Question

A: The Bustillo Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $4 per direct labor-hour; the budgeted fixed manufacturing overhead is $84,000 per month, of which $15,900 is factory depreciation. If the budgeted direct labor time for November is 7,900 hours, then the total budgeted manufacturing overhead for November is? $115,600 / $99,700 / $131,500 / $84,000

B: Bustillo Inc. cost formula for its vehicle operating cost is $2,920 per month plus $322 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $8,350. The spending variance for vehicle operating cost in December would be closest to? $278 U / $278 F / $922 U / $922 F

C: Bustillo Inc. uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $56,760 per month plus $2,626 per flight plus $9 per passenger. The company expected its activity in February to be 63 flights and 262 passengers, but the actual activity was 62 flights and 263 passengers. The actual cost for plane operating costs in February was $220,700. The plane operating costs in the planning budget for February would be closest to? $224,556 / $223,326 / $221,939 / $220,700

C2: A total of 6,850 kilograms of a raw material was purchased at a total cost of $21,920. The materials price variance was $1,370 favorable. The standard price per kilogram for the raw material must be? $0.20 / $3.00 / $3.20 / $3.40

D: Bustillo Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate
Direct materials		4.5	pounds	$	4.00	per pound
Direct labor		0.8	hours	$	21.00	per hour
Variable overhead		0.8	hours	$	9.50	per hour

In January the company produced 3,320 units using 13,280 pounds of the direct material and 2,776 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $14,040. The actual direct labor cost was $57,895 and the actual variable overhead cost was $25,260. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor rate variance for January is? $401 F / $401 U / $2,119 U / $2,119 F

E: Last year, Bustillo's division had total sales of $13,420,000, net operating income of $1,261,480, and average operating assets of $2,684,000. The company's minimum required rate of return is 15%. The division's margin is closest to? 9.4% / 47.0% / 62.7% / 20.0%

Answer 1

Ans. A	Option   1st    $115,600
		November
	Budgeted direct labor hours	7900
	(X) Variable overhead rate	$4.00
	Budgeted variable overhead	$31,600
	Budgeted fixed overhead	$84,000
	Budgeted total overhead	$115,600
	*Budgeted variable overhead = budgeted labor hours * Variable overhead rate
	*Budget total overhead   =   Budgeted variable overhead + Budgeted fixed overhead
Ans. B	Option 3rd $922 U
	Flexible budgeted vehicle cost =   Fixed vehicle cost + (Variable cost per snow day * Actual level of activity)
		$2,920 + ($322 * 14)
		$2,920 + $4,508
		$7,428
	Spending variance = Actual cost - Flexible budget
	$8,350 - $7,428
	$922 Unfavorable
	*Actual cost is higher than budgeted, so the variacne is unfavorable.
Ans. C	Option   1st    $224,556
	*Planning budget is prepared on the basis of expected units.
	Plane operating cost = Fixed cost + (Variable cost per flight * Planned flights) + (Variable cost per passenger * Planned passengers)
		$56,760 + ($2,626 * 63) + ($9 * 262)
		$56,760 + $165,438 + $2,358
		$224,556
Ans. C 2	Option   4th       $3.40 per kilogram
	Materials price variance = (Standard price * Actual quantity) - Actual materials purchased cost
	$1,370 =   (Standard price * 6,850) - $21,920
	$1,370 +   $21,920 = Standard price * 6,850
	$23,290 = Standard price * 6,850
	Standard price =   $23,290 / 6,850
	Standard price =   $3.40
Ans. D	Option   1st    $401 F
	Labor rate variance = (Standard rate * Actual hours) - Actual labor cost
	($21 * 2,776) - $57,895
	$58,296 - $57,895
	$401 Favorable
Ans. E	Option   1st    9.4%
	Margin =   Net operating income / Sales * 100
		$1,261,480 / $13,420,000 * 100
		9.4%