ACCT 2302 2007 Exam 3 Chapter 10-13a 1.Which A) B) C) D) of the following would produce a materials price variance? an excess quantity of materials used. an excess number of direct labor-hours worked in completing a job. shipping materials to the plant by air freight rather than by truck. breakage of materials in production. C 2.The standard price per unit of materials is used in the calculation of which of the following variances? Materials price variance No No Yes Yes Materials quantity variance No Yes No Yes A) B) C) D) A 3.In a certain standard costing system direct labor-hours are used as the base for applying variable manufacturing overhead costs. The standard direct labor rate is twice the variable manufacturing overhead rate. Last period the labor efficiency variance was unfavorable. From this information one can conclude that last period the variable overhead efficiency variance was: A) unfavorable and half the labor efficiency variance. B) favorable and half the labor efficiency variance. C) unfavorable and twice the labor efficiency variance. D) favorable and twice the labor efficiency variance. B 4.Which of the following statements is a good description of the variances that should be investigated under the management by exception concept? A) all variances should be investigated. B) only unfavorable variances should be investigated. C) a small random sample of all variances should be investigated. D) unusually large favorable and unfavorable variances should be investigated. D 5.The following materials standards have been established for a particular raw material used in the company's sole product: Standard quantity per unit of output...... Standard price........................................ 1.0 pound $16.60 per pound The following data pertain to operations concerning the product for the last month: Actual materials purchased.................... Actual cost of materials purchased......... Actual materials used in production....... Actual output.......................................... 2,200 pounds $34,650 1,900 pounds 2,100 units 1 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 What is the materials quantity variance for the month? A) $3,320 F B) $3,150 F C) $4,980 U D) $4,725 U D 6.The following materials standards have been established for a particular raw material used in the company's sole product: Standard quantity per unit of output...... Standard price........................................ 0.1 pound $18.20 per pound The following data pertain to operations for the last month: Actual materials purchased.................... Actual cost of materials purchased......... Actual materials used in production....... Actual output.......................................... 5,700 pounds $100,320 5,600 pounds 55,800 units What is the materials price variance for the month? A) $1,820 U B) $1,760 U C) $3,420 F D) $352 U A 7.The following labor standards have been established for a particular product: Standard labor-hours per unit of output.......... Standard labor rate......................................... 8.0 hours $13.10 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked........... Actual total labor cost......... Actual output...................... 4,000 hours $53,000 400 units What is the labor efficiency variance for the month? A) $10,600 U B) $11,080 U C) $11,080 F D) $10,480 U 8.The following labor standards have been established for a particular product: Standard labor-hours per unit of output.......... Standard labor rate......................................... 2.4 hours $15.45 per hour 2 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 The following data pertain to operations concerning the product for the last month: Actual hours worked........... Actual total labor cost......... Actual output...................... 5,400 hours $85,860 2,200 units What is the labor rate variance for the month? A) $1,908 U B) $2,430 U C) $4,284 U D) $4,284 F B 9.The direct labor standards for a particular product are: 4 hours of direct labor @ $12.00 per direct labor-hour = $48.00 During October, 3,350 units of this product were made, which was 150 units less than budgeted. The labor cost incurred was $159,786 and 13,450 direct laborhours were worked. The direct labor variances for the month were: Labor Rate Variance $1,614 U $1,614 U $1,614 F $1,614 F Labor Efficiency Variance $600 U $600 F $600 U $600 F A) B) C) D) B 10.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 ) B ) C ) D ) $4,180 F $4,180 F $21,460 F $21,460 F Labor Efficiency Variance $14,804 U $17,280 U $14,804 U $17,280 U D 11.The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output.......... Standard variable overhead rate............ 5.6 hours $19.15 per 3 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 hour The following data pertain to operations for the last month: Actual hours........................................... Actual total variable overhead cost........ Actual output.......................................... 5,100 hours $99,195 1,100 units What is the variable overhead efficiency variance for the month? A) $20,299 F B) $18,769 F C) $1,848 F D) $20,617 F C 12.The following standards for variable manufacturing overhead have been established for a company that makes only one product: Standard hours per unit of output.......... Standard variable overhead rate............ 2.8 hours $16.30 per hour The following data pertain to operations for the last month: Actual hours........................................... Actual total variable overhead cost........ Actual output.......................................... 7,600 hours $127,300 2,500 units What is the variable overhead spending variance for the month? A) $3,420 U B) $3,150 F C) $10,050 U D) $13,200 U Use the following to answer questions 13-15: Stench Foods Company uses a standard cost system to collect costs related to the production of its garlic flavored yogurt. The garlic (materials) standards for each container of yogurt produced are 0.8 ounces of crushed garlic at a standard cost of $2.30 per ounce. During the month of June, Stench purchased 75,000 ounces of crushed garlic at a total cost of $171,000. Stench used 64,000 of these ounces to produce 71,500 containers of yogurt. C 13.What A) B) C) D) is Stench's materials price variance for the month of June? $1,500 favorable $15,640 unfavorable $17,250 favorable $23,800 favorable B 14.What is Stench's materials quantity variance for the month of June? 4 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 A) B) C) D) $1,500 favorable $15,640 unfavorable $17,250 favorable $23,800 favorable D 15.Assume that it takes 15 minutes of labor time to crush enough garlic to fill one container of yogurt. Because the smell of the garlic can be unbearable, workers are given (and they take it!) 10 minutes of break time every hour (i.e., 50 minutes of work, 10 minutes of break). How many minutes should Stench use as a standard quantity of labor time per container of yogurt? A) 18.0 B) 16.2 C) 17.0 D) 17.5 Use the following to answer questions 16-19: The Collins Company uses standard costing and has established the following direct material and direct labor standards for each unit of the single product it makes: Direct materials.......... Direct labor................ 4 gallons at $8 per gallon 1 hour at $16 per hour During July, the company made 6,000 units of product and incurred the following costs: Direct materials purchased...... Direct materials used............... Direct labor used...................... 26,800 gallons at $8.20 per gallon 25,200 gallons 5,600 hours at $15.30 per hour 16.The material price variance for July was: A) $5,360 favorable B) $5,360 unfavorable C) $5,040 favorable D) $5,040 unfavorable B 17.The materials quantity variance for July was: A) $22,960 unfavorable B) $22,400 unfavorable C) $9,600 unfavorable D) $9,840 unfavorable A 18.The labor rate variance for July was: A) $3,920 unfavorable B) $6,120 unfavorable C) $1,120 favorable D) $3,920 favorable A 19.The labor efficiency variance for July was: A) $6,400 favorable B) $89,600 favorable C) $10,320 favorable 5 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 D) $6,120 favorable D 20. A major disadvantage of static budgets is: A) the difficulty in developing such budgets due to the high cost of gathering the necessary information. B) the cost behavior pattern of manufacturing overhead, which is primarily fixed. C) that the variances between actual and budget on a static budget result from comparing actual costs at one level of activity to budgeted costs at a different level of activity. D) their length and complexity. D 21.If the price a company paid for overhead items, such as utilities, decreased during the year, the company would probably report a(n): A) favorable efficiency variance. B) favorable spending variance. C) unfavorable efficiency variance. D) unfavorable spending variance. B 22.Papenfuss Family Inn is a bed and breakfast establishment in a converted 100-yearold mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: Activity level................................. Variable overhead costs: Supplies..................................... Laundry..................................... Fixed overhead costs: Utilities...................................... Salaries and wages.................... Depreciation.............................. Total overhead cost...................... 86 guests $ 86.00 507.40 340.00 4,790.00 2,620.00 $8,343.4 0 The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 76 guests? Assume that the activity levels of 86 guests and 76 guests are within the same relevant range. A) $52,848.40 B) $8,343.40 C) $8,274.40 D) $7,373.24 A 23.Hatzenbuhler Manufacturing Corporation has prepared the following overhead budget for next month. Activity level................................ Variable overhead costs: Supplies.................................... Indirect labor............................ Fixed overhead costs: Supervision............................... 6,800 machine-hours $ 22,440 55,760 19,300 6 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 Utilities..................................... Depreciation............................. Total overhead cost.................. 5,700 7,400 $110,600 The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 6,600 machine-hours rather than 6,800 machine-hours? Assume that the activity levels of 6,800 machine-hours and 6,600 machine-hours are within the same relevant range. A) $107,824.00 B) $110,600.00 C) $108,300.00 D) $107,347.06 A 24.Sesareo Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,130 square feet and the actual level of activity was 1,180 square feet. The company's owner budgets for supply costs, a variable overhead cost, at $2.60 per square foot. The actual supply cost last month was $2,130. In the company's flexible budget performance report for last month, what would have been the variance for supply costs? A) $808 F B) $938 F C) $90 U D) $130 U C 25.Eng Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 16,800 skeins and the actual level of activity was 16,600 skeins. The company's owner budgets for dye costs, a variable overhead cost, at $0.44 per skein. The actual dye cost last month was $7,690. In the company's flexible budget performance report for last month, what would have been the variance for dye costs? A) $298 U B) $93 F C) $88 F D) $386 U C 26.Suski 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.................................. Actual level of activity....................................... Cost formula for variable overhead cost............ Budgeted fixed overhead cost........................... Actual total variable overhead........................... Actual total fixed overhead................................ 7,400 7,500 $5.90 $60,000 $42,750 $61,000 MHs MHs per MH What was the variable overhead spending variance for the month? A) $1,500 favorable B) $590 unfavorable C) $910 favorable D) $1,000 unfavorable 7 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 C 27.Masek 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............................................ Actual level of activity................................................. Cost formula for variable manufacturing overhead cost.......................................................................... Budgeted fixed manufacturing overhead cost............. Actual total variable manufacturing overhead............ Actual total fixed manufacturing overhead................. 2,000 2,400 $5.90 $50,00 0 $14,88 0 $49,00 0 MHs MHs per MH What was the fixed overhead budget variance for the month? A) $2,360 unfavorable B) $1,000 unfavorable C) $2,360 favorable D) $1,000 favorable B 28.Sholette Manufacturing Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company's cost formula for variable manufacturing overhead is $5.00 per MH. During the month, the actual total variable manufacturing overhead was $22,540 and the actual level of activity for the period was 4,600 MHs. What was the variable overhead spending variance for the month? A) $92 favorable B) $92 unfavorable C) $460 unfavorable D) $460 favorable D 29.Tropiano Electronics Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs). The company had budgeted its fixed manufacturing overhead cost at $62,100 for the month and its level of activity at 3,200 MHs. The actual total fixed manufacturing overhead was $61,600 for the month and the actual level of activity was 3,000 MHs. What was the fixed overhead budget variance for the month to the nearest dollar? A) $3,381 unfavorable B) $500 favorable C) $500 unfavorable D) $3,381 favorable C 30.Schley Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: Original Budget Variable overhead costs: Supplies.................................... $ 3,840 Actual Costs $ 4,730 8 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 Indirect labor............................ Total variable overhead cost.... 22,400 $26,240 25,260 $29,990 The original budget was based on 3,200 machine-hours. The company actually worked 3,510 machine-hours during the month and the standard hours allowed for the actual output were 3,660 machine-hours. What was the overall variable overhead efficiency variance for the month? A) $550 favorable B) $1,208 unfavorable C) $22 favorable D) $1,230 favorable A 31.Machain Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's cost formula for variable overhead cost is $2.90 per machine-hour. The actual variable overhead cost for the month was $15,270. The original budget for the month was based on 5,000 machine-hours. The company actually worked 5,090 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 5,200 machinehours. What was the variable overhead efficiency variance for the month? A) $580 unfavorable B) $190 unfavorable C) $509 unfavorable D) $319 favorable A 32.Hall Company's standards call for 750 direct labor-hours to produce 500 units. During May 400 units were produced. The company worked 650 direct labor-hours. The standard hours allowed for May production would be: A) 750 hours B) 650 hours C) 600 hours D) 100 hours B 33.If a cost is a common cost of the segments on a segmented income statement, the cost should: A) be allocated to the segments on the basis of segment sales. B) not be allocated to the segments. C) excluded from the income statement. D) treated as a product cost rather than as a period cost. C 34.Spiedino Company sells its products to both residential and commercial customers in eight sales territories. In which of the following ways could Spiedino be segmented? A) by product and then further segmented by type of customer. B) by type of customer and then further segmented by sales territory. C) by sales territory and then further segmented by product line. D) all of the above. 35.Which of the following would not be included in operating assets in return on investment calculations? A) Cash. B) Accounts Receivable. C) Equipment D) Factory building rented to (and occupied by) another company. 9 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 36.Quinnett Corporation has two divisions: the Export Products Division and the Business Products Division. The Export Products Division's divisional segment margin is $34,300 and the Business Products Division's divisional segment margin is $86,700. The total amount of common fixed expenses not traceable to the individual divisions is $95,600. What is the company's net operating income? A) $216,600 B) $121,000 C) $25,400 D) ($121,000) C 37.Gunderman Corporation has two divisions: the Alpha Division and the Charlie Division. The Alpha Division has sales of $230,000, variable expenses of $131,100, and traceable fixed expenses of $63,300. The Charlie Division has sales of $540,000, variable expenses of $307,800, and traceable fixed expenses of $120,700. The total amount of common fixed expenses not traceable to the individual divisions is $119,200. What is the company's net operating income? A) $147,100 B) $331,100 C) $27,900 D) $211,900 D 38.Given the following data: Average operating assets............ Total liabilities............................. Sales........................................... Contribution margin.................... Net operating income.................. Return on investment (ROI) would be: A) 5% B) 12% C) 25% D) 60% D 39.Last year a company had sales of $400,000, a turnover of 2.4, and a return on investment of 36%. The company's net operating income for the year was: A) $144,000 B) $120,000 C) $80,000 D) $60,000 A 40.Hal Etoesus currently works as the fry guy at Burger Breath Drive Thru but is thinking of quitting his job to attend college full time next semester. Which of the following would be considered an opportunity cost in this decision? A) the cost of the textbooks B) the cost of the cola that Hal will consume during class C) Hal's lost wages at Burger Breath $250,00 0 $100,00 0 $600,00 0 $150,00 0 $30,000 10 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 D) both A and B above 41.Which of the following would be relevant in the decision to sell or throw out obsolete inventory? Direct material cost assigned to the inventory Yes Yes No No Fixed overhead cost assigned to the inventory Yes No Yes No A) B) C) D) A 42.In a make-or-buy decision, relevant costs include: A) unavoidable fixed costs B) avoidable fixed costs C) fixed factory overhead costs applied to products D) fixed selling and administrative expenses B 43.In situations where management must decide between accepting or rejecting a onetime-only special order where there is sufficient idle capacity to fill the order, which one of the following is NOT relevant in making the decision? A) absorption costing unit product costs B) variable costs C) incremental costs D) differential costs B 44.When a multi-product factory operates at full capacity, decisions must be made about what products to emphasize. In making such decisions, products should be ranked based on: A) selling price per unit B) contribution margin per unit C) contribution margin per unit of the constraining resource D) unit sales volume B 45.Kahn Company produces and sells 8,000 units of Product X each year. Each unit of Product X sells for $10 and has a contribution margin of $6. It is estimated that if Product X is discontinued, $50,000 of the $60,000 in fixed costs charged to Product X could be eliminated. These data indicate that if Product X is discontinued, overall company net operating income should: A) increase by $2,000 per year B) decrease by $2,000 per year C) increase by $38,000 per year D) decrease by $38,000 per year T 46.Fixed costs are sunk costs and are therefore irrelevant in decisions. T 47.A complete income statement must be prepared as part of a differential cost analysis. T 48.Future costs that do not differ between the alternatives in a decision are avoidable 11 Ercan Sinmaz ACCT 2302 2007 Exam 3 Chapter 10-13 costs. F 49.The book value of an old machine is always considered a sunk cost in a decision. F 50.A product that does not cover its allocated share of general corporate administrative expenses should be dropped. 12 Ercan Sinmaz