Question

1. Hassock Corp. produces woven wall hangings. It takes 4 hours of direct labor to produce a single wall hanging. Hassock’s standard labor cost is $16 per hour. During August, Hassock produced 14,900 units and used 60,170 hours of direct labor at a total cost of $960,720. What is Hassock’s labor efficiency variance for August?

• $9,120 unfavorable.

• $7,120 unfavorable.

• $4,000 favorable.

• $9,120 favorable.

• $11,120 unfavorable.

2. Based on a predicted level of production and sales of 23,000 units, a company anticipates total contribution margin of $94,300, fixed costs of $23,000, and operating income of $71,300. Based on this information, the budgeted operating income for 20,000 units would be?

• $71,300.

• $59,000.

• $42,550.

• $94,300.

3. Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?

• $25,000.

• $30,000.

• $20,000.

• $12,500.

• $35,000.

• $117,300.

4. Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials price variance is:

Direct materials standard (7 kg. @ $2.35/kg.)	$16.45	per finished unit
Actual cost of materials purchased	$392,150
Actual direct materials purchased and used	157,000	kgs.

• $42,300 unfavorable.

• $23,200 unfavorable.

• $23,200 favorable.

• $42,300 favorable.

• $19,100 unfavorable.

5. A company's flexible budget for 11,000 units of production reflects sales of $319,000; variable costs of $99,000; and fixed costs of $93,500. Calculate the expected level of operating income if the company produces and sells 14,000 units.

• $161,000.

• $126,500.

• $186,000.

• $186,500.

• $74,000.

Answer 1

1	Labor efficiency variance =Standard Rate*(Actual labor hours - Standard Hours)
	Labor efficiency variance =$16*(60,170 - 59,600) =$9,120(Unfavourable)
	So Option A is answer
2	Contribution margin per unit =$94,300 / 23000 units =$4.10
	Contribution margin at 20,000 units =20,000*$4.10 =$82,000
	Less:Fixed Cost =$23,000
	Operating Income at 20,000 units =$59,000
	So Option B is answer
3	Sales(12500*$10)	$         1,25,000
	Less:Variable Costs(12500*$6)	$            75,000
	Contribution margin	$            50,000
	Less:Fixed Costs(10000*$3)	$            30,000
	Net Income	$            20,000
	So Option C is answer
4	Material Price Variance =Actual quantity used*(Standard Price - Actual Price)
	Material Price Variance =157,000*$2.35 - $392,150 =$23,200(Unfavourable)
	So Option B is answer
5	Sales(14000*$29)	$         4,06,000
	Less:Variable Costs(14000*$9)	$         1,26,000
	Contribution margin	$         2,80,000
	Less:Fixed Costs	$            93,500
	Net Income	$         1,86,500
	So Option D is answer