Accounting 7, 8, 9, 10

Harold Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During March, the company budgeted for 7,900 units, but its actual level of activity was 7,860 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for March:

Actual results $ 135,850 Flexible budget [$0 + ($18 × 7,860)] 141,480 Spending variance $ 5,630 Because the actual expense is less than the flexible budget, the variance is favorable (F).

Speyer Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,260 patient-visits and the actual level of activity was 1,250 patient-visits. The cost formula for administrative expenses is $5.00 per patient-visit plus $27,000 per month. The actual administrative expense was $25,300. In the clinic's flexible budget performance report for last month, the spending variance for administrative expenses was:

Actual results $25,300 Flexible budget [$27,000 + ($5.00 × 1,250)] 33,250 Spending variance $ 7,950 Because the flexible budget is greater than the actual expense, the variance is favorable (F).

Paparo Corporation has provided the following data from its activity-based costing system: Activity Cost Pool Total Cost Total Activity Assembly $775,100 46,000 hrs Processing orders $57,375 1,500 orders Inspection $108,772 1,420 hrs Data concerning the company's product Q79Y appear below: Annual unit production and sales 450 Annual machine-hours 1,120 Annual number of orders 110 Annual inspection hours 50 Direct materials cost $41.00 per unit Direct labor cost $41.29 per unit According to the activity-based costing system, the average cost of product Q79Y is closest to: (Round your intermediate calculations to 2 decimal places.)

Assembly $775,100 46,000 hrs 16.85 per machine hour Processing orders $57,375 1500 orders 38.25 per order Inspection $108,772 1420 hrs 76.60 per inspection hour The overhead cost charged to Product Q79Y is: 16.85 x 1120= 18872 38.25 x 110= 4207.50 76.60 x 50= 3830 Total overhead cost= 26,909.50 Direct materials (450 x 41.00) $18450 Direct labor (450 x 41.29) 18,580.50 overhead 26,909.50 total cost $63,940 Cost per unit= $63,940/450 units = $142.09 per unit

Haylock Incorporated bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 5,600 direct labor-hours will be required in August. The variable overhead rate is $5.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $69,440 per month, which includes depreciation of $15,680. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

August Budgeted direct labor-hours 5,600 Variable manufacturing overhead rate 5.40 Variable manufacturing overhead 30,240 Fixed manufacturing overhead 69,440 Total manufacturing overhead 99,680 Less depreciation - 15,680 Cash disbursement for manufacturing overhead 84000

Which of the following budgets are prepared before the sales budget? budgeted income statement direct labor budget A) yes yes B) yes no C) no yes D) no no

Choice D

Hubbard Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During January, the kennel budgeted for 2,100 tenant-days, but its actual level of activity was 2,060 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for January: Data used in budgeting: fixed element per variable element month tenant-day Revenue $0 $31.10 Wages and salaries $ 2,300 $ 7.20 Food and supplies 1,000 8.10 Facility expenses 9,500 2.70 Administrative expenses 7,000 0.30 Total expenses $19,800 $18.30 Actual results for January: Revenue $63,606 Wages and salaries $17,282 Food and supplies $18,346 Facility expenses $14,432 Administrative expenses $ 7,408 The facility expenses in the flexible budget for January would be closest to: rev: 06_29_2020_QC_CS-208650

Cost = Fixed cost + (Variable cost per unit × q) = $9,500 + ($2.70 × 2,060) = $15,062

Activity-based costing is best proposed, designed and implemented by the accounting department without requiring the time of busy managers.

False

Unit-level activities are performed each time a batch is handled or processed.

False

Sathre Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Fixed Element Variable Element per per month Well Serviced Revenue 4500 Employee salaries + wages 56400 900 Servicing materials 700 Other expenses 35400 When the company prepared its planning budget at the beginning of December, it assumed that 34 wells would have been serviced. However, 32 wells were actually serviced during December. The "Employee salaries and wages" in the flexible budget for December would have been closest to: rev: 06_29_2020_QC_CS-208650

Flexible Budget Wells serviced (q) 32 Employee salaries & wages (56,400+900q) 85,200

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget?

It is calculated based on the sales budget and the desired ending inventory.

The following materials standards have been established for a particular product: Standard quantity per unit of output 5.0meters Standard price 17.70 per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 7,900meters Actual cost of materials purchased $143,780 Actual materials used in production 7,400meters Actual output 1,450units What is the materials price variance for the month?

Materials price variance = (AQ× AP) − (AQ × SP) = $143,780 − (7,900 meters × $17.70 per meter) = $143,780 − $139,830 = $3,950 U

Magno Cereal Corporation uses a standard cost system for its "crunchy pickle" cereal. The materials standard for each batch of cereal produced is 1.4 pounds of pickles at a standard cost of $3.00 per pound. During the month of August, Magno purchased 78,000 pounds of pickles at a total cost of $253,500. Magno used all of these pickles to produce 60,000 batches of cereal. What is Magno's materials quantity variance for August?

Materials quantity variance = (AQ − SQ) × SP = [78,000 pounds − (60,000 batches × 1.4 pounds per batch)] × $3.00 per pound = [78,000 pounds − (84,000 pounds)] × $3.00 per pound = [−6,000 pounds)] × $3.00 per pound = $18,000 F

Feemster Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During October, the company budgeted for 5,900 units, but its actual level of activity was 5,850 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for October:

Revenue per unit $ 29.90 Total variable expense per unit 16.30 Contribution margin per unit $ 13.60 Total fixed expense $ 64,200 Flexible budget [($13.60 × 5,850) − $64,200] $ 15,360 Planning budget [($13.60 × 5,900) − $64,200] 16,040 Activity variance $ 680 Because the flexible budget net operating income is less than the planning budget, the variance is unfavorable (U).

The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 3.5hours Standard variable overhead rate $15.20per hour The following data pertain to operations for the last month: Actual hours 3,800hours Actual total variable manufacturing overhead cost $59,090 Actual output 800units What is the variable overhead efficiency variance for the month?

SH = 800 units × 3.5 hours per unit = 2,800 hours Variable overhead efficiency variance = (AH − SH) × SR = (3,800 hours − 2,800 hours) × $15.20 per hour = (1,000 hours) × $15.20 per hour = $15,200 U

Factory security and assembly activities at an appliance manufacturing plant would be best classified as unit-level, batch-level, product-level, or organization-sustaining activities?

Security: Organization Assembly: Unit

Piper Corporation's standards call for 1,000 direct labor-hours to produce 250 units of product. During October the company worked 1,250 direct labor-hours and produced 300 units. The standard hours allowed for October would be:

Standard hours per unit of output = 1,000 direct labor-hours ÷ 250 units = 4 direct labor-hours per unit Standard hours allowed = 300 units × 4 direct labor-hours per unit = 1,200 hours

The general model for calculating a quantity variance is:

Standard price × (Actual quantity of inputs used − Standard quantity allowed for output).

Which of the following statements is NOT correct concerning the Manufacturing Overhead Budget?

The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead.

In a flexible budget, what will happen to fixed costs as the activity level increases?

The fixed cost per unit will decrease.

Viger Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company has provided the following data for the most recent month: Budgeted level of activity 8,400MHs Actual level of activity 8,600MHs Standard variable manufacturing overhead rate $7.10per MH Actual total variable manufacturing overhead $58,650 What was the variable overhead rate variance for the month?

Variable overhead rate variance = (AH × AR) − (AH × SR) = $58,650 − (8,600 hours × $7.10 per hour) = $58,650 − $61,060 = $2,410 F

Bennette Corporation has provided the following data concerning its overhead costs for the coming year: Wages and salaries $490,000 Depreciation 195,000 Rent 215,000 Total $ 900,000 The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year: Activity Cost Pool Total Activity Assembly 35,000 labor-hours Order processing 450 orders Other Not applicable The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs. The distribution of resource consumption across activity cost pools is given below: Activity Cost Pools (Order Processing) Wages and salaries 35% Depreciation 50% Rent 35% The activity rate for the Order Processing activity cost pool is closest to:

Wages and salaries (35% x $490,000) $171,500 Depreciation (50% x 195,000) 97,500 Rent (35% x 215,000) 75,250 Total $344,250 Order Processing: $344,250/450 orders= $765 per order

Mayeux Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system: Costs: Wages and salaries $320,000 Depreciation 160,000 Utilities 240,000 Total $720,000 Activity Cost Pools (Setting Up): Wages and salaries 40% Depreciation 55% Utilities 50% How much cost, in total, would be allocated in the first-stage allocation to the Setting Up activity cost pool?

Wages and salaries (40% x 320,000) $128,000 Depreciation (55% x 160,000) 88,000 Utilities (50% x 240,000) 120,000 Total $336,000

Pooler Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.45 direct labor-hours. The direct labor rate is $9.00 per direct labor-hour. The production budget calls for producing 7,000 units in April and 6,800 units in May. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

april may total required production in units 7000 6800 direct labor-hrs per unit .45 .45 total direct labor-hrs need 3150 3060 direct labor cost per hr 9 9 total direct labor cost 28350 27540 55890

When using a flexible budget, a decrease in activity within the relevant range:

decreases total costs.

The following are budgeted data: jan. feb. march sales in units 15,700 21,400 18,700 production in units 18,700 19,700 17,600 One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 25% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:

february Required production in units 19,700 raw materials required per unit 1 raw materials needed to meet production 19,700 add desired ending raw materials inventory (17,600 x 1 x 25%) 4,400 total raw materials needs 24,100 less beginning raw materials inventory (19,700 x 1 x 25%) 4,925 raw materials to be purchased 19,175

A budget that is based on the actual activity of a period is known as a:

flexible budget.

When preparing a direct materials budget, the required purchases of raw materials in units equals:

raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.

The production department should generally be responsible for materials price variances that resulted from:

rush orders arising from poor scheduling.

The usual starting point for a master budget is:

the sales forecast or sales budget.

A favorable labor rate variance indicates that

the standard rate exceeds the actual rate

In activity-based costing, the activity rate for an activity cost pool is computed by dividing the total overhead cost in the activity cost pool by:

the total activity for the activity cost pool

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:

under activity-based costing some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products.