Question

Question 31

Kellar Corporation manufactured 2,500 chairs during the month of June. The following variable manufacturing overhead data pertain to June:

•             Budgeted variable overhead cost per unit: $15.00
•             Actual variable manufacturing overhead cost: $21,800
•             Flexible budget amount for variable manufacturing overhead: $21,000
•             Variable manufacturing overhead efficiency variance: $520 F

What is the variable overhead rate variance for Kellar Corporation?

	A.	The variable overhead rate variance = $ 800 F.
	B.	The variable overhead rate variance = $ 280 U.
	C.	The variable overhead rate variance = $1,320 F.
	D.	The variable overhead rate variance = $ 800 U.
	E.	The variable overhead rate variance = $1,320 U.

Question 32

Fresh-Cut processes bags of frozen organic vegetables sold at specialty grocery stores. Fresh-Cut allocates manufacturing overhead based on direct labour hours. The company’s projected manufacturing overhead was $800,000, of which $600,000 is fixed. They expected to process 160,000 cases. The direct labour standard for each case is 15 minutes. The company’s actual processing was 180,000 cases of frozen organic vegetables during the year, incurring at total of $840,000 of manufacturing overhead, where $610,000 of it was fixed. Based on this information, calculate the company’s overhead flexible budget variance.

	A.	The company’s overhead flexible budget variance $15,000 U.
	B.	The company’s overhead flexible budget variance $60,000 F.
	C.	The company’s overhead flexible budget variance $15,000 F.
	D.	The company’s overhead flexible budget variance is $ 5,000 U.
	E.	The company’s overhead flexible budget variance $60,000 U.

Question 33

The Tandem division of Great Adventures Cycle Company had the following results last year (in thousands):

•             Sales                            $6,000,000
•             Operating Income          $280,000
•             Total Assets                          ? ? ?
•             Current Liabilities $500,000

Management’s target rate of return is 8% and the weighted average cost of capital is 6%. Tandem’s effective tax rate is 30%.

If Tandem’s Asset Turnover = 4.0, what is the company’s Return on Investment?

	A.	Tandem’s ROI is: 8.00%
	B.	Tandem’s ROI is: 4.67%
	C.	Tandem’s ROI is: 14.00%
	D.	Tandem’s ROI is: 18.67%
	E.	ROI cannot be calculated with the given information.

Question 34

The following information relates to the Miracle Corporation and its Toy Division:

•             Toy Division Sales                             $8,000,000
•             Toy Division Operating Income                   ? ? ?
•             Toy Division Total Assets                  $3,000,000
•             Toy Division Current Liabilities           $750,000
•             Corporate rate of return target 12%
•             Corporate weighted average cost of capital   8%
•             Corporate effective tax rate 25%
•             Residual Income                                    $120,000

Based on the above information, what is the Toy Division’s Economic Value added?

	A.	The Toy Division’s Economic Value Added (EVA) is $120,000.
	B.	EVA cannot be calculated with the given information.
	C.	The Toy Division’s Economic Value Added (EVA) is $180,000.
	D.	The Toy Division’s Economic Value Added (EVA) is $ 90,000.
	E.	The Toy Division’s Economic Value Added (EVA) is $240,000.

Question 35

Benchmark, Home Hardware’s manufacturing division of lawn-mowing and snow-blowing equipment, segments its business according to customer type: Professional or Residential. The following division information was available for the past year:

Assume that management has a 25% target rate of return for each division. The weighted average cost of capital for Benchmark is 15% and the effective tax rate is 30%.

What is the Return on Investment for the Professional Division if Asset Turnover = 2.75?

	A.	The Return on Investment for the Professional Division is: 44.00%
	B.	The Return on Investment for the Professional Division is: 36.36%
	C.	The Return on Investment for the Professional Division is: 30.98%
	D.	The Return on Investment for the Professional Division is: 25.0%
	E.	The Return on Investment for the Professional Division is: 16.0%

Answer 1

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Answer 31	Amount $
Flexible variable manufacturing overhead budget	21,000.00
Actual variable manufacturing overhead	21,800.00
Variable manufacturing overhead variance	800.00	Unfavorable
Add: Variable manufacturing overhead efficiency variance	520.00	Favorable
Variable overhead rate variance	1,320.00	Unfavorable
Answer is option E.
Answer 32
Budgeted manufacturing overhead	800,000.00
Less: Fixed	600,000.00
Variable manufacturing overhead	200,000.00
Budgeted number of cases	160,000.00
Labor hour per case	0.15
Budgeted Labor hour	24,000.00
Budgeted Variable manufacturing overhead rate per hour	8.33
Actual manufacturing overhead	840,000.00
Less: Fixed	610,000.00
Actual manufacturing overhead	230,000.00
Actual number of cases	180,000.00
Labor hour per case	0.15
Actual Labor hour	27,000.00
Flexible budget overhead	225,000.00
Less: Actual manufacturing overhead	230,000.00
Overhead flexible budget variance	5,000.00	Unfavorable
Answer is option D.
Answer 33
Asset Turnover ratio=	Sales/ Total Assets
4=	6000000/ Total Assets
Total Assets	6000000/ 4
Total Assets	1,500,000.00
Operating Income	280,000.00
Return on Investment	18.67%
Answer is option D.
Answer 34
Total Assets	3,000,000.00
Corporate rate of return target	12%
Corporate return	360,000.00
Add: Residual Income	120,000.00
Operating Income	480,000.00
EVA= NOPAT- (WACC* capital invested)
Operating Income	480,000.00
Less: Tax at 25%	120,000.00
NOPAT	360,000.00
Total Assets	3,000,000.00
Less: Current Liabilities	750,000.00
Net Investment	2,250,000.00
Cost of capital	8%
WACC* capital invested	180,000.00
Economic value added	180,000.00
Answer is Option C.
Answer 35
Please provide sales data. Without sales data I cannot provide the answer.