Question

In: Accounting

1. Assume that a company has two cost drivers—number of courses and number of students. The...

1. Assume that a company has two cost drivers—number of courses and number of students. The planned number of courses and students were 5 and 100, respectively. The actual number of courses and students were 6 and 110, respectively. One of the company’s expenses is influenced by both cost drivers and it has a fixed element as well. Its cost formulas are $50 per course, $5 per student, and $1,000 per period. The total actual amount of this expense is $1,880. The spending variance for this expense would be:

a. 30 U

b. $30 F

c. $130 F

d. $130 U

2. Assume that a company provided the following cost formulas for three of its expenses (where q refers to the number of hours worked):

Rent (fixed) $3,000
Supplies (variable) $4.00q
Utilities (mixed) $150 + $0.75q


The company’s planned level of activity was 2,000 hours and its actual level of activity was 1,900 hours. If these are the company’s only three expenses, what total amount of expense would appear in the company’s flexible budget?

a. $12025

b. $12175

c. $12650

d. $12250

Solutions

Expert Solution

  • Question 1
    >Correct answer = Option ‘a’ $ 30 U

Actual Results

Spending Variances

Flexible Budget

Courses

                                     6

                            6

Students

                                110

                       110

Expense

$                   1,880.00

$                  30.00

Unfavourable

$          1,850.00

[$1850 – 1880]

= $ 1000 + ($50 x 6) + ($5 x 110)

  • Question 2
    >Total expenses that would be appearing
    = $3000 + $ 150 + ($4 x 1900 actual hours) + ($0.75 x 1900 actual hours)
    = 3000 + 150 + 7600 + 1425
    = $ 12,175

>Correct Answer = Option ‘B’ $ 12,175


Related Solutions

1) Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in...
1) Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in operation and the number of passengers served —that it uses in its budgeting and performance reports. Data concerning the company’s cost formulas appear below: Fixed Cost per Month Cost per Bus Cost per Passenger Vehicle operating costs $ 6,800 $ 476 $ 4.5 Advertising $ 2,500 Administrative costs $ 5,300 $ 38 $ 1.5 Insurance $ 3,900 For example, vehicle operating costs should be...
Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in operation...
Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in operation and the number of passengers served —that it uses in its budgeting and performance reports. Data concerning the company’s cost formulas appear below: Fixed Cost per Month Cost per Bus Cost per Passenger Vehicle operating costs $ 6,800 $ 476 $ 3 Advertising $ 2,500 Administrative costs $ 5,300 $ 38 $ 1.5 Insurance $ 3,900 For example, vehicle operating costs should be $6,800...
Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in operation...
Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in operation and the number of passengers served —that it uses in its budgeting and performance reports. Data concerning the company’s cost formulas appear below: Fixed Cost per Month Cost per Bus Cost per Passenger Vehicle operating costs $ 6,800 $ 476 $ 4 Advertising $ 2,500 Administrative costs $ 5,300 $ 38 $ 1.5 Insurance $ 3,900 For example, vehicle operating costs should be $6,800...
Assume activity-based costing is suitable for your business. Select TWO possible activity cost drivers in your...
Assume activity-based costing is suitable for your business. Select TWO possible activity cost drivers in your business and describe in detail what the activities in the cost driver are.
1. The Allstate Insurance Company determined the average number of years between accidents for drivers in...
1. The Allstate Insurance Company determined the average number of years between accidents for drivers in a large number of U.S. cities. The ‘Accidents’ sheet in the ‘Lab12 Chp 10n11 S20’ spreadsheet contains the results for 32 randomly selected cities east of the Mississippi River and 32 randomly selected cities west of the Mississippi River. (a) Are the samples independent or paired? (b) Consider constructing a 90% confidence interval for the difference in average number of years between accidents of...
5) A company has identified the following overhead costs and cost drivers for the coming year:...
5) A company has identified the following overhead costs and cost drivers for the coming year: Overhead Item Cost Driver Budgeted Cost Budgeted Activity Level Machine setup Number of setups $ 20,000 200 Inspection Number of inspections 130,000 6,500 Material handling Number of material moves 80,000 8,000 Engineering Engineering hours 50,000 1,000 Total $280,000 The following information was collected on three jobs that were completed during the year: Job 101 Job 102 Job 103 Direct materials $5,000 $12,000 $8,000 Direct...
Assume a company produces two products: x and y.     Assume the cost functions are as follows:...
Assume a company produces two products: x and y.     Assume the cost functions are as follows: C(qx, 0) = 2qx^2 C(0, qy) = qy^2 C(qx, qy) = 2qx^2 + qy^2 + qxqy A. Calculate the economies of scale meaure (S) for x B. Does x exhibit economies of scale? C. Calculate the economies of scale meaure (S) for y D. Does y exhibit economies of scale? E. Calculate the economies of scope meaure (SC) F. Would it be better to...
Cost Formulas, Single and Multiple Activity Drivers, Coefficient of Correlation Kimball Company has developed the following...
Cost Formulas, Single and Multiple Activity Drivers, Coefficient of Correlation Kimball Company has developed the following cost formulas: Material usage: Ym = $85X; r = 0.97 Labor usage (direct): Yl = $17X; r = 0.96 Overhead activity: Yo = $349,000 + $100X; r = 0.73 Selling activity: Ys = $52,000 + $12X; r = 0.92 where X = Direct labor hours The company has a policy of producing on demand and keeps very little, if any, finished goods inventory (thus,...
The controller for Vitrina Inc. has established the following activity cost pools and cost drivers.          ...
The controller for Vitrina Inc. has established the following activity cost pools and cost drivers.                                         Budgeted               Budgeted                                         Overhead               Level for Activity Cost Pool Cost    Cost Driver            Cost Driver Machine setups                 $200,000                Number of setups         160 Material handling               100,000                Weight of material   50,000 kilograms Waste control                        50,000                Weight of chemicals          10,000 kilograms Quality control                       75,000                Number of inspections 300 Other overhead costs        200,000                Machine hours        20,000...
Assume Sally is a professor who has a PhD in accounting and teaches tax courses. She...
Assume Sally is a professor who has a PhD in accounting and teaches tax courses. She decides that it would help her teaching to earn a law degree with a heavy emphasis on tax classes. Can she deduct the cost of the tax courses offered as part of her law degree? Explain and cite to specific provisions in the Code and Treasury Regulation.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT