ACC 2302 - Exam 3 - Practice Exam

A favorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period. T/F

True

The materials price variance is computed by multiplying the difference between the actual price and the standard price by the actual quantity of materials purchased. T/F

True

The sales budget is usually prepared before the production budget. T/F

True

Under absorption costing, fixed manufacturing overhead is treated as a product cost. T/F

True

Under variable costing, product costs consist of direct materials, direct labor, and variable manufacturing overhead. T/F

True.

Sharron Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced 3,000 Variable costs per unit: (blank) Direct materials $91 Direct labor $13 Variable manufacturing overhead $7 Variable selling and administrative expense $6 Fixed costs: Fixed manufacturing overhead $237,000 Fixed selling and administrative expense $165,000 There were no beginning or ending inventories. The variable costing unit product cost was: a. $111 per unit. b. $190 per unit. c. $117 per unit. d. $110 per unit. Response Feedback: Direct Materials + Direct Labor + Variable Manufacturing Overhead= Variable Costing Unit Product Cost

a. $111 per unit.

Arakaki Inc. is working on its cash budget for January. The budgeted beginning cash balance is $41,000. Budgeted cash receipts total $114,000 and budgeted cash disbursements total $113,000. The desired ending cash balance is $60,000. The excess (deficiency) of cash available over disbursements for January will be: a. $42,000. b. $155,000. c. $40,000. d. $1,000.

a. $42,000.

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Units in beginning inventory 0 Units produced 7,300 Units sold 7,200 Units in ending inventory 100 Variable costs per unit: Direct materials $29 Direct labor $49 Variable manufacturing overhead $5 Variable selling and administrative $4 Fixed costs: Fixed manufacturing overhead $94,900 Fixed selling and administrative $79,200 What is the absorption costing unit product cost for the month? a. $96 per unit. b. $3 per unit. c. $87 per unit. d. $100 per unit.

a. $96 per unit.

A quantity of a particular raw material was purchased for $43,250. The standard cost of the material was $2.00 per kilogram and there was an unfavorable materials price variance of $3,250. How many kilograms were purchased? a. 20,000. b. 21,625. c. 23,250. d. 24,875. Response Feedback: Materials price variance = (AQ × AP) - (AQ × SP) $3,250 U = $43,250 - (AQ × $2.00 per kilogram) $3,250 = $43,250 - (AQ × $2.00 per kilogram) AQ × $2.00 per kilogram = $43,250 - $3,250 AQ × $2.00 per kilogram = $40,000 AQ = $40,000 ÷ $2.00 per kilogram AQ = 20,000 kilograms

a. 20,000.

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $126 Units in beginning inventory 0 Units produced 3,100 Units sold 3,000 Units in ending inventory 100 Variable costs per unit: Direct materials $22 Direct labor $43 Variable manufacturing overhead $3 Variable selling and administrative $10 Fixed costs: Fixed manufacturing overhead $89,900 Fixed selling and administrative $42,000 What is the net operating income for the month under variable costing? a. $15,000. b. $12,100. c. $2,900. d. $5,300.

b. $12,100

The manufacturing overhead budget at Amrein Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 4,900 direct labor-hours will be required in August. The variable overhead rate is $9.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $96,040 per month, which includes depreciation of $7,350. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: a. $88,690. b. $134,750. c. $46,060. d. $142,100.

b. $134,750.

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $112 Units in beginning inventory 0 Units produced 5,500 Units sold 5,300 Units in ending inventory 200 Variable costs per unit: Direct materials $33 Direct labor $37 Variable manufacturing overhead $5 Variable selling and administrative $6 Fixed costs: Fixed manufacturing overhead $71,500 Fixed selling and administrative $79,500 What is the net operating income for the month under absorption costing? a. $2,600. b. $15,900. c. ($1,700). d. $13,300.

b. $15,900.

The following materials standards have been established for a particular product: Standard quantity per unit of output 1.7 meters Standard price $19.80 per meter The following data pertain to operations concerning the product for the last month: Actual materials purchased 5,800 meters Actual cost of materials purchased $113,680 Actual materials used in production 5,100 meters Actual output 3,200 units What is the materials quantity variance for the month? a. $13,720 U. b. $6,732 F. c. $13,860 U. d. $6,664 F. Response Feedback: SQ = 1.7 meters per unit × 3,200 units = 5,440 meters Materials quantity variance = (AQ - SQ) × SP = (5,100 meters - 5,440 meters) × $19.80 per meter = (-340 meters) × $19.80 per meter = $6,732 F

b. $6,732 F.

The WRT Corporation makes collections on sales according to the following schedule: 25% in month of sale 65% in month following sale 5% in second month following sale 5% uncollectible The following sales have been budgeted: Sales April $120,000 May $100,000 June $110,000 Budgeted cash collections in June would be: a. $27,500. b. $98,500. c. $71,000. d. $115,500.

b. $98,500.

Which of the following costs at a manufacturing company would be treated as a product cost under both absorption costing and variable costing? Variable manufacturing overhead A) Yes B) Yes C) No D) No Variable selling and administrative expense A) Yes B) No C) Yes D) No a. A). b. B). c. C). d. D).

b. B).

Routit Corporation had the following sales and production for the past four years: Production in units Year 1. 5,000 Year 2. 6,000 Year 3. 5,000 Year 4. 5,000 Sales in units Year 1. 4,000 Year 2. 5,000 Year 3. 5,000 Year 4. 7,000 Selling price per unit, variable cost per unit, and total fixed cost are the same each year. There were no beginning inventories in Year 1. Which of the following statements is correct? a. Under variable costing, net operating income for Year 3 and Year 4 would be the same. b. Under variable costing, net operating income for Year 2 and Year 3 would be the same. c. Variable costing net income would exceed absorption costing net income in Year 1. d. Absorption costing net income would exceed variable costing net income in Year 4.

b. Under variable costing, net operating income for Year 2 and Year 3 would be the same.

Which of the following would produce a labor rate variance? a. Poor quality materials causing breakage and work interruptions. b. Use of persons with high hourly wage rates in tasks that call for low hourly wage rates. c. Excessive number of hours worked in completing a job. d. An unfavorable materials quantity variance.

b. Use of persons with high hourly wage rates in tasks that call for low hourly wage rates.

George Corporation has no beginning inventory and manufactures a single product. If the number of units produced exceeds the number of units sold, then net operating income under the absorption method for the year will: a. be equal to the net operating income under variable costing. b. be greater than the net operating income under variable costing. c. be equal to the net operating income under variable costing plus total fixed manufacturing costs. d. be equal to the net operating income under variable costing less total fixed manufacturing costs

b. be greater than the net operating income under variable costing.

The variance that is usually most useful in assessing the performance of the purchasing department manager is: a. the materials quantity variance. b. the materials price variance. c. the labor rate variance. d. the labor efficiency variance.

b. the materials price variance.

The principal difference between variable costing and absorption costing centers on: a. whether variable manufacturing costs should be included in product costs. b. whether fixed manufacturing costs should be included in product costs. c. whether fixed manufacturing costs and fixed selling and administrative costs should be included in product costs. d. whether selling and administrative costs should be included in product costs.

b. whether fixed manufacturing costs should be included in product costs.

Dreary Credit Agency uses a standard cost system for the processing of its credit applications. The labor standard at Dreary is 10 applications per 8 hour day at a standard cost of $15 per hour. During the last pay period, Dreary's credit agents worked 1,920 hours and processed 2,500 applications. The total labor cost for the agents during this period was $29,184. What was Dreary's labor efficiency variance for this last pay period? a. $384 Unfavorable. b. $816 Favorable. c. $1,200 Favorable. d. $1,500 Favorable. Response Feedback: Labor efficiency variance = (AH - SH) × SR = [1,920 hours - (2,500 applications × 0.80 hours per application)] × $15 per hour = [1,920 hours - (2,000 hours)] × $15 per hour = [-80 hours)] × $15 per hour = $1,200 F

c. $1,200 Favorable.

Blue Corporation's standards call for 2,500 direct labor-hours to produce 1,000 units of product. During May 900 units were produced and the company worked 2,400 direct labor-hours. The standard hours allowed for May production would be: a. 2,500 hours. b. 2,400 hours. c. 2,250 hours. d. 1,800 hours. Response Feedback: Standard hours per unit of output = 2,500 direct labor-hours ÷ 1,000 units = 2.5 direct labor-hours per unit Standard hours allowed = 900 units × 2.5 direct labor-hours per unit = 2,250 hours

c. 2,250 hours.

The following are budgeted data: Sales(units) April. 15,000 May. 20,000 June. 18,000 Production(units) April. 18,000 May. 19,000 June. 16,000 Two pounds of material are required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for May should be: a. 39,200 pounds. b. 52,000 pounds. c. 36,800 pounds. d. 38,000 pounds.

c. 36,800 pounds.

Frodic Corporation has budgeted sales and production over the next quarter as follows: Month July August September Sales in units 40,000 52,000 (?) Production in units 41,200 52,300 56,650 The company has 4,000 units of product on hand at July 1. 10% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 71,500 units. Budgeted sales for September would be (in units): a. 65,000 units. b. 61,000 units. c. 55,000 units. d. 57,000 units.

c. 55,000 units.

The standard cost card for a product indicates that one unit of the product requires 8 kilograms of a raw material at $0.80 per kilogram. The production of the product in April was 870 units, but production had been budgeted for 850 units. During April, 8,200 kilograms of the raw material were purchased for $6,888 and 7,150 kilograms of the raw material were used in production. The material variances for April were: Material Price Variance A) $286 U B) $286 U C) $328 U D) $328 U Material Quantity Variance A) $152 U B) $280 U C) $152 U D) $280 U a. A). b. B). c. C). d. D). Response Feedback: Materials price variance = (AQ × AP) - (AQ × SP) = $6,888 - (8,200 kilograms × $0.80 per kilogram) = $6,888 - $6,560 = $328 U Materials quantity variance = (AQ - SQ) × SP = [7,150 kilograms - (870 units × 8 kilograms per unit)] × $0.80 per kilogram = [7,150 kilograms - (6,960 kilograms)] × $0.80 per kilogram = [190 kilograms] × $0.80 per kilogram = $152 U

c. C).

The budget method that maintains a constant twelve-month planning horizon by adding a new month on the end as the current month is completed is called: a. an operating budget. b. a capital budget. c. a continuous budget. d. a master budget.

c. a continuous budget.

Laurey Inc. is working on its cash budget for May. The budgeted beginning cash balance is $45,000. Budgeted cash receipts total $129,000 and budgeted cash disbursements total $124,000. The desired ending cash balance is $60,000. To attain its desired ending cash balance for May, the company needs to borrow: a. $110,000. b. $-0-. c. $60,000. d. $10,000.

d. $10,000

Paradise Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. Beginning Inventory Raw material* 40,000 Finished Goods 80,000 EndingInventory Raw material* 50,000 Finished goods 50,000 (*Three pounds of raw material are needed to produce each unit of finished product.) If Paradise Corporation plans to sell 480,000 units during next year, the number of units it would have to produce during the year would be: a. 440,000 units. b. 480,000 units. c. 510,000 units. d. 450,000 units. Response Feedback: Finished goods: Beginning inventory + Units produced = Ending inventory + Units sold 80,000 + Units produced = 50,000 + 480,000 Units produced = 50,000 + 480,000 - 80,000 = 450,000

d. 450,000 units.

The standard cost card of a particular product specifies that it requires 4.5 direct labor-hours at $12.80 per direct labor-hour. During March, 2,300 units of the product were produced and direct labor wages of $128,300 were incurred. A total of 11,700 direct labor-hours were worked. The direct labor variances for the month were: Labor Rate Variance A) $4, 180 F B) $4,180 F C) $21,460 F D) $21, 460 F Labor Efficiency Variance A) $14,804 U B) $17,280 U C) $14,804 U D) $17,280 U a. A). b. B). c. C). d. D). Response Feedback: Labor rate variance = (AH × AR) - (AH × SR) = $128,300 - (11,700 direct labor-hours × $12.80 per direct labor-hour) = $128,300 - ($149,760) = $21,460 F Labor efficiency variance = (AH - SH) × SR = [11,700 direct labor-hours - (2,300 units × 4.5 direct labor-hours per unit)] × $12.80 per direct labor-hour = [11,700 direct labor-hours - (10,350 direct labor-hours)] × $12.80 per direct labor-hour = [1,350 direct labor-hours] × $12.80 per direct labor-hour = $17,280 U

d. D).

The first budget a company prepares in a master budget is the production budget. T/F

False