×

### Let's log you in.

or

Don't have a StudySoup account? Create one here!

×

### Create a StudySoup account

#### Be part of our community, it's free to join!

or

##### By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

by: Viki Buglen

175

2

17

# Study 2 BUSACC 0040

Viki Buglen
Rutgers

### Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

×
Unlock Preview

### Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

## About this Document

Second part of the study guide for managerial accounting
COURSE
Managerial Accounting
PROF.
Duanping Hong
TYPE
Study Guide
PAGES
17
WORDS
KARMA
50 ?

## Popular in Department

This 17 page Study Guide was uploaded by Viki Buglen on Thursday November 26, 2015. The Study Guide belongs to BUSACC 0040 at Rutgers University taught by Duanping Hong in Fall 2015. Since its upload, it has received 175 views.

×

## Reviews for Study 2

×

×

### What is Karma?

#### You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 11/26/15
The Task Company is to begin operations in April. They have budgeted April sales of  \$30,000. May sales of \$34,000, June sales of \$40,000, July sales of \$42,000, and August  sales of \$38,000. 10% of each month's sales will represent cash sales; 75% of the balance  will be collected in the month following the sale, 17% the second month, 6% the third  month and the balance is bad debts. 23 What is the amount of cash to be collected in the month of July?  A. \$34,022  B .    \$38 022 C. \$42,000 D. \$37,580 Answer: B Explanation:  (\$42,000 ∙ .10) + (\$40,000 ∙ .90 ∙ .75) + (\$34,000 ∙ .90 ∙ .17) + (\$30,000 ∙ .90 ∙ .06) =  \$38,022 24. Assume the Task Company charges 1 1/2% on any balance that is not collected in  the month following the month of sale. This charge will also change the collection  percentages to 15% cash sales, 80% of the balance collected in the month  following the sale, 16% the second month, 3% the third month. This stricter credit  policy will reduce the estimated sales budgets by 7% each month. What is the  amount of cash to be collected in July?  A. \$39,199 B. \$35,312 C. \$38,193  D .    \$36 242 Answer: D Explanation: \$42,000 ∙ .93 = \$39,060; \$40,000 ∙ .93 = \$37,200; \$34,000 ∙ .93 = \$31,620; \$30,000 ∙ .93   = \$27,900; (\$39,060 ∙ .15) + (\$37,200 ∙ .85 ∙ .80) + (\$31,620 ∙ .85 ∙ .16 ∙ 1.015) +  (\$27,900 ∙ .85 ∙ .03 ∙ 1.015) = \$36,242 Seard Clinic uses patient­visits as its measure of activity. The clinic has provided the following report:     25. .What is the Sales Volume variance of operating income?  A) \$11,560 favorable  B) \$11,380 favorable  C) \$2,820 unfavorable  D) \$180 unfavorable  Answer: A Explanation: 26. What is the Flexible budget variance of operating income?  A) \$11,560 favorable  B) \$11,380 favorable  C) \$2,820 unfavorable  D) \$180 unfavorable  Answer: D Explanation: Quindo Table Company manufactures tables for schools. The 2015 operating budget is based on sales of 44,000 units at \$55 per table. Operating income is anticipated to be \$132,000. Budgeted variable costs are \$35 per unit, while fixed costs total \$660,000. Actual income for 2015 was a surprising \$477,000 on actual sales of 46,000 units at \$57 each.Actual variable costs were \$33 per unit and fixed costs totaled \$627,000. 27. What is the Sales Volume variance for Operating Income? A) \$40,000 favorable B) \$579,000 unfavorable C) \$579,000 Favorable D) \$217,000 favorable Answer: A Flexible Volume Actual Results Variances Flexible Budget Variances Sales-Static Units sold 46,000 46,000 44,000 Sales \$2,622,000 \$92,000 F \$2,530,000 \$110,000 F \$2,420,000 Variable costs 1,518,000 92,000 F 1,610,000 70,000 U 1,540,000 Contribution margin \$1,104,000 \$184,000 F \$920,000 \$40,000 F \$880,000 Fixed costs 627,000 33,000 F 660,000 0 660,000 Operating income \$477,000 \$217,000 F \$260,000 \$40,000 F \$220,000 The Sales Volume variance for Operating Income = \$40,000 favorable. 28. What is the Flexible budget variance of operating income? A) \$40,000 favorable B) \$579,000 unfavorable C) \$579,000 Favorable D) \$217,000 favorable Answer: D Explanation: See above. 29.Coroid Corporation used the following data to evaluate their current operating system. The company sells items for \$11 each and had used a budgeted selling price of \$12 per unit. Actual Budgeted Units sold 280,000 units 275,000 units Variable costs \$900,000 \$885,000 Fixed costs \$ 55,000 \$ 52,000 What is the static-budget variance of operating income? A) \$238,000 favorable B) \$238,000 unfavorable C) \$235,000 Favorable D) \$235,000 unfavorable Answer: B Explanation: B) Actual Static Static-budget Results Budget Variance Units sold 280,000 275,000 Revenues \$3,080,000 \$3,300,000 \$(220,000) U Variable costs 900,000 885,000 (15,000) U Contribution margin \$2,180,000 \$2,415,000 235,000 U Fixed costs 55,000 52,000 3,000 U Operating income \$2,125,000 \$2,363,000 \$238,000 U 30. The following standards have been established for a raw material used to make product P62: Company has plans to produce and sell 900 units of the product. The following data pertain to a recent month's operations: The material variances were: Price Variance Quantity Variance A. \$60 F \$12,615 U B. \$3,350 F \$9,362 U C. \$3,350 U \$9,362 U D. \$1,300 U \$12,615 U Answer: B a. What is the materials price variance for the month? b. What is the materials quantity variance for the month? a. Materials price variance = (AQ AP) - (AQ  SP) = \$100,500 - (6,700 pounds  \$15.50 per pound) = \$100,500 - \$103,850 = \$3,350 F b. SQ = 920 units  6.3 pounds per unit = 5,796 pounds Materials quantity variance = (AQ - SQ) SP = (6,400 pounds - 5,796 pounds) \$15.50 per pound = (604 pounds) \$15.50 per pound = \$9,362 U The German Company uses standard costing. The company makes and sells Hats. The following data are for the month ofAugust: Actual cost of direct material purchased and used: \$65,560  Material price variance: \$5,960 unfavorable  Total materials variance: \$22,360 unfavorable  Standard cost per pound of material: \$4  Standard cost per direct labor-hour: \$5 Actual direct labor-hours: 6,500 hours  Labor efficiency variance: \$3,500 favorable  Standard number of direct labor-hours per hat: 2 hours  Total labor variance: \$400 unfavorable 31. The total number of units of Hats produced duringAugust was: A. 10,800 B. 14,400 C. 3,600 D. 6,500 Answer: D Solution: 32. The actual material cost per pound was: A. \$4.00 B. \$3.67 C. \$3.30 D. \$4.40 Answer: D 33. The actual direct labor rate per hour was: A. \$5.60 B. \$5.00 C. \$10.00 D. \$4.40 Answer: A Total labor variance = Labor rate variance + Labor efficiency variance \$400 U = Labor rate variance + \$3,500 F Labor rate variance = \$3,900 U Labor rate variance = (AH AR) - (AH  SR) =AH (AR - SR) \$3,900 = 6,500 hours (AR - \$5 per hour) \$3,900 = 6,500 hours AR - \$32,500 6,500 hours AR = \$36,400 AR = \$36,400  6,500 hours = \$5.60 per hour 34. Dowen Corporation applies manufacturing overhead to products on the basis of standard machine- hours. For the most recent month, the company based its budget on 4,400 machine-hours. Budgeted and actual overhead costs for the month appear below: The company actually worked 4,460 machine-hours during the month. The standard hours allowed for the actual output were 4,310 machine-hours for the month. What was the overall variable overhead efficiency variance for the month? A. \$2,198 favorable B. \$1,695 unfavorable C. \$150 unfavorable D. \$503 favorable Answer: B Variable overhead = \$21,560 + \$28,160 = \$49,720 SR = \$49,720  4,400 hours = \$11.30 per hour Variable overhead efficiency variance = (AH - SH) SR = (4,460 hours - 4,310 hours) \$11.30 per hour = (150 hours) \$11.30 per hour = \$1,695 U 34. Brown Industries has the following information about its standards and production activity for December: Actual manufacturing overhead cost incurred, \$92,500 Variable manufacturing overhead cost @ \$3.25 per unit produced Fixed manufacturing overhead cost @ \$1.50 per unit produced (\$22,500/15,000 budgeted units) Actual units produced, 5,400 Assume the allocation base for fixed overhead costs is the number of units to be produced. How much are the total applied overhead for the month? A) \$48,750 B) \$92,500 C) \$71,250 D) \$25,650 Explanation: D) Franklin Glass Works uses a standard cost system in which manufacturing overhead is applied on the basis of standard direct labor-hours. Each unit requires two standard hours of direct labor for completion. The denominator activity for the year was based on budgeted production of 200,000 units. Total overhead was budgeted at \$900,000 for the year, and the fixed manufacturing overhead rate was \$1.50 per direct labor- hour. The actual data pertaining to the manufacturing overhead for the year are presented below: 35. Franklin's variable overhead rate variance for the year is: A. \$20,000 unfavorable B. \$22,000 favorable C. \$22,000 unfavorable D. \$20,000 favorable Answer: C Explanation: Predetermined overhead rate = Estimated total manufacturing overhead at capacity  Estimated total amount of the allocation base at capacity = \$900,000  (200,000 units  2 hours per unit) = \$2.25 per hour Predetermined overhead rate = Fixed component of predetermined overhead rate + Variable component of predetermined overhead rate \$2.25 per hour = \$1.50 per hour + Variable component of predetermined overhead rate Variable component of predetermined overhead rate = \$0.75 per hour = SR Variable overhead rate variance = (AH AR) - (AH  SR) = \$352,000 - (440,000 hours  \$0.75 per hour) = \$352,000 - \$330,000 = \$22,000 U 36. The fixed manufacturing overhead applied to Franklin's production for the year is: A. \$484,200 B. \$575,000 C. \$594,000 D. \$600,000 Answer: C Manufacturing overhead applied = Predetermined overhead rate  Standard hours allowed for the actual output = 198,000 units  \$1.50 per hour  2 hours per unit = \$594,000 37. The Smart Company makes a single product and uses standard costing. Some data  concerning this product for the month of May follow:      The variable overhead rate variance for May was closest to:  A. \$2,290 F  B .    \$2,2 0 U C. \$1,710 F D. \$1,710 U Answer: B AR = \$58,290  ‚ 14,000 = \$4.16 (rounded) Variable overhead rate variance = AH (AR ­ SR) = 14,000 (\$4.16 ­ \$4.00) =  \$2,290 U (rounded)  38. Cosier Corporation has a standard cost system in which it applies manufacturing  overhead to products on the basis of standard machine­hours (MHs). The  company has provided the following data for the most recent month:   What was the fixed manufacturing overhead spending variance for the month?  A. \$2,000 unfavorable B. \$2,000 favorable C. \$610 unfavorable D. \$610 favorable Answer: B Explanation: spending  variance = Actual fixed overhead ­ Budgeted fixed  overhead cost = \$63,000 ­ \$65,000 = \$2,000 F 39. The following information summarizes the standard cost for producing one metal tennis racket  frame. In addition, the variances for one month's production are given. Assume that all inventory accounts  have zero balances at the beginning of the month.      What were the actual quantity of materials used during the month?  A. 2,156. B. 2,100. C. 2,225. D. 1,975. Answer: C Explanation: (\$4.00 ∙ AQ) ­ (2,100 ∙ \$4.00) = \$500 U; AQ = 2,225 8­30 (30 min.) Comprehensive variance analysis.  (Original Problem from the  book so that you can check the answers) Chef   Whiz   manufactures   premium   food   processors.   The   following   are   some  manufacturing overhead data for Chef Whiz for the year ended December 31, 2014: Budgeted number of output units: 588 Planned allocation rate: 3 machine­hours per unit  Actual number of machine­hours used: 1,170 Static­budget variable manufacturing overhead costs: \$72,324 Required: Compute the following quantities (you should be able to do so in the prescribed order): 1. Budgeted number of machine­hours planned 2. Budgeted fixed manufacturing overhead costs per machine­hour 3. Budgeted variable manufacturing overhead costs per machine­hour 4. Budgeted number of machine­hours allowed for actual output produced 5. Actual number of output units 6. Actual number of machine­hours used per output unit SOLUTION 1. Budgeted number of machine­hours planned can be calculated by multiplying the  number  of units planned (budgeted) by the number of machine­hours allocated per  unit: 588 units ∙ 3 machine­hours per unit = 1,764 machine­hours. 2. Budgeted fixed MOH costs per machine­hour can be computed by dividing the  flexible  budget amount for fixed MOH (which is the same as the static budget) by  the number of machine­hours planned (calculated in 1.): \$343,980 ÷ 1,764 machine­hours = \$195.00 per machine­hour. 3. Budgeted variable MOH costs per machine­hour are calculated as budgeted  variable  MOH costs divided by the budgeted number of machine­hours planned: \$72,324 ÷ 1,764 machine­hours = \$41.00 per machine­hour. 1. Budgeted number of machine­hours allowed for actual output achieved can be  calculated by dividing the flexible­budget amount for variable MOH by budgeted  variable MOH  costs per machine­hour: \$79,950 ÷ \$41.00 per machine­hour= 1,950 machine­hours allowed. 2. The actual number of output units is the budgeted number of machine­hours  allowed for actual output achieved divided by the planned allocation rate of  machine hours per unit: 1,950 machine­hours ÷ 3 machine­hours per unit = 650 units. 3. The actual number of machine­hours used per output unit is the actual number of  machine hours used (given) divided by the actual number of units manufactured: 1,170 machine­hours ÷ 650 units = 1.8 machine­hours used per output unit. 8­30 (30 min.) Comprehensive variance analysis.  Changed to:  Chef Whiz manufactures premium food processors. The company allows 3 machine­ hours per unit in its budget. The following are some manufacturing overhead data for  Chef Whiz for the year ended December 31, 2014: Budgeted number of machine hours : 1,764 machine hours Planned allocation rate: Actual number of machine­hours used: 1,170 Static­budget variable manufacturing overhead costs: \$72,324 40. What is the budgeted number of machine hours allowed for actual output? A) 1,170 hours B) 1,615 hours  C) 1,950 hours D) 1,764 hours Answer: D Budgeted number of machine­hours planned can be calculated by multiplying the number  of units planned (budgeted) by the number of machine­hours allocated per unit: 588 units ∙ 3 machine­hours per unit = 1,764 machine­hours. 41. What is the Actual number of output units? A) 588 Units B) 650 Units C) 1,083 Units D) 620 Units Answer: B The actual number of output units is the budgeted number of machine­hours allowed for  actual output achieved divided by the planned allocation rate of machine hours per unit: 1,950 machine­hours ÷ 3 machine­hours per unit = 650 units. 42. What is the Actual number of machine­hours used per output unit? A) 2.2 hours per output unit B) 1.5 hours per output unit C) 1.8 hours per output unit D) 2.0 hours per output unit Answer: C The actual number of machine­hours used per output unit is the actual number of  machine hours used (given) divided by the actual number of units manufactured: 1,170 machine­hours ÷ 650 units = 1.8 machine­hours used per output unit. 43. What is the Budgeted fixed manufacturing overhead costs per unit? A) \$ 585 B) \$195 C) \$41  D) \$647 Answer: A First, Budgeted number of units planned can be calculated by dividing  the number of  machine hours planned (budgeted) by the number of machine­hours allocated per unit: 1,764 machine­hours. / 3 machine­hours per unit = 588 units Then, Budgeted fixed MOH costs per unit can be computed by dividing the flexible  budget amount for fixed MOH (which is the same as the static budget) by the number of  units planned  \$343,980 ÷ 588 units = \$585 per unit Best Around, Inc.is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2014, budgeted fixed manufacturing overhead cost was \$20,000. Actual manufacturing overhead was \$23,180 fixed. Additional information about the company’s performance report is as follows: • Variable manufacturing overhead spending variance \$2,282 F • Variable manufacturing overhead efficiency variance \$2,478 F • Production-volume variance \$4,000 F 44. If the company uses a denominator level of 1,000 hours and a Variable Overhead rate of \$42 per machine hour, the actual Variable Overhead incurred during the year was: A) \$35,560 B) \$50,204 C) \$45,640 D) \$37,270 Answer: C Please see the table below 45.Use the same information as above. Now suppose the denominator level was 800 rather than 1,000 machine-hours. Recompute the actual Variable Overhead incurred during the year. A) \$35,560 B) \$50,204 C) \$45,640 D) \$37,270 Answer: A Flexible Budget: Allocated: Budgeted Input Qty. Budgeted Input Qty. Allowed for Allowed for Actual Costs Actual Input Qty. Actual Output Actual Output Incurred × Budgeted Rate × Budgeted Rate × Budgeted Rate Variable Manufacturing (1,141  \$42.00*) (1,200  \$42.00*) (1,200  \$42.00*) Overhead \$45,640 \$47,922 \$50,400 b \$50,400 \$2,282 F* \$2,478 F* Spending variance Efficiency variance Never a variance Fixed Manufacturing (Lump sum) (Lump sum) Overhead \$23,180* \$20,000* \$20,000* \$24,000c \$3,180 U \$4,000 F* Spending variance Never a variance Production­volume  Total Applied manufacturing overhead = \$50,400 + \$20,000 = \$70,400 Budgeted FMOH rate = Standard fixed manufacturing overhead allocated ÷ Standard machine-hours a allowed for actual output achieved = \$86,800 ÷ 6,200 = \$14. bBudgeted hours allowed for actual output achieved must be derived from the output level variance before this figure can be derived, or because the fixed manufacturing overhead rate is \$20,000 ÷ 1,000 = \$20 and the allocated amount is \$24,000, the budgeted hours allowed for the actual output achieved must be 1,200 c\$24,000 \$20). 1,200  (\$20,000* ÷ 1,000*) = \$24,000. Answers: 1. \$45,640 Since the BQ per unit is 2 machine hours, given the rate of \$42 per hour, BOH (Variable) = 500 X 2 X 42 = 42,000 Total budgeted manufacturing overhead = \$42,000 + \$20,000 = \$62,000 2. 20,000/800= \$25 per machine hour is the BMOH. This implies that BQ * is now 24,000/25 = 960 hours. So Flexible budger amount for VOH is 960 X 42= 40320 and actual VOH incurred will be 35,560 Litchfield Industries gathered the following information for the month ended June 31: The static budget volume is 5,500 units: Overhead flexible budget is: Number of units 9,000 10,000 11,000 Budgeted machine hours 13,000 14,500 16,000 Budgeted variable overhead costs: \$50,000 \$56,000 \$62,000 Budgeted fixed overhead costs: \$35,750 \$35,750 \$35,750 Actual production was 12,000 units. Actual overhead costs were \$28,000 for variable costs and \$37,000 for fixed costs.Actual machine hours worked were 16,000 hours. 46.What is the amount of total budgeted machine hours allowed for actual output? A) 7,975 B) 17,400 C) 17,500 D) 12,000 Answer: B Explanation: Budgeted machine hours allowed per unit: 14,500/10,000= 1.45 12,000 x 1.45 = 17,400 hours 47. What is the fixed overhead production volume variance? (Assume the allocation base for fixed overhead costs is machine hours.) A) \$42,250 unfavorable B) \$42,250 favorable C) \$36,400 Unfavorable D) \$36,400 favorable Answer: B) Explanation: 48. 22. What is the amount of Variable Overhead allocated to production? A) \$35,750 B) \$102,950 C) \$67,200 D) \$145,200 Answer: C Solution: Allocated MOH =12,000 units * (\$56,000/10,000 units) = \$ 67,200

×

×

### BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.

×

### You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

## Why people love StudySoup

Bentley McCaw University of Florida

#### "I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Kyle Maynard Purdue

#### "When you're taking detailed notes and trying to help everyone else out in the class, it really helps you learn and understand the material...plus I made \$280 on my first study guide!"

Jim McGreen Ohio University

Forbes

#### "Their 'Elite Notetakers' are making over \$1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!
×

### Refund Policy

#### STUDYSOUP CANCELLATION POLICY

All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email support@studysoup.com

#### STUDYSOUP REFUND POLICY

StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here: support@studysoup.com

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to support@studysoup.com

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.