In: Accounting
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.
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