ACCTG 231 Exam 3 Review

（True / False) When a company is involved in more than one activity in the entire value chain, it is vertically integrated.

True

Variable Manufacturing Overhead Efficiency Variance Formula

VMEV=SR(AH-SH)

Variable Manufacturing Overhead Rate Variance Formula

VMRV=AH(AR-SR)

Bell Inc. has the following direct materials standard to manufacture 1 laptop: 1.5 Pounds of plastic per Laptop @ $4.00 per pound Last week, 1,700 pounds of materials were purchased and used to make 1,000 laptop. The materials cost a total of $6,630. Bell's materials quantity variance (MQV) for the week was: $170 unfavorable. $170 favorable. $800 unfavorable. $800 favorable.

$800 unfavorable

Bell Inc. has the following direct materials standard to manufacture 1 laptop: 1.5 Pounds of plastic per Laptop @ $4.00 per pound Last week, 1,700 pounds of materials were purchased and used to make 1,000 laptop. The materials cost a total of $6,630. How many pounds of materials should Bell have used to make 1,000 laptops? 1,700 pounds. 1,500 pounds. 1,200 pounds. 1,000 pounds.

1,500 pounds

Bell Inc. has the following variable manufacturing overhead standard to manufacture one laptop: 1.5 standard hours per laptop at $3.00 per direct labor hour Last week, 1,550 hours were worked to make 1,000 laptop, and $5,115 was spent for variable manufacturing overhead. Bell's rate variance (VMRV) for variable manufacturing overhead for the week was: $465 unfavorable. $400 favorable. $335 unfavorable. $300 favorable.

$465 unfavorable

Bell Inc. has the following direct labor standard to manufacture one laptop: 1.5 standard hours per laptop at $12.00 per direct labor hour Last week, 1,550 direct labor hours were worked at a total labor cost of $18,910 to make 1,000 laptop. Bell's labor efficiency variance (LEV) for the week was: $590 unfavorable. $590 favorable. $600 unfavorable. $600 favorable.

$600 unfavorable

Colonial Heritage makes reproduction colonial furniture from select hardwoods. Reference Checkpoint 45 The company's supplier of hardwood will only be able to supply 2,000 board feet this month. Assume the company follows the plan we have proposed. Up to how much should Colonial Heritage be willing to pay above the usual price to obtain more hardwood? $40 per board foot $25 per board foot $20 per board foot Zero

$20 per board foot

Denny Associates has been offered a four-year contract to supply the computing requirements for a local bank. The working capital would be released at the end of the contract. Denny Associates requires a 14% return. Reference Checkpoint 58 What is the net present value of the contract with the local bank? $150,000 $ 28,156 $ 92,340 $132,916

$28,156

Bell Inc. has the following direct labor standard to manufacture one laptop: 1.5 standard hours per laptop at $12.00 per direct labor hour Last week, 1,550 direct labor hours were worked at a total labor cost of $18,910 to make 1,000 laptop. Bell's labor rate variance (LRV) for the week was: $310 unfavorable. $310 favorable. $300 unfavorable. $300 favorable.

$310 unfavorable

Zanny Electronics Corporation uses a standard cost system for the production of its water ski radios. The direct labor standard for each radio is 0.9 hours. The standard direct labor cost per hour is $7.20. During the month of August, Zanny's water ski radio production used 6,600 direct labor-hours at a total direct labor cost of $48,708. This resulted in production of 6,900 water ski radios for August. What is Zanny's labor rate variance for August? $972 Favorable $1,188 Unfavorable $2,160 Favorable $2,808 Unfavorable

$1,188 Unfavorable

CoolAir Corporation manufactures air conditioners. CoolAir has the capacity to manufacture and sell 80,000 air conditioners each year but is currently only manufacturing and selling 60,000. The following per unit numbers relate to annual operations at 60,000 units: Reference Checkpoint 36 The City of Clearwater would like to purchase 3,000 air conditioners from CoolAir but only if they can get them for $75 each. Variable selling and administrative costs on this special order will drop down to $2 per unit. This special order will not affect the 60,000 regular sales and it will not affect the total fixed costs. The annual financial advantage (disadvantage) for the company as a result of accepting this special order should be: ($21,000) $24,000 $144,000 ($129,000)

$144,000

The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output 3.5 hours Standard variable overhead rate $ 15.20 per hour The following data pertain to operations for the last month: Actual hours 3,800 hours Actual total variable manufacturing overhead cost $ 59,090 Actual output 800 units What is the variable overhead efficiency variance for the month? $15,550 U $15,200 U $16,530 U $980 F

$15,200 U

Bell Inc. has the following variable manufacturing overhead standard to manufacture one laptop: 1.5 standard hours per laptop at $3.00 per direct labor hour Last week, 1,550 hours were worked to make 1,000 laptop, and $5,115 was spent for variable manufacturing overhead. Bell's efficiency variance (VMEV) for variable manufacturing overhead for the week was: $435 unfavorable. $435 favorable. $150 unfavorable. $150 favorable.

$150 unfavorable

Bell Inc. has the following direct materials standard to manufacture 1 laptop: 1.5 Pounds of plastic per Laptop @ $4.00 per pound Last week, 1,700 pounds of materials were purchased and used to make 1,000 laptop. The materials cost a total of $6,630. Bell's materials price variance (MPV) for the week was: $170 unfavorable. $170 favorable. $800 unfavorable. $800 favorable.

$170 favorable

The following materials standards have been established for a particular product: Standard quantity per unit of output 5.3 meters Standard price $ 17.20 per meter Actual Price $ 17.45 The following data pertain to operations concerning the product for the last month: Actual materials purchased 8,100 meters Actual materials used in production 7,600 meters Actual output 1,400 units What is the materials price variance for the month? $3,141 U $2,025 U $8,600 U $8,725 U

$2,025 U

The following labor standards have been established for a particular product: Standard labor-hours per unit of output 8.7 hours Standard labor rate $ 18.10 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 3,800 hours Actual total labor cost $ 67,640 Actual output 500 units What is the labor efficiency variance for the month? A) $9,790 F B) $11,095 U C) $9,955 F D) $11,095 F

$9,955 F

The Cook Corporation has two divisions--East and West. The divisions have the following revenues and expenses: Reference checkpoint 30 The management of Cook is considering the elimination of the West Division. If the West Division were eliminated, its traceable fixed costs could be avoided. Total common corporate costs would be unaffected by this decision. Given these data, the elimination of the West Division would result in an overall company net operating income (loss) of: $15,000 ($155,000) ($75,000) ($60,000)

($155,000)

Lusk Corporation produces and sells 10,000 units of Product X each month. The selling price of Product X is $40 per unit, and variable expenses are $32 per unit. A study has been made concerning whether Product X should be discontinued. The study shows that $70,000 of the $120,000 in monthly fixed expenses charged to Product X would not be avoidable even if the product was discontinued. If Product X is discontinued, the annual financial advantage (disadvantage) for the company of eliminating this product should be: ($30,000) $30,000 $40,000 ($40,000)

($30,000)

Colonial Heritage makes reproduction colonial furniture from select hardwoods. Reference Checkpoint 44 The company's supplier of hardwood will only be able to supply 2,000 board feet this month. What plan would maximize profits? 500 chairs and 100 tables 600 chairs and 80 tables 500 chairs and 80 tables 600 chairs and 100 tables

600 chairs and 80 tables

(True / False) Fixed costs are irrelevant in decisions about whether a product should be dropped.

False

(True / False) In a special order situation, any fixed cost associated with the order directly would be irrelevant.

False

(True / False) Variable costs are always relevant costs in decisions.

False

Paine Corporation processes sugar beets in batches that it purchases from farmers for $72 a batch. A batch of sugar beets costs $11 to crush in the company's plant. Two intermediate products, beet fiber and beet juice, emerge from the crushing process. The beet fiber can be sold as is for $27 or processed further for $16 to make the end product industrial fiber that is sold for $40. The beet juice can be sold as is for $43 or processed further for $28 to make the end product refined sugar that is sold for $100. Which of the intermediate products should be processed further? Fiber Sugar No Yes No No Yes No Yes Yes

Fiber No Sugar Yes

Labor Efficiency Variance

LEV=SR(AH-SH)

Labor Rate Variance Formula

LRV=AH(AR-SR)

Material Price Variance Formula

MPV=AQ(AP-SP)

Material Quantity Variance Formula

MQV=SP(AQ-SQ)

Colonial Heritage makes reproduction colonial furniture from select hardwoods. Reference Checkpoint 43 The company's supplier of hardwood will only be able to supply 2,000 board feet this month. Is this enough hardwood to satisfy demand? Yes No

No

Consider the following two investments: Project X Project Y Initial investment $100,000 $100,000 Year 1 cash inflow $60,000 $60,000 Year 2 cash inflow $40,000 $35,000 Year 3 cash inflow $0 $25,000 Which project has the shortest payback period? Project X Project Y Cannot be determined

Project X

The general model for calculating a quantity variance is: Actual quantity of inputs used × (Actual price − Standard price). Standard price × (Actual quantity of inputs used − Standard quantity allowed for output). (Actual quantity of inputs used × Actual price) − (Standard quantity allowed for output × Standard price). Actual price × (Actual quantity of inputs used − Standard quantity allowed for output).

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

(True / False) A relevant cost is any cost that is relevant to decision making.

True

(True / False) The payback method is most appropriate for projects whose cash flows do not extend far into the future.

True

(True / False) The term joint cost is used to describe the costs incurred up to the split-off point in a process involving joint products.

True

Banfield Corporation makes three products that use compound W. Data concerning those products appear below: Reference Checkpoint 42 Rank the products in order of their current profitability from most profitable to least profitable. In other words, rank the products in the order in which they should be emphasized WX, VP, YI YI, VP, WX WX, YI, VP VP, WX, YI

YI, VP, WX

CoolAir Corporation manufactures air conditioners. CoolAir has the capacity to manufacture and sell 80,000 air conditioners each year but is currently only manufacturing and selling 60,000. The following per unit numbers relate to annual operations at 60,000 units: Reference Checkpoint 37 The City of Clearwater would like to purchase 3,000 air conditioners from CoolAir but only if they can get them for $75 each. Variable selling and administrative costs on this special order will drop down to $2 per unit. This special order will not affect the 60,000 regular sales and it will not affect the total fixed costs. Should CoolAir accept the special order? Yes No

Yes

An unfavorable materials quantity variance indicates that: actual usage of material exceeds the standard material allowed for output. standard material allowed for output exceeds the actual usage of material. actual material price exceeds standard price. standard material price exceeds actual price.

actual usage of material exceeds the standard material allowed for output

United Industries manufactures a number of products at its highly automated factory. The products are very popular, with demand far exceeding the factory's capacity. To maximize profit, management should rank products based on their: gross margin contribution margin selling price contribution margin per unit of the constrained resource

contribution margin per unit of the constrained resource

Accepting a special order will improve overall net operating income if the revenue from the special order exceeds: the contribution margin on the order. the incremental costs associated with the order. the variable costs associated with the order. the sunk costs associated with the order.

the incremental costs associated with the order