Question

In: Accounting

Part 1 Milltown Company specializes in selling used cars. During the month, the dealership sold 31...

Part 1 Milltown Company specializes in selling used cars. During the month, the dealership sold 31 cars at an average price of $15,900 each. The budget for the month was to sell 29 cars at an average price of $16,900. Compute the dealership's sales price variance for the month.
$31,000 unfavorable.
$10,900 favorable.
$31,000 favorable.
$33,800 unfavorable.
$33,800 favorable.

Part 2 A company’s flexible budget for 22,000 units of production showed sales, $105,600; variable costs, $33,000; and fixed costs, $28,000. The fixed costs expected if the company produces and sells 28,000 units is:

  • $28,000.

  • $133,600.

  • $105,600.

  • $42,000.

  • $33,000.

Part 3 Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is:

Direct materials standard (4 lbs @ $1/lb) $4 per finished unit
Total direct materials cost variance—unfavorable $15,750
Actual direct materials used 125,000 lbs.
Actual finished units produced 25,000 units

Multiple Choice

  • $9,250 favorable.

  • $25,000 unfavorable.

  • $20,750 favorable.

  • $15,750 unfavorable.

  • $9,250 unfavorable.

Part 3 Fletcher Company collected the following data regarding production of one of its products. Compute the variable overhead cost variance.

Direct labor standard (2.0 hrs. @ $13.00/hr.) $ 26.00 per finished unit
Actual direct labor hours 98,500 hrs.
Budgeted units 50,500 units
Actual finished units produced 48,500 units
Standard variable OH rate (2 hrs. @ $14.00/hr.) $ 28.00 per finished unit
Standard fixed OH rate ($353,500/50,500 units) $ 7.00 per unit
Actual cost of variable overhead costs incurred $ 1,351,000
Actual cost of fixed overhead costs incurred $ 560,000

Multiple Choice

  • $14,100 favorable.

  • $7,000 favorable.

  • $20,750 unfavorable.

  • $20,750 favorable.

  • $21,100 unfavorable.

Solutions

Expert Solution

Part 1: Milltown Company

Answer: $31,000 unfavorable

Sales price variance = Actual quantity sold x (Actual price - Budgeted price) = 31 x ($15900 - $16900) = 31 x $-1000 = $31000 U

Part 2: Answer: $28,000

The total fixed costs remain constant with a change in volume and hence will continue to be $28,000 even if the production and sales changes from 22,000 units to 28,000 units.

Part 3: Georgia Inc.

Answer: $9,250 favorable

Total direct materials cost variance = Direct materials price variance + Direct materials quantity variance = $15,750 unfavorable

Direct materials quantity variance = Standard price x (Actual quantity - Standard quantity) = $1 x (125,000 - 100,000) = $25,000 unfavorable

Standard quantity = 25,000 units x 4 = 100,000

Direct materials price variance = Total direct materials cost variance - Direct materials quantity variance = $15,750 unfavorable - $25,000 unfavorable = $9,250 favorable

Part 3: Fletcher Company

Answer: $7,000 favorable

Variable overhead cost variance = Actual variable overheads incurred - Budgeted variable overheads = $1,351,000 - (48500 x $28) = $1,351,000 - $1,358,000 = $7,000 favorable


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