500 hours 9,000 hours Variable overhead cost per machine-hour $5.35 $5.30 What is the variable overhead efficiency variance? A) $2,650 unfavorable B) $2,675 favorable C) $2,650 favorable D) $2,675 unfavorable.
Answer: A Explanation:Variable overhead efficiency variance = [9,500 − 9,000] × $5.30 = $2,650 unfavorable
A $5,000 unfavorable flexible-budget variance indicates that ________. A) the flexible-budget amount exceeded actual variable manufacturing overhead by $5,000 B) the actual variable manufacturing overhead exceeded the flexible-budget amount by $5,000 C) the flexible-budget amount exceeded standard variable manufacturing overhead by $5,000 D) the standard variable manufacturing overhead exceeded the flexible-budget amount by $5,000
Answer: B
All of the following are possible causes of actual machine hours exceeding budgeted machine hours except: A) Poor scheduling B) Actual leasing costs for the machine were higher than expected C) Machines were not maintained in good operating condition D) Budgeted standards were set to tight
Answer: B
In ________, fixed manufacturing costs are included as inventoriable costs. A) variable costing B) absorption costing C) throughput costing D) activity-based costing
Answer: B
One possible means of determining the difference between operating incomes for absorption costing and variable costing is by ________. A) subtracting sales of the previous period from sales of this period B) subtracting fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory C) multiplying the number of units produced by the budgeted fixed manufacturing cost rate D) adding fixed manufacturing costs to the production-volume variance
Answer: B
Teddy Company uses a standard cost system. In May, $234,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $240,000. Which of the following variable manufacturing overhead entries would have been recorded for May? A) Accounts Payable Control and other accounts 240,000 Work-in-Process Control 240,000 B) Work-in-Process Control 240,000 Variable Manufacturing Overhead Allocated 240,000 C) Work-in-Process Control 234,000 Accounts Payable Control and other accounts 234,000 D) Accounts Payable Control and other accounts 234,000 Variable Manufacturing Overhead Control234,000
Answer: B
Under absorption costing, fixed manufacturing costs ________. A) are period costs B) are inventoriable costs C) are treated as an expense D) are sunk costs
Answer: B
Which of the following best describes how fixed cost are treated in a variable cost method? A) They are part of the product cost B) They are excluded from inventory cost and are treated as period costs C) They are allocated to the product cost using a denominator-level capacity choice D) They are classified as nonmanufacturing costs
Answer: B
Which of the following costs will be treated as period costs under absorption costing? A) raw materials used in the production B) sales commission paid on sale of product C) depreciation on factory equipment D) rent for factory building
Answer: B
Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base? A) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base B) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Budgeted total quantity of cost allocation base C) Budgeted fixed overhead cost per unit of cost allocation base = Actual total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base D) Budgeted fixed overhead cost per unit of cost allocation base = Budgeted total costs in fixed overhead cost pool ÷ Actual total quantity of cost allocation base
Answer: B
Which of the following is true of variable costing? A) It expenses administrative costs as cost of goods sold. B) It treats direct manufacturing costs as a product cost. C) It includes fixed manufacturing overhead as an inventoriable cost. D) It is required for external reporting to shareholders.
Answer: B
Which of the following statements is true of variable overhead costs? A) Variable overhead costs always have unused capacity. B) Variable overhead costs have no production-volume variance. C) Variable overhead costs have no spending variance. D) Variable overhead costs have no efficiency variance.
Answer: B
Which of the following statements is true? A) When production is equal to sales, operating income will be greater under variable costing than under absorption costing. B) When production is greater than sales, operating income will be lower under variable costing than absorption costing. C) When production is less than sales, operating income is higher under absorption costing than variable costing. D) When production is greater than sales, operating income is greater under absorption cost than under variable costing.
Answer: B
________ is a method of inventory costing in which only variable manufacturing costs are included as inventoriable costs. A) Fixed costing B) Variable costing C) Absorption costing D) Mixed costing
Answer: B
________ method includes fixed manufacturing overhead costs as inventoriable costs. A) Variable costing B) Absorption costing C) Throughput costing D) Activity-based costing
Answer: B
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results. Actual Flexible Static Results Budget Budget Sales volume (in units) 15,000 11,000 Sales revenues $245,000 $ $235,000 Variable costs 139,000 $ ________ 184,000 Contribution margin 106,000 $ 51,000 Fixed costs 42,000 $ ________ 31,000 Operating profit $64,000 $ $20,000 The flexible budget will report ________ for variable costs. A) $101,933 B) $250,909 C) $45,000 D) $184,000
Answer: B Explanation: 15,000 units × $184,000 / 11,000 = $250,909
Majestic Corporation manufactures wheel barrows and uses budgeted machine hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data: Budgeted output units 28,475 units Budgeted machine-hours 17,085 hours Budgeted variable manufacturing overhead costs for 28,475 units $358,785 Actual output units produced 32,475 units Actual machine-hours used 15,000 hours Actual variable manufacturing overhead costs $384,060 What is the flexible-budget amount for variable manufacturing overhead? A) $358,785 B) $409,185 C) $384,060 D) $336,755
Answer: B Explanation: Budgeted machine hours per unit = 17,085 ÷ 28,475 = 0.6 Budgeted machine hours allowed for 32,475 units = 32,475 × 0.6= 19,485 Budgeted variable overhead rate per machine hour = $358,785 ÷ 17,085 = $21.00 Flexible-budget amount = 19,485 × $21.00 = $409,185
Lancelot Corporation manufactures tennis gear and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data: Budgeted output units 8,000 units Budgeted machine-hours 24,000 hours Budgeted variable manufacturing overhead costs for 8,000 units $288,000 Actual output units produced 8,500 units Actual machine-hours used 23,750 hours Actual variable manufacturing overhead costs $250,000 What is the flexible-budget amount for variable manufacturing overhead? A) $250,000 B) $306,000 C) $288,000 D) $235,294
Answer: B Explanation: Budgeted machine hours per unit = 24,000 ÷ 8,000 = 3 Budgeted machine hours allowed for 8,500 units = 8,500 × 3 = 25,500 Budgeted variable overhead rate per machine hour = $288,000 ÷ 24,000 = $12.00 Flexible-budget amount = 25,500 × $12.00 = $306,000
Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. Budgeted quantity Budgeted price Direct materials 0.40 pounds $20 per pound Direct labor 0.80 hours $15 per hour During July, GII produced and sold 4,000 containers using 1,700 pounds of direct materials at an average cost per pound of $15 and 3,225 direct manufacturing labor hours at an average wage of $15.25 per hour. The direct material price variance during July is ________. A) $20,000 unfavorable B) $8,500 favorable C) $8,500 unfavorable D) $2,000 unfavorable
Answer: B Explanation: Direct material price variance = 1,700 × ($20 − $15) = $8,500 F
Radon Corporation manufactured 37,500 units during March. The following fixed overhead data pertain to March: Actual Static Budget Production 37,500 units 34,000 units Machine-hours 10,375 hours 10,200 hours Fixed overhead costs for March $213,200 $204,000 What is the fixed overhead production-volume variance? A) $9,200.00 unfavorable B) $21,000.00 favorable C) $21,000.00 unfavorable D) $9,200.00 favorable
Answer: B Explanation: Fixed cost per machine hour = $204,000 ÷ 10,200 = $20 Machine hours per unit = 10,200 ÷ 34,000 = 0.3 Fixed cost per unit = $20 × 0.3 = $6.00 Fixed overhead allocated = 37,500 × $6.00 = $225,000.00 Fixed overhead production-volume variance = $204,000 − $225,000.00 =$21,000.00 F
) Furniture, Inc., estimates the following number of mattress sales for the first four months of 2019: Month Sales January 29,000 February 40,800 March 34,600 April 36,200 Finished goods inventory at the end of December is 7,000 units. Target ending finished goods inventory is 20% of the next month's sales. How many mattresses need to be produced in January 2019? A) 27,800 mattresses B) 30,160 mattresses C) 41,800 mattresses D) 44,160 mattresses
Answer: B Explanation: Number of mattresses to be produced in January = [29,000 units (Estimated sales) + 8,160 units (Budgeted ending inventory for January × 20%) - 7,000 units (Beginning inventory)] = 30,160 mattresses.
Swan Textiles Inc. produces and sells a decorative pillow for $98.00 per unit. In the first month of operation, 2,300 units were produced and 1,800 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: Variable manufacturing costs $23.00 per unit Variable marketing costs $6.00 per unit Fixed manufacturing costs $15 per unit Administrative expenses, all fixed $21.00 per unit Ending inventories: Direct materials -0- WIP -0- Finished goods 500 units What is the contribution margin using variable costing? A) $135,000 B) $124,200 C) $165,600 D) $123,500
Answer: B Explanation: Total sales = $98.00 × 1,800 = $176,400 Variable cost of goods sold = $23.00 × 1,800 = $41,400 Variable marketing costs = $6.00 × 1,800 = $10,800 Total variable costs = $52,200 Contribution margin = $176,400 - $52,200 = $124,200
Lincoln Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and used a budgeted selling price of $18 per unit. Actual Budgeted Units sold 45,000 units 31,000 units Variable costs $161,000 $150,000 Fixed costs $44,000 $50,000 What is the static-budget variance of variable costs? A) $6,000 favorable B) $11,000 unfavorable C) $14,000 favorable D) $5,000 unfavorable
Answer: B Explanation:Static-budget variance of variable costs = $161,000 − $150,000 = $11,000 U
Cold Products Corporation manufactured 27,000 ice chests during September. The variable overhead cost-allocation base is $11.75 per machine-hour. The following variable overhead data pertain to September: Actual Budgeted Production 27,000 units 26,000 units Machine-hours 13,500 hours 7,800 hours Variable overhead cost per machine-hour: $11.25 $11.75 What is the variable overhead efficiency variance? A) $6,750 favorable B) $63,450 unfavorable C) $56,700 unfavorable D) $66,975 unfavorable
Answer: B Explanation:[13,500 - (27,000 × 7,800/26,000) mh] × $11.75 = $63,450 unfavorable
Fixed overhead costs ________. A) never have any unused capacity B) have no spending variance C) have no efficiency variance D) have no production-volume variance
Answer: C
In flexible budgets the costs that are not "flexed" because they remain the same within a relevant range of activity (such as sales or output) are called ________. A) total overhead costs B) total budgeted costs C) fixed costs D) variable costs
Answer: C
The gross-margin format is used for ________. A) variable costing income statement B) mixed costing income statement C) absorption costing income statement D) standard costing income statement
Answer: C
The variable overhead flexible-budget variance can be further explained by calculating the: A) price variance and the efficiency variance B) static-budget variance and sales-volume variance C) spending variance and the efficiency variance D) sales-volume variance and the spending variance
Answer: C
Variable costing regards fixed manufacturing overhead as a(n) ________. A) administrative cost B) inventoriable cost C) period cost D) product cost
Answer: C
When fixed overhead spending variance is unfavorable, it can be safely assumed that ________. A) flexible budget amount is higher than actual costs incurred B) fixed overhead allocated for actual output is lower than actual costs incurred C) flexible budget amount is lower than actual costs incurred D) fixed overhead allocated for actual output is higher than actual costs incurred
Answer: C
Which of the following best defines standard costing? A) It is the same as actual costing but done in real time. B) It is a system that traces direct cost to output by multiplying actual process or rates by actual quantities of inputs + allocates overhead by on the basis of actual quantities of the allocation base used. C) It is a system that traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for the actual output produced. D) It is a system that allocates overhead costs on the basis of standard overhead cost rates times the actual quantities of the allocation based used.
Answer: C
Which of the following costs is inventoried when using absorption costing? A) variable selling costs B) fixed administrative costs C) variable manufacturing costs D) fixed selling costs
Answer: C
Which of the following is true of absorption costing? A) It expenses marketing costs as cost of goods sold. B) It treats direct manufacturing costs as a period cost. C) It includes fixed manufacturing overhead as an inventoriable cost. D) It treats indirect manufacturing costs as a period cost.
Answer: C
Which of the following statements is true of fixed overhead cost variances? A) The difference between actual costs and flexible budget costs will give the production volume variance. B) The difference between actual costs and static budget costs will give the production volume variance. C) The difference between flexible budget costs and allocated overhead costs will give the production volume variance. D) The difference between static budget costs and flexible budget costs will give the production volume variance.
Answer: C
________ is a method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs. A) Variable costing B) Mixed costing C) Absorption costing D) Standard costing
Answer: C
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results. Actual Flexible Static Results Budget Budget Sales volume (in units) 15,000 13,000 Sales revenues $236,000 $ $234,000 Variable costs 166,000 $ ________ 182,000 Contribution margin 70,000 $ 52,000 Fixed costs 41,000 $ ________ 31,000 Operating profit $29,000 $ $21,000 The flexible budget will report ________ for the fixed costs. A) $73,923 B) $31,000 Favorable C) $31,000 D) $10,000 Unfavorable
Answer: C Explanation: $31,000, given in the static budget
The actual information pertains to the month of June. As a part of the budgeting process, Great Cabinets Company developed the following static budget for June. Great Cabinets is in the process of preparing the flexible budget and understanding the results. Actual Flexible Static Results Budget Budget Sales volume (in units) 18,000 23,000 Sales revenues $900,000 $ $1,150,000 Variable costs 360,000 $ ________ 463,910 Contribution margin 540,000 $ 686,090 Fixed costs 275,300 $ ________ 269,500 Operating profit $264,700 $ $416,590 The flexible budget will report ________ for variable costs. A) $592,774 B) $460,000 C) $363,060 D) $463,910
Answer: C Explanation: 18,000 units × $463,910 / 23,000 = $363,060
First Class, Inc., expects to sell 28,000 pool cues for $14 each. Direct materials costs are $3, direct manufacturing labor is $5, and manufacturing overhead is $0.82 per pool cue. The following inventory levels apply to 2019: Beginning inventory Ending inventory Direct materials 26,000 units 26,000 units Work-in-process inventory 0 units 0 units Finished goods inventory 1,300 units 2,800 units How many pool cues need to be produced in 2019? A) 30,800 cues B) 29,300 cues C) 29,500 cues D) 26,500 cues
Answer: C Explanation: 28,000 units (Budgeted sales) + 2,800 (Budgeted ending inventory) - 1,300 (Beginning inventory) = 29,500 cues
Fast Track Auto produces and sells an auto part for $85 per unit. In 2017, 110,000 parts were produced and 90,000 units were sold. Other information for the year includes: Direct materials $23 per unit Direct manufacturing labor $6 per unit Variable manufacturing costs $1 per unit Sales commissions $6 per part Fixed manufacturing costs $790,000 per year Administrative expenses, all fixed $310,000 per year What is the inventoriable cost per unit using absorption costing? A) $30.00 B) $36.00 C) $37.18 D) $40.00
Answer: C Explanation: Absorption costing considers all variable manufacturing costs and all fixed manufacturing costs as inventoriable costs. Therefore, in this case, direct materials, direct manufacturing labor, variable manufacturing costs, and fixed manufacturing costs will be considered as inventoriable cost. The total inventoriable cost is $37.18 ($23 + $6 + $1 + $7.18*). * $790,000/110,000= $7.18 per unit
) Lincoln Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and used a budgeted selling price of $18 per unit. Actual Budgeted Units sold 43,000 units 33,000 units Variable costs $166,000 $150,000 Fixed costs $41,000 $58,000 What is the static-budget variance of operating income? A) $164,000 favorable B) $164,000 unfavorable C) $181,000 favorable D) $181,000 unfavorable
Answer: C Explanation: Actual Static Static-budget Results Budget Variance Units sold 43,000 33,000 Revenues $774,000 $594,000 $180,000 F Variable costs 166,000 150,000 16,000 U Contribution margin $608,000 $444,000 164,000 F Fixed costs 41,000 58,000 $17,000 F Operating income $567,000 $386,000 $181,000 F
Lancelot Corporation manufactures tennis gear and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data: Budgeted output units 9,500 units Budgeted machine-hours 28,500 hours Budgeted variable manufacturing overhead costs for 9,500 units $68,400 Actual output units produced 9,800 units Actual machine-hours used 28,100 hours Actual variable manufacturing overhead costs $250,000 What is the amount of the budgeted variable manufacturing overhead cost per unit? A) $2.40 per unit B) $6.98 per unit C) $7.20 per unit D) $25.51 per unit
Answer: C Explanation: Budgeted machine hours per unit = 28,500 ÷ 9,500 = 3 Budgeted variable overhead rate per machine hour = $68,400 ÷ 28,500 = $2.40 Budgeted variable manufacturing overhead cost per unit = 3 × $2.40 = $7.20
Mid City Products Inc. (MCP), developed standard costs for direct material and direct labor. In 2017, MCP estimated the following standard costs for one of their most popular products. Budgeted quantity Budgeted price Direct materials 6 pounds $4.25 per pound Direct labor 0.50 hours $15.00 per hour During September, MCP produced and sold 2,000 units using 12,400 pounds of direct materials at an average cost per pound of $4.00 and 950 direct labor hours at an average wage of $15.15 per hour. The direct labor price variance during September is ________. A) $750.00 unfavorable B) $150.00 favorable C) $142.50 unfavorable D) $142.50 favorable
Answer: C Explanation: Direct labor price variance = 950 dlh × ($15.15 − $15.00) = $142.50 U
Heavy Products, Inc. developed standard costs for direct material and direct labor. In 2017, AII estimated the following standard costs for one of their major products, the 10-gallon plastic container. Budgeted quantity Budgeted price Direct materials 0.80 pounds $60 per pound Direct labor 0.10 hours $20 per hour During June, Heavy Products produced and sold 15,000 containers using 25,000 pounds of direct materials at an average cost per pound of $64 and 12,000 direct manufacturing labor-hours at an average wage of $21.56 per hour. June's direct material flexible-budget variance is ________. A) $60,000 unfavorable B) $100,000 favorable C) $880,000 unfavorable D) $18,720 favorable
Answer: C Explanation: Flexible-budget variance = (25,000 × $64) − (15,000 × 0.80 × $60) = $880,000 U
Orange Corporation has budgeted sales of 23,000 units, targeted ending finished goods inventory of 9,000 units, and beginning finished goods inventory of 6,000 units. How many units should be produced next year? A) 38,000 units B) 32,000 units C) 26,000 units D) 23,000 units
Answer: C Explanation: Number of units to be produced next year = 23,000 units (estimated sales) + 9,000 units (budgeted ending inventory) - 6,000 units (opening inventory) = 26,000 units.
) AAA Manufacturing Inc, makes a product with the following costs per unit: Direct materials $180 Direct labor $20 Manufacturing overhead (variable) $30 Manufacturing overhead (fixed) $130 Marketing costs $75 What would be the inventoriable cost per unit under variable costing and what would it be under absorption costing? A) $180 for variable costing and $305 under absorption costing B) $230 for variable costing and $305 under absorption costing C) $230 for variable costing and $360 under absorption costing D) $200 for variable costing and $305 under absorption costing
Answer: C Explanation: Variable costing: $180 + $20 + $30 = $230 Absorption costing: $180 + $20 + $30 + $130 = $360
Time Again LLC produces and sells a mantel clock for $100 per unit. In 2017, 41,000 clocks were produced and 37,000 were sold. Other information for the year includes: Direct materials $42 per unit Direct manufacturing labor $7 per unit Variable manufacturing costs $4.00 per unit Sales commissions $14.50 per part Fixed manufacturing costs $64.00 per unit Administrative expenses, all fixed $38.50 per unit What is the inventoriable cost per unit using absorption costing? A) $49.00 B) $53.00 C) $117.00 D) $106.00
Answer: C Explanation:Absorption costing considers all variable manufacturing costs and all fixed manufacturing costs as inventoriable costs. Therefore, in this case, direct materials, direct manufacturing labor, variable manufacturing costs, and fixed manufacturing costs will be considered as inventoriable cost. The total inventoriable cost = ($42 + $7 + $4.00 + $64.00) = $117.00.
Genent Industries, Inc. (GII), developed standard costs for direct material and direct labor. In 2017, GII estimated the following standard costs for one of their major products, the 30-gallon heavy-duty plastic container. Budgeted quantity Budgeted price Direct materials 0.20 pounds $40 per pound Direct labor 0.10 hours $18 per hour During July, GII produced and sold 4,000 containers using 1,000 pounds of direct materials at an average cost per pound of $37 and 475 direct manufacturing labor hours at an average wage of $18.75 per hour. The direct material efficiency variance during July is ________. A) $5,000 unfavorable B) $7,400 favorable C) $8,000 unfavorable D) $5,000 favorable
Answer: C Explanation:Direct material efficiency variance = $40 × [1,000 − (4,000 × 0.20)] = $8,000
Schooner Corporation used the following data to evaluate its current operating system. The company sells items for $25 each and used a budgeted selling price of $25 per unit. Actual Budgeted Units sold 173,000 units 181,000 units Variable costs $1,081,000 $1,285,000 Fixed costs $806,000 $770,000 What is the static-budget variance of variable costs? A) $36,000 favorable B) $36,000 unfavorable C) $204,000 favorable D) $204,000 unfavorable
Answer: C Explanation:Static-budget variance of variable costs = $1,081,000 − $1,285,000 = $204,000 F
Outdoor Gear Corporation manufactured 1,000 coolers during October. The following variable overhead data relates to October: Variable overhead spending variance $1,300 Unfavorable Variable overhead efficiency variance $182 Unfavorable Budgeted machine hours allowed for actual output 608 machine hours Actual cost per machine hour $28 Budgeted cost per machine hour $26 Calculate the variable overhead flexible-budget variance. A) $1,118 unfavorable B) $1,118 favorable C) $1,482 unfavorable D) $1,482 favorable
Answer: C Explanation:Variable overhead flexible-budget variance = $1,300 (U) + $182 (U) = $1,482 (U)
Marshall Company uses a standard cost system. In March, $270,000 of variable manufacturing overhead costs were incurred and the flexible-budget amount for the month was $310,000. Which of the following variable manufacturing overhead entries would have been recorded for March? A) Accounts Payable Control and other accounts 310,000 Work-in-Process Control 310,000 B) Variable Manufacturing Overhead Allocated 310,000 Accounts Payable and other accounts 310,000 C) Work-in-Process Control 270,000 Accounts Payable Control and other accounts 270,000 D) Variable Manufacturing Overhead Control 270,000 Accounts Payable Control and other accounts 270,000
Answer: D
Osium Company made the following journal entry: Variable Manufacturing Overhead Allocated 250,000 Variable Manufacturing Overhead Efficiency Variance 80,000 Variable Manufacturing Overhead Control 300,000 Variable Manufacturing Overhead Spending Variance 30,000 Which of the following statements is true of the given journal entry? A) Osium overallocated variable manufacturing overhead. B) A $30,000 unfavorable spending variance was recorded. C) Work-in-Process is currently overstated. D) A $80,000 unfavorable efficiency variance was recorded.
Answer: D
The actual information pertains to the month of June. As part of the budgeting process, Colonial Fencing Company developed the following static budget for September. Colonial is in the process of preparing the flexible budget and understanding the results. Actual Flexible Static Results Budget Budget Sales volume (in units) 19,000 20,500 Sales revenues $510,000 $ $615,000 Variable costs 256,000 $ ________ 300,000 Contribution margin $254,000 $ 315,000 Fixed costs 235,000 $ ________ 228,000 Operating profit $19,000 $ $87,000 The flexible budget for sales revenues will be? A) $615,000 B) $510,000 C) $635,500 D) $570,000
Answer: D
Which of the following journal entries is used to record actual variable overhead costs incurred? A) Accounts Payable Variable Overhead Control B) Variable Overhead Control Accounts Receivable C) Work-in-Process Control Variable Overhead Control D) Variable Overhead Control Accounts Payable and various other accounts
Answer: D
Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit? A) Budgeted output allowed per input unit × Budgeted variable overhead cost rate per input unit B) Budgeted input allowed per output unit ÷ Budgeted variable overhead cost rate per input unit C) Budgeted output allowed per input unit ÷ Budgeted variable overhead cost rate per input unit D) Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit
Answer: D
J&J Materials and Construction Corporation produces mulch and distributes the product by using dump trucks. The company uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 710 truckloads Budgeted fleet hours 568 hours Budgeted variable manufacturing overhead costs for 710 loads $87,756.00 Actual output units produced and delivered 635 truckloads Actual fleet hours 468 hours Actual variable manufacturing overhead costs $82,896.00 What is the budgeted variable manufacturing overhead cost per unit? A) $154.50 per unit B) $177.13 per unit C) $130.54 per unit D) $123.60 per unit
Answer: D Explanation: Budgeted fleet hours per unit = 568 ÷ 710 = 0.8 Budgeted variable overhead rate per machine hour = $87,756.00 ÷ 568 = $154.50 Budgeted variable manufacturing overhead cost per unit = 0.8 × $154.50 = $123.60
Castleton Corporation manufactured 41,000 units during March. The following fixed overhead data relates to March: Actual Static Budget Production 41,000 units 39,000 units Machine-hours 6,020 hours 5,850 hours Fixed overhead costs for March $125,500 $117,000 What is the amount of fixed overhead allocated to production? A) $128,210.13 B) $117,000.00 C) $125,500.00 D) $123,000.00
Answer: D Explanation: Fixed overhead cost per machine hour = $117,000 ÷ 5,850 = $20 Machine hours per unit = 5,850 ÷ 39,000 = 0.15 Fixed overhead cost per unit = $20 × 0.15 = $3.00 Fixed overhead allocated = 41,000 × $3.00 = $123,000.00
Jean Peck's Furniture manufactures tables for hospitality sector. It takes only bulk orders and each table is sold for $500 after negotiations. In the month of January, it manufactures 3,100 tables and sells 2,700 tables. Actual fixed costs are the same as the amount of fixed costs budgeted for the month. The following information is provided for the month of January: Variable manufacturing costs $130 per unit Fixed manufacturing costs $105,000 per month Fixed Administrative expenses $30,000 per month At the end of the month Jean Peck's Furniture has an ending inventory of finished goods of 400 units. The company also incurs a sales commission of $13 per unit. What is the gross margin when using absorption costing? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.) A) $958,700 B) $1,179,900 C) $842,003 D) $907,551
Answer: D Explanation: Total sales: $500 x 2,700 units = $1,350,000 Total cost of goods sold: ($130 + ($105,000/ 3,100units) ) x 2,700 units = $442,449 Gross margin under absorption costing: $1,350,000 - $442,449 = $907,551
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results. Actual Flexible Static Results Budget Budget Sales volume (in units) 10,000 8,000 Sales revenues $239,000 $ $235,000 Variable costs 167,000 $ ________ 184,000 Contribution margin 72,000 $ 51,000 Fixed costs 38,000 $ ________ 33,000 Operating profit $34,000 $ $18,000 The flexible-budget variance for variable costs is ________. (Round the final answer to the nearest dollar.) A) $17,000 favorable B) $33,400 unfavorable C) $17,000 unfavorable D) $63,000 favorable
Answer: D Explanation: [(10,000 × $184,000 / 8,000)] − $167,000 = $63,000 F
Comfort Company manufactures pillows. The 2015 operating budget is based on production of 25,000 pillows with 0.75 machine-hour allowed per pillow. Budgeted variable overhead per hour was $25. Actual production for 2015 was 27,000 pillows using 19,050 machine-hours. Actual variable costs were $23 per machine-hour. Required: Calculate Budgeted variable overhead. Calculate the variable overhead spending and efficiency variances.
Answer:Budgeted variable overhead = $25 × (25,000 × 0.75) machine-hours = $468,750 Spending variance = ($25 − $23) × 19,050 = $38,100 favorable Efficiency variance = [19,050 − (27,000 × 0.75)] × $25 = $30,000 favorable
Coffey Company maintains a very large direct materials inventory because of critical demands placed upon it for rush orders from large hospitals. Item A contains hard-to-get material Y. Currently, the standard cost of material Y is $4.25 per gram. During February, 22,000 grams were purchased for $4.40 per gram, while only 20,000 grams were used in production. There was no beginning inventory of material Y. Required: a. Determine the direct materials price variance, assuming that all materials costs are the responsibility of the materials purchasing manager. b. Determine the direct materials price variance, assuming that all materials costs are the responsibility of the production manager. c. Discuss the issues involved in determining the price variance at the point of purchase versus the point of consumption.
a. Material price variance = 22,000 × ($4.40 - $4.25) = $3,300 unfavorable b. Material price variance = 20,000 × ($4.40 - $4.25) = $3,000 unfavorable c. Measuring the price variance at the time of materials purchased is desirable in situations where the amount of materials purchased varies substantially from the amount used during the period. Failure to measure the price variance based on materials purchased could result in a substantial delay in determining that a price change occurred. Also, if the purchasing manager is to be held accountable for his/her purchasing activities, it is appropriate to have the materials price variances computed at the time of purchase so the manager can include the variances on his/her monthly report. This encourages the purchasing manager to be more responsible for the activities under his/her control. It provides a closer relationship between responsibility and authority and becomes a relevant performance measure.